Item
1.01.
|
Entry
into a Material Definitive Agreement
|
Auctus
Fund, LLC Promissory Note
On
October 8, 2020, LGBTQ Loyalty Holdings, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Auctus
SPA”) with Auctus Fund, LLC, a Delaware limited liability company (“Auctus”). Pursuant to the terms of the Auctus
SPA, Auctus agreed to purchase from the Company, for a purchase price of $300,000: (i) a Convertible Promissory Note in the principal
amount of $300,000.00 (the “Auctus Note”); (ii) a common stock purchase warrant permitting Auctus to purchase up to
100,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at an exercise
price of $0.015 per share (the “Warrant A”); and (iii) a common stock purchase warrant permitting Auctus to purchase
up to 100,000,000 shares of the Company’s Common Stock at an exercise price of $0.015 per share (the “Warrant B”)
and together with the Warrant A, the “Warrants”).
The
Auctus Note accrues interest at a rate of 12% per annum and matures on October 8, 2021. If the Company prepays the Auctus Note,
the Company shall pay all of the principal and interest, together with a prepayment penalty of lesser of 24% per annum and the
maximum amount permitted under law from the due date thereof until the same is paid (“Default Interest”). The Auctus
Note contains customary events of default. If an event of default occurs, the Auctus Note becomes immediately due and payable,
and the Company must pay all of the principal, interest, Default Interest, and, depending on the type of default, other penalties.
Any outstanding obligations owing under the Auctus Note which is not paid when due shall bear interest at the rate of 24% per
annum.
The
Auctus Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein. The
conversion price shall be the “Market Price” which is defined as the volume weighted average price for the Common
Stock during the 5 trading day period ending on the latest complete trading day prior to the conversion date. The conversion price
may also be adjusted downward if, within the 3 days following the transmittal of a conversion notice, the Company’s common
stock has a closing bid which is equal to or more than 5% less than the conversion price set forth in the conversion notice. Additional
discounts to the conversion price and penalties will apply if certain events occur, including failure to timely deliver conversion
shares, if conversion shares are not deliverable by DWAC, or if the Company’s stock is subject to a DTC chill. For all shares
of common stock issuable upon conversion of the Auctus Note, Auctus is entitled to “piggy-back” registration rights
in connection with any future registration statement the Company may file.
The
“Exercise Period” of each Warrant shall be from the date of issuance through the five year anniversary of the date
of issuance. Further, in the event that the Market Price is greater than the Exercise Price contained in the Warrant, then Auctus
may exercise the Warrant on a cashless basis, as more fully detailed in the Warrant. Moreover, so long as there is no event of
default under the Auctus SPA, the Auctus Note or any other transaction documents, Auctus shall not, without the Company’s
written consent, exercise Warrant B, in whole or in part.
Power
Up Lending Group Ltd. Promissory Note
On
September 29, 2020, the Company entered into a Securities Purchase Agreement (the “Power Up SPA”) with Power Up Lending
Group Ltd., a Virginia corporation (“Power Up”). Pursuant to the terms of the Power Up SPA, Power Up agreed to purchase
from the Company, for a purchase price of $83,000, a 10% Convertible Note (the “Power Up Note”) in the principal amount
of $91,300.
The
Power Up Note accrues interest at a rate of 10% per annum and matures on September 29, 2021. The Power Up Note, plus all accrued
but unpaid interest and other amounts due on the Power Up Note, may be prepaid at any time prior to the maturity date. If the
Power Up Note is prepaid on or prior to the 30th calendar day after the issuance date, the amount due upon prepayment
will be multiplied by 110%. If the Power Up Note is prepaid between the 31st and 60th calendar day after
the issuance date, the amount due upon prepayment will be multiplied by 115%. If the Power Up Note is prepaid between the 61st
and 90th calendar day after the issuance date, the amount due upon prepayment will be multiplied by 120%. If
the Power Up Note is prepaid between the 91st and 120th calendar day after the issuance date, the amount
due upon prepayment will be multiplied by 125%. If the Power Up Note is prepaid between the 121st and 150th
calendar day after the issuance date, the amount due upon prepayment will be multiplied by 130%. If the Power Up Note is prepaid
between the 151st and 180th calendar day after the issuance date, the amount due upon prepayment will be
multiplied by 135%. The Company must provide advanced notice to the holder of any prepayments and the holder may elect to convert
all or any portion of the Power Up Note prior to prepayment. The Power Up Note contains customary events of default. Upon the
occurrence of an event of default, the Power Up Note shall become immediately due and payable and the Company shall pay to Power
Up an amount equal to 150% times the sum of the then outstanding principal, accrued and unpaid interest, the prepayment penalty
of 22% per annum, and, depending on the type of default, other penalties. The Company is subject to a restrictive covenant regarding
sales of assets.
The
Power Up Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein, at
a conversion price of 60% multiplied by the lowest trading price for the Common Stock during the 20 trading day period ending
on the latest complete trading day prior to the conversion date. It is subject to equitable adjustments relating to the Company’
securities or the securities of any subsidiary, combinations, recapitalization, reclassifications, extraordinary distributions
and similar events. Additional discounts to the conversion price and penalties will apply if certain events occur, including failure
to timely deliver conversion shares.
JSJ
Investments, Inc. Promissory Note1
On
September 28, 2020, the Company entered into a convertible promissory note (“JSJ Note”) with JSJ Investments, Inc.,
a Texas corporation (“JSJ”), pursuant to which JSJ purchased from the Company, at a purchase price of $103,000, a
10% Convertible Note (the “JSJ Note”) in the principal amount of $108,000.
The
JSJ Note accrues interest at a rate of 10% per annum and matures on September 28, 2021. The JSJ Note, plus all accrued but unpaid
interest and other amounts due on the JSJ Note, may be prepaid at any time prior to the maturity date. If the JSJ Note is prepaid
on or prior to the 90th calendar day after the issuance date, the amount due upon prepayment will be multiplied by
125%. If the JSJ Note is prepaid between the 91st and 120th calendar day after the issuance date, the amount
due upon prepayment will be multiplied by 130%. If the JSJ Note is prepaid between the 121st and 180th calendar
day after the issuance date, the amount due upon prepayment will be multiplied by 140%. If the JSJ Note is prepaid between the
181st and maturity date, the amount due upon prepayment will be multiplied by 150%. The JSJ Note contains customary
events of default. Upon an event of default, the interest rate shall increase to 18% for as long as the event of default is continuing
(“Default Interest”). At any time on or after the Maturity Date, the Company may repay the then outstanding principal
plus accrued interest and Default Interest, if any, to JSJ.
The
JSJ Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein, at any
time after 180 days from the issuance date. The conversion price is 60% multiplied by the lowest trading price for the Common
Stock during the 20 trading day period ending on the latest complete trading day prior to the date of a conversion notice. It
is subject to equitable adjustments relating to the Company’ securities or the securities of any subsidiary, combinations,
recapitalization, reclassifications, extraordinary distributions and similar events. Additional penalties will apply if certain
events occur, including failure to timely deliver conversion shares.
EMA
Financial, LLC Promissory Note and Amendment
On
March 11, 2020, the Company entered into a Securities Purchase Agreement (the “EMA SPA”) with EMA Financial, LLC (“EMA”).
Pursuant to the terms of the EMA SPA, EMA agreed to purchase from the Company, for a purchase price of $78,750, a 10% Convertible
Note (the “EMA Note”) in the principal amount of $85,000.
The
EMA Note accrues interest at a rate of 10% per annum and matures on November 5, 2020. The EMA Note, plus all accrued but unpaid
interest and other amounts due on the EMA Note, may be prepaid at any time prior to the maturity date. If the EMA Note is prepaid
on or prior to the 60th calendar day after the issuance date, the amount due upon prepayment will be multiplied by
115%. If the EMA Note is prepaid between the 61st and 120th calendar day after the issuance date, the amount
due upon prepayment will be multiplied by 125%. If the EMA Note is prepaid between the 121st and 180th calendar
day after the issuance date, the amount due upon prepayment will be multiplied by 135%. The Company must provide advanced notice
to the holder of any prepayments and the holder may elect to convert all or any portion of the EMA Note prior to prepayment. The
EMA Note contains customary events of default. If an event of default occurs, the Company must pay to EMA amount equal to the
greater of 200% times the sum of the then outstanding principal, accrued and unpaid interest, the prepayment penalty of 24% per
annum, and, depending on the type of default, other penalties (collectively known as the “Default Sum”) or the “parity
value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable
upon conversion of or otherwise pursuant to such Default Sum, multiplied by (b) the highest closing price for the Common Stock
during the period beginning on the date of first occurrence of the event of default and ending one day prior to the mandatory
repayment date.
The
Auctus Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein. The
conversion price shall be the lower of: (i) the lowest closing price of the Common Stock during the preceding 20 trading day period
ending on the latest complete trading day prior to March 11, 2020, (ii) $0.04, or (iii) 60% of the lowest traded price for the
Common Stock on the principal market during the 20 consecutive trading days on which at least 100 shares of Common Stock were
traded including and immediately preceding the conversion date. Additional discounts to the conversion price and penalties will
apply if certain events occur, including if the closing price drops below $0.015, if the Company’s stock is subject to a
DTC chill, or if the EMA Note cannot be converted in free trading shares after 181 days from the issuance date. For all shares
of common stock issuable upon conversion of the EMA Note, EMA is entitled to “piggy-back” registration rights in connection
with any future registration statement the Company may file. EMA also has the right of first refusal to participate in any additional
capital raises and additional promissory note issuances, and the EMA Note will be immediately amended if terms and conditions
granted under subsequent issuances or sales are more favorable than the terms of the EMA Note.
Effective
as of September 29, 2020, the Company and EMA entered into an Amendment to the Note (the “EMA Amendment”), pursuant
to which EMA and the Company agreed to amend the issuance date of the EMA Note from March 11, 2020 to September 29, 2020 and to
extend the maturity date of the EMA Note from November 5, 2020 to September 29, 2021.
Item
1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of the Auctus SPA, Auctus Note,
Warrants, Power Up SPA, Power Up Note, JSJ Note, EMA SPA, EMA Note, and EMA Amendment, and does not purport to be a complete description
of the rights and obligations of the parties thereunder. Such descriptions are qualified in their entirety by reference to each
such document, copies of which are attached as exhibits to this Current Report on Form 8-K and are incorporated by reference into
this Item 1.01.
1
NTD: No SPA provided.