ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On
January 16, 2018, NanoFlex Power Corporation, a Florida corporation (the “Company”) entered into a Securities Purchase
Agreement (the “Power Up SPA”) with Power Up Lending Group Ltd. (“Power Up”) pursuant to which Power Up
purchased a convertible promissory note evidencing a loan of $54,000. On January 16, 2018, the Company issued Power Up a $54,000
convertible promissory note (the “Power Up Note”). The Power Up Note entitles the holder to 12% interest per annum
and matures on October 30, 2018.
Power
Up may convert the Power Up Note into shares of the Company’s common stock beginning on the date which is 180 days from
the issuance date of the Power Up Note, at a price equal to 61% of the average of the lowest two trading prices during the 15
trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up
may not convert the Power Up Note to the extent that such conversion would result in Power Up’s beneficial ownership being
in excess of 4.99% of the Company’s issued and outstanding common stock together with all shares owned by Power Up and its
affiliates. The beneficial ownership limitation may not be waived by Power Up.
If
the Company prepays the Power Up Note within 30 days of its issuance, the Company must pay all of the principal at a cash redemption
premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the note, then such redemption
premium is 115%; if such repayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium
is 120%; and if such repayment is made from the 91st to the 180th day after issuance, then such redemption premium is 125%. After
the expiration of the 180 days following the issuance, there shall be no further right of pre-payment.
In
connection with the Power Up Note, the Company agreed to cause its transfer agent to reserve 2,276,793 shares of the Company’s
common stock, in the event that the Power Up Note is converted. The Power Up Note was funded on January 18, 2018.
The
foregoing descriptions of the Power Up SPA and note are qualified in their entirety by reference to the full text of the form
of Securities Purchase Agreement and form note, copies of which are filed herewith as Exhibit 10.1 and 10.2 respectively, and
are incorporated by reference herein.
On
January 16, 2018, the Company entered into a Securities Purchase Agreement (the “EMA SPA”) with EMA Financial, LLC
(“EMA”) pursuant to which EMA agreed to purchase a convertible promissory note evidencing a loan of $125,000. The
loan under the EMA SPA was funded on January 24, 2018
.
On January 16, 2018, the Company shall issue to EMA a $125,000 convertible
promissory note (the “EMA Note”). EMA is purchasing the EMA Note for a purchase price of $117,500. The EMA Note has
an interest rate of 10% per annum, a default interest rate of 24% and matures on January 16, 2019.
EMA
may convert the EMA Note into shares of the Company’s common stock beginning from the date of issuance of the EMA Note through
the date which is 180 days from the issuance date of the EMA Note, at a conversion price of $0.50 per share. Starting on the 181
st
date after the issuance date of the EMA Note, EMA may convert the EMA Note into shares of the Company’s common stock
at a conversion price equal to the lower of (i) the closing price of the Company’s common stock on the principal market
on the trading day immediately preceding the date of conversion of the EMA Note or (ii) 60% of the lowest sale price for the Common
Stock on the Principal Market during the 20 consecutive trading day conversion including and immediately preceding the Conversion
Date, or the closing bid price, whichever is lower, provided, however, that EMA may not convert the EMA Note to the extent that
such conversion would result in EMA’s beneficial ownership being in excess of 4.99% of the Company’s issued and outstanding
common stock together with all shares owned by EMA and its affiliates, unless such limit is waived by EMA. The conversion price
under the EMA Note is further subject to additional adjustments as set forth in the full text of the EMA Note, which is filed
herewith as Exhibit 10.4
If
the Company prepays the EMA Note within six months following the issuance date of the EMA Note, the Company must pay all of the
principal at a cash redemption premium of either (i) 150% if such prepayment is made after 90 days after the issuance date of
the EMA Note or (ii) 135% if such prepayment is made prior to or on the 90
th
day after the issuance of the EMA Note.
After the expiration of six months following the issuance of the EMA Note, there shall be no further right of pre-payment.
In
connection with the EMA Note, the Company’s transfer agent reserved 4,806,000 shares of the Company’s common stock,
in the event that the EMA Note is converted.
The
foregoing descriptions of the EMA SPA and the EMA Note are qualified in their entirety by reference to the full text of the form
of the EMA SPA and the form of the EMA Note, copies of which are filed herewith as Exhibit 10.3 and 10.4 respectively, and are
incorporated by reference herein.
The
Company intends to pay off the EMA Note and the Power Up Note prior to the conversion of such notes, with funding it plans to
raise from additional financings. If the Company does make the prepayment of the Power UP Note, the Company shall be subject to
the redemption premiums set forth in such note as described above. Further, if the EMA Note or the Power Up Note, or both, are
converted prior to the Company paying off such notes, it would lead to substantial dilution to the Company’s shareholders
as a result of the conversion price for notes possibly being below the market price. There can be no assurance that the additional
funds will be available to the Company when needed to pay of these notes, or if available, on terms that will be acceptable to
the Company or its shareholders. If the Company fails to obtain such additional financing on a timely basis, the holders of such
notes may convert them and sell the underlying shares which may result in significant dilution to shareholders due to the conversion
discount, as well as a significant decrease in our stock price.