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Item 1.01
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Entry into a Material Definitive Agreement.
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Effective September 13, 2016,
we entered into a senior secured credit facility agreement (the “Credit Facility” or the “Agreement”) with
TCA Global Credit Master Fund L.P (“TCA”) to provide capital for the acquisition of HowCo. We had the ability to borrow
up to $6,500,000,
subject to certain conditions and approval by TCA,
with an
initial loan at closing of $3,500,000. The Credit Facility is secured by substantially all our assets and our subsidiaries and
under the terms of the Credit Facility, except in limited circumstances, we are not permitted to encumber any of our assets, sell
any shares of common stock or incur additional indebtedness without TCA’s prior written consent. All of our assets, including the
assets of Howco, are secured by the TCA credit facility, which could be sold by TCA to satisfy the debt we owe it should we not
be able to repay TCA in full.
The Credit Facility originally
bore interest at a rate of 18%, required monthly payments of $52,500 which was interest only starting on October 13, 2016 through
February 13, 2017, and monthly payments, including interest and principal, of $298,341 starting on March 13, 2017 through maturity
on March 13, 2018.
As previously
disclosed in the Company’s 10-K for the period ending September 30, 2017, in April 13, 2017, the Company received a default
notice from TCA and was given a 10-day period to cure the default. The note became convertible and the interest rate increased
to 25% (default rate) upon expiration of the default cure period, as the default was not cured. From March 2017 through October
2018, the Company did not make the required monthly contracted payments. We have been in discussions with TCA and TCA agreed informally
to work with us to achieve our business plan as long as we are continuing to make progress in that regard.
Effective October
30, 2018, the registrant, Bantek, Inc d/b/a Drone USA, Inc. (“Drone USA”), entered into a First Amendment to Settlement
Agreement dated October 30, 2018, with TCA Global Credit Master Fund, LP (“TCA”) under which Drone USA issued to TCA
a Second Replacement Convertible Promissory Note (the “Note”) in the principal amount of $6,018,192.42.
The Note has a
term of 26 months, has a reduced interest rate of 12% and requires reduced monthly payments on a Payment Schedule labeled “Exhibit
A” to the Note. The Note also has a conversion rate for any unpaid principal and interest and a conversion price which is
at a price equal to: (i) the Conversion Amount (the numerator) divided by (ii) eighty-five percent (85%) of the lowest of the daily
volume weighted average price of the Borrower’s Common Stock during the five (5) Business Days immediately prior to the Conversion
Date. No shares of Drone USA common stock can be issued to the extent TCA would own more than 4.99% of the outstanding shares of
Drone USA common stock.
The foregoing
is a summary of the terms of the First Amendment to Settlement Agreement and Second Replacement Convertible Promissory Note and
is qualified in its entirety by the First Amendment to Settlement Agreement and Second Replacement Convertible Promissory Note
attached hereto and incorporated herein as Exhibits 10.1 and 10.2, respectively.