|12 Months Ended|
Dec. 31, 2019
February 2020 Private Placement
On February 28, 2020, the Company released the last of four escrow drawdowns, thus completing a private placement (the “Private Placement”) of $835,000 of units (the “Units”), each consisting of (i) one (1) share of common stock and (ii) a warrant to purchase 0.50 share of common stock (collectively, the “Warrants,” and together with the Units, the common stock and the shares of common stock issuable upon exercise of the Warrants (the “Investor Warrant Shares”), at a price per Unit of $0.4585 (the “Price Per Unit”). The Units were issued pursuant to a Unit Purchase Agreement, dated February 4, 2020 (the “Purchase Agreement”), and a Subscription Agreement, dated February 28, 2020 (the “Subscription Agreement”) by and among the Company and the purchaser signatory thereto (the “Holder”). The Private Placement, which was priced above market, resulted in gross proceeds of $835,000 before fees and other expenses associated with the transaction. The proceeds will be used primarily toward increasing shareholders equity to comply with Nasdaq Listing Rule 5550(b) and for general corporate purposes.
The Warrants are exercisable to purchase up to an aggregate of 906,390 shares of common stock commencing on the date of issuance at an exercise price of $0.49 per share (the “Exercise Price”). The Warrants are exercisable immediately and will expire on the close of business on February 28, 2025. The Exercise Price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes.
The exercise of the Warrants are subject to beneficial ownership limitations such that the Holder may exercise a Warrant to the extent that such exercise would result in the Holder being the beneficial owner in excess of 4.99% (or, upon election of purchaser, 9.99%), which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company.
The offers and sales of securities in the Private Placement were made pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act, including pursuant to Rule 506 thereunder. Such offers and sales were made solely to “accredited investors” under Rule 506 and were made without any form of general solicitation and with full access to any information requested by the investor regarding the Company or the securities offered in the Private Placement.
The foregoing does not purport to be a complete description of the Unit Purchase Agreement, the Subscription Agreement, and the Warrants, is qualified in its entirety by reference to the full text of such documents, which are attached as Exhibits 4.1, 10.1, and 10.2 to this Form 8-K and are incorporated by reference herein.
On January 23, 2020, we entered into a funding agreement, as amended (the “Funding Agreement”), pursuant to which an unaffiliated accredited investor provided us with convertible debt funding in the amount of $100,000, which was funded on January 24, 2020, so that we could fund certain obligations due and payable on such date. The funding agreement provides for the issuance of a promissory note, in the principal amount of $111,100, which reflects a 10% original issue discount, and is payable on or before February 24, 2020, by our paying such investor $111,100. On February 27, 2020, such parties amended the Funding Agreement to reflect (i) that payment on such note shall be paid to such investor 45 days from execution the Funding Agreement, or March 9, 2020 (ii) that the conversion price of such note shall equal $0.35, (iii) an increase in the number of warrants to be issued to such investor and a modification to the terms of such warrants and (iv) a modification to the conversion terms of and rights granted under such note, which terms are described below. The outstanding principal amount of such note is convertible into our common stock, at any time until maturity, at a conversion rate of $0.35 per share. If we do not repay the outstanding principal amount of $111,100 on or before the amended maturity date, such investor, thereafter, has the right after 90 days from the issuance of such note to convert the outstanding principal amount into our common stock at a conversion rate equal to the lesser of (i) $0.35 and (ii) a discounted price to the market price of our common stock in the event that we enter into a subsequent financing transaction with other investors. Under the terms of this financing, the investor is entitled to the issuance of 10,000 shares of our common stock and a five-year warrant exercisable for 158,714 shares of common stock with an exercise price of $0.49 per share. Additionally, such investor has been granted a most favored nation right pursuant to the Funding Agreement.
Convertible Promissory Note
On March 22, 2020, the Company entered into a private placement (the “Private Placement”) of $2,040,000 in principal amount of a senior secured convertible promissory note (the “Note”) due March 22, 2022 and a warrant (the “Warrant”) to purchase 4,553,571 shares of the Company’s common stock, $0.0001 par value per share to an institutional investor (the “Investor”). The Note and Warrant were issued pursuant to a Securities Purchase Agreement, entered into as of March 22, 2020 (the “Purchase Agreement”), by and between the Company and the Investor. Upon funding, which is expected subsequent to the filing of this Form 10-K, the Private Placement is expected to result in gross proceeds of $1,700,000, before fees and other expenses associated with the transaction, including but not limited to, an $85,000 commitment fee payable to the Investor. The net proceeds to be received by the Company will be used primarily for working capital, debt repayment and general corporate purposes.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef