Item
8.01. Other Matters
As
previously reported on a Form 8-K filed on May 24, 2019, on May 23, 2019, the Parties agreed to an omnibus resolution to these
outstanding matters and entered into an Exchange Agreement and a Side-Letter Agreement as described below:
Exchange
Agreement Under the Exchange Agreement, the Investor exchanged all of its rights under the original securities issued
in the May 2015 Private Placement including: i. Convertible Note subject to the Optional Offset with a current balance of $2,197,231.00,
ii. Related accrued interest under the Convertible Note with a balance of $26,107.52 as of March 31, 2019, iii. Warrant to purchase
1,800,000 common shares (post-split basis), iv. Related Securities and Pledge Agreement, v. Related Guarantee Agreement and the,
vi. Related Registration Rights Agreement) (the “Original Securities”) for 605,816 fully paid and nonassessable shares
of the Company’s common stock, par value $0.0001.
Side-letter
Agreement Concurrent with the Exchange Agreement described above the parties also entered into a side-letter
agreement (the “Side-Letter Agreement”). The Side-Letter Agreement provides that on November 23, 2019, the
Company will, if required if required under the Side-letter Agreement, issue additional shares of common stock to the
Investor based on an increase in the fully-diluted shares outstanding (as defined below) of the Company from the date of the
Side-Letter Agreement’s execution to its six-month anniversary (the “True-Up Shares”). The issuance of the
True-Up Shares, if any, shall provide the Holder with rights to acquire additional shares to be calculated according to the
following formula:
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A-B=
Aggregate Number of Rights Shares
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A = 9.99% of shares
of Common Stock outstanding on the Six-Month Anniversary (calculated based on the Number of Fully-Diluted Shares Outstanding
(as defined below))
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B = The shares of
Common Stock Issued to the Purchaser contemporaneously with the Agreement
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For
the purposes of this Side-Letter Agreement, “Number of Fully-Diluted Shares Outstanding” means, as of any time of
determination, the sum of (i) the aggregate number of issued and outstanding shares of common stock as of such time of determination,
(ii) the aggregate maximum number of shares of common stock issuable on an as-converted and as-exchanged basis, as applicable
(excluding any exercise of warrants to purchase Common Stock and all Rights issued pursuant to the Agreement), pursuant to all
capital stock and all other securities of the Company or any of its Subsidiaries (excluding any warrants to purchase common stock
and all rights to acquire common shares issued pursuant to the Side-Letter Agreement) outstanding as of such time of determination
(or issuable pursuant to agreements in effect as of such time).
Notwithstanding
the foregoing, if any warrants to purchase common stock are outstanding (or issuable upon conversion or exchange of securities
outstanding) as of the six-month anniversary of the Side-Letter Agreement (each, an “Outstanding Warrant”), on such
six-month anniversary the Company shall issue the Investor an additional right to acquire a warrant (the “New Warrant”)
exercisable into 9.99% of the shares of common stock issuable upon exercise of all Outstanding Warrants as of the six-month anniversary
(the “New Warrant Shares”). The New Warrant Shares shall be of like tenor to the Outstanding Warrants.
Consistent
with the developments above, effective November 23, 2019 the parties finalized the reconciliation pursuant to the Side-Letter
Agreement described below and the related issuance of the True-Up Shares. Pursuant to the provisions of the Side-letter Agreement
the parties agreed to the issuance of 567,348 common shares, par value $0.0001 per share and the issuance of a warrant to purchase
61,380 common shares at an exercise price of $0.50 per share and an expiration date of June 19, 2026.
Under
the Side-letter Agreement, the Company has agreed that it will not raise capital through May 23, 2020 at a price that is below
$0.10 per share (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) without
the Investor’s consent.