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Item 1.01.
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Entry into a Material
Definitive Agreement.
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Securities Purchase Agreement
On January 7, 2019, Ozop Surgical Corp.
a Nevada corporation (the “Company”) entered into a securities purchase agreement (the “SPA”) with Auctus
Fund, LLC, a Delaware limited liability company (the “Investor”), pursuant to which the Company agreed to issue to
the Investor an 8% secured convertible promissory note, (the “Note”) in the aggregate principal amount of $150,000
in exchange for a purchase price of $150,000.
Pursuant to the SPA, the Company agreed
to pay the Investor $14,000 to cover the Investor’s due diligence expenses incurred in connection with the SPA and Note,
which is to be offset against the proceeds of the Note. The proceeds will be used by the Company for working capital and other
general corporate purposes. Pursuant to the SPA, the Company agreed not to conduct any equity (or debt with an equity component)
financing (the “Future Offering”), other than certain excepted issuances as set forth in the SPA, during the period
beginning on the closing date of the SPA and ending12 months following such date without first giving the Investor notice of the
Future Offering and allowing the Investor the option to purchase the securities being offered in the Future Offering on the same
terms as contemplated by such Future Offering.
The SPA includes customary representations,
warranties and covenants by the Company and customary closing conditions.
Convertible Promissory Note
The Note matures on January 7, 2020.
The Note is a senior obligation of the Company with priority over all “indebtedness” of the Company, as such term is
defined in the Note. Additionally, the Company agreed pursuant to the Note, that so long as any funds are owed by the Company under
the Note, that the Company will not incur “indebtedness,” as such term is defined in the Note, that is senior to the
Note.
The Note is convertible into shares
of the Company’s common stock, $0.001 par value per share, beginning on the date which is 180 days from the issuance date
of the Note, at a conversion price equal to the lesser of (1) the lowest trading price during the previous 20 trading day period
ending on the last completed trading date prior to the date of conversion of the Note and (2) 65% multiplied by the average of
the 3 lowest trading prices of the Company’s common stock during the 20 day trading period ending on the latest completed
trading day of the common stock prior to the date of conversion of the Note. Further in accordance with the terms of the Note,
while the Note is outstanding, if any third party has the right to convert any funds into shares of the Company’s common
stock at a discount to market greater than the conversion price under the Note in effect at that time, then the Investor in its
sole discretion, may utilize such greater discount percentage until the Note is no longer outstanding. Additionally, pursuant to
the Note, if at any time while the Note is outstanding, the Company either sells shares of its common stock at a price lower than
the conversion price then in effect under the Note, or if the Company sells any securities exercisable, exchangeable or convertible
into shares of the Company’s common stock at a price lower than the conversion price then in effect under the Note, then
the conversion price under the Note shall be adjusted to equal such lower price. Provided, however, that the Investor may not convert
the Note to the extent that such conversion would result in the Investor’s beneficial ownership being in excess of 4.99%
of the Company’s issued and outstanding common stock together with all shares owned by the Investor and its affiliates.
Pursuant to the Note, at any time when
the Note is outstanding, if the Company issues any convertible securities or rights to purchase stock, warrants, securities or
other property (the “Purchase Rights”) pro rata to the record holders of any class of common stock, then the Investor
will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Investor
could have acquired if it had held the number of shares of common stock acquirable upon complete conversion of the Note immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of common stock are to be determined for the grant, issue or sale of such Purchase Rights.
The Note carries a pre-payment penalty
if the Note is paid off in 90, 180, 210, 240, 270, 300, 330 or 364 days following the issue date. The pre-payment penalty is based
on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%, 130%, 135%, 140%,
145%, 150%, 155% and 160% respectively. After the expiration of 364 days following the issue date, the Company shall have no right
of prepayment.
Pursuant to the Note, during any period
where monies are owed to the Investor under the Note, if the Company seeks to loan money or give credit, such action must be approved
in writing by the Investor, unless such loan or credit is already in existence, or if such action is made in the ordinary course
of business or if the amount at issue does not exceed $100,000. Pursuant to the Note, during any period where monies are owed to
the Investor under the Note, if the Company seeks to incur, assume or guaranty or incur any liability on borrowed money, such action
must be approved in writing by the Investor, unless such borrowing is already in existence, or if such action is made in the ordinary
course of business or if the amount at issue is used to repay the Note. The Company further agreed that until the Note is satisfied
in full, if the Company receives cash proceeds from any source, including the issuance of equity or debt/equity securities, the
Company will within 1 business day of receipt of such proceeds inform the Investor of same and the Investor has the right in its
sole discretion to require the Company to use such funds to repay the amount due under the Note.
The Company further agreed that until
the Note is satisfied in full, the Company will not sell or lease any significant assets without the Investor’s written consent.
The Company further agreed that until the Note is satisfied in full, the Company will not declare any distributions on its common
stock or redeem or repurchase any shares of its common stock, without the Investor’s written consent. Additionally, pursuant
to the Note, the Company agreed not to consummate any capital raising transaction during the initial 60 days after the issuance
date of the Note. Further, pursuant to the Note, the Company agreed to include on its next registration statement filed with the
Securities and Exchange Commission, all shares issuable upon conversion of the Note.
Warrant
In connection with the Note, and pursuant
to the SPA, the Company agreed to issue to the Investor, a warrant (the “Warrant”) to purchase 50,000 shares of the
Company’s common stock as a commitment fee. The Warrant has a term of five (5) years and an exercise price of $1.50.
The foregoing descriptions
of the SPA, the Note, and the Warrant, do not purport to be complete and are qualified in their entirety by reference to the full
text of the transaction documents, copies of which are filed as Exhibits 10.1, 10.2 and 10.3. respectively, to this Current Report
on Form 8-K and are incorporated by reference herein.