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Item 1.01.
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Entry into a Material Definitive Agreement.
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Issuance of Commitment Fee Shares, Note, Warrants,
and Series D Preferred Shares
On July 23, 2021, SmartMetric, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Purchase Agreement”) with AJB Capital Investments, LLC (the “Investor”)
with respect to the sale and issuance to the Investor of: (i) a commitment fee in the amount of $250,000 in the form of 12,500,000 shares
(the “Commitment Fee Shares”) of the Company’s common stock (the “Common Stock”), (ii) a promissory note
in the aggregate principal amount of $300,000 (the “Note”), (iii) Common Stock Purchase Warrants to purchase up to an aggregate
of 10,000,000 shares of the Common Stock (the “Warrants”), and (iv) 5,000 shares of the Company’s Series D Convertible
Preferred Stock (the “Series D Shares”). The Note and Warrants were issued on July 23, 2021 (the “Original Issue
Date”).
Pursuant to the terms of the
Purchase Agreement, the Commitment Fee Shares were issued at a value of $250,000, the Note was issued in a principal amount of $300,000
for a purchase price of $270,000, resulting in an original issue discount of $30,000; the Warrants were issued, with an initial exercise
price of $0.05 per share, subject to adjustment as described herein; and 5,000 Series D Shares were issued. The aggregate cash subscription
amount received by the Company from the Investor for the issuance of the Commitment Fee Shares, Note and Warrants was $253,000, due to
a reduction in the $270,000 purchase price as a result of broker, legal, and transaction fees. This summary is not a complete description
of all of the terms of the Purchase Agreement and is qualified in its entirety by reference to the full text of the Purchase Agreement
filed as Exhibit 10.1 hereto, which is incorporated by reference into this Item 1.01.
Commitment Fee Shares
The Commitment Fee Shares consist of 12,500,000
shares of the Common Stock, which contain a true-up provision. At any time the Investor may elect during the period beginning on the date
which is the six (6) month anniversary of the closing date of the Purchase Agreement and ending on the date which is the eighteen (18)
month anniversary of the closing date of the Purchase Agreement (the “Adjustment Period”), the Investor may deliver to the
Company a reconciliation statement showing the net proceeds actually received by the Investor from the sale of the Commitment Fee Shares
(the “Sale Reconciliation”). If, as of the date of the delivery by Investor of the Sale Reconciliation, the Investor has not
realized net proceeds from the sale of such Commitment Fee Shares equal to at least the Commitment Fee, as shown on the Sale Reconciliation,
then the Company shall either pay in cash the applicable shortfall amount or immediately take all required action necessary or required
in order to cause the issuance of additional shares of Common Stock to the Investor in an amount sufficient such that, when sold and the
net proceeds thereof are added to the net proceeds from the sale of any of the previously issued and sold Commitment Fee Shares, the Investor
shall have received total net funds equal to $250,000 (the “Commitment Fee”). If additional shares of Common Stock are issued
pursuant to the immediately preceding sentence, and after the sale of such additional issued shares of Common Stock, the Investor still
has not received net proceeds equal to at least the Commitment Fee, then the Company shall again be required to immediately take all required
action necessary or required in order to cause the issuance of additional shares of Common Stock to the Investor as contemplated above,
and such additional issuances shall continue until the Investor has received net proceeds from the sale of such Common Stock equal to
the Commitment Fee.
Terms of Note
The Note matures on January 23, 2022, six (6)
months after the Original Issue Date, and provides for interest to accrue at an interest rate equal to 10% per annum, or, upon an Event
of Default, as defined in the Note, the lesser of (i) 18% per annum, and (ii) the maximum amount permitted under law (the “Default
Interest”). The Investor shall have the right, only following an Event of Default, to convert all or any part of the outstanding
and unpaid principal, interest, penalties, and all other amounts under the Note into fully paid and non-assessable shares of the Company’s
Common Stock, as such Common Stock exists on the date of issuance of the shares underlying the Note, or any shares of capital stock or
other securities of the Company into which such Common Stock shall hereafter be changed or reclassified (the “Conversion Shares”).
The initial conversion price, following and during an Event of Default, for the principal and interest of the Note shall equal the lesser
of 90% representing a 10% discount multiplied by the lowest trading price (i) during the previous twenty (20) trading day period ending
on the date of issuance of the Conversion Shares, or (ii) during the previous twenty (20) Trading Day period ending on date of conversion
of the Note, subject to adjustment as provided therein. The Note is subject to adjustment upon certain events such as distributions and
mergers, and has full ratchet anti-dilution protections for issuance of securities by the Company at a price that is lower than the then-current
conversion price except for certain exempt issuances. In addition, if, at any time while the Note is issued and outstanding, the Company
issues any convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of
any class of common stock, then the Investor will be entitled to acquire, upon the terms applicable to such sales, the aggregate number
of shares could have acquired if the Note had been converted.
The Note also contains certain negative covenants,
including prohibitions on incurrence of indebtedness, sales of assets, stock repurchases, and distributions. The Investor may not convert
the Note into an amount of shares of Common Stock that would result in the beneficial ownership by the Investor and its affiliates of
greater than 4.99% of the number of shares of Common Stock outstanding (the “Beneficial Ownership Limitation”). The Note may
be prepaid at any time. The Note includes customary Events of Default, including, among other things, payment defaults, covenant breaches,
breaches of certain representations and warranties, certain events of bankruptcy, liquidation and suspension of the Company’s Common
Stock from trading. If such an Event of Default occurs, the holders of the Notes may be entitled to take various actions, which
may include the acceleration of amounts due under the Note and accrual of interest as described above, as well as the conversion of the
Note. As described below, the Note is collateralized by the Series D Shares.
The foregoing description is qualified in its
entirety by reference to the full text of the form of Note filed as Exhibit 10.2 hereto and is incorporated by reference into this Item
1.01.
Series
D Shares
Pursuant
to the terms of the Purchase Agreement, the Company is obligated to issue to the Investor 5,000 shares of the Company’s Series D
Shares. The Series D Shares may be converted into shares of the Company’s Common Stock upon an Event of Default under the
Note. Upon repayment of the Note, or the conversion of the Note, the Investor shall surrender the certificate or certificates representing
the current amount of Series D Shares held at such time. For a description of the Series D Shares, please see Item 5.03 of this Current
Report.
Terms of Warrants
As described above, Investor received Warrants
to purchase up to 10,000,000 shares of the Company’s Common Stock. The initial exercise price for the Warrants is $0.05 per share,
subject to adjustment as described below, and the Warrants are exercisable for a period of three years after the date of the Purchase
Agreement. The Warrants are exercisable for shares of Common Stock upon the payment in cash of the exercise price. The exercise price
of the Warrants is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications or similar events affecting the Common Stock and also upon any distributions of assets, including cash, stock or other
property to the Company’s stockholders. The exercise price of the Warrants is also subject to full ratchet price adjustment if the
Company sells or grants any option to purchase, sell or re-price any Common Stock or Common Stock Equivalents (as defined therein) at
an exercise price lower than the then-current exercise price of the Warrant with the exception for certain exempted issuances and subject
to certain limitations on the reduction of the exercise price as provided in the Warrants. In the event of a Fundamental Transaction,
as defined in the Warrants and generally including: (i) if the Company effects any merger of the Company with or into another entity and
the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) if the Company effects
any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least
50% of the Common Stock accept such offer, or (iv) if the Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than
as a result of a subdivision or combination of shares of Common Stock), then, upon any subsequent exercise of the Warrant, the Investor
or its assigns shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the Company and any
additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which the Warrant is exercisable
immediately prior to such event (disregarding any limitation on exercise contained herein solely for the purpose of such determination).
For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the exercise price among the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Investor or its assigns shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Investor will not have the right
to exercise any portion of the Warrant if the Investor (together with its affiliates) would beneficially own in excess of 4.99% of the
number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined
in accordance with the terms of the Warrants. The foregoing description is qualified in its entirety by reference to the full text of
the form of Warrant filed as Exhibit 10.3 hereto and is incorporated by reference into this Item 1.01.
Closing Rights and Company Obligations
The Purchase Agreement includes additional Company
obligations including obligations on the Company to satisfy the current public information requirements under SEC Rule 144(c); obligations
on the Company with respect to the use of proceeds from the sale of securities under the Purchase Agreement; purchaser rights to approve
certain subsequent equity sales by the Company; and purchaser rights to participate in future Company financings. Reference should be
made to the full text of the Purchase Agreement filed as Exhibit 10.1 hereto, which is incorporated by reference into this Item 1.01.