In August 2017, Protea Biosciences Group,
Inc., a Delaware corporation (“Protea” or the “Company”) received a loan in the amount of $440,000 from
Summit Resources, Inc., a West Virginia corporation (“Summit”) controlled Steve Antoline, a member of the board of
directors of the Company, under a maximum 10% $500,000 note (the “Summit Note”) dated August 25, 2017 that is payable
to Summit on the earlier of (a) December 31, 2017, (b) the Company’s receipt of $2,500,000 or more from any subsequent private
placement of securities consummated prior to December 31, 2017, or (c) the completion of a public offering of Company securities.
In consideration of its making of the loan, and in addition to interest and any other charges to be paid pursuant to the Summit
Note, the Company granted to Summit or its designees a seven-year warrant to purchase, for an initial exercise price of $0.075
per share, 60,000,000 shares of the Company’s common stock, $0.0001 par value per share (“Common Stock”).
In addition to the above financing, and
in order to provide the Company with funds necessary to continue to operate its business, the Company intends to seek to obtain
additional funds through one or more private placements of convertible notes and warrants to accredited investors. However, as
of August 25, 2017, on a pre-split basis, based on 398,633,940 outstanding shares of Common Stock and up to 329,779,576 additional
shares that would be issuable upon conversion of currently outstanding convertible notes and debentures and exercise of currently
outstanding warrants, the Company would not have enough shares authorized under our certificate of incorporation to issue shares
of Common Stock or reserve shares of Common Stock for subsequent issuance to prospective investors in such financings.
To accommodate the need to have available
sufficient shares of Company Common Stock, on August 25, 2017, the Company entered into an agreement with PPLL, LLC (the holder
of a $360,000 convertible Company note) and Summit, under which PPLL and Summit each agreed that until January 15, 2018, they
|
|
•
|
would not convert any convertible notes
held by them or exercise any warrants issued to Summit unless and until the Company has, in addition to all shares of Common Stock
issued and issuable to connection with additional proposed financings, a sufficient number of shares of authorized Common Stock
available to be issued to PPLL and Summit upon full conversion or exercise of their securities; and
|
|
|
•
|
would waive the covenants of our Company
to reserve up 139,333,333 shares of our Common Stock otherwise potentially issuable to PPLL and Summit.
|
In connection with such agreement, the
Company committed to PPLL and Summit that by no later than January 15, 2018, the Company would either consummate a reverse stock
split or obtain stockholder approval to increase the 750,000,000 shares of Common Stock under its certificate of incorporation
to provide for a sufficient number of authorized but unissued shares of Common Stock to accommodate the full conversion and exercise
of all convertible notes and warrants held by PPLL and Summit. Failure to effectuate the reverse split or amendment to our certificate
of incorporation would be an event of default under the notes.
There can be no assurance that the Company
we will be able to obtain any additional financing or that it will be able to provide an adequate number of shares of Common Stock
to comply with the terms of all of our outstanding convertible securities and warrants.
In a related development, on August 25,
2017, the Board of Directors of the Company authorized a one-for-fifty (1:50) reverse stock split of the Company’s outstanding
Common Stock and shares of Common Stock issuable upon the conversion or exercise of convertible securities, warrants or options
with such reverse stock split to be implemented by the Company either prior to our in connection with any future public offering
of Company securities.