| Item 1.01 |
Entry into a Material Definitive Agreement. |
Effective September 28, 2022, Edgemode, Inc. (the
“Company”) entered into a Series B Preferred Stock Purchase Agreement (the “Purchase Agreement”) with 1800 Diagonal
Lending LLC, a Virginia limited liability company (the “Investor”) pursuant to which the Company issued and sold to the Investor
an additional 55,000 shares of Series B Preferred Stock for a purchase price of $55,000.00. Following the issuance date the Investor beneficially
owns an aggregate of 212,500 shares of Series B Preferred Stock.
The terms of the Series B Preferred Stock, including
the terms of conversion, pursuant to the Company’s Certificate of Designation, Preference and Rights of Series B Preferred Stock
of the Company (the “Certificate of Designation”), are provided below.
Pursuant to the Purchase Agreement, the Investor
may convert all or a portion of the outstanding Series B Preferred Stock into shares of the Company’s Common Stock beginning on
the date which is 180 days after the issuance date of the Series B Preferred Stock into Common Stock; provided, however, that the Investor
may not convert the Series B Preferred Stock to the extent that such conversion would result in beneficial ownership by the Investor and
its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock.
The Company will have the right, at the Company’s
sole option, provided that an event of default has not occurred, to redeem all or any portion of the shares of Series B Preferred Stock,
exercisable on not more than 3 Trading Days prior written notice to the holders of the Series B Preferred Stock, in full. If the Company
redeems the shares of Series B Preferred Stock within 90 days of its issuance, the Company must pay all of the principal at a cash redemption
premium of 120%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Series B Preferred Stock,
then such redemption premium is 125%. After the 180th day following the issuance date, there shall be no further right of optional redemption.
On the date which is the earlier of: (i) twelve (12) months following the issuance date; or (ii) at the option of the Investor, upon the
occurrence of an Event of Default as defined under the Certificate of Designation (the “Mandatory Redemption Date”), the Company
shall redeem all of the shares of Series B Preferred Stock of the Investor (which have not been previously redeemed or converted). With
five (5) days of the Mandatory Redemption Date, the Company shall make payment to the Investor of an amount in cash equal to the total
number of shares of Series B Preferred Stock held by such Investor multiplied by the then current Stated Value as adjusted pursuant to
the terms hereof (including but not limited to the addition of any accrued unpaid dividends and any default adjustments. An Event of Default
includes the Company’s failure to pay a mandatory redemption amount, comply with its SEC reporting obligations and any bankruptcy
or liquidation.
Effective July 20, 2022 the Company established
a series of redeemable convertible preferred stock (the “Series B Preferred Stock”), stated value $1.00 per share (the “Stated
Value”), pursuant to a Certificate of Designation, Preference and Rights of Series B Preferred Stock of the Company (the “Certificate
of Designation”). The Stated Value shall increase to $2.00 upon an Event of Default.
Pursuant to the Certificate of Designation, the
Company authorized 1,000,000 shares of the Series B Preferred Stock, which may be convertible into shares of common stock, par value $0.001
per share, of the Company (the “Common Stock”) at the option of the holders thereof at any time after the issuance of the
Series B Preferred Stock, at a conversion price equal a Variable Conversion Price (the “Conversion Price”). The “Variable
Conversion Price” means 65% multiplied by the Market Price (representing a discount rate of 35%). The “Market Price”
means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading Day period
ending on the latest complete trading day prior to the conversion date. The “Trading Price” means, for any security as of
any date, the actual closing price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market.
The Series B Preferred Stock will, with respect
to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) senior with respect to dividends and right of liquidation
with the Company’s Common Stock and (b) junior with respect to dividends and right of liquidation to all existing and future indebtedness
of the Company and existing and outstanding preferred stock of the Company.
The Series B Preferred Stock shall have no right
to vote on any matters requiring shareholder approval or any matters on which the shareholders are permitted to vote. So long as any shares
of Series B Preferred Stock are outstanding, the Company will not, without the affirmative approval of the Investor (i) alter or change
adversely the powers, preferences or rights given to the Series B Preferred Stock or alter or amend this Certificate of Designations,
(ii) authorize or create any class of stock ranking as to distribution of dividends or a liquidation preference senior to the Series B
Preferred Stock, (iii) amend its Articles of Incorporation, as amended in breach of any of the provisions the Certificate of Designation,
(iv) increase the authorized number of shares of Series B Preferred Stock, (v) liquidate, dissolve or wind-up the business and affairs
of the Company, or effect any Deemed Liquidation Event (as defined below), (vi) breach any of the provisions set forth herein; or (vii)
enter into any binding agreement with respect to any of the foregoing. A “Deemed Liquidation Event” means: (a) a merger or
consolidation in which the Company is a constituent party or a subsidiary of the Company is a constituent party and the Company issues
shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or
a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue
to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation,
at least a majority, by voting power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting
corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation
of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction
or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company
and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the
Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries,
except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.
Each share of Series B Preferred Stock will carry
an annual dividend in the amount of eight percent (8%) of the price per share of Series B Preferred Stock of $1.00 (the “Dividend
Rate”), which shall be cumulative, payable solely upon redemption, liquidation or conversion. Upon the occurrence of an Event of
Default, the Dividend Rate shall automatically increase to twenty two percent (22%).
In connection with the Certificate of Designation,
the Company agreed to cause its transfer agent to reserve six times the number of shares of Common Stock that would be issuable upon full
conversion of the Series B Preferred Stock (assuming that the 4.99% limitation set forth in herein is not in effect) (based on the respective
Conversion Price of the Series B Preferred Stock as defined below in effect from time to time).
The proceeds from the sale of the Series B Preferred
Stock shall be used for working capital. In addition, the Company paid $3,750 to the Investor and its counsel for legal and due diligence
fees.
The foregoing summaries of the terms of the Certificate
of Designation and the Purchase Agreement are subject to, and qualified in their entirety by, the agreements and instruments attached
hereto as Exhibits 3.1 and 10.1, respectively, which are incorporated by reference herein.