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Item 3.02
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Unregistered Sales of Equity Securities.
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Ionic Bridge Transaction
On September 21, 2018, Dthera Sciences,
a Nevada corporation (the “Company,” “we,” or “us”) entered into a Securities Purchase Agreement
(the “Ionic Purchase Agreement") with Ionic Ventures, LLC (“Ionic”) for the issuance and sale of (i) an
Original Issue Discount Senior Convertible Promissory Note (the “Ionic Note”) in the aggregate principal amount of
$1,100,000 with a six-month term, that is convertible into shares (the “Ionic Conversion Shares") of our common stock,
par value $0.001 per share (the “Common Stock”) under certain conditions set forth in the Ionic Note, and (ii) warrants
(the “Ionic Warrants”) to acquire shares (the “Ionic Warrant Shares”) of our Common Stock pursuant to the
terms of the Ionic Purchase Agreement. As an added inducement to Ionic to enter into the Ionic Purchase Agreement, we also issued
1,000,000 shares of our restricted common stock (the “Ionic Commitment Shares,” and collectively with the Ionic Note
and the Ionic Warrants, the “Ionic Securities”). The purchase price for the Ionic Securities was $1,000,000.
Pursuant to the Ionic Purchase Agreement,
as long as the Ionic Note is outstanding (including any extension or modification thereto), if we effect a future financing that
is permitted under the Ionic Purchase Agreement, Ionic may elect, in its sole discretion, to exchange up to $550,000 of the Note
then held by Ionic for any securities issued in such permitted future financing, all on terms as specified in the Ionic Purchase
Agreement. In addition, at any time prior to the listing of the Common Stock on a national securities exchange, Ionic benefits
from a “most favored nation” provision requiring the Company to amend the terms of the Ionic Securities to reflect
any more favorable terms in any subsequent sales of securities of like tenor, structure or kind as the Ionic Securities.
We incurred certain fees in connection
with the Ionic Purchase Agreement, all of which were paid on or about September 21, 2018: (i) we reimbursed Ionic for their legal
fees; and (ii) we paid an advisory fee to Alliance Global Partners (“AGP”), which served as the placement agent in
connection with the sale of the Ionic Securities.
The Ionic Purchase Agreement contains certain
customary representations, warranties, and covenants by, among, and for the benefit of the parties, which were made solely for
the benefit of the parties thereto and are intended as a way of allocating the risk among such parties. Accordingly, stockholders
should not rely on such representations, warranties and covenants as characterizations of the actual state of facts or condition
of the Company.
We intend to use the proceeds from the
sale of the Ionic Securities for general corporate purposes.
The sale of the Ionic Securities is exempt
from the registration requirements of the Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(a)(2)
of the Act (in that the Ionic Securities were sold by us in a transaction not involving any public offering) and pursuant to Rule
506 of Regulation D promulgated thereunder. The Ionic Securities are restricted securities that have not been registered under
the Act, and will not be registered under the Act, and may not be offered or sold absent registration or applicable exemption from
the registration requirements.
Original Issue Discount Convertible
Promissory Notes
The Ionic Note accrues no interest, and
was issued at an original issue discount, with a purchase price of $1,000,000 for the aggregate principal amount of $1,100,000.
The Ionic Note is due and payable six months
after issuance, on March 21, 2019 (the “Maturity Date”). All principal and interest due and owing under the Ionic Note
is convertible into shares of our Common Stock, at any time after the earlier of the Maturity Date or the listing of our Common
Stock on a national securities exchange, or after the occurrence and during the continuance of an event of default (as defined
in the Ionic Note), at the election of the holder, at a conversion price equal to $0.50, subject to adjustment. The conversion
price of the Ionic Note is subject to adjustment for (a) stock splits, stock dividends, combinations, or similar events at any
time while the Ionic Note is outstanding, and (b) full ratchet anti-dilution protection at any time prior to the listing of the
Common Stock on a national securities exchange.
Upon the consummation of any public offering
of our Common Stock or Common Stock equivalents that is consummated in connection with the listing of our Common Stock on a national
securities exchange, $550,000 of the Ionic Note will automatically convert into securities of like tenor, structure, and kind as
the securities issued in such public offering at a 25% discount to the public offering price.
So long as no event of default has occurred,
the Ionic Note may be repaid at any time prior to the Maturity Date without premium or penalty. Additionally, the Ionic Note is
to be repaid on the earlier of the Maturity Date or three days following the closing of a qualified offering, defined as a single
offering with gross proceeds to us equal to or in excess of $5,000,000.
If there is an event of default under the
Ionic Note, Ionic may convert all or any part of the Ionic Note into shares of our Common Stock at a conversion price equal to
65% of the closing market price at the time of such conversion. In addition, 125% of the outstanding principal amount of the defaulted
Ionic Note and accrued but unpaid interest may, at the holder's election, become immediately due and payable in cash.
The Ionic Note may not be converted and
shares of Common Stock may not be issued under the Ionic Note if, after giving effect to the conversion or issuance, the holder,
together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, at the election of Ionic made as of the closing,
of the outstanding shares of Common Stock. At Ionic’s option, the beneficial ownership limitation may be raised or lowered
to any other percentage not in excess of 9.99%, except that any increase will only be effective upon 61 days' prior notice to us.
Ionic Warrants
Pursuant to the terms of the Ionic Purchase
Agreement, we also agreed to grant to Ionic warrants to purchase up to 2,000,000 shares of Common Stock. The per-share exercise
price of the Ionic Warrants is $0.65, subject to certain adjustments. The Ionic Warrants have a term of five years. The Ionic Warrants
are exercisable at any time on or after the issuance date of the Ionic Warrants, on a cashless basis (solely to the extent that
a registration statement is not then effective to cover resales of the underlying shares of Common Stock) or on a cash basis.
The exercise price of the Ionic Warrants
is $0.65 per share, subject to adjustment for stock splits, stock dividends, combinations, or similar events. In addition, at any
time prior to the listing of the Common Stock on a national securities exchange, the Ionic Warrants are subject to (a) full ratchet
anti-dilution protection, (b) a Black-Scholes payout provision upon the occurrence of any fundamental transaction and (c) a prohibition
on certain exchange transactions by the Company, other than in connection with certain financings permitted by the Ionic Purchase
Agreement and the Ionic Note.
The Ionic Warrants may not be exercised
if, after giving effect to the exercise, the holder of the Ionic Warrant together with its affiliates would beneficially own in
excess of 4.99% or 9.99%, at the election of the holder as of the closing, of the outstanding shares of our Common Stock. At a
holder's option, the beneficial ownership limitation applicable to the exercise of the Ionic Warrants may be raised or lowered
to any other percentage not in excess of 9.99%, except that any increase will only be effective upon 61 days' prior notice to us.
Security Agreement
As collateral for all of our obligations
under the Ionic Purchase Agreement and related documents executed in connection therewith, we granted to Ionic a first priority
security interest in all of our assets pursuant to the terms of the Security Agreement and Subsidiary Guarantee, each of which
was entered into between Ionic and us and was dated September 21, 2018.
The description of certain terms and conditions
of the forms of Ionic Purchase Agreement, Subsidiary Guarantee, Security Agreement, Ionic Note and Ionic Warrant set forth herein
do not purport to be complete and are qualified in their entirety by reference to such documents, which are filed as Exhibits 10.1,
10.2, 10.3 4.1, and 4.2, respectively, to this Current Report on Form 8-K, and are incorporated herein by reference.