Item
1.01 Entry into a Material Definitive Agreement.
Between
November 22, 2021 and December 2, 2021, American International Holdings Corp (the “Company”, “we”
and “us”) entered into four separate Securities Purchase Agreements (collectively, the “Purchase Agreements”)
with four accredited institutional investors (collectively, the “Investors”), for the sale of convertible promissory
notes in an aggregate principal amount of $2,000,000 (collectively, the “Notes”) and warrants to purchase an aggregate
of 13,333,332 shares of the Company’s common stock (collectively, the “Warrants”). The Purchase Agreements,
Notes, and Warrants are collectively referred to as the “Transaction Documents”). The Company and the Investors closed
the sale of the Notes and Warrants between November 23, 2021 and December 3, 2021. Gross proceeds of $1,800,000 were raised through the
sale of the Notes and Warrants.
J.H.
Darbie & Co., Inc. acted as placement agent for the offering and was paid a total of $188,000 in placement agent fees of which $98,000
was paid in cash and $90,000 was paid in the form of 1,151,678 shares of restricted common stock from the Company.
The
Purchase Agreements
Pursuant
to the Purchase Agreements, the Company is required to use the proceeds of the sale of the Notes for business development and not for
the repayment of any indebtedness owed to officers, directors or employees of the Company or their affiliates (except for certain excepted
payments not to exceed $115,000 under certain of the Purchase Agreements); any loan, credit, or advance to any officers,
directors, employees, or affiliates of the Company; the repayment of any debt issued in corporate finance transactions; any loan to or
investment in any other corporation, partnership, enterprise or other person, except in connection with the Company’s currently
existing operations; or in violation or contravention of any applicable law, rule or regulation. The Company is not permitted to enter
into any public or private offering of the Company’s securities (including convertible securities) with any other investor that
is more favorable in any material respect than the Investor’s rights under the Transaction Documents, unless similar terms are
granted to the Investor, and is prohibited from entering into certain “variable rate transactions” (including the issuance
of convertible securities with a conversion or exercise price that varies with trading prices of the Company’s common stock or
is contingent upon a future event relating to the Company’s business or the market for its common stock, or any agreement to issue
securities at a future determined price) for as long as the Notes are outstanding. The Company is also required to maintain the listing
and trading of its common stock on the principal securities exchange or trading market where such common stock is listed or traded and
timely file all required reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), with a penalty of 1% of the purchase price of the Notes to be paid on the date of any reporting failure
and every thirty days thereafter until such reporting failure is cured. The Company also granted the Investors piggy-back registration
rights (except in connection with underwritten offerings and other customary exceptions) and agreed to indemnify the Investors in connection
with certain violations of the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), in connection
with the piggy-back registration rights. Each Purchase Agreement includes indemnification obligations of the Company and customary representations
and warranties of the Buyers and the Company regarding the purchase and offer and sale of the Notes.
The
Notes
Each
Note contains a 10% original issue discount, matures one year from its date of issue, and accrues interest at a rate of 10% per annum
(16% upon the occurrence of an event of default). The Notes also included expense reimbursements of the Investors in the aggregate amount
of $30,000. The Notes do not provide for fixed installment payments, but each Note provides that upon the Company’s receipt of
cash proceeds from any source, at the Investor’s option, the Company will immediately apply up to 50% of such proceeds to repay
all or any portion of the outstanding principal amount and interest then due under such Note (or up to 100% of the proceeds of any offering
of common stock or common stock equivalents that results in the immediate listing for trading of the Company’s common stock on
a national stock exchange or Nasdaq, and occurs within 220 days from the date the Notes are issued, referred to as an “Uplist
Offering”).
The
Notes (including accrued interest thereon) are convertible into shares of the Company’s common stock at any time after the occurrence
of an event of default under the Notes, the date that an Uplist Offering has been completed or 10 business days after notice of pre-payment
has been provided to the holders by the Company, at a conversion price equal to $0.075 per share; however, if the Company consummates
any Uplist Offering on or before 220 calendar days from the issuance date of the applicable Note, the conversion price thereof will be
equal to 80% of the offering price per share of the Company’s common stock in such Uplist Offering. Each Note contains a requirement
for the Company to reserve a number of shares of common stock equal to the greater of: (i) two times the number of shares of common stock
then issuable upon conversion of such Note or (ii) a fixed number of shares of common stock which equal two times the initial number
of shares issuable upon conversion of the Note. Each Note provides for a reduction of the conversion price to match the price per share
of any dilutive issuance made while the Note is outstanding (other than pursuant to certain customary excepted issuances), provided that
no adjustment is required unless the Company fails to consummate an Uplist Offering on or before 220 calendar days after the issuance
date of the Note, provided that if such Uplist Offering is not completed within such 220 calendar day period, the conversion price is
adjusted for any dilutive issuance which occurred during such 220 calendar day period. The conversion price of the Notes may be adjusted
upon the occurrence of certain events, such as a merger, consolidation, exchange of shares, recapitalization, reorganization, or similar
events.
The
Notes have priority over all unsecured indebtedness of the Company, and while the Notes are outstanding, the Company is prohibited from
incurring any unsecured indebtedness that is senior to or pari passu with the Notes, paying or declaring any dividend or other distribution
on shares of capital stock other than dividends in kind and distributions pursuant to any shareholders’ rights plan which is approved
by a majority of the Company’s disinterested directors, selling, leasing or otherwise disposing of any significant portion of its
assets outside the ordinary course of business and from lending money, giving credit, making advances to or entering into any transaction
with any person, firm, joint venture or corporation (other than transactions in existence prior to the issuance of the Notes of which
the Investors have been informed in writing prior to closing, transactions with unaffiliated third parties in the ordinary course of
business, transactions with unaffiliated third parties not in excess of $100,000).
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’s) holdings in the Company to exceed 4.99% of the Company’s issued and outstanding
shares of common stock. The Notes contain customary events of default, which include failure by the Company to maintain a market capitalization
of at least $2,000,000 on any trading day; the suspension, trading halt, or delisting of the Company’s common stock on the principal
securities exchange or trading market on which the Company’s common stock is listed or traded; final judgments equal to or greater
than $100,000 rendered against the Company; failure to consummate an Uplist Offering within 220 calendar days after the issue date of
each Note; and the Company’s failure to comply with the reporting obligations of the Exchange Act. Upon the occurrence of an event
of default, the amount of each Note increases by 125% (including principal and accrued interest) and is immediately due and payable.
The Company has the right to prepay the Notes by paying 110% of the principal and interest thereon at any time (provided we are required
to provide the holders 10 trading days’ prior written notice of such repayment), plus $750 per note holder for administrative fees.
The
Warrants
The
Warrants have a term of five years, and are exercisable beginning 90 days after the issuance date, and an exercise price of $0.075 per
share; however, if the Company consummates any Uplist Offering on or before 180 calendar
days from the grant date of the Warrants, the exercise price will be equal to 120% of the offering price per share of the Company’s
common stock in such Uplist Offering. If the exercise price is lower than the highest traded price of the Company’s common stock
during the 150 trading days prior to the date of exercise and the shares underlying the Warrants are not registered, the Warrants may
be exercised via cashless exercise (with the formula for such cashless exercise being set forth in the Warrants, and based on such highest
traded price within the last 150 days). The exercise price and the number of shares underlying the Warrant will be adjusted to account
for any dividend or distribution by the Company to the holders of its common stock. Each Warrant provides for a reduction of the exercise
price to match the price per share of any dilutive issuance made while the Warrant is outstanding (other than in connection with stock
plan issuances and other customary exceptions). Such reduction of the exercise price will not apply to the Uplist Offering if the Uplist
Offering is consummated on or before 180 calendar days after the grant date of the Warrant.
The exercise price of the Warrants is subject to customary adjustment upon the occurrence of certain events, such as a subdivision (by
any stock split, stock dividend, recapitalization or otherwise) of the Company’s common stock.
Each
Warrant contains a requirement for the Company to reserve two times the number of shares of common stock issuable upon the exercise of
such Warrant. If the Company undertakes certain fundamental transactions (such as certain mergers, exchanges, or the sale of substantially
all of the Company’s assets) while the Warrants are outstanding, the Investors will have the right to receive any consideration
received by the record holders of the Company’s common stock as a result of such fundamental transaction and the exercise price
of the Warrants will be adjusted to account for such additional consideration. 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 4.99% of the Company’s issued and outstanding shares of common stock.
Disclaimers
Regarding the Transaction Documents
The
representations, warranties, covenants, and agreements contained in the Purchase Agreements and the other Transaction Documents were
made solely for the benefit of the parties to the Purchase Agreements and such other Transaction Documents. In addition, such representations,
warranties, covenants, and agreements (i) are intended as a way of allocating the risk between the Company and the Investors 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, Warrant and Note 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 Transaction Documents, which subsequent information may or may
not be fully reflected in public disclosures.
The
foregoing descriptions of the Purchase Agreements, Notes, and Warrants are not complete, and qualified in their entirety by the full
text of such agreements, attached hereto as Exhibits 10.1, 10.2, and 10.3 hereto, which are incorporated by reference herein.