Item
1.01.
|
Entry
into a Material Definitive Agreement
|
Auctus
Fund, LLC Promissory Note
LGBTQ
Loyalty Holdings, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “SPA”), dated
August 11, 2020 and effective August 11, 2020 (the “Issuance Date”), by and between the Company and Auctus Fund, LLC
(“Auctus”), pursuant to which Auctus purchased from the Company, for a purchase price of $150,000 (the “Purchase
Price”): (i) a Convertible Promissory Note in the principal amount of $150,000.00 (the “Note”); (ii) a common
stock purchase warrant permitting Auctus to purchase up to 7,500,000 shares of the Company’s common stock, par value $0.001
per share (the “Common Stock”), at an exercise price of $0.015 per share (the “Warrant A”); and (iii)
a common stock purchase warrant permitting Auctus to purchase up to 7,500,000 shares of the Company’s Common Stock at an
exercise price of $0.015 per share (the “Warrant B”) and together with the Warrant A, the “Warrants”,
and together with the Note, the “Securities”).
The
Note accrues interest at a rate of twenty-four percent (12%) per annum and matures on August 11, 2021 (the “Maturity Date”).
If the Company prepays the Note, the Company shall pay all of the principal and interest, together with a prepayment penalty of
the maximum amount permitted under law from the due date thereof until the same is paid. The Note contains customary events of
default (each an “Event of Default”). If an Event of Default occurs, liquidated damages of five percent (5%) of the
outstanding amount of the Note per day plus accrued and unpaid interest on the Note, prorated for partial months, will become
immediately due and payable in cash or Common Stock at Auctus’ election. Any outstanding obligations owing under the Note
which is not paid when due shall bear interest at the rate of twenty four percent (24%) per annum.
The
Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein. The conversion
price (the “Conversion Price”) shall be the “Market Price” which is defined as the volume weighted average
price for the Common Stock during the five (5) trading day period ending on the latest complete trading day prior to the conversion
date. The conversion price may also be adjusted downward if, within the 3 days following the transmittal of a conversion notice,
the Company’s common stock has a closing bid which is equal to or more than 5% less than the conversion price set forth
in the conversion notice. Additional discounts to the conversion price and penalties will apply if certain events occur, including
failure to timely deliver conversion shares, if conversion shares are not deliverable by DWAC, or if the Company’s stock
is subject to a DTC chill. While the Note is outstanding, the Company may not enter into any variable rate debt transactions in
an amount greater than $300,000 without the consent of Auctus. For all shares of common stock issuable upon conversion of the
Note, Auctus is entitled to “piggy-back” registration rights in connection with any future registration statement
the Company may file.
The
“Exercise Period” of each Warrant shall be from the date of issuance through the five year anniversary of the date
of issuance. Further, in the event that the Market Price is greater than the Exercise Price contained in the Warrant, then the
Holder may exercise the Warrant on a cashless basis, as more fully detailed in the Warrant. Moreover, so long as there is no Event
of Default under the SPA, the Note or any other Transaction Documents, the Holder shall not, without the Company’s written
consent, exercise Warrant B, in whole or in part.
Item
1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of the SPA, the Note, and the
Warrants, and does not purport to be a complete description of the rights and obligations of the parties thereunder, and such
descriptions are qualified in their entirety by reference to the full text of the SPA, the Note, and the Warrants, which are attached
as Exhibits 10.1, 10.2, 10.3, respectively, to this Current Report on Form 8-K, and are incorporated herein by reference.