ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On
March 16, 2020, Cardax, Inc. (the “Company”) entered into two securities purchase agreements with certain accredited
investors for the issuance of two convertible promissory notes by the Company in the aggregate principle amount of $500,000 with
aggregate gross proceeds of $460,000 as outlined below. The terms and conditions of each of the securities purchase agreements
and convertible promissory notes were substantially similar.
Securities
Purchase Agreement #1
The
Company entered into a Securities Purchase Agreement (the “Purchase Agreement #1”) with an accredited investor
(the “Lender #1”) for the purchase of a convertible promissory note in the aggregate principle amount of $250,000
(the “Note #1”). As a commitment fee, the Company issued 5,000 shares of its common stock, par value $0.001
per share (the “Common Stock”) to the Lender #1. The Purchase Agreement #1 provided that the Company shall
use the proceeds from the sale of the Note #1 first for the full repayment the convertible promissory note issued by the Company
on April 18, 2019, in the original principal amount of $150,000, and second for working capital and other general corporate purposes.
Convertible
Promissory Note #1
The
Company issued the Note #1 to the Lender #1, which included the following terms:
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Principal
Amount: $250,000, which included an original issue discount of $20,000 and gross proceeds to the Company of $230,000.
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Issue
Date: March 16, 2020
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Maturity
Date: September 16, 2020
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Interest
Rate: 10% per annum from the date the Note #1 was fully funded by the Lender #1, such date being March 17, 2020
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Conversion:
The Lender #1 may convert any or all obligations of the Note #1, including any outstanding and unpaid principal amount and
interest, into shares of Common Stock at $4.50 per share, subject to customary adjustments for stock splits or similar transactions,
for six (6) calendar months following the Issue Date. Thereafter, the Note #1 may be converted at a price per share equal
to 70% multiplied by the average of the two (2) lowest trading prices for the Common Stock during the fifteen (15) trading
day period prior to the date of conversion, wherein “trading price” means the volume weighted average price of
the Common Stock on the OTCQB or applicable trading market. The conversion price is also subject, at the discretion of the
Lender #1, to full ratchet anti-dilution in the event the Company issues any Common Stock at a per share price lower than
the conversion price then in effect.
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Share
Reserve: The Company agreed to maintain a reserve of its unissued shares of Common Stock that is not less than five (5) times
the number of shares actually issuable under the Note #1.
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Beneficial
Ownership Limitation: The number of shares of Common Stock that may be issued upon conversion is subject to specified limitations
of beneficial ownership that are set forth in Note #1 of 4.99% or, at the option of the Lender #1, 9.99% of the issued and
outstanding shares of Common Stock, which limitations may be decreased or terminated in the sole discretion of the Lender
#1 upon 61 days’ notice to the Company.
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The
Company may prepay the Note for six (6) calendar months following the Issue Date, without penalty or premium.
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Returnable
Shares: The Company issued 27,777 shares of Common Stock to the Lender #1, which must be returned to the Company if the Note
#1 is fully repaid or fully converted within six (6) calendar months following the Issue Date.
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The
Purchase Agreement #1 and the Note #1 also included customary representations, warranties, covenants, and events of default.
Securities
Purchase Agreement #2
The
Company entered into a Securities Purchase Agreement (the “Purchase Agreement #2”) with an accredited investor
(the “Lender #2”) for the purchase of a convertible promissory note in the aggregate principle amount of $250,000
(the “Note #2”). As a commitment fee, the Company issued 5,000 shares of Common Stock to the Lender #2. The
Purchase Agreement #2 provided that the Company shall use the proceeds from the sale of the Note #2 for working capital and other
general corporate purposes.
Convertible
Promissory Note #2
The
Company issued a Convertible Promissory Note (the “Note #2”) to Lender #2 in the same amount and on substantially
similar terms and conditions as the Note #1.
The
terms and conditions of each of the Purchase Agreements #1 and #2 and the Notes #1 and #2 were substantially similar.
Definitive
Agreements
Forms
of the Purchase Agreement #1, Note #1, Purchase Agreement #2, and Note #2 are filed as Exhibits 10.1, 10.2, 10.3, and 10.4, respectively,
to this Current Report on Form 8-K. Each such agreement or document has additional customary representations, warranties, and
covenants.
The
description of the transactions contemplated by these agreements does not purport to be complete and is qualified in its entirety
by reference to the full text of the documents filed as exhibits hereto and incorporated herein by reference.