Item 1.01
Entry into a Material Definitive Agreement.
On May 1, 2019 we received funds from Crown Bridge Partners, LLC ("Crown Bridge") under a Securities Purchase Agreement dated April 18, 2019
(the “SPA”). Under the terms of the SPA, we received a total of $95,000, after an original issue discount of $5,000, and issued a convertible promissory note dated April 18, 2019, in the principal amount of $100,000 (the " Note"). In addition, we
reimbursed Crown Bridge $2,000 for its legal fees. We also issued warrants to purchase 60,606 shares of our common stock (the “Warrant”).
The maturity date of the Note is 12 months from April 18, 2019. The Note bears interest at 10% per annum at its face amount, with a default
rate of 15% per annum (or the maximum amount permitted by law). If we prepay the Note through the 180
th
day following the date thereof, we must pay all of the principal and interest with a prepayment penalty ranging from 135% to 150%.
After the 180
th
day we have no further right of prepayment.
Crown Bridge may, at any time, convert all or any part of the outstanding principal of the Note into shares of our common stock at a price
per share equal to 60% (representing a 40% discount rate) of the lowest trading price of the common stock during the 20 trading day period ending on the last complete trading day prior to the date of conversion. If the conversion price is equal to
or lower than $0.35 per share, an additional 15% discount will be applied (resulting in a 55% discount rate, assuming no other adjustments); if we are unable to deliver converted shares via DWAC, an additional 10% discount will be applied
(resulting in a discount rate of 50%, assuming no other adjustments); if we fail to comply with our reporting requirements under the Exchange Act, an additional 15% discount will be applied (resulting in a discount rate of 55%, assuming no other
adjustments); and if we fail to maintain our status as "DTC Eligible" or if at any time the conversion price is lower than $0.10, an additional 10% discount will be applied (resulting in a discount of 65%, assuming no other adjustments except for
the 15% discount due to the conversion price below $0.35). Crown Bridge may not convert the Note to the extent that such conversion would result in beneficial ownership by Crown Bridge and its affiliates of more than 4.99% of our issued and
outstanding common stock. We have also granted piggy-back registration rights for the shares issuable upon conversion of the Note.
The Note contains certain representations, warranties, covenants (both affirmative and negative), and events of default, including if our
common stock is suspended or delisted for trading, or if we are delinquent in our periodic report filings with the SEC. In the event of a default, at the option of Crown Bridge, it may consider the Note immediately due and payable and the amount of
repayment increases to 150% of the outstanding balance of the Note. The Note also grants Crown Bridge a right of first refusal for any future capital raises or financings by us. It also contains a most favored nations provision for any more
favorable terms in future financing transactions by us.
The Warrant may be exercised at any time through the second anniversary date of the Note. The exercise price per share of common stock under
the Warrant is $1.65 per share, subject to adjustment, including cashless exercise. The Warrant also contains a most favored nations provision.
Item 1.01
of this Current Report on Form 8-K contains only a brief description of the material
terms of the Note, the SPA, and the Warrant (the “Transaction Documents”) 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 Transaction Documents filed as exhibits to this Current Report on Form 8-K.