Item
1.01 Entry into a Material Definitive Agreement.
On
January 6, 2021 (the “Closing Date”), American International Holdings Corp (the “Company”,
“we” and “us”) closed the transactions contemplated by a Securities Purchase Agreement dated
January 6, 2021 (the “Purchase Agreement”), which was entered into with a group of accredited institutional
investors (collectively, the “Investors”), for the sale of convertible promissory notes.
Pursuant
to the Purchase Agreement, the Company agreed to sell 6% Original Issue Discount Senior Secured Convertible Promissory Notes in
an aggregate principal amount of $1,450,000 (the “Notes”) and warrants to purchase up to an aggregate of 6,750,000
shares of the Company’s common stock (the “Warrants”) to the Investors and entered into a Security Agreement,
a Guaranty Agreement, a Pledge Agreement, and a Registration Rights Agreement (the foregoing, collectively with the Purchase Agreement,
Notes and Warrant, the “Transaction Documents”). The Purchase Agreement includes indemnification obligations
of the Company, requirements for the Company to reserve three times the number of shares of common stock issuable upon conversion
of the Notes and exercise of the Warrants, the right of the Investors to participate up to 30% in any future equity or debt offering
made by the Company in the 12 months after the Closing Date, a prohibition on the Company selling any shares of common stock or
common stock equivalents until 30 days after the Closing Date, subject to certain exceptions, a one year prohibition on the Company
entering into any equity line transaction or variable rate transaction (including convertible notes with adjustable conversion
prices), and a one year prohibition, without the approval of the Investors, of a reverse or forward stock split.
A
total of $850,000 in Notes (the “First Tranche Notes”) were sold on the Closing Date, and a total of $600,000
in Notes (the “Second Tranche Notes”), are required to be purchased by the Investors 50 days after the effective
date of a Registration Statement filed by the Company with the Securities and Exchange Commission to register the resale of the
shares of common stock issuable upon exercise of the Warrants, subject to certain other closing conditions, including, the Company
maintaining at least a $0.12 per share stock price and $50,000 per day trading volume (each during the 10 prior trading days prior
to the second closing), and that prior to the trading day before the closing date for the sale of the Second Tranche Notes, the
outstanding balance of principal and interest due under the Notes which would be outstanding immediately after the closing of
the sale of the Second Tranche Notes, do not exceed 15% of the market capitalization of the Company. In connection with the sale
of the First Tranche Notes, the Company paid $25,000 of the Investors’ legal fees and certain other amounts in expense reimbursements.
The
Company plans to use a portion of the proceeds from the sale of the Notes to fully repay its outstanding convertible debentures
held by Geneva Roth Remark Holdings, Inc., LGH Investments, LLC, JSJ Investments, LLC, and Quick Capital, LLC.
The
First Tranche Notes mature on January 7, 2022 and accrue interest at a rate of 6% per annum (15% upon the occurrence of an event
of default) payable to the Investors in cash on a calendar quarterly basis (which changes to monthly upon the occurrence of an
event of default). Each of the Notes contained a 6% original issue discount.
The
First Tranche Notes are convertible into shares of the Company’s common stock at any time, at a rate equal to the lesser
of (i) $0.50 per share and (ii) 75% of the lowest daily volume-weighted average price (VWAP) of the Company’s common stock
during the seven consecutive trading days prior to the delivery of a conversion notice (the “Market Price”),
but not less than 75% of the VWAP on the Closing Date. The Second Tranche Notes are convertible into shares of the Company’s
common stock at a rate equal to the lesser of (1) the VWAP on the closing date of the Second Tranche Notes or (2) the Market Price,
but not less than 75% of the VWAP on the Second Tranche closing date. However, if while any Notes are outstanding and the daily
VWAP on any of seven consecutive trading days is less than the applicable floor price(s), such floor price(s) are reduced (but
not increased) to 75% of the VWAP on the seventh trading day.
The
conversion price of the Notes may be adjusted upon the occurrence of certain events and the Notes may be declared immediately
due and payable by the Investors in the event the Company defaults on any terms of the Notes or the other Transaction Documents.
Additionally, at the option of the Investors, upon the occurrence of any event of default, the Investors can elect to convert
the Notes at the lower of the stated conversion price and a conversion price equal to 70% of the lowest closing bid price of the
common stock during the 10 consecutive trading day period ending and including the date of delivery or deemed delivery of any
applicable conversion notice (the “Alternative Conversion Price”). The Notes contain penalties for the Company’s
failure to timely deliver shares due upon conversion thereof. The Notes contain provisions limiting each Investor’s ability
to convert any portion of its individual Note if such conversion would cause the Investor’s (or any affiliate of any such
Investor) holdings in the Company to exceed 9.99% of the Company’s issued and outstanding shares of common stock. The Notes
contain customary events of default, which include any default of $30,000 of more of indebtedness of the Company, final judgements
equal to or greater than $75,000 rendered against the Company, and the Company’s failure to comply with the reporting obligations
of the Securities Exchange Act of 1934, as amended. Upon the occurrence of an event of default, at the option of the holder thereof,
the amount of the Note increases by 110% (including principal and accrued interest) (plus 2% additional for each event of default
that occurs thereafter). The Notes contain certain rights of the holders thereof upon the occurrence of a change of control or
fundamental transaction, each as described in greater detail therein.
The
Warrants are exercisable at various prices with (i) Warrants to purchase 2,250,000 shares of common stock exercisable at $0.20
per share, (ii) Warrants to purchase 2,250,000 shares of common stock exercisable at $0.35 per share, and (iii) Warrants to purchase
2,250,000 shares of common stock exercisable at $0.50 per share. All of the Warrants may be exercised via cashless exercise in
the event that the shares underlying the Warrants are not registered within 180 days of the closing of the transaction. The Warrants,
if not exercised by such date, terminate on January 7, 2026. The Warrants contain provisions limiting each Investor’s ability
to exercise the Warrants if such exercise would cause the Investor’s (or any affiliate of any such Investor) holdings in
the Company to exceed 9.99% of the Company’s issued and outstanding shares of common stock. The Warrants are only exercisable
by each applicable Investor if such Investor purchases its applicable Second Tranche Note. We may prepay the Notes (provided we
treat all Note holders equally) by paying 110% of the principal and interest thereon at any time (provided we are required to
provide the holders 15 days prior written notice of such repayment, and during which time period the holder may convert the Note
into common stock). Unless the Company’s common stock is listed on the NYSE, the NYSE American, the Nasdaq Capital Market,
Nasdaq Global Market or Nasdaq Global Select, at any time the Company issues common stock or common stock equivalents, subject
to certain exceptions, below the then exercise price, the exercise price of the Warrants reset to the lower of such dilutive issuance
or the VWAP on the next trading day following the first public disclosure of such dilutive issuance. Upon an event of default,
the exercise price of the Warrants, at the option of the Investors, is the Alternative Conversion Price. If the Company undertakes
a fundamental transaction and the successor entity is not a publicly-traded company, the holders of the Warrants have the right
to require the Company to pay the greater of (a) the Black Scholes Value of the warrants; and (b) the positive difference between
the consideration payable in such fundamental transaction minus the exercise price.
Pursuant
to the Security Agreement, the Company and each of its subsidiaries provided the Investors a first priority security interest
in substantially all of their assets to secure the repayment of the Notes.
The
Subsidiary Guaranty, signed by each of the Company’s subsidiaries, provides for joint and several guaranties of the obligations
set forth in the Notes by each of the Company’s subsidiaries. Each future subsidiary of the Company is required to enter
into a joinder to the agreement as well.
Pursuant
to the Pledge Agreement, we pledged all of the outstanding securities of each of our subsidiaries to the collateral agent of the
Investors in order to secure amounts payable pursuant to the Notes.
In
connection with the Registration Rights Agreement, we provided the Investors registration rights in connection with the Notes
and Warrants, and agreed to (1) file a Registration Statement on Form S-1 within 21 days after the Closing Date to register the
common stock to be acquired by the Investors pursuant to the conversion of the Notes and exercise of the Warrants and any other
shares of common stock subsequently acquired by the Investors, and granted the Investors piggy-back registration rights. We also
agreed to indemnify the Investors in connection with any liability in connection with the registration of such securities.
The
Transaction Documents contain other representations, warranties, covenants and restrictions common with this type of transaction,
including but not limited to, most favored nations provisions (which apply to the conversion price of the Notes, the terms of
the Notes and the terms of the Warrants) and future participation clauses, and prohibitions on further borrowing.
The
representations, warranties, covenants and agreements contained in the Purchase Agreement and Warrants were made solely for the
benefit of the parties to the Purchase Agreement and Warrants. In addition, such representations, warranties, covenants and agreements
(i) are intended as a way of allocating the risk between the parties to the Purchase Agreement and Warrants and not as statements
of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by shareholders
of, or other investors in, the Company. Accordingly, the form of Purchase Agreement and forms of the Warrant are filed with this
report only to provide investors with information regarding the terms of transaction, and not to provide investors with any other
factual information regarding the Company. Shareholders should not rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning
the subject matter of the representations and warranties may change after the date of the Purchase Agreement and Warrants, which
subsequent information may or may not be fully reflected in public disclosures.
The
foregoing descriptions of the Purchase Agreement, Notes, Warrants, Security Agreement, Pledge Agreement, Registration Rights Agreement
and Subsidiary Guaranty Agreement, are not complete, and qualified in their entirety by the full text of such agreements, attached
hereto as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.7, hereto, which are incorporated by reference herein.