Item 1.01 Entry into a Material Definitive Agreement
On January 15, 2020, we issued a debenture for $1,000,000 pursuant to a
securities purchase agreement with an accredited investor dated December 6,
2019. The debenture has a maturity date of June 6, 2021, provided that in case
of an event of default, the debenture may become at the holder's election
immediately due and payable. The debenture bears interest at the rate of 5.5%
per annum, and on issuance, we paid to the holder a commitment fee equal to 2.5%
of the amount of the debenture.
The holder may convert the debenture in its sole discretion at any time on or
prior to maturity at the lower of $3.00 or 93% of the average of the four lowest
daily VWAPs during the 10 consecutive trading days immediately preceding the
conversion date, provided that the conversion price may never be less than
$2.00. We may not convert any portion of the debenture if such conversion would
result in the holder beneficially owning more than 4.99% of our then issued and
common stock, provided that such limitation may be waived by the holder with 65
days' notice.
Any time after the six-month anniversary of the issuance of the debenture that
the daily VWAP is less than $2.00 for a period of twenty consecutive trading
days (the "Triggering Date") and only for so long as such conditions exist after
a Triggering Date, we shall make monthly payments beginning on the last calendar
day of the month when the Triggering Date occurred. Each monthly payment shall
be in an amount equal to the sum of (i) the principal amount outstanding as of
the Triggering Date divided by the number of such monthly payments until
maturity, (ii) a redemption premium of 20% in respect of such principal amount
and (iii) accrued and unpaid interest hereunder as of each payment date. We may,
no more than twice, obtain a thirty-day deferral of a monthly payment due as a
result of a Triggering Date through the payment of a deferral fee in the amount
equal to 10% of the total amount of such monthly payment. Each deferral payment
may be paid by the issuance of such number of shares as is equal to the
applicable deferral payment divided by a price per share equal to 93% of the
average of the four lowest daily VWAPs during the 10 consecutive Trading Days
immediately preceding the due date in respect of such monthly payment being
deferred, provided that such shares issued will be immediately freely tradable
shares in the hands of the holder.
Item 3.02 Unregistered Sale of Equity Securities
The information set forth in Item 1.01 hereof is incorporated by reference into
this Item 3.02.
The securities mentioned above were issued in reliance on exemptions from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Act"), and Rule 506 of Regulation D promulgated under the Act. These
transactions qualified for exemption from registration because among other
things, the transaction did not involve a public offering, the investor was an
accredited investor and/or qualified institutional buyer, the investor had
access to information about our company and its investment, the investor took
the securities for investment and not resale, and we took appropriate measures
to restrict the transfer of the securities.
Item 9.01 Financial Statements and Exhibits.
Exhibits.
10.1 Securities Purchase Agreement, dated December 5, 2019 (incorporated by
reference to Exhibit 10.1 to our current report on Form 8-K filed on
December 12, 2019)
10.2 Form of Debenture (incorporated by reference to Exhibit 10.2 to our
current report on Form 8-K filed on December 12, 2019)
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