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Item 1.01.
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement, Convertible
Promissory Note and Warrant with Auctus Fund, LLC.
On October 24, 2019, Ozop Surgical Corp.
a Nevada corporation (the “Company”) entered into a securities purchase agreement (the “Auctus SPA”) with
Auctus Fund, LLC, a Delaware limited liability company (the “Investor”), pursuant to which the Company agreed to issue
to the Investor a 12% secured convertible promissory note (the “Auctus Note”) in the aggregate principal amount of
$225,000 in exchange for a purchase price of $225,000.
Pursuant to the Auctus SPA, the Company
agreed to pay the Investor $20,000 to cover the Investor’s due diligence expenses incurred in connection with the SPA and
Auctus Note, which is to be offset against the proceeds of the Auctus Note. The Auctus Note was funded on October 31, 2019, when
the Company received proceeds of $192,927, after disbursements for the Company and lender transaction costs, fees and expenses
of $12,073 to cover transactional expenses in connection with the sale of the Auctus Note, which were included in the principal
amount of the Auctus Note. The proceeds will be used by the Company for working capital, redemption of certain convertible notes
and other general corporate purposes. Pursuant to the SPA, the Company agreed not to conduct any equity financing (or debt financing
with an equity component) (the “Future Offering”), other than excepted issuances as set forth in the SPA, during the
period beginning on the closing date of the SPA and ending 12 months following such date, without first giving the Investor notice
of the Future Offering and allowing the Investor the option to purchase the securities being offered in the Future Offering on
the same terms as contemplated by such Future Offering. The SPA includes customary representations, warranties and covenants by
the Company and customary closing conditions.
The Auctus Note matures on October 24,
2020. Additionally, the Company agreed, pursuant to the Auctus Note, that so long as any funds are owed by the Company under the
Auctus Note, that the Company will not incur “indebtedness,” as such term is defined in the Note, that is senior to
the Note.
The Auctus Note is convertible into
shares of the Company’s common stock, $0.001 par value per share, at any time beginning from the issuance date of the Auctus
Note, at a conversion price equal to the lesser of (i) $0.05, and (ii) 58% of the average of the 2 lowest trading prices during
the 20 trading days prior to the conversion date. The conversion price of the Auctus Note is subject to proportional adjustment
in the event of stock splits, stock dividends, rights offerings by us relating to our securities or the securities of any our
subsidiaries, combinations, recapitalization, reclassifications, extraordinary distributions, and similar events. The Auctus Note
contains a beneficial ownership limitation providing that the Investor may not convert the Auctus Note to the extent that such
conversion would result in the Investor’s beneficial ownership being in excess of 4.99% of the Company’s issued and
outstanding common stock together with all shares owned by the Investor and its affiliates.
We may prepay in full the unpaid principal
and interest on the Auctus Note in 90, 180, 210, 240, 270, 300, or 330 days following the issue date, through 1 business day prior
to the maturity date. The pre-payment amount is based on the then-outstanding principal at the time of payment plus accrued and
unpaid interest multiplied by 120%, 130%, 135%, 140%, 145%, 150%, 155% and 160% respectively. After the date which is one business
day prior to the maturity date, the Company shall have no right of prepayment.
In connection with the Auctus Note,
and pursuant to the SPA, the Company agreed to issue to the Investor, a warrant (the “Auctus Warrant”) to purchase
3,750,000 shares of the Company’s common stock as a commitment fee. The Warrant has a term of five (5) years and an exercise
price of $0.03, subject to adjustments.
The foregoing descriptions
of the Auctus SPA, the Auctus Note, and the Auctus Warrant, do not purport to be complete and are qualified in their entirety by
reference to the full text of those agreements, which are filed as Exhibits 10.1, 10.2 and 10.3. respectively, to this Current
Report on Form 8-K and incorporated by reference herein.
Convertible Promissory Note with Carebourn Capital,
L.P.
On October 24, 2019, the Company entered
into a securities purchase agreement (the “Carebourn SPA”) with Carebourn Capital, L.P., a Delaware limited liability
partnership (“Carebourn”), pursuant to which the Company agreed to issue to Carebourn a 12% secured convertible promissory
note, (the “Carebourn Note”) in the aggregate principal amount of $248,400 in exchange for a purchase price of $248,400.
The Note bears interest at the rate of 12% per annum and is due and payable on October 25, 2020. The Carebourn Note had an original
issue discount of $32,400. The Carebourn Note was funded on October 25, 2019, when the Company received proceeds of $200,000, after
disbursements for the lender’s transaction costs, fees and expenses of $16,000 to cover Carebourn’s transactional expenses
in connection with the sale of the Carebourn Note, which were included in the principal amount of the Carebourn Note. Periodic
payments are due by us on the Carebourn Note at the rate of $250 per day via direct withdrawal from our bank account. The proceeds
of the Carebourn Note will be used by the Company for working capital, redemption of certain convertible notes and other general
corporate purposes.
The Carebourn
Note provides for standard and customary events of default such as failing to timely make payments under the Carebourn Note when
due, the failure of the Company to timely comply with the Securities Exchange Act of 1934, as amended, reporting requirements and
the failure to maintain a listing on the OTC Markets. Additionally, upon the occurrence of certain defaults, as described in the
Carebourn Note, we are required to pay Carebourn liquidated damages in addition to the amount owed under the Note.
The principal amount of the Carebourn
Note and all accrued interest thereon is convertible at the option of the holder thereof into our common stock at any time following
the date the Carebourn Note was issued. The conversion price of the Carebourn Note is equal to 60% of the lowest price quoted on
the OTC Markets for the Company’s common stock during the 25 trading days prior to the conversion date. The conversion price
of the Carebourn Note is subject to proportional adjustment in the event of stock splits, stock dividends, rights offerings by
us relating to our securities or the securities of any our subsidiaries, combinations, recapitalization, reclassifications, extraordinary
distributions, and similar events. The Carebourn Note contains a beneficial ownership limitation, waivable by Carebourn, providing
that Carebourn may not convert the Carebourn Note to the extent that such conversion would result in Carebourn’s beneficial
ownership being in excess of 4.99% of the Company’s issued and outstanding common stock together with all shares owned by
Carebourn and its affiliates.
We may prepay
in full the unpaid principal and interest on the Carebourn Note, with at least 3 trading days’ notice, (a) any time prior
to the 180th day after the issuance date, by paying 130% of the principal amount of the Carebourn Note together with accrued interest
thereon; and (b) any time beginning on the 181st day after the issuance date and ending on the 364th day after the issuance date,
by paying 150% of the principal amount of the Carebourn Note together with accrued interest thereon. After the expiration of the
364th day after the issuance date, we have no right of prepayment.
In the event
we receive any third party offer to provide us funding while the note is outstanding, we are required to offer Carebourn a right
of first refusal to provide such funding on the terms offered by the third party. We also agreed that if we provide any financing
source more favorable terms than Carebourn under the note while the note is outstanding that the Carebourn note would, at the option
of Carebourn, be amended to include such more favorable terms.
The foregoing
descriptions of the Carebourn SPA and the Carebourn Note do not purport to be complete and are qualified in their entirety by reference
to the full text of those agreements, which are filed as Exhibits 10.4 and 10.5, respectively, to this Current Report on Form 8-K
and incorporated by reference herein.
The Company will utilize
approximately $200,000 of the proceeds received from the Auctus and Carebourn Notes to redeem and pay in full convertible notes
that would have been eligible to convert to free trading stock within the first week of November.