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Item
1.01
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Entry
into a Material Definitive Agreement.
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GHS
Investments, LLC Transaction
On
May 12, 2021, we entered into a Securities Purchase Agreement (the “May SPA”) with GHS Investments, LLC (the “Purchaser”),
a Nevada limited liability company, pursuant to which for a purchase price of $150,000, the Purchaser purchased an additional one hundred
and fifty (150) shares of the Company’s Series D Convertible Preferred Stock (“Series D Preferred Stock”) and a five
year warrant to purchase up to 1,500,000 shares of the Company’s Common Stock at $0.001 per share (the “Warrant”).
As
previously reported on Current Report on Form 8-K on April 16, 2021, we entered into Securities Purchase Agreement (the “April
SPA”) with the Purchaser pursuant to which for a purchase price of $440,000, the Purchaser purchased four hundred (400) shares
of the Company’s Series D Preferred Stock and a five year warrant to purchase up to 40,000,000 shares of the Company’s Common
Stock at $0.001 per share.
In
connection with the April SPA, we filed a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred
Stock (the “Series D COD”) with the Delaware Secretary of State to create a new class of preferred stock, $0.001 par value
per share, designated Series D Convertible Preferred Stock and authorized the issuance of up to four hundred (400) shares of Series D
Preferred Stock. On the April 9, 2021, all of the four hundred (400) shares of Series D Preferred Stock were issued to the Purchaser.
The Series D Preferred Stock has a stated value of $1,200 per share (“Stated Value”) and the holder of the Series D Preferred
Stock has the right to receive a dividend equal to eight percent (8%) per annum, payable quarterly, beginning on the issuance date of
the Series D Preferred Stock and ending on the date that Series D Preferred Share has been converted or redeemed. Dividends may be paid
in cash or in shares of Series D Preferred Stock at the discretion of the Company. Further, the holders of the Series D Preferred Stock
has the right to receive assets in the event of liquidation, dissolution or winding up before any distribution or payment shall be made
to the holders of any securities junior to the Series D Preferred Stock.
In
connection with the May SPA, we filed a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred
Stock (the “May Series D COD”) with the Delaware Secretary of State to increase the number of authorized Series D Preferred
Stock to up to one thousand (1,000) shares of Series D Preferred Stock. The May Series D Preferred Stock is identical to the Series D
Preferred Stock as more fully detailed herein and on the Series D COD filed herewith.
The
conversion price (the “Conversion Price”) for the Series D Preferred Stock shall be $0.008109, equal to 90% of the average
VWAP for the ten (10) Trading Days immediately preceding the date of the May SPA. The Conversion Price will be appropriately adjusted
for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases
the Common Stock. Following an “Event of Default,” as defined in the May SPA, the Conversion price shall equal the lower
of: (a) the then applicable Conversion Price; or (b) a price per share equaling eighty percent (80%) of the lowest traded price for the
Company’s common stock during the fifteen (15) Trading Days immediately preceding, but not including, the Conversion Date.
Each
share of Series D Preferred Stock is convertible, at any time and from time to time, at the option of the holder thereof, into that number
of shares of Common Stock (subject in each case to a 4.99% beneficial ownership limitation) determined by dividing the Stated Value of
such share of Series D Preferred Stock by the Series D Preferred Stock Conversion Price.
Additionally,
the Company shall have the right to redeem (a “Corporation Redemption”), all (but not less than all), shares of the Series
D Preferred Stock issued and outstanding at any time after the issuance date, upon five (5) business days’ notice, at a redemption
price per Series D Preferred Stock then issued and outstanding (the “Corporation Redemption Price”), equal to the product
of (i) the Premium Rate multiplied by (ii) the sum of (x) the Stated Value, (y) all accrued but unpaid dividends, and (z) all other amount
due to the holder pursuant to the Series D COD and the SPA including, but not limited to late fees, liquidated damages and the legal
fees and expenses of the holder’s counsel relating to the Series D COD and/or the SPA. “Premium Rate” means (a) 1.15
if all of the Series D Preferred Stock is redeemed within ninety (90) calendar days from the issuance date thereof; (b) 1.2 if all of
the Series D Preferred Stock is redeemed after ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance
date thereof; (c) 1.25 if all of the Series D Preferred Stock is redeemed after one hundred twenty (120) calendar days and within one
hundred eighty (180) calendar days from the issuance date thereof; and (iv) each share of Series D Preferred Stock shall be redeemed
on the date that is one (1) calendar year from the date of its issuance.
Pursuant
to the May Series D COD, we are required to reserve and keep available out of our authorized and unissued shares of Common Stock two
times the number of Common Stock needed to convert or exercise all Series D Preferred Stock and Warrants. Further, the holders of the
Series D Preferred Stock and Warrants are entitled to vote with all holders of the Common Stock on an as converted or as exercised basis.
The
May Series D COD provides for conversion price adjustments in the event of stock dividends, stock splits and similar transactions. It
also provides for certain adjustments in connection with subsequent rights offerings, pro rata distributions to holders of our Common
Stock and fundamental transactions. Additionally, from the date of the SPA until the date when the holder no longer holds any Series
D Preferred Stock, upon any issuance by the Company or any of its subsidiaries of Common Stock or common stock equivalents (as defined
in the Series D COD) for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the
holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of Series D Preferred
Stock then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.
Following
an “Event of Default” (as defined in the May Series D COD), all outstanding shares of Series D Preferred Stock shall come
immediately due for redemption and the redemption amount shall accrue interest at the lesser of: (a) eighteen percent (18%) per annum;
or (b) the maximum legal rate. Redemption following an Event of Default shall occur at an amount equaling: 1.35 multiplied by the sum
of the Stated Value, all accrued but unpaid dividends and all other amounts due pursuant to the Series D COD for all Series D Preferred
Stock outstanding. Additionally, following an Event of Default, the Conversion Price shall equal the lower of: (a) the then applicable
conversion price; or (b) a price per share equaling eighty percent (80%) of the lowest traded price for the Company’s Common Stock
during the fifteen (15) trading days preceding the relevant conversion.
The
May SPA and Warrant are attached to this Current Report as Exhibits 10.1 and 10.2, respectively. The May Series D COD is attached to
this Current Report as Exhibit 3.1. All descriptions of the May SPA, Warrant, and May Series D COD herein are qualified in their entirety
to the text of Exhibits 3.1, 10.1 and 10.2 hereto, which is incorporated herein by reference.
The
Series D Preferred Stock and Warrant were issued in the offering is exempt from the registration requirements of the Securities Act of
1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder
because, among other things, the transaction did not involve a public offering, the investor is an accredited investors, the investor
took the securities for investment and not resale and the Company took appropriate measures to restrict the transfer of the securities.
Power
Up Lending Group Ltd. Convertible Promissory Note
On
May 4, 2021, the Company entered into a Securities Purchase Agreement (the “Power Up SPA”) with Power Up Lending Group Ltd.,
a Virginia corporation (“Power Up”). Pursuant to the terms of the Power Up SPA, Power Up agreed to purchase from the Company,
for a purchase price of $153,750, a 10% Convertible Promissory Note (the “Power Up Note”) in the principal amount of $169,125.
The
Power Up Note accrues interest at a rate of 10% per annum and matures on May 4, 2022. The Power Up Note, plus all accrued but unpaid
interest and other amounts due on the Power Up Note, may be prepaid at any time prior to the maturity date. If the Power Up Note is prepaid
on or prior to the 30th calendar day after the issuance date, the amount due upon prepayment will be multiplied by 110%. If the Power
Up Note is prepaid between the 31st and 60th calendar day after the issuance date, the amount due upon prepayment will be multiplied
by 115%. If the Power Up Note is prepaid between the 61st and 90th calendar day after the issuance date, the amount due upon prepayment
will be multiplied by 120%. If the Power Up Note is prepaid between the 91st and 180th calendar day after the issuance date, the amount
due upon prepayment will be multiplied by 125%. The Company must provide advanced notice to the holder of any prepayments and the holder
may elect to convert all or any portion of the Power Up Note prior to prepayment. The Power Up Note contains customary events of default.
Upon the occurrence of an event of default, the Power Up Note shall become immediately due and payable and the Company shall pay to Power
Up an amount equal to 150% times the sum of the then outstanding principal, accrued and unpaid interest, the prepayment penalty of 22%
per annum, and, depending on the type of default, other penalties. The Company is subject to a restrictive covenant regarding sales of
assets.
The
Power Up Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein, at a conversion
price of 60% multiplied by the lowest trading price for the Common Stock during the 20 trading day period ending on the latest complete
trading day prior to the conversion date. It is subject to equitable adjustments relating to the Company’ securities or the securities
of any subsidiary, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. Additional discounts
to the conversion price and penalties will apply if certain events occur, including failure to timely deliver conversion shares.
The
Power Up SPA and Power Up Note are attached to this Current Report as Exhibits 10.3 and 10.4, respectively. All descriptions of the Power
Up SPA and Power Up Note herein are qualified in their entirety to the text of Exhibits 10.3 and 10.4 hereto, which is incorporated herein
by reference.
The
Power Up Note issued in the offering is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder because, among other things, the transaction
did not involve a public offering, the investor is an accredited investors, the investor took the securities for investment and not resale
and the Company took appropriate measures to restrict the transfer of the securities.
