Item
1.01 Entry into a Material Definitive Agreement
EMA
Financial LLC Convertible Note
Effective
on April 27, 2017, the Company issued a convertible note, in the principal amount of $113,000, bearing interest at the rate of
10% per annum (the “Convertible Note”) to EMA Financial, LLC (the “Holder”) pursuant to
a Securities Purchase Agreement dated as of April 3, 2017. The Convertible Note provides the Holder the right, at any time after
180 days from the Closing Date of this Note, to convert the outstanding balance (including accrued and unpaid interest) of such
Convertible Note into shares of the Company’s common stock at a price ("Conversion Price") for each share of common
stock equal to the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately
preceding the Closing Date, and (ii) 55% of either the lowest sale price for the Common Stock on the Principal Market during the
fifteen (15) consecutive Trading Days immediately preceding the Conversion Date or the closing bid price, whichever is lower,
provided, however
, if the Company’s share price at any time loses the bid (ex: 0.0001 on the ask with zero market
makers on the bid on level 2), then the Conversion Price may, in the Holder’s sole and absolute discretion, be reduced to
a fixed conversion price of 0.00001 (if lower than the conversion price otherwise),
and provided,
that if on the date of
delivery of the Conversion Shares to the Holder, or any date thereafter while Conversion Shares are held by the Holder, the closing
bid price per share of Common Stock on the Principal Market on the Trading Day on which the Common Shares are traded is less than
the sale price per share of Common Stock on the Principal Market on the Trading Day used to calculate the Conversion Price hereunder,
then such Conversion Price shall be automatically reduced such that the Conversion Price shall be recalculated using the new low
closing bid price (“Adjusted Conversion Price”) and shall replace the Conversion Price above, and Holder shall be
issued a number of additional shares such that the aggregate number of shares Holder receives is based upon the Adjusted Conversion
Price. The Convertible Note is payable, along with interest thereon, on April 3, 2018.
In
the event any principal or interest is not timely paid or another Event of Default, the Convertible Note is immediately due and
payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), and interest
shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at
the highest rate of interest permitted by law. The Holder is prohibited from converting the Convertible Note into shares of the
Company’s common stock to the extent that such conversion would result in the Holder beneficially owning more than 9.99%
of the Company’s common stock.
During
the first six months in which the Convertible Note is outstanding, the Company may redeem the Convertible Note as follows: (i)
if the redemption is within the first 90 days, then for an amount equal to 120% of the unpaid principal amount of the Convertible
Note along with any interest that has accrued during that period, and (ii) after the 90
th
day, but prior to the 180
th
,
then for an amount equal to 125% of the unpaid principal amount of the Convertible Note along with any accrued interest. After
six months have elapsed from the closing date the Convertible Note cannot be prepaid.
The
Convertible Note provides for customary events of default such as failing to timely make payments under the Convertible Note when
due, unsatisfied judgments against the Company, failure to issue conversion shares in a timely manner and failure of the Company
to file annual and quarterly reports with the Securities and Exchange Commission. Upon the occurrence of an event of default,
as described in the Convertible Note, the Holder is entitled to enforce any and all of its rights and remedies provided in the
Convertible Note or any other rights or remedies afforded by law to collect the default amount, calculated as 150% (or 200% if
the default relates to delivery of conversion shares) of the Default Amount as defined, or if the Default Amount is not paid within
five business days, to require the Company to immediately issue, in lieu of the Default Amount, the number of shares of Common
Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.
The
foregoing descriptions of the SECURITY PURCHASE AGREEMENT AND Convertible Note do not purport to be complete and are qualified
in their entirety by reference to the FORMS OF SECURITY PURCHASE AGREEMENTS AND Convertible Note, which are filed as Exhibits
10.4 and 10.47 to this Current Report on Form 8-K and are incorporated herein by reference. DEFINED TERMS USED IN THE DESCRIPTIONS
IN THIS CURRENT REPORT SHALL HAVE THE MEANINGS PROVIDED IN THE RESPECTIVE EQUITY PURCHSE AGREEMENT AND CONVERTIBLE NOTE, UNLESS
SPECIFICALLY DEFINED ABOVE IN THIS REPORT.