Item 1.01
Entry into a Material Definitive Agreement
On June
5, 2018, we entered into a securities purchase agreement (the
"SPA") with an accredited investor (the “Buyer”) to
place Convertible Debentures (the “Debentures”) with a
maturity date of one year after the issuance thereof in the
aggregate principal amount of up to $300,000 (the
“Transaction”), provided that in case of an event of
default, the Debentures may become at the holder’s election
immediately due and payable. The closing of the Transaction
occurred on June 5, 2018 when we issued a Debenture for $300,000.
We intend to use the net proceeds from the Transaction to test lead
candidates from our CB101 program for their therapeutic
efficacy in in vivo rodent models of Parkinson's disease and for
general corporate purposes.
The
Debentures bear interest at the rate of 5% per annum. In
addition, we must pay to the holder a fee equal to 7% of the amount
of the Debentures to assist in their monitoring costs for the
Debentures. The net proceeds of the financing will be used for
general corporate matters and for other expenses.
The
Debenture may be converted into shares of our common stock at any
time on or prior to maturity at the lower of $0.05 or 93% of the
average of the three lowest daily VWAPs during the 10 consecutive
trading days immediately preceding the conversion date, provided
that as long as we are not in default under the Debenture, the
conversion price may never be less than $0.01. We may not
convert any portion of a Debenture if such conversion would result
in the holder beneficially owning more than 4.99% of our then
issued and common stock, provided that such limitation may be
waived by the holder with 65 days’ notice.
Any
time after the six-month anniversary of the issuance of a Debenture
that the daily VWAP is less than $0.01 for a period of twenty
consecutive trading days (the “Triggering Date”) and
only for so long as such conditions exist after a Triggering Date,
we shall make monthly payments beginning on the last calendar day
of the month when the Triggering Date occurred. Each monthly
payment shall be in an amount equal to the sum of (i) the principal
amount outstanding as of the Triggering Date divided by the number
of such monthly payments until maturity, (ii) a redemption premium
of 20% in respect of such principal amount and (iii) accrued and
unpaid interest hereunder as of each payment date. We may, no
more than twice, obtain a thirty day deferral of a monthly payment
due as a result of a Triggering Date through the payment of a
deferral fee in the amount equal to 10% of the total amount of such
monthly payment. Each deferral payment may be paid by the
issuance of such number of shares as is equal to the applicable
deferral payment divided by a price per share equal to 93% of the
average of the four lowest daily VWAPs during the 10 consecutive
Trading Days immediately preceding the due date in respect of such
monthly payment begin deferred, provided that such shares issued
will be immediately freely tradable shares in the hands of the
holder.
The SPA
and Debentures is subject to a Security Agreement to secure payment
and performance of our obligations under the Debentures and related
agreements pursuant to which we granted the Buyer a security
interest in all of our assets. The security interest
granted pursuant to the Security Agreement terminates on the
payment in full of outstanding Debentures and any interest on, or
other payments due under, the Debentures.
On June 5, 2018, we also entered into an Amendment Agreement with
the Buyer whereby we amended the terms of certain debentures issued
pursuant to the terms of a Securities Purchase Agreement entered
into on January 25, 2017 and November 20, 2017. Those debentures
were (i) a convertible debenture issued on January 25, 2017 in a
face amount of $300,000, (ii) a convertible debenture issued on
March 2, 2017 in a face amount of $150,000 (iii) a convertible
debenture issued on May 3, 2017 in a face amount of $150,000, (iv)
a convertible debenture issued on November 20, 2017 in a face
amount of $150,000 and (v) a convertible debenture issued on
February 14, 2018 in a face amount of $150,000 (each as amended, an
“Initial Debenture”). The Amendment Agreement lowered
the conversion price of the Initial Debentures to the lower of (i)
$0.05 and (ii) 93% of the average of the three lowest daily VWAPs
during the ten consecutive Trading Days immediately preceding the
conversion date, but in no event lower than $0.01.