ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On January 2, 2020, we entered into a Securities Purchase Agreement
(“Auctus SPA”) with Auctus Fund, LLC., a Delaware limited company (“Auctus”), pursuant to which we issued
and sold to the Auctus a convertible promissory note, dated December 31, 2019, in the principal amount of $75,000 (the “Auctus
Note”). We received $59,250 less fees and commissions.
The maturity date for repayment of the Auctus Note is September
31, 2020 and the Auctus Note bears interest at 10% per annum. All principal and accrued interest on the Auctus Note is convertible
into shares of our common stock at the election of the Auctus at any time at a conversion price equal to the lesser of (i) the
lowest trading price during the previous 20 days and ending on the latest trading date prior to the date of the Auctus Note, or
(ii) a 60% of the lowest trading price for our common stock during the 20 trading day period immediately prior to conversion.
We have the right to prepay the Auctus Note at any time prior to
180 days following the closing date. The amount we are required to prepay increases from 120% to 140% of the principal amount plus
accrued interest and other charges the closer we get to 180 days from closing.
The Auctus Note contains customary default events which, if triggered
and not timely cured, will result in default interest and penalties.
On January 9, 2020, we entered into a Securities Purchase
Agreement (“Crown SPA”) with Crown Bridge Partners, LLC., a New York limited company (“Crown”),
pursuant to which we issued and sold to Crown a convertible promissory note, dated January 8, 2020, in the principal amount
of $121,500 (the “Crown Note”). We received $35,000 as the first tranche less fees and commissions.
In connection with the issuance of the Crown
Note, we granted Crown a five year cashless warrant (the “Warrant”) to purchase 10,000 shares of our common stock
at an exercise price of $10 per share.
The maturity date for repayment of the Crown
Note is twelve months from each tranche made and the Crown Note bears interest at 10% per annum. All principal and accrued
interest on the Crown Note is convertible into shares of our common stock at the election of Crown at any time at a
conversion price equal to the lesser of (i) the lowest trading price during the previous 20 days and ending on the latest
trading date prior to the date of the Crown Note, or (ii) a 60% of the lowest trading price for our common stock during the
20 trading day period immediately prior to conversion.
We have the right to prepay the Crown Note at any time prior to
180 days following the closing date. The amount we are required to prepay increases from 120% to 140% of the principal amount plus
accrued interest and other charges the closer we get to 180 days from closing.
The Crown Note contains customary default events which, if triggered
and not timely cured, will result in default interest and penalties.
The foregoing description of the Auctus SPA, the Auctus Note, the
Crown SPA and the Crown Note and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the full text of the Auctus SPA, the Auctus Note, the Crown SPA and the Crown Note, which are
included in this Current Report as Exhibits 10.1, 4.1, 10.2 and 4.2, respectively, and are incorporated herein by reference.
If the above notes are converted prior to us paying off such notes
under the prepayment provisions, it would lead to substantial dilution to our shareholders as a result of the conversion discounted
for the notes. There can be no assurance that there will be any funds available to pay the notes, or if available, on terms that
will be acceptable to us or our shareholders. If we fail to obtain such additional financing on a timely basis, the purchasers
may convert the notes and sell the underlying shares, which may result in significant dilution to shareholders due to the conversion
discount, as well as a significant decrease in our stock price.