Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
On
Also pursuant to the Purchase Agreement, in connection with the issuance of the Note, (a) the Company entered into a Security Agreement (the "Security Agreement"), pursuant to which payment of the full amount of the Note is secured by Collateral (as defined in the Security Agreement) and (b) the Company's subsidiaries jointly and severally agreed to guarantee and act as surety for payment of the Note, pursuant to a Subsidiary Guarantee (the "Subsidiary Guarantee").
The net amount received by the Company was approximately
The Company intends to use the net proceeds from the sale of the Note for business development, repayment of existing indebtedness and general corporate purposes, subject to the limitations described in the Purchase Agreement.
The Company granted to the Investor a right of participation and first refusal with respect to future capital raises of the Company during the terms of the Note, subject to certain exceptions.
Pursuant to the Purchase Agreement, the Company granted the Investor piggyback registration rights with respect to the shares underlying the Warrants. In addition, the Company agreed that, while any amount remains unpaid under the Note, it would not sell securities on more materially favorable terms than those provided to the Investor, without adjusting the Investor's terms accordingly. Further, among other things, the Company agreed that, while any amount remains unpaid under the Auctus Note, it would not enter into any variable rate transactions.
The Note bears interest commencing on the Issuance Date at a fixed rate of 12%
per annum on any unpaid principal balance, and will be payable, along with the
principal amount, on
Amortization payments shall be made to the Investor in six installments each in
the amount of
Provided that an Event of Default (as defined in the Note) has not occurred, the
Company may prepay in whole or in part the amounts outstanding under the Note
along with a
The Note contains customary events of default for a transaction such as the Capital Raise which entitle the Investor, 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 125% of the outstanding principal and accrued interest. Any principal or interest on the Note which is not paid when due shall bear interest at the rate of the lesser of (i) 16% per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid.
The Warrants each have an exercise price of
The exercise of the Warrants are subject to a beneficial ownership limitation of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise.
The foregoing is a brief description of the purchase of the Note and the Warrants, and is qualified in its entirety by reference to the full text of the Purchase Agreement, the Note, the First Warrant, the Second Warrant, the Security Agreement and the Subsidiary Guarantee, copies of which are included as Exhibits 10.1, 10.2, 4.1, 4.2, 10.3 and 10.4, respectively, to this Current Report on Form 8-K, each of which are incorporated herein by reference.
Item 3.02 Unregistered Sales of
The disclosure set forth above in Item 2.03 of this Current Report on Form 8-K relating to the issuance of the Note and the Warrants is incorporated by reference herein. The Note and the Warrants each was, and, unless subsequently registered, the shares underlying the Warrants will be, issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as no general solicitation was used in the offer and sale of such securities.
Item 4.01 Change in Registrant's Certifying Accountant
Effective
BF Borgers was the independent registered accounting firm for the Company prior
to its acquisition through a reverse take-over of
The Company has requested MaloneBailey to furnish it with a letter addressed to
the
Item 9.01 Financial Statements and Exhibits.
Exhibit Description 4.1 First Common Stock Purchase Warrant 4.2 Second Common Stock Purchase Warrant 10.1 Stock Purchase Agreement 10.2 Secured Promissory Note 10.3 Security Agreement 10.4 Subsidiary Guarantee 16.1 Letter fromMaloneBailey LLP
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