Item
1.01 Entry
into a Material Definitive Agreement
On November 20, 2017, we entered into a
securities purchase agreement with an accredited investor (the
“Buyer”) to place Convertible Debentures (the
“Debentures”) with a maturity date of one year after
the issuance thereof in the aggregate principal amount of up to
$300,000 (the “Transaction”), provided that in case of
an event of default, the Debentures may become at the
holder’s election immediately due and payable. The initial
closing of the Transaction occurred on November 20, 2017 when we
issued a Debenture for $150,000. The second closing is
scheduled for within five days of the date on which we have
received net proceeds of at least $100,000 from financing
transactions after November 1, 2017 on terms and conditions
reasonably satisfactory to the Buyer, in its sole discretion. We
intend to use the net proceeds from the Transaction to test lead
candidates from our CB101 program for their therapeutic
efficacy in in vivo rodent models of Parkinson's disease and for
general corporate purposes.
The Debentures bear interest at the rate
of 5% per annum. In addition, we must pay to the holder
a fee equal to 7% of the amount of the Debentures to assist in
their monitoring costs for the Debentures. The net proceeds of the
financing will be used for general corporate matters and for other
expenses.
The Debenture may be converted into
shares of our common stock at any time on or prior to maturity at
the lower of $0.10 or 93% of the average of the three lowest daily
VWAPs during the 10 consecutive trading days immediately preceding
the conversion date, provided that as long as we are not in default
under the Debenture, the conversion price may never be less than
$0.01. We may not convert any portion of a Debenture if such
conversion would result in the holder beneficially owning more than
4.99% of our then issued and common stock, provided that such
limitation may be waived by the holder with 65 days’
notice.
Any
time after the six-month anniversary of the issuance of a Debenture
that the daily VWAP is less than $0.01 for a period of twenty
consecutive trading days (the “Triggering Date”) and
only for so long as such conditions exist after a Triggering Date,
we shall make monthly payments beginning on the last calendar day
of the month when the Triggering Date occurred. Each monthly
payment shall be in an amount equal to the sum of (i) the principal
amount outstanding as of the Triggering Date divided by the number
of such monthly payments until maturity, (ii) a redemption premium
of 20% in respect of such principal amount and (iii) accrued and
unpaid interest hereunder as of each payment date. We may, no
more than twice, obtain a thirty day deferral of a monthly payment
due as a result of a Triggering Date through the payment of a
deferral fee in the amount equal to 10% of the total amount of such
monthly payment. Each deferral payment may be paid by the
issuance of such number of shares as is equal to the applicable
deferral payment divided by a price per share equal to 93% of the
average of the four lowest daily VWAPs during the 10 consecutive
Trading Days immediately preceding the due date in respect of such
monthly payment begin deferred, provided that such shares issued
will be immediately freely tradable shares in the hands of the
holder
We also entered into a Security Agreement to secure payment and
performance of our obligations under the Debentures and related
agreements pursuant to which we granted the investor a security
interest in all of our assets. The security interest
granted pursuant to the Security Agreement terminates on the
payment in full of outstanding Debentures and any interest on, or
other payments due under, the
Debentures.
On November 20, 2017, we also entered into an Amendment Agreement
with the Buyer whereby we amended the terms of three debentures
issued pursuant to the terms of a Securities Purchase Agreement
entered into on January 25, 2017. Those three debentures were (i) a
convertible debenture issued on January 25, 2017 in a face amount
of $300,000, (ii) a convertible debenture issued on March 2, 2017
in a face amount of $150,000 and (iii) a convertible debenture
issued on May 3, 2017 in a face amount of $150,000 (each as
amended, an “Initial Debenture”). Prior to the
Amendment Agreement, each Initial Debenture was convertible into
shares of our common stock at any time on or prior to maturity at
the lower of $0.3107 or 93% of the average of the three lowest
daily VWAPs during the 10 consecutive trading days immediately
preceding the conversion date, provided that as long as we are not
in default under the Debenture, the conversion price may never be
less than $0.05 (the “Initial Debenture Floor Price”).
The Amendment Agreement lowered the Initial Debenture Floor Price
to $0.01 and extended the maturity date of the Initial Debentures
to November 20, 2018.
