Item 1.01
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Entry into Material Definitive Agreement.
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Software License and Reseller Agreement
In 2017 True Nature Holding, Inc. “the Company”) began development of a series of applications termed SimpleHIPAA and SimpleHIPAA for Veterinarians and Pets, both aimed at providing a personal healthcare record (PHR) that could be used by both humans and pet owners. During 2018 the application design was expanded to include interfaces with both office management systems used by doctors and veterinary clinics, and those used by pharmacy operators who might fulfil prescriptions. In June 2018 the Company entered into a custom development agreement with a pharmacy operator in Florida to customize the software for their particular needs. In December 2019 we concluded an expanded software license agreement that includes a provision for the user to have full access to the source code for their internal purposes, or its successors and assignees. We have also created a right for the operator to resell in object code form the resulting application under their own brand. The Company has fully delivered the software and has been paid an initial $3,500 fee, with an additional $21,500 to be paid on successive sales by the operator. The initial fee is being recognized as earned revenue in 2019 with the subsequent payments as unearned revenue, and thus will be recognized in the periods in which they are collected. This is a non-exclusive agreement, and the Company believes similar reseller agreements will be a continuing source of revenue going forward. A copy of this agreement is includer herein as Exhibit 10.01.
Reductions in Payables
In December 2019 approximately $333,000 of accounts payable was eliminated through a total of $38,500 in cash payments, As noted below, approximately $683,000 of other amounts owed were converted into 27,324 shares of a newly issued Series X Preferred Stock (the “Series X Preferred”), priced at $25.00 per share. As a result of these and other actions, we estimate that the total liabilities of the Company (unaudited and subject to change) at December 31, 2019 should be approximately $1.3 million, down from the $2.6 million reported at September 30, 2019.
Exchange of Debt into newly issued Series X Perpetual Preferred Shares
The Company has entered into agreements with debt holders and note holders of the Company who have agreed to cancel the obligations of the Company in favor of the issuance of a new Series X Perpetual Preferred Stock (“the Series X Preferred”). The Series X Preferred shares are priced at $25.00 per share and will pay a 10% per year dividend. The dividend may be paid in cash or in the issuance of restricted common stock. If the Company chooses to pay the dividend in restricted common stock the number of shares issued to fulfil the dividend payment shall be determined based on the stock price on the date the dividend award is made by the Board of Directors. The decision to make the dividend payment in cash or through the issuance of restricted stock shall be at the Company’s sole discretion. The Company intends to pay the dividend monthly. These shares may be redeemed after 36 months and are not convertible into common stock. While these shares remain outstanding the holders of this group will likely have voting control of the Company, as noted below. There is no intention to register these shares. The holders will have the right to exchange the preferred shares for any security which may be registered during the period when the shares are held on a dollar for dollar basis, with the terms of the exchanged security to survive any prior terms.
The Series X Preferred shares include “super voting rights” such that each share will have 20,000 votes in any matter for which a vote of shareholders will be required. As a result, based on the current number of common stock shares outstanding of approximately 80 million, the holders of the Series X Preferred shares will have the ability to vote up to 88% of the shares votes available. Therefore, the holders of the Series X Preferred stock, in aggregate, will have sufficient shares to approve any matter presented to the common shareholders for approval. Should these shares be exchanged for another security in the future, as noted above, the “super voting rights” would be extinguished, and the voting rights of the securities received in exchange would be granted to the holders instead.
The aggregate debt being extinguished through the issuance of 27,324 Series X Preferred shares totaled approximately $683,000 and included: a) amounts owed to vendors in the form of general payables, b) amounts owed to current and former insiders that were accrued and not paid as previously agreed to, and c) certain obligations under the notes previously issued for payment of obligations on behalf of the Company. The debts being exchanged were all verified by the Company’s accountants and have been reported in the Company’s filings with the SEC, and all participants have agreed that should the upcoming audit of the Company financials as of December 31, 2019 show any differences in the amounts owed, the number of Series X Preferred shares previously issued shall be adjusted. A copy of the form of agreement used to convert these obligations is attached herein as Exhibit 10.02. A copy of the Series X Preferred Stock Description and Certification of Designation is attached herein as Exhibit 3.6.
The 2020 Directors Advisory Agreement
On December 30, 2019, the Board of Directors of the Company approved Director Advisory Agreements for each Company Director (each an “Agreement,” collectively the “Agreements”). Each Agreement is for one (1) year and is effective immediately.
The Agreement has three (3) components: (i) per the Agreement, each Director shall receive a $2,000 per month stipend, except that in any month in which there is a physical meeting of all of the Board of Directors it shall be $5,000. All fees and stipends will accrue until the Company has sufficient funding to pay it in total, of which $1,000 of the stipend will get priority treatment, along with other conventional payroll obligations; (ii) each Director will receive a restricted stock allocation of 1 million shares that shall be immediately issued to the Director on his appointment (or to his assignee(s)) with certain reverse vesting provisions subject to the Directors continued standing as a Board member, such that: 1/6th of the shares shall be fully vested within 180 days, 1/6th shall be fully vested as of 6 months, 1/6th shall be fully vested as of 12 months, 1/6th shall fully vest as of 24 months, 1/6th shall fully vest as of 30 months and 1/6th shall fully vest as of 36 months. If the Director has remained a member of the Board continuously through 36 months, the individual shall own 1 million shares of restricted stock with no further reverse vesting provisions. The restricted common stock issuances are considered appropriate additional annual compensation for active board duties. All share grants will be subject to Rule 144 and will have a six-month holding period according to the Securities Act. If the Director leaves the Board during this 6-month holding period, then any shares not previously relieved of the reverse vesting provisions will be rescinded. The Company retains the right to issue these shares via a Stock Option program upon filing of the S-8 rather than issue restricted stock.
The Agreements further provide that any of the Directors may be removed on a vote of the majority of the disinterested members of the Board of Directors, as well as the terms of the Company's Bylaws, Articles of Incorporation and under the Delaware General Corporate Law (DGCL).
The description of the Agreements is a summary only and does not fully describe all the terms and conditions and is qualified in its entirety by copies of the form of 2020 Directors Advisory Plan is attached herein as Exhibit 10.03.
Sale and Issuance of Eagle Equities, LLC Term Note
The Company entered into a Securities Purchase Agreement and Promissory note dated December 19, 2019 and funded on December 19, 2019 in the net amount of $256,000. The lender was Eagle Equities, LLC. The new note carries an 12% interest rate and has a maturity date of twelve (12) months from the date of execution. The Company may prepay the note, and management intends to fulfil this option, at a premium of 110% to 140% of principal and interest between the date of issuance and 180 days thereafter. Should the note not be paid in full, any remaining balance, at any time after 180 days after issuance maybe convertible into the Company’s common stock at a conversion price for each share of common stock equal to 60% of the lowest traded price of the Company's common stock for the 20 prior trading days including the day upon which a notice of conversion is received by the Company. The use of proceeds requires the Company to redeem certain previously issued convertibles notes, and there is a prohibition in the agreement against additional discounted convertible notes.
Item 1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of the Eagle Equities, LLC Note, the Eagle Equities, LLC SPA, and does not purport to be a complete description of the rights and obligations of the parties thereunder, and such descriptions are qualified in their entirety by reference to the full text of the Eagle Equities, LLC Note, the Eagle Equities, LLC SPA, filed as Exhibits 10.4 and 10.5, respectively, to this Current Report on Form 8-K, and are incorporated herein by reference.