Item
1.01 Entry into a Material Definitive Agreement.
On
February 24, 2020, American International Holdings Corp. (the “Company” or “AMIH”) entered
into a Securities Purchase Agreement with Adar Alef, LLC, an accredited investor (“Adar Alef”), pursuant to
which the Company sold Adar Alef a convertible promissory note in the principal amount of $157,500, representing a purchase price
of $150,000 and an original issue discount of $7,500, in exchange for $150,000 in cash (less $7,500 of Adar Alef’s legal
fees as discussed below)(the “Adar Alef Note”). The Adar Alef Note accrues interest at a rate of 8% per annum
(24% upon the occurrence of an event of default) and has a maturity date of February 24, 2021. We also reimbursed a total of $7,500
of Adar Alef’s legal fees in connection with the sale of the note. The outstanding balance of the Adar Alef Note is automatically
reduced by $7,500 if, on the 6th monthly anniversary of the issuance date of the Adar Alef Note, the closing price
of the Company’s common stock is greater than $0.30 per share.
The
Company has the right to prepay the Adar Alef Note at any time during the first six months the note is outstanding at the rate
of (a) 120% of the unpaid principal amount of the note plus interest, during the first 90 days the note is outstanding, (b) 125%
of the unpaid principal amount of the note plus interest between days 91 and 120 after the issuance date of the note, (c) 130%
of the unpaid principal amount of the note plus interest between days 121 and 150 after the issuance date of the note, and (d)
135% of the unpaid principal amount of the note plus interest between days 151 and 180 after the issuance date of the note. The
Adar Alef Note may not be prepaid after the 180th day following the issuance date.
Adar
Alef may in its option, convert the outstanding principal and interest on the Adar Alef Note into shares of our common stock at
a conversion price per share equal to 60% of the lowest daily volume weighted average price (“VWAP”) of our
common stock during the 10 days trading days prior to, and including, the date of conversion. The 40% discount discussed above
is automatically increased to 50% in the event we experience a depository trust company ‘chill’ on our common stock.
Additionally, in the event that we are not ‘current’ in our filings with the Securities and Exchange Commission, six
months after the date of the note, the conversion price decreases to the lowest closing bid price of our common stock during the
delinquency period, less the applicable percentage discount discussed above.
The
conversion discount, look back period and other terms of the Adar Alef Note are adjustable on a ratchet basis if the Company offers
any more favorable terms to any other note holder after the date of the Adar Alef Note.
The
Adar Alef Note provides for standard and customary events of default such as failing to timely make payments under the Adar Alef
Note when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements
and the failure to maintain a listing on the OTC Markets. Additionally, upon the occurrence of certain defaults, as described
in the Adar Alef Note, we are required to pay Adar Alef liquidated damages in addition to the amount owed under the Adar Alef
Note (which generally total between an additional 15% and 50% of the principal amount of the note, depending on the reason for
the default).
At
no time may the Adar Alef Note be converted into shares of our common stock if such conversion would result in Adar Alef and its
affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock, which amount may be increased
to 9.9% upon 60 days’ prior written notice.
The
Adar Alef Note also contains customary positive and negative covenants.
We
hope to repay the Adar Alef Note prior to any conversion. In the event that the Adar Alef Note is not repaid in cash in its entirety,
Company shareholders may suffer significant dilution if, and to the extent that, the balance of the Adar Alef Note is converted
into common stock.
The
description of the Adar Alef Note and Subscription Agreement above is not complete and is qualified in its entirety by the full
text of the Adar Alef Note and Securities Purchase Agreement, filed herewith as Exhibits 10.2 and 10.1, respectively,
which are incorporated by reference in this Item 1.01.