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Item 1.01
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Entry into a Material Definitive Agreement.
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On May 28, 2020, DPW Holdings, Inc., a
Delaware corporation (the “Company”) entered into a Securities Purchase and Exchange Agreement (the “Agreement”)
with an institutional investor (the “Investor”). Pursuant to the Agreement, the Company agreed to exchange a
12% secured promissory note (the “Original Note”) in the original principal face amount of approximately $236,000
issued to the Investor in January of 2020 for a new note of like tenor due and payable on June 30, 2020 (the “Exchanged
Note”) that would become convertible into common stock of the Company (the “Common Stock”) should
the Company be in default under the terms of the Exchanged Note. In addition, pursuant to the Agreement, the Company issued to
the Investor a note due and payable on November 28, 2020 in the principal face amount of $200,000 that becomes convertible into
Common Stock commencing June 30, 2020 (the “Convertible Note” and with the Exchanged Note, the “Notes”)
with an original issue discount of twenty percent (20%). In conjunction with the issuance of the Convertible Note, the Company
also issued to the Investor a warrant (the “Warrant”) to purchase an aggregate of 400,000 shares of Common Stock
at an exercise price of $1.07, which is the closing price of the Common Stock on May 28, 2020. Each of the conversion of the Notes
and the exercise of Warrant is subject to approval of the NYSE American (the “Exchange Approval”).
Description of the Exchanged Note
The principal
amount of the Exchanged Note, plus any accrued and unpaid interest at a rate of 12% per annum, shall be due and payable on June
30, 2020. Provided that Exchange Approval has been obtained, then upon the occurrence of an event of default, all sums due under
the Exchanged Note may at the option of the Investor be convertible into shares of Common Stock (the “Conversion Shares”)
at the VWAP for the five prior trading days measured as of the time the Investor gives notice of its election to make the Exchange
Note convertible. In no event shall the conversion price be lower than $0.30.
The Exchanged
Note contains standard and customary events of default including, but not limited to, failure to make payments when due under the
Note, failure to comply with certain covenants contained in the Note, or bankruptcy or insolvency of the Company. After the occurrence
of any Event of Default that results in the eventual acceleration of the Exchanged Note, the interest rate thereon shall accrue
at an additional interest rate equal to the lesser of one and one-half percent (1.5%) per month (eighteen percent (18.0%) per annum)
or the maximum rate permitted under applicable law.
Pursuant to the
Exchanged Note, upon receipt of the notice of default, the Company shall file a registration statement on Form S-3, if eligible,
or on Form S-1, and the Investor shall have the right to include the Conversion Shares as part of such registration statement.
Description of the Convertible Note
The Convertible
Note has a principal face amount of $200,000 with an original issue discount of twenty percent (20%) and a maturity date of November
28, 2020 (the “Maturity Date”), subject to two extensions as set forth in the Convertible Note. Interest shall
accrue upon each extension. Beginning June 30, 2020, the Convertible Note shall be convertible into such number of shares of Common
Stock issuable determined by dividing the amount due under the Convertible Note by greater of: (x) 80% of the VWAP for the five
trading days prior to the date of the conversion notice and (y) $0.30 (subject to adjustments), (the “Conversion Price”).
The Convertible Note contains standard and customary events of default including, but not limited to, failure to make payments
when due under the Convertible Note, failure to comply with certain covenants contained in the Convertible Note, or bankruptcy
or insolvency of the Company.
After the occurrence
of any Event of Default (as defined in the Convertible Note) that results in the eventual acceleration of the Convertible Note
and the payment of (i) 120% of the aggregate of outstanding principal amount of the Convertible Note and the accrued and unpaid
interest thereon (the “Outstanding Amount”) for an Event of Default occurring during the first 18 months of
the Convertible Note and (ii) 140% of the Outstanding Amount thereafter.
Description
of the Warrant
The Warrant entitles the Investor to purchase
400,000 shares of Common Stock (the “Warrant Shares”) at an exercise price of $1.07 per share for a period of
five years, subject to certain beneficial ownership limitations. The Warrant is immediately exercisable once the Company obtains
approval thereof by the NYSE American. The exercise price is subject to adjustment for customary stock splits, stock dividends,
combinations or similar events. Notwithstanding anything therein to the contrary, if within six months from the date of the Warrant,
there is no effective registration statement covering the resale of the Warrant Shares, then the Warrant may be exercised via cashless
exercise at the option of the Investor.
The foregoing
descriptions of the Agreement, the Exchanged Note, the Convertible Note and the Warrant do not purport to be complete and are qualified
in their entirety by reference to their respective forms which are annexed hereto as Exhibits 10.1, 4.1,
4.2, and 4.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The
foregoing 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 such exhibits.