GNAL Generation Alpha Inc (CE)

Item 3.02. Unregistered Sales of Equity Securities.

On April 2, 2019, Extracting Point, LLC (“ Extracting Point ”), a newly-formed wholly-owned subsidiary of Generation Alpha, Inc. (the “ Company ”), entered into a loan agreement (the “ Loan Agreement ”) with Michael Cannon and Jennifer Cannon, Trustees of the Core 4 Trust Dated February 29, 2016 (the “ Lender ”), pursuant to which Extracting Point borrowed $3,500,000 from the Lender (the “ Loan ”). The Loan is evidenced by an installment note – interest included (the “ Note ”), guaranteed by the Company pursuant to a corporate guaranty (the “ Guaranty ”) and is secured by a first priority lien on the Property (as hereinafter defined) pursuant to a deed of trust and assignment of rents between Extracting Point and Thomas Title & Escrow, for the benefit of the Lender (the “ Deed of Trust ”). Extracting Point used the net proceeds from the Loan to acquire the Property.

The Note, together with accrued and unpaid interest, is due and payable on March 31, 2024 (the “ Maturity Date ”). Interest on the Note will accrue at the rate of 10% per annum. For the first 12 months, Extracting Point shall pay the Lender interest only of $29,166.67 per month. After the first 12 months, Extracting Point shall pay the Lender principal and interest of $88,769.04 per month. Extracting Point has the right to prepay the Note at any time, however, Extracting Point agreed to pay the first 36 months of interest, even if the Note is repaid prior to that date.

As additional consideration for the issuance of the Loan, Extracting Point and the Company agreed to pay the Lender an amount equal to five percent (5%) of the management fees (the “ Management Royalty ”) received relating to the services rendered on the Property, for a period of three years from the date an “Approval to Operate” is granted by the Arizona Department of Health Services (such date, the “ Commencement Date ”). In the event that the Commencement Date has not occurred on or prior to April 2, 2021, then Extracting Point and the Company agreed to pay the Lender an amount equal to five percent (5%) of the fair market value of the rent of the Property as if the Property was fully occupied (the “ Rental Royalty ”), such payments to be made each month for a period of thirty-six months, provided, that, if the Commencement Date occurs after the Rental Royalty has commenced, the Rental Royalty payments shall cease and the Management Royalty payments shall commence, and any amounts paid as a Rental Royalty shall be credited against any Management Royalty owed.

In connection with the Loan, the Company issued to the Lender a warrant (the “ Warrant ”) to purchase 1,000,000 shares of the Company’s common stock, exercisable for five years from issuance at an exercise price of $1.00 per share. The Warrant exercise price is subject to adjustment only in the event of a stock dividend or split. The Warrant issued in connection with the Loan was not registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The Lender is an “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act. This Current Report shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such securities contain a legend stating the same.

The foregoing descriptions of the Loan Agreement, Note, Guaranty, Deed of Trust and Warrant are qualified in their entirety by reference to the full text of the Loan Agreement, Note, Guaranty, Deed of Trust and Warrant, which are incorporated by reference as exhibits 10.01, 10.02, 10.03, 10.04 and 10.05 respectively, hereto.