Item
1.01 Entry into a Material Definitive Agreement.
AJB
February 2022 Loan Transaction
On
February 24, 2022, The Crypto Company (the “Company”) borrowed funds pursuant to the terms of a Securities Purchase Agreement
(the “Feb. SPA”) entered into with AJB Capital Investments, LLC (“AJB”), and issued a Promissory Note in the
principal amount of $300,000 to AJB (the “Feb. Note”) in a private transaction for a purchase price of $275,000 (giving effect
to an original issue discount). After payment of the fees and costs, the net proceeds to the Company were $257,000, which will be used
for working capital and other general corporate purposes.
The
maturity date of the Feb. Note is August 24, 2022. The Feb. Note bears interest at 10% per year, and principal and accrued interest is
due on the maturity date. The Company may prepay the Feb. Note at any time without penalty. The Company’s failure to make required
payments under the AJB Note or to comply with various covenants, among other matters, would constitute an event of default. Upon an event
of default under the Feb. SPA or the Feb. Note, the Feb. Note will bear interest at 18%, AJB may immediately accelerate the Feb. Note
due date, AJB may convert the amount outstanding under the Feb. 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 Feb 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 Feb. SPA, the Company
paid AJB a commitment fee of 60,000 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 $150,000, 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 Feb. Note off before its maturity date, then the Company may redeem 24,000 of the commitment
fee shares for one dollar. Pursuant to the Feb. SPA, the Company also issued to AJB a common stock purchase warrant (the “warrant”)
to purchase 200,000 shares of the Company’s common stock for $5.25 per share. The warrant expires on February 24, 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 Feb. SPA, Feb. Note and warrant.
The
offer and sale of the Feb. 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.
February
2022 Miner Acquisitions
Effective
February 24, 2022, the Company entered into two separate Purchase Agreement and Bill of Sales to purchase a total of 215 cryptocurrency
miners (each, a “Purchase Agreement”) and closed upon the acquisition. The first Purchase Agreement was entered into with
Bitmine Immersion Technologies, Inc. (“BIT”) whereby the Company agreed to purchase a total of 95 miners for a total purchase
price of $337,500 and the second Purchase Agreement was entered into with Innovative Digital investors, LLC (“IDI”) whereby
the Company agreed to purchase a total of 120 miners for a total purchase price of $696,000. In each case the Company paid one half of
the purchase price at closing (effective February 25, 2022) and the other half of the purchase price is payable in accordance with a
10% unsecured promissory note delivered to each of BIT and IDI. The promissory note delivered to BIT is in the principal amount of $168,750,
is payable in two installment payments, and has a maturity date of May 15, 2022. The promissory note delivered to IDI is in the principal
amount of $348,000, is payable in four installment payments, and has a maturity date of October 15, 2022.