Item 1.01 Entry into a Material Definitive Agreement.
On March 6, 2023, the Company entered into a Securities Purchase Agreement (the
"SPA") with AJB Capital Investments, LLC (the "Purchaser"), pursuant to which we
sold a Promissory Note in the principal amount of $530,000 (the "Note") to the
Purchaser in a private transaction to for a purchase price of $519,400 (giving
effect to original issue discount of $10,600). In connection with the sale of
the Note, the Company also paid the Purchaser's legal fees and due diligence
costs of $15,000, resulting in net proceeds to the Company of $504,400, which
will be used for working capital and other general corporate purposes.
The Note matures on September 6, 2023, bears interest at the rate of 12% per
annum and only following an event of default (as defined in the Note), is
convertible into shares of the Company's common stock at a conversion price
equal to the lower of the "VWAP" (as hereinafter defined) of the common stock
during (i) the ten (10) trading day period preceding the issuance date of the
Note; or (ii) the ten (10) trading day period preceding the date of conversion
of the Note (the "Conversion Shares"). As used in the Note, "VWAP" means, for
any date, the price of our common stock as determined by the first of the
following clauses that applies: (i) if the common stock is then listed or quoted
on one or more established stock exchanges or national market systems, the daily
volume weighted average price of the common stock for such date on the trading
market on which the common stock is then listed or quoted as reported by
Bloomberg L.P.; or (ii) if the common stock is regularly quoted on an automated
quotation system (including applicable tiers of the over-the-counter market
maintained by OTC Markets Group, Inc.) or by a recognized securities dealer, the
volume weighted average price of the common stock for such date on the
applicable OTC Markets Group, Inc. tier or as quoted by such securities dealer.
In accordance with the terms of the SPA, as of March 6, 2023, the Company has
reserved 120,000,000 shares of its authorized but unissued common stock for
issuance in the event the Purchaser exercises its right to convert the Note
following an event of default.
The Note may be prepaid by the Company at any time without penalty. The Note
also contains covenants, events of defaults, penalties, default interest and
other terms and conditions customary in transactions of this nature.
Pursuant to the terms of the SPA, the Company paid a commitment fee to the
Purchaser in the amount of $300,000 (the "Commitment Fee") in the form of
15,000,000 shares of the Company's common stock (the "Commitment Fee Shares")
and issued the Purchaser a Warrant exercisable for a five-year period to
purchase up to 10,000,000 shares of our common stock at a price of $0.06 per
share (the "Warrant Shares").
Pursuant to the terms of the SPA, the Company granted certain piggyback
registration rights under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Conversion Shares, the Warrant Shares and
the Commitment Fee Shares.
The offer and sale of the above securities to the Purchaser 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.
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.
Item 3.02 Unregistered Sales of Equity Securities
The information set forth under Item 1.01 is incorporated herein by reference.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
10.1 Securities Purchase Agreement with AJB Capital Investments dated
March 6, 2023
10.2 Promissory Note made in favor of AJB Capital Investments dated
March 6, 2023
10.3 Warrant issued to AJB Capital Investments dated March 6, 2023
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