Item 1.01 Entry into a Material Definitive Agreement.
Effective March 7, 2023, The Crypto Company (the "Company") borrowed funds
pursuant to a Securities Purchase Agreement (the "SPA") entered into with 1800
Diagonal Lending, LLC ("Diagonal"), and Diagonal purchased a convertible
promissory note (the "Note") from the Company in the aggregate principal amount
of $54,250. Pursuant to the SPA, the Company agreed to reimburse Diagonal for
certain fees in connection with entry into the SPA and the issuance of the Note.
The SPA contains customary representations and warranties by the Company and
Diagonal typically contained in such documents.
The maturity date of the Note is March 2, 2024 (the "Maturity Date"). The Note
bears interest at a rate of 10% per annum, and a default interest of 22% per
annum. Diagonal has the option to convert all of the outstanding amounts due
under the Note into shares of the Company's common stock beginning on the date
which is 180 days following the date of the Note and ending on the later of: (i)
the Maturity Date and (ii) the date of payment of the default amount, as such
term is defined under the Note. The conversion price under the Note for each
share of common stock is equal to 65% of the lowest trading price of the
Company's common stock for the 10 trading days prior to the conversion date. The
conversion of the Note is subject to a beneficial ownership limitation of 4.99%
of the number of shares of common stock outstanding immediately after giving
effect to such conversion. Failure of the Company to convert the Note and
deliver the common stock when due will result in the Company paying Diagonal a
monetary penalty for each day beyond such deadline.
The Company may prepay the Note in whole, however, if it does so between the
issuance date and the date which is 60 days from the issuance date, the
repayment percentage is 115%. If the Company prepays the Note on or between the
61st day after issuance and the 90th day after issuance, the prepayment
percentage is 120%. If the Company prepays the Note on or between the 91st day
after issuance and 180 days after issuance, the prepayment percentage is 125%.
After such time, the Company can submit an optional prepayment notice to
Diagonal, however the prepayment shall be subject to the agreement between the
Company and Diagonal on the applicable prepayment percentage.
Pursuant to the Note, as long as the Company has any obligations under the Note,
the Company cannot without Diagonal's written consent, sell, lease or otherwise
dispose of any significant portion of its assets.
The Note contains standard and customary events of default such as failing to
timely make payments under the 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. The
occurrence of any of the events of default, entitle Diagonal, among other
things, to accelerate the due date of the unpaid principal amount of, and all
accrued and unpaid interest on, the Note. Upon an "Event of Default", interest
shall accrue at a default interest rate of 22%, and the Company may be obligated
pay to the Diagonal an amount equal to 150% of all amounts due and owing under
the Note.
The foregoing descriptions of SPA and Note, do not purport to be complete and
are qualified in their entirety by the full text of the forms of the of SPA and
Note which will be filed as exhibits to a subsequent current, quarterly, or
annual report to be filed by the Company.
The offer and sale of the Note to Diagonal was made in a private transaction
exempt from the registration requirements of the Securities Act in reliance on
exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of
Regulation D promulgated thereunder.
Separate from the entry into the SPA with Diagonal, effective March 13, 2023,
the Company and AJB Capital Investments, LLC ("AJB") entered into an agreement
whereby, among other things, AJB agreed to extend the maturity date of the
promissory note issued to AJB in May 2022 to January 15, 2024, and with all
accrued and unpaid interest and principal to be due at maturity. Additionally,
effective March 13, 2023, the Company and Efrat Investments, LLC ("Efrat")
entered into an agreement whereby, among other things, Efrat agreed to extend
the maturity date of the promissory note issued to Efrat in April 2022 to
January 15, 2024, and with all accrued and unpaid interest and principal to be
due at maturity. In each case, in connection with the accommodations made by the
lenders the Company agreed to amend the exercise price of the warrants
previously issued to AJB and Efrat to $0.50 per share and also agreed to issue
to each of AJB and Efrat a new "prefunded" warrant exercisable to purchase
shares of Company common stock subject in each case to certain ownership
limitations and other terms and conditions of the warrants.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 is incorporated herein by reference.
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