Item
1.01 Entry into a Material Definitive Agreement.
AJB
Capital Investments Loan
Effective
January 13, 2022, The Crypto Company (the “Company”) borrowed funds pursuant to the terms of a Securities Purchase Agreement
(the “AJB SPA”) entered into with AJB Capital Investments, LLC (“AJB”), and issued a Promissory Note in the principal
amount of $750,000 (the “AJB Note”) to AJB in a private transaction for a purchase price of $675,000 (giving effect
to a 10% original issue discount). In connection with the sale of the AJB Note, the Company also paid certain fees and due diligence
costs of AJB and brokerage fees to J.H. Darbie & Co., a registered broker-dealer. After payment of the fees and costs, the
net proceeds to the Company were $655,250, which will be used for working capital, to fund potential acquisitions or other forms of strategic
relationships, and other general corporate purposes.
The
maturity date of the AJB Note is July 12, 2022, but it may be extended for six months upon the consent of AJB and the Company.
The AJB Note bears interest at 10% per year, and principal and accrued interest is due on the maturity date. The Company may prepay the
AJB Note at any time without penalty. Under the terms of the AJB Note, the Company may not sell a significant portion of its assets without
the approval of AJB, may not issue additional debt that is not subordinate to AJB, must comply with the Company’s reporting requirements
under the Securities Exchange Act of 1934, and must maintain the listing of the Company’s common stock on the OTC Market or other
exchange, among other restrictions and requirements. The Company’s failure to make required payments under the AJB Note or to comply
with any of these covenants, among other matters, would constitute an event of default. Upon an event of default under the AJB SPA or
AJB Note, the AJB Note will bear interest at 18%, AJB may immediately accelerate the AJB Note due date, AJB may convert the amount outstanding
under the AJB Note into shares of Company common stock at a discount to the market price of the stock, and AJB will be entitled to its
costs of collection, among other penalties and remedies.
The
Company provided various representations, warranties, and covenants to AJB in the AJB SPA. The Company’s breach of any representation
or warranty, or failure to comply with the covenants would constitute an event of default. Also pursuant to the AJB SPA, the Company
paid AJB a commitment fee of 125,000 unregistered shares of the Company’s common stock (the “commitment fee shares”).
If, after the sixth month anniversary of closing and before the thirty-sixth month anniversary of closing, AJB has been unable to sell
the commitment fee shares for $375,000, then the Company may be required to issue additional shares or pay cash in the amount of the
shortfall. However, if the Company pays the AJB Note off before July 12, 2022, then the Company may redeem 62,500 of the commitment fee
shares for one dollar. Pursuant to the AJB SPA, the Company also issued to AJB a common stock purchase warrant (the “warrant”)
to purchase 500,000 shares of the Company’s common stock for $5.25 per share. The warrant expires on January 12, 2025. The warrant
also includes various covenants of the Company for the benefit of the warrant holder and includes a beneficial ownership limitation on
the holder that, in certain circumstances, may serve to restrict the holder’s right to exercise the warrant. The Company also entered
into a Security Agreement with AJB pursuant to which the Company granted to AJB a security interest in substantially all of the Company’s
assets to secure the Company’ obligations under the AJB SPA, AJB Note and warrant.
The
offer and sale of the AJB Note and the warrant was made in a private transaction exempt from the registration requirements of the Securities
Act of 1933, as amended (the “Securities Act”), in reliance on exemptions afforded by Section 4(a)(2) of the Securities Act
and Rule 506(b) of Regulation D promulgated thereunder.
Sixth
Street Lending Loan
Effective
January 18, 2022, the Company borrowed funds pursuant to a Securities Purchase Agreement (the “Sixth Street SPA”) entered
into with Sixth Street Lending, LLC (“Sixth Street”) and issued a Promissory Note in the principal amount of $116,200 (the
“Sixth Street Note”) to Sixth Street in a private transaction to for a purchase price of $103,750 (giving effect to an original
issue discount). The Company agreed to various covenants in the Sixth Street SPA. After payment of the fees, the net proceeds to the
Company were $100,000, which will be used for working capital and other general corporate purposes.
The
Sixth Street Note has a maturity date of January 13, 2023 and the Company has agreed to pay interest on the unpaid principal balance
of the Sixth Street Note at the rate of twelve percent (12.0%) per annum from the date on which the Sixth Street Note was issued until
the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. Payments are due monthly, beginning
in the end of February 2022. The Company has the right to prepay the Sixth Street Note in accordance with the terms set forth in the
Sixth Street Note.
Following
an event of default, and subject to certain limitations, the outstanding amount of the Sixth Street Note may be converted into shares
of Company common stock. Amounts due under the Sixth Street Note would be converted into shares of the Company’s
common stock at a conversion price equal to 75% of the lowest trading price with a 10-day
lookback immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an event of default
the Sixth Street Note will become immediately due and payable and the Company shall pay to Sixth Street, in full satisfaction of its
obligations thereunder, additional amounts as set forth in the Sixth Street Note. In no event may Sixth Street effect a conversion if
such conversion, along with all other shares of Company common stock beneficially owned by Sixth Street and its affiliates would exceed
4.99% of the outstanding shares of Company common stock.
The
offer and sale of the Sixth Street Note to Sixth Street was made in a private transaction exempt from the registration requirements of
the Securities Act in reliance on exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated
thereunder.