Item 1.01
Entry into a Material Definitive Agreement.
On June 20, 2019 we entered into a 10% Fixed Convertible Promissory Note with Tangiers Global, LLC (“Tangiers”) in the aggregate principal
amount of up to $550,000 (the “Tangiers Note”) dated June 20, 2019. The initial principal amount of the Tangiers Note is $165,000, for which Tangiers paid a purchase price of $150,000 on June 24, 2019, representing approximately a 10% original
issue discount, due six months from the effective date of each payment by Tangiers. Upon our request, subject to certain conditions, Tangiers will pay up to an additional $400,000 consideration, subject to a 10% original issue discount, and in
such event, the maturity date for the additional payment would be six months from the effective date of such payment. The sum that we must repay to Tangiers would be prorated based on the consideration actually paid by Tangiers, such that we are
only required to repay the amount funded (plus the original issue discount, interest and other fees, as applicable), and we are not required to repay any unfunded portion of the Tangiers Note.
The Tangiers Note is convertible at the option of Tangiers at a conversion price of $0.65 per share, subject to adjustment in the event of
a forward split, stock dividend, or the like, but not adjusted in the event of a reverse split, recombination, or the like. If a prepayment is made within 90 days, we must pay an amount equal to 110% of the principal amount so paid; from 91 to
120 days, we must pay an amount equal to 120% of the principal amount so paid; and from 121 to 180 days, we must pay an amount equal to 130% of the principal amount so paid. Upon the occurrence of an event of default, as such term is defined
under the Tangiers Note, at the holder’s election, the Note will be immediately due and payable in cash at an amount equal to the principal amount due, plus an additional amount equal to 30% of the principal amount. In addition, five days
following acceleration of the repayment of the Note, interest will accrue at the rate of 20% per annum or the maximum legal rate. We have also caused our transfer agent to reserve not less than 7,500,000 shares of the Company’s common stock for
issuance upon conversion.
In the even the Note is not repaid on or before the maturity date, the holder may convert in whole or in part the outstanding principal
amount of the Note into shares of our common stock at a conversion price equal to the lower of initial conversion price of $0.65 per share or 60% of the lowest trading price of our common stock during the 15 consecutive trading days prior
conversion.
For a period of 45 days following the initial funding under the Note, we have agreed not to enter into any convertible debt financing
transaction with another party. Further, we have granted a right of first refusal to Tangiers in connection future financings by us so long as the Note is outstanding.
With respect to the above loan transaction with Tangiers, we issued Tangiers a stock purchase warrant allowing for the purchase of
1,100,000 shares of our common stock at $1.25 per share on a cashless basis for a period of five years.
In addition to the loan transaction with Tangiers, we have entered into an Investment Agreement with Tangiers (the “Investment Agreement”)
whereby Tangiers has agreed to purchase shares of our common stock up to an aggregate of $10,000,000 under certain terms and conditions. The purchase price for the shares is 80% of the lowest trading price of the stock during the five consecutive
trading days prior to receipt by Tangiers of the notice from us requiring purchase by them. The maximum number of shares we can require Tangies to purchase is restricted to 200% of the average daily trading volume during 10 consecutive trading
days, provided the amount is at least $5,000 and does not exceed $500,000.
In connection with the Investment Agreement we also granted to Tangiers registration rights for the shares issuable in this transaction and
have agreed to file a registration statement for the shares within 45 days following funding. We have further agreed to use our best efforts to have the registration statement declared effective not later than 120 days following its initial
filing.
This current report on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy any shares of common stock, nor
shall there be any sale of shares of common stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other
jurisdiction.
The foregoing descriptions of the Tangiers transaction documents are qualified in their entirety by reference to the full text of such
documents, copies of which are attached as Exhibits hereto. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the
parties to such agreements and may be subject to limitations agreed upon by the contracting parties.