ITEM 1.01 Entry into a Definitive Material Agreement
On June 25, 2019, Jacksam Corporation (the “Company”), entered into a Securities Purchase Agreement (the “Agreement”) with the following persons or entities (each a “Purchaser” and, collectively, the “Purchasers”): L1 Capital Global Opportunities Master Fund, Phyto II, LP, Merida Capital Partners III, LP, James Kenny, William Sanger, Wilson Allen, Paul D. Kaneb, Jerald Lanzotti, Mark Adams and David Hall.
Under the terms of the Agreement, the Company sold (i) senior secured convertible promissory notes in varying denominations to the Purchasers in an aggregate principal amount of $2,388,888.85 (the “Notes”) and (ii) warrants (the “Warrants”) to purchase up to an aggregate of 3,685,714 shares of the Company’s common stock, par value $0.001 per share.
The Notes were issued at a discount of 10% to the total face principal amount of $2,3888,888.85, resulting in gross proceeds to the Company at closing of $2,150,000. The Notes bear interest at a rate of 15.0% per annum until maturity, the entirety of which was prepaid by the Company at the time of closing in a total amount of $358,333. The principal balance of $2,3888,888.85 on the Notes is due and payable March 25, 2020, unless sooner accelerated by reason of a material default by the Company or unless converted prior to maturity. Each of the Notes is convertible at the option of the holder into our common stock at a conversion price of $0.35 per share, subject to customary adjustments including subsequent dilutive issuances by the Company. The Company’s obligations under the Notes are secured by a first priority security interest in all assets of the Company.
The Warrants entitle the holders, at any time during the five year period following issuance, to purchase up to an aggregate of 3,685,714 shares of our common stock at an exercise price of $0.35 per share, subject to customary adjustments including subsequent dilutive issuances by the Company.
The foregoing description of the terms of the Agreement, the Notes, the Warrants and the related security agreements is qualified in its entirety by reference to the full text of the agreements, the final forms of which are filed herewith and incorporated herein by this reference.
The Purchasers include Mark Adams, our Chief Executive Officer, President, and a member of our board of Directors. Mr. Adams paid $250,000 to purchase a Note in the principal amount of $277,777.77 and a Warrant that entitles him to purchase up to 428,571 shares of our common stock. At closing, the Company prepaid interest in the amount of $41,666.67 to Mr. Adams on his Note.
The Purchasers also include David Hall, our Executive Vice President of Sales. Mr. Hall agreed to pay $100,000 to purchase a Note in the principal amount of $111,111.11 and a Warrant that entitles him to purchase up to 171,429 shares of our common stock. Upon receiving the purchase price for the Note and Warrant from Mr. Hall, the Company will prepay interest in the amount of $16,666.67 to Mr. Hall on his Note.
The Company paid a financial advisory fee of $110,000.00 to a financial advisor (the “Financial Advisor”), a licensed broker-dealer with FINRA, at closing.
Total proceeds to the Company, net of original issue discount, prepaid interest on the Notes, the advisory fee to the Financial Advisor, legal fees of Purchasers, and other related expenses were $1,668,819. As of the filing of this Current Report, the Company has yet to receive $208,333.34 of the total net proceeds from the closing, comprised of the anticipated net proceeds from sales to Mr. Hall and Mr. Sanger.