Item
1.01 Entry into a Material Definitive Agreement.
Clearday,
Inc. (“Clearday” or the “Company”) entered into a loan agreement with an institutional lender to obtain gross
proceeds of approximately $283,500.
Financing
On
September 30, 2022, the Company closed a loan with an institutional lender (“Lender”) under the terms of a Securities Purchase
Agreement (the “Securities Purchase Agreement) dated as of September 28, 2022, and issued an unsecured promissory note in the principal
amount of $315,000, which included original issue discount of $31,500 (the “Note”) to the Lender. The Note provided proceeds
to us in the amount of $283,500
before fees and expenses. We paid $28,350 in placement fees in connection with the sale of the Note and $7,000 of expenses of the Lender.
After payment of such fees and closing costs, the
sale of the Note resulted in $248,150 in net proceeds to the Company. The
Note was issued in a transaction that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”), under Section 4(a)(2) thereof. The net proceeds were used for general working purposes.
The
obligations under the Note incur interest equal to 12% per annum, subject to increase to the lesser of 16% per annum or the maximum amount
permitted by law upon an Event of Default as defined by the Note. The Note’s maturity date is 380 days after the September 28 agreement
date of the SPA. Interest and principal are payable from and after 90 calendar days after the funding date, subject to a five business
day grace period, in equal monthly payments of $60,000 plus accrued and unpaid interest, subject to our right to extend any or each of
the first three such payments for 30 days upon payment of a fee equal to 10% of the amount due on such payment date. We may prepay the
obligations under the Note upon notice of seven trading days without payment or penalties or fees other than a $750 administrative fee.
We
paid the Lender a commitment fee (“Commitment Fee”) of our common stock (“Commitment Shares”). 34,650 of Commitment
Shares were issued and vested on the funding date of the Note. An additional 157,000 Commitment Shares vest monthly over the term of
the Note.
The
Note ranks as our senior unsecured debt. No security interests were granted to the Lender. The Lender has certain rights that may be
exercised only upon an Event of Default (as defined by the Note). These rights include the right to exercise a warrant (the “Warrant”)
to purchase 472,500 shares of our common stock at a price per share of $0.50, which Warrant will be void cancelled when the Note is repaid
in full, if there has not been an Event of Default. The Lender also has the right to convert the obligations under the Note, from and
after an Event of Default, at a price per share equal to $0.50. Each of the exercise price of the Warrant and the conversion price of
the Note are subject to adjustment in the event we issue shares of common stock or equivalents at a price per share that is lower than
the then exercise or conversion price. The Lender has no right to convert the Note or exercise the Warrant unless there is an Event of
Default under the Note.
We
have agreed to reserve shares of our common stock for issuance to the Lender upon any conversion of the Note, which may be converted
only after an Event of Default, equal to the product of number of shares that would be issued upon any such conversion multiplied by
1.25.
We
agreed to register under the Securities Act the Commitment Shares and the shares of common stock underlying the Warrant and the Note
under the terms of a Registration Rights Agreement within 180 days after the funding date, if the Note has not been repaid prior to such
date. We have also provided under the Securities Purchase Agreement that we will provides for such registration of such shares of our
common stock in any other registration statement that we may file under the Securities Act, subject to certain customary exceptions.
The
Note has customary representations, warranties and covenants, including, without limitation, our indemnification of the Lender a judgement
that is unvacated, unbonded or unstayed for a period of twenty (20) days, other than certain specified matters.
We
have provided the Lender with a right of first refusal with respect to any bona fide offer of any financing that we intend to pursue
that may be exercised by the Lender within five trading days after we provide a notice of such proposed financing. If the Lender does
not exercise its right of first refusal, then we may close such financing within 30 days. The Lender’s right of first refusal is
not applicable to any of the following: (1) a bona fide offer of capital or financing from a nationally recognized broker dealer that
is retained by Borrower and acceptable to the Holder, which acceptance will not be unreasonably delayed, withheld or conditioned (“Investment
Banker”), or any person or party that is introduced to the Company by the Investment Banker in its capacity as a placement agent,
(ii) a bona fide offer of capital or financing from a person or party if such capital or financing is used by the Company for the acquisition
or refinance of real property so long as (a) any security interest granted to such person or party is solely limited to the real property
being acquired or refinanced and (b) such person or party shall have no rights at any time in such transaction or any related transaction
to acquire Common Stock or Common Stock Equivalents of the Company (each a “Real Property Transaction”), as well as (iii)
a bona fide offer of capital or financing from a person or party if such person or party is solely purchasing the Company’s accounts
receivable(s) or sharing of the Company’s revenues, in each case so long as such person or party shall have no rights at any time
to acquire Common Stock or Common Stock Equivalents of the Company (each a “Factoring Transaction”).
The
Note is subject to repayment from the use the proceeds of certain transactions. If, prior to the full repayment or satisfaction of the
Note’s obligations, we receive cash proceeds of more than $2,000,000.00 (the “Minimum Threshold”) in the aggregate,
from the sale of assets or issuance of our securities, including pursuant to an Equity Line of Credit (as defined in this Note), then
the Lender may require us to apply up to 50% of such proceeds after the Minimum Threshold to repay all or any portion of the outstanding
obligation under the Note; provided that such repayment obligation is not applicable to Real Property Transactions (as defined by the
Note as noted above), the sale of assets to customers of the Company in the ordinary course of business, the sale of interests in real
estate, or any Small Business Administration Economic Injury Disaster Loan. In addition to the foregoing, the proceeds of revenues arising
from revenues in our Florida residential care facility to accommodate residents taking respite or refuge from Hurricane Ian will be used
to repay the Note, in part.
The
Lender has “most favored nations” status. While the Note’s obligations are outstanding, we will provide the Lender
with any terms under any other public or private offering of our securities (including securities convertible into shares of our common
stock) with any individual or entity (an “Other Investor”) that has the effect of establishing rights or otherwise benefiting
such Other Investor in a manner more favorable in any material respect to such Other Investor than the rights and benefits established
in favor of the Lender, in each case, other than with respect to any Real Property Transaction (as defined in the Note), Factoring Transaction
(as defined in the Note), or Buyout Transaction (as defined in the Note, generally to be when we use the proceeds to repay the Note’s
obligations).
The
foregoing descriptions of our obligations under the Securities Purchase Agreement, Note, Warrant and Registration Rights Agreement are
not complete and are qualified in their entirety by reference to the full text of each such document, which is filed as Exhibits 10.1,
10.2, 10.3 and 10.4 to this Report and are incorporated herein by reference.
