Item 3.02
Unregistered
Sales of Equity Securities
GS
Capital Partners Amendment
On
August 31, 2017, the Company and GS Capital Partners, LLC (“GS Capital) agreed to amend the 5% Convertible Redeemable Note
the Company issued to GS Capital on June 27, 2017 (the “GS Capital Prior Note”). The GS Capital Prior Note was disclosed
in a Current Report on Form 8-K filed by the Company on June 30, 2017.
The
sole amendment to the GS Capital Prior Note was to delete the fixed conversion price of $0.00125 and replace it with a floating
conversion price. Specifically, GS Capital is now able, at any time, to convert all or any amount of the principal face amount
of the GS Note then outstanding into shares of the Company’s common stock at a price for each share of common stock equal
to 70% of the lowest daily volume weighted average price (“VWAP”) of the common stock as reported on the National
Quotations Bureau OTC Markets exchange which the Company’s shares are traded or any exchange upon which the common stock
may be traded in the future, for the fifteen (15) prior trading days including the day upon which a notice of conversion is received
by the Company or its transfer agent. In the event the Company experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to 60% instead of 70% while that “Chill” is in effect.
The
foregoing description of the amendment to the GS Capital Prior Note is qualified in its entirety by reference to the provisions
of the Amendment to Convertible Promissory Note filed as 4.1 to this Current Report on Form 8-K, which is incorporated herein
by reference.
GS
Capital Partners New Notes
On
August 31, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with GS Capital
whereby the Company issued to GS Capital two 8% Convertible Redeemable Notes each in the principal amount of $48,000. The first
8% Convertible Redeemable Note (the “First Note”) was funded with gross cash proceeds of $45,600 to the Company and
the second 8% Convertible Redeemable Note (the “Back-End Note”) was initially paid for by an offsetting promissory
note issued by GS Capital to the Company (the “Note Receivable”). The terms of the Back-End Note require cash funding
prior to any conversion thereunder. The Note Receivable is due April 30, 2018, unless certain conditions are not met, in which
case both the Back-End Note and the Note Receivable may both be cancelled. Both the First Note and the Back-End Note have a maturity
date one year from the date of issuance upon which any outstanding principal and interest is due and payable.
The
amounts cash funded plus accrued interest under both the First Note and the Back-End Note are convertible into to convert into
shares of the Company’s common stock at a price for each share of common stock equal to 70% of the lowest daily VWAP of
the common stock as reported on the National Quotations Bureau OTC Markets exchange which the Company’s shares are traded
or any exchange upon which the common stock may be traded in the future, for the fifteen (15) prior trading days including the
day upon which a notice of conversion is received by the Company or its transfer agent. In the event the Company experiences a
DTC “Chill” on its shares, the conversion price shall be decreased to 60% instead of 70% while that “Chill”
is in effect.
The
Back-End Note will not be cash funded and such note, along with the Note Receivable, will be immediately cancelled if the shares
do not maintain a minimum trading price during the five days prior to such funding and a certain aggregate dollar trading volume
during such period. Upon an event of default, principal and accrued interest will become immediately due and payable under the
notes. Additionally, upon an event of default, both notes will accrue interest at a default interest rate of 24% per annum or
the highest rate of interest permitted by law. Further, certain events of default may trigger penalty and liquidated damage provisions.
During
the first six months First Note and the Back-End Note are in effect, the Company may redeem either by paying to GS Capital an
amount as follows: (i) if the redemption is within the first 90 days either note is in effect, then for an amount equal to 120%
of the unpaid principal amount of either note along with any interest that has accrued during that period, (ii) if the redemption
is after the 91st day the either note is in effect, but less than the 180th day, then for an amount equal to 133% of the unpaid
principal amount of either note along with any accrued interest. Neither note may be redeemed after 180 days.
Additionally,
and pursuant to the Purchase Agreement, the Company shall issue to GS Capital 17,000,000 shares of the Company’s common
stock (the “Commitment Shares”).
The
foregoing descriptions of the Purchase Agreement, the First Note, the Note Receivable and the Back-End Note are qualified in their
entirety by reference to the provisions of the Purchase Agreement, the First Note, the Note Receivable and the Back-End Note,
included in Exhibits 10.2, 4.2, 4.3 and 4.4 respectively, to this Current Report on Form 8-K, which are incorporated herein by
reference.
The
Commitment Shares and shares of common stock underlying the First Note and the Back-End Note will be issued in reliance upon an
exemption from registration provided by Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
This Current Report on Form 8-K is not and shall not be deemed to be an offer to sell or the solicitation of an offer to buy common
stock.