Item 1.01 Entry into a Material Definitive Agreement
On
The Note bears interest at a rate of ten percent (10%) per annum. The Note
carries an original issue discount of
Upon the occurrence of an Event of Default (as defined in the Note), the Investor shall have the right to increase the balance of the Note by 15% for major defaults and 5% for minor defaults. In addition, the Note provides that upon occurrence of an Event of Default, the interest rate shall accrue on the outstanding balance at the rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.
The Company is required to reserve 11,500,000 shares of Common Stock from its authorized and unissued Common Stock to provide for all issuances of Common Stock under the Note (the "Share Reserve"), and is required add additional shares of Common Stock to the Share Reserve in increments of 1,000,000 shares as and when requested by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than three (3) times the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) as of the date of the request by the Redemption Conversion Price (as defined in the Note). The Company is requested to further require the Transfer Agent (as defined in the Purchase Agreement) to hold the shares of Common Stock reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor's delivery of a Redemption Notice under the Note. Finally, the Company is requested to require the Transfer Agent to issue shares of Common Stock pursuant to the Note to Investor out of its authorized and unissued shares, and not the Share Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Share Reserve. The Transfer Agent will only issue shares out of the Share Reserve to the extent there are no other authorized shares available for issuance and then only with Investor's written consent.
The offering of
The foregoing descriptions of the Purchase Agreement and the Note are summaries of the material terms of such agreements, do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement and the Note, which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K and incorporated by reference herein.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosure set forth in Item 1.01 of this Current Report on Form 8-K to the extent required by Item 2.03 is incorporated herein by reference.
Item 9.01 Financial Statement and Exhibits
(d) Exhibits 5.1 Legal Opinion ofMagStone Law, LLP 10.1 Securities Purchase Agreement. 10.2 Convertible Promissory Note.
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