Item 3.02 Unregistered Sales of
On
The Convertible Notes (the "Notes") included in the Units accrue interest at a
rate of 12% per annum, with all principal and interest due two (2) years from
the date of issuance. The Notes are convertible to shares of our common stock at
a price equal to the lower of: (a)
In the event of our default under the Notes, conversion price shall be reduced to the lower of (i) thirty (30) day volume weighted average of the closing price per share of our common stock, if the conversion herein occurs prior a Qualified Offering, or (ii) 65% of the lowest closing price for our common stock during the twenty (20) consecutive trading day period immediately preceding the date of the conversion.
The Notes also include certain protections for investors, including the following:
(1) So long as the Notes are outstanding, upon our issuance of any security, or an amendment to a security that was issued before the date Note, with any term that the holder reasonably believes is more favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was not similarly provided to the holder of the Note, such term, at the holder's option, shall become a part of the Note.
(2) If, at any time while the Notes are outstanding, we issue any common stock or other securities convertible into, exercisable for, or that otherwise entitle any person or entity the right to acquire, shares of our common stock, at an effective price per share that is lower than the then Conversion Price for the Note (such lower price, the "Base Conversion Price" and such issuances, collectively, a "Dilutive Issuance") then the Conversion Price shall be reduced, at the option of the holder, to a price equal to the Base Conversion Price. If we enter into a variable rate transaction, we shall be deemed to have issued common stock pursuant to this provision at the lowest possible price per share at which such securities could be issued in connection with such variable rate transaction. Such adjustment shall be made whenever such common stock or other securities are issued.
The two provisions enumerated above do not apply with regard to issuances to officers, directors, or employees under a stock option plan, to issuances pursuant to convertible securities outstanding prior to the date of the Notes, or to issuances pursuant to acquisitions or other strategic transactions.
The Warrants included in the Units are exercisable for a period of five (5)
years and entitle the holder to purchase shares of our common stock at a price
equal to the lower of (i)
The foregoing is a summary of the material terms of the Notes and the Warrants, each of which are filed hereto as Exhibits and should be reviewed in their entirety for additional information. Our offer and sale of the Notes and the Warrants was exempt from registration pursuant to Rule 506(b) under Regulation D, as the Units were offered exclusively to accredited investors and we engaged in no general solicitation or advertising regarding the private offering.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description 10.1 Form of Securities Purchase Agreement 10.2 Form of Convertible Note 10.3 Form of Warrant
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