Item
2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
On December 31, 2019 (the “Issuance Date”),
Brain Scientific Inc. (the “Company”) entered into a Securities Purchase Agreement and issued and sold to Vista Capital
Investments, LLC (the “Investor”), a Convertible Note in the original principal amount of $275,000 (the “Note”),
and a warrant to purchase 100,000 shares of the Company’s common stock (the “Warrant”, and together with the
Note, the “Securities”). The aggregate purchase price received by the Company for the sale of the Securities was $250,000
after an original issue discount of $25,000.
The Company intends to use the net proceeds
from the sale of the Securities for the Company’s working capital and general corporate purposes.
A one-time interest charge of 8% was applied
on the Issuance Date to the Outstanding Balance (as defined in the Note”) and will be payable, along with the Principal (as
defined in the Note), on July 31, 2020 (the “Maturity Date”), as may be extended at the option of the Investor.
The unpaid outstanding principal amount and
accrued and unpaid interest under the Note shall be convertible into shares of the Company’s common stock at any time at
the option of the Investor. The conversion price shall be equal to 80% multiplied by the price per share paid by the investors
in the next capital raising transaction consummated by the Company in the amount of $1,000,000 or more (the “Qualified Financing”),
subject to adjustments as provided in the Note. In the event the Investor elects to convert the Note prior to a Qualified Financing,
the conversion price shall be the effective exercise price per share from time to time pursuant to the Warrant. At any time prior
to the Maturity Date, upon 10 business days’ notice to the Investor, the Company shall have the right to pre-pay the entire
remaining principal amount of the Note subject to the pre-payment terms contained in the Note.
The Note contains a price-based anti-dilution
provision, pursuant to which the conversion price of the Note shall be reduced upon the occurrence of certain dilutive issuances
of Company securities as set forth in the Note. The conversion of the Note is also subject to a beneficial ownership limitation
of 4.99% of the number of shares of common stock outstanding immediately after giving effect to such conversion. In the event the
Company, prior to the Maturity Date, issues any Security (as defined in the Note) with any term more favorable to the holder of
such Security or with a term in favor of the holder of such Security that was not similarly provided to the Investor, then at the
Investor’s option such term shall become a part of the Note. The Company also agreed to provide piggy-back registration rights
to the Investor pursuant to which the Company shall include all shares issuable upon conversion of the Note on the next registration
statement the Company files with the Securities and Exchange Commission.
The Note contains events of default which,
among other things, entitle the Investor to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid
interest on, the Note. Upon the occurrence of any event of default, the Outstanding Balance shall immediately and automatically
increase to 130% of the Outstanding Balance immediately prior to the event of default, and the conversion price of the Note shall
be redefined to equal 65% of the lowest trade accruing during the 10 consecutive Trading Days (as defined in the Note) immediately
preceding the applicable Conversion Date (as defined in the Note). Nickolay Kukekov, a director of the Company, and a third party,
each has personally guaranteed the repayment of the Note.
The Warrant has an exercise price of $1.25
per share (the “Exercise Price”), subject to adjustments as provided in the Warrant, and has a term of five years.
The Warrant contains a price-based anti-dilution provision, pursuant to which the exercise price of the Warrant shall be reduced
upon the occurrence of certain dilutive issuances of securities as set forth in the Warrant, with a corresponding increase in the
number of shares underlying the Warrant if the dilutive event occurs during the first three years of the Warrant, and a cashless
exercise provision. The exercise of the Warrant is subject to a beneficial ownership limitation of 9.99% 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 Securities and is qualified in its entirety by reference to the full text of the Securities Purchase Agreement,
Note, and Warrant, copies of which are included as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K,
each of which are incorporated herein by reference.