Item 1.01 – Entry into a Material Definitive Agreement
On December 5, 2017, the Company entered into a securities purchase agreement with UAHC Ventures LLC, a Nevada limited liability company, its successors and/or assigns (“UAHC”). UAHC is a non-related party.
Under this securities purchase agreement, the Company issued a convertible promissory note in the original principal amount of $545,000. There was an original issue discount of $40,000. The Company agrees to pay $5,000 to UAHC to cover legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the securities. The Company will reserve 80,000,000 common shares to provide for all potential issuances, and will add additional reserve shares if requested by UAHC. The promissory note has a term of ten months, and bears an interest rate of 10% per annum. Should the Company choose to prepay this note, then upon five trading days notice they may pay an amount equal to 125% of the outstanding balance of the note. After six months, this note is convertible into common shares of the Company at the lower of either the market price or $0.05 per share at the time of conversion. If the Company fails to deliver conversion shares by the fourth trading day following conversion, a late fee equal to the greater of $500 or 2% of the applicable lender conversion share value (determined by the product of the number of shares deliverable pursuant to any conversion multiplied by the closing trade price of the common shares on the delivery date for such conversion) rounded to the nearest multiple of $100, which will be assessed for each day after the third trading day until the delivery is made. At no time can an issuance cause the holder of the note to beneficially own a number of shares exceeding 4.99% of the outstanding common shares of the Company, unless the market capitalization is less than $10,000,000, at which point the holder cannot beneficially own a number of shares exceeding 9.99% of the outstanding common share of the Company.
Should the Company default on this note, interest shall accrue on the outstanding balance at a rate of 22% per annum until the default is remedied. Any conversions made following a judgment or arbitration award against the Company shall be made at 80% of the lowest closing price ten trading days immediately preceding the date of the conversion.
The Company also issued a warrant to purchase common shares equal to $272,500 divided by the closing trade price as of the issue date. This warrant has a term of five years. At any time prior to the expiration date, the holder may elect a “cashless” exercise of the warrant whereupon the holder is entitled to receive a number of common shares equal to the excess of the current market value over the aggregate exercise price of the shares, divided by the exercise price. At no time can an issuance cause the holder of the note to beneficially own a number of shares exceeding 4.99% of the outstanding common shares of the Company, unless the market capitalization is less than $10,000,000, at which point the holder cannot beneficially own a number of shares exceeding 9.99% of the outstanding common share of the Company.
On December 12, 2017, the Company was notified that this note was assigned to a non-
related third party.