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Item
1.01.
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Entry
into a Material Definitive Agreement.
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On
June 1, 2021, we entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor
(the “Purchaser”), pursuant to which the Company sold and issued: (i) a senior secured redeemable debenture (the
“Debenture”) in the aggregate principal amount of $15,000,000.00 (the “Aggregate Principal
Amount”), and (ii) warrants to purchase up to an aggregate of 1,500,000 shares of the Company’s common stock at
an exercise price of $12.00 per share (the “Warrant”). However, the amount of shares exercisable pursuant
to the Warrant is directly connected to how long the Debenture remains outstanding. If the Debenture is repaid on or before the one year
anniversary date of the Initial Exercise Date (as defined herein), the Purchaser shall be entitled to exercise up to 500,000 shares of
common stock. Thereafter so long as the Debenture has not been repaid, beginning on the date that is
366 days from the Initial Exercise Date, the Warrant may be exercised for up to an additional 500,000 shares of common stock. Should
the Debenture remain outstanding, beginning on the date that is 732 days from the Initial Exercise Date, the Warrant may be exercised
for up to an additional further 500,000 shares of common stock. The Warrant is immediately exercisable upon issuance (the “Initial
Exercise Date”) at an exercise price of $12.00 per share, subject to adjustment as provided therein. The Warrant has a term
of three years.
Subject to limited exceptions, the Purchaser
will not have the right to exercise any portion of the Warrant if the Purchaser, together with its affiliates, would exceed the Beneficial
Ownership Limitation; provided, however, that upon 61 days’ prior notice to us, the holder may increase the Beneficial Ownership
Limitation, provided that in no event will the Beneficial Ownership Limitation exceed 9.99%.
We
received gross proceeds of $15,000,000 and intend to use such proceeds for working capital and general corporate purposes. The Purchase
Agreement contains customary representations, warranties and agreements by us and customary conditions to closing.
The
Aggregate Principal Amount of the Debenture, together with interest, shall be due and payable on June 1, 2024. The Debenture bears interest
as follows as follows: (i) for the period beginning on June 1, 2021 and ending on the date that is six (6) months thereafter (the “Initial
Interest Rate Period”) shall be six percent (6%), (ii) for the period beginning the date following the Initial Interest Rate
Period and ending on the date that is three (3) months thereafter (the “Second Interest Rate Period”), nine percent
(9%), and (iii) for the period beginning the date following the Second Interest Rate Period and ending on June 1, 2024, twelve percent
(12%). The Debenture contains redemption provisions which require the Company to redeem the principal amount outstanding on the Debenture,
as set forth in the Debenture.
In
connection with the Purchase Agreement, the Company has agreed to secure all of the Company’s Obligations (as defined in the Purchase
Agreement) to the Purchaser under the Debenture, Company Security Agreement (as defined below) and all other Transaction Documents (as
defined in the Purchase Agreement) by granting to the Purchaser an unconditional and continuing security interest in all of the assets
and properties of the Company, whether now existing or hereafter acquired, pursuant to that certain Security Agreement, dated as of June
1, 2021 (the “Company Security Agreement”). Moreover, the subsidiaries of the Company, LifeMD PR, LLC, a limited
liability company organized and existing under the laws of Puerto Rico, and LegalSimpli Software, LLC, a limited liability company organized
and existing under the laws of Puerto Rico (each, a “Guarantor” and together, the “Guarantors”),
have agreed to deliver a guaranty agreement in favor of the Purchaser, dated as of June 1, 2021 (the “Guaranty Agreement”).
Furthermore, the Company entered into an Intellectual Property Security Agreement with the Purchaser dated as of June 1, 2021, granting
the Purchaser a security interest in certain intellectual property of the Company (“IP Security Agreement”).
In
connection with the Purchase Agreement, the Company and the Purchaser also entered into a Registration Rights Agreement (the “Registration
Rights Agreement”) under which the Company agreed to register the shares underlying the Warrant within sixty (60) days ( the
“Resale Registration Statement”), but in no event later than ninety (90) days following the filing deadline (the “Effectiveness
Deadline”); provided, that the Effectiveness Deadline shall be extended to one hundred twenty (120) days after the filing
deadline if the Resale Registration Statement is reviewed by, and receives comments from, the SEC.
The
foregoing descriptions of the Debenture, Warrant, Purchase Agreement, Registration Rights Agreement, Company Security Agreement, Guarantor
Security Agreement, Guarantee Agreement, and Intellectual Property Security Agreement are qualified in their entirety by reference to
the full text of the Form of Debenture, Form of Warrant, Form of Securities Purchase Agreement, Form of Registration Rights Agreement,
Form of Company Security Agreement, Form of Guarantor Security Agreement, Form of Guarantee Agreement, and Form of Intellectual Property
Security Agreement, which are attached to this Current Report on Form 8-K (this “8-K”) as Exhibits 4.1, 4.2, 10.1,
10.2, 10.3, 10.4, 10.5, and 10.6 respectively, and incorporated herein by reference in their entirety.