ZEST Ecoark Holdings Inc

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

____________________________________________________________

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

___________________________________________________________________

 

Date of Report (Date of earliest event reported):  February 22, 2024

 

RISKON INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		001-40701		30-0680177
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141

(Address of principal executive offices) (Zip Code)

 

(800) 762-7293

(Registrant's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		ROI		The Nasdaq Capital Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

Item 1.01

Entry into a Material Definitive Agreement.

 

Amendment and Exchange Agreement

 

On February 21, 2024 (the “Execution Date”), RiskOn International, Inc., a Nevada corporation (the “Company”) entered into an amendment and exchange agreement (the “Agreement”) with holders of outstanding securities of the Company (collectively, the “Holders”). The Holders, pursuant to a securities purchase agreement, dated as of April 27, 2023 entered into with the Company (the “SPA”), purchased certain senior secured convertible notes (the “Notes”) and warrants (the “Warrants” and together with the SPA and the Notes, the “Existing Transaction Documents”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).

 

Pursuant to the Agreement, (i) the Company agreed to sell 1,000 shares of Common Stock at a price of $0.15 per share to one of the Holders (the “Proposed Common Offering”), (ii) the Holders agreed to exchange Warrants to purchase 100 shares of Common Stock for an aggregate of 6,602,712 newly issued shares of Common Stock or rights to purchase shares of Common Stock (the “Exchange”), (iii) the Holders agreed to grant the Company a waiver under the Existing Transaction Documents to consummate a subsequent placement, pursuant to which the Company may issue and sell up to $20 million of shares of newly designated Series E Convertible Preferred Stock (the “Series E Preferred Stock”), (iv) the Holders granted the Company a limited waiver in connection with the Proposed Common Offering of the provision in the Warrants that would increase the number of shares of Common Stock issuable upon exercise of the Warrants in the event that the Warrant exercise price (the “Exercise Price”) was reduced as a result of the issuance of Common Stock at a price per share less than the current Exercise Price (the “Warrant Adjustment”) so that the Proposed Common Offering only increased the number of Warrants to the number held by the Holders prior to the Exchange and (v) the Holders agreed to permanently waive the Warrant Adjustment going forward (collectively, (i) – (v), the “Transactions”). The consummation of the Transactions is subject to the Company obtaining consent, or no-objection, from the Nasdaq Stock Market and delivery to the Company’s transfer agent delivery instructions to issue the shares of Common Stock in the Exchange (the “Delivery Time”). Upon the consummation of the Proposed Common Offering, the conversion price of the Notes and the Exercise Price would be reduced to $0.15 per share and $0.20 per share, respectively.

 

The foregoing description of the Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Series E Preferred Stock

 

On the Execution Date, the Company entered into a Master Services Agreement (the “MSA”) and a Statement of Work #1 (the “SOW”) with MeetKai, Inc. (“MeetKai”), pursuant to which, as of the Effective Time (as hereinafter defined), MeetKai will grant the Company a right (the “License”) to use, sub-license and/or resell MeetKai’s generative artificial intelligence platform (the “Platform”) as well as to provide hosting of the Platform and other development services. The License will be perpetual (the “Term”) and the Company will have the (i) right (which shall be exclusive during the first five years of the Term, and non-exclusive thereafter) to use, sub-license and/or resell the Platform on a “white-labeled basis” to the Company’s end customer (the “End User”), provided that such end customers are headquartered within the territory of North America (the “Territory”) and (ii) non-exclusive right to use, sub-license and/or resell the Platform to an End User outside the Territory. Either party will have the right to terminate the License (A) after five years from the Effective Time, for any or no reason, upon 60 days prior written notice, (B) upon written notice if a second statement of work related to development of the front-facing interface incorporating the Platform is not executed within 30 days of the Execution Date, or (C) at any time if the other party materially breaches the SOW and fails to cure such breach within agreed upon cure periods. In addition, the Company will have the right to terminate the License at any time beginning 34 months after the Effective Time, for any or no reason, upon 60 days prior written notice. For purposes of the MSA and the SOW, the “Effective Time” shall mean immediately after the Delivery Time.

 

The licensing fee (the “Licensing Fee”) for the License for the Term will be $15 million, of which $10 million will be paid at the Effective Time, $3 million will be paid on the first anniversary of the Effective Time and $2 million will be paid on the second anniversary of the Effective Time. The Company will pay MeetKai an annual maintenance fee (the “Maintenance Fee” and together with the Licensing Fee, the “Fees”) for the maintenance of the Platform starting in the fourth year of the Term, and each subsequent year. The parties agree to use good faith efforts to determine the amount of the Maintenance Fee, if any, that will be required. In the event that the parties cannot agree on whether a Maintenance Fee is required or the amount of such Maintenance Fee, the parties agreed to submit the dispute to binding arbitration. In addition, the Company agreed to pay MeetKai 50% of net revenue received by the Company from Licensing of the Platform.

 

The Licensing Fee and Maintenance Fee, if any, will be paid through the issuance of shares of Series E Preferred Stock. The terms of the Series E Preferred Stock shall be as set forth in the Certificate of Designations of the Rights, Preferences and Limitations of the Series E Convertible Preferred Stock (the “Series E Certificate”), which Series E Certificate shall be filed with the Nevada Secretary of State prior to the Effective Time. Each share of Series E Preferred Stock has a stated value of $100.00 per share (the “Series E Stated Value”). The number of shares of Series E Preferred Stock to be issued, multiplied by the Series E Stated Value, will equal the amount of Fees owed. On the Execution Date, the Company and MeetKai entered into a securities purchase agreement (the “MeetKai SPA”), pursuant to which the Company will sell the Series E Preferred Stock to MeetKai as payment for the Fees. At the Effective Time, the Company issued MeetKai 100,000 shares of Series E Preferred Stock.

 

 

The material terms of the Series E Preferred Stock and the MeetKai SPA are summarized below.

 

Description of the Series E Preferred Stock

 

Conversion Rights

 

Pursuant to the Series E Certificate, each share of Series E Preferred Stock is convertible into a number of shares (the “Series E Conversion Shares”) of Common Stock determined by dividing the Series E Stated Value by the Series E Conversion Price. The “Series E Conversion Price” is (i) prior to March 1, 2024, $0.10, subject to adjustment as provided in the Series E Certificate and (ii) on and after March 1, 2024, the greater of (A) $0.025 per share, subject to adjustment as provided in the Series E Certificate and (B) the average closing price of the Common Stock during the two (2) consecutive trading days prior to the date of conversion. Pursuant to the Series E Certificate, no shares of Series E Preferred Stock may be converted (i) until no more than $250,000 of principal face amount of the Notes are outstanding, (ii) that results in the holder of Series E Preferred Stock beneficially owning more than 4.99% of the Common Stock and (iii) that results in the issuance, in the aggregate, of Series E Conversion Shares in excess of 19.99% of the number of shares of Common Stock issued and outstanding as of the Execution Date, without shareholder approval, in accordance with the rules and regulations of the Nasdaq Stock Market (“Nasdaq”).

 

Dividend, Voting and Liquidation Rights

 

The holders of Series E Preferred Stock are not entitled to receive dividends and do not vote, except as required by Nasdaq or Nevada law. Each share of Series E Preferred Stock also has a $100.00 liquidation preference in the event of a liquidation, dissolution or winding up of the Company, and ranks senior to the Common Stock but junior to all other equity securities of the Company, either currently existing or issued in the future. The Company is required to maintain a reserve of authorized and unissued shares of Common Stock equal to 200% of the Series E Conversion Shares.

 

Optional and Mandatory Redemption

 

The Company has the right, at any time upon not less than five days’ prior written notice, to redeem all or a portion of the outstanding shares of Series E Preferred Stock at a price per share equal to the Series E Stated Value. The holders of Series E Preferred Stock have the right to require the Company to redeem all or a portion of the outstanding shares of Series E Preferred Stock at a price per share equal to the Series E Stated Value upon the occurrence of certain limited events, including bankruptcy, insolvency, liquidation, or if the Common Stock is not listed or quoted for ten consecutive trading days on a trading market, which includes any level of the OTC Markets operated by OTC Markets Group, Inc.

 

Description of the MeetKai SPA

 

Pursuant to the MeetKai SPA, the Company agreed to use commercially reasonable efforts to prepare and file a registration statement with the U.S. Securities and Exchange Commission registering the Series E Conversion Shares for resale and to get the resale registration statement effective as soon as possible. The Company also granted MeetKai piggyback registration rights for the Series E Conversion Shares.

 

The foregoing descriptions of the MSA, SOW, MeetKai SPA and the Series E Certificate and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to the MSA, SOW, MeetKai SPA and the Series E Certificate filed as Exhibits 10.2, Exhibit 10.3, Exhibit 10.4 and Exhibit 3.1, respectively, hereto to this Current Report on Form 8-K and are incorporated herein by reference.

 

Item 5.02           Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On February 21, 2024, William Horne notified the Company, of his decision to resign as a director of the Company, effective that day. Mr. Horne’s resignation was not the result of any disagreement with the Company, or its management on any matter relating to the Company's operations, policies or practices. The Company thanks Mr. Horne for his contributions.

 

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits:

 

Exhibit No.		Description
3.1		Form of Certificate of Designations of the Rights, Preferences and Limitations of the Series E Convertible Preferred Stock.
10.1		Amendment and Exchange Agreement, dated as of February 21, 2024.
10.2		Master Services Agreement, dated as of February 21, 2024, by and between RiskOn International, Inc. and MeetKai, Inc.
10.3		Statement of Work #1, dated as of February 21, 2024, by and between RiskOn International, Inc. and MeetKai, Inc.
10.4		Securities Purchase Agreement, dated as of February 21, 2024, by and between RiskOn International, Inc. and MeetKai, Inc.
101		Pursuant to Rule 406 of Regulation S-T, the cover page is formatted in Inline XBRL (Inline eXtensible Business Reporting Language).
104		Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	RISKON INTERNATIONAL, INC.
Dated: February 22, 2024	/s/ Henry Nisser
	Henry Nisser President and General Counsel

 

 

-5-

 

 

 

Exhibit 3.1

 

RISKON INTERNATIONAL, INC.

 

CERTIFICATE OF DESIGNATIONS OF RIGHTS, PREFERENCES AND LIMITATIONS

 

OF

 

SERIES E CONVERTIBLE PREFERRED STOCK

 

February 21, 2024

 

Pursuant to Section 78.1955 of the Nevada Revised Statutes (the “NRS”) and Article IV of the Articles of Incorporation (as most recently amended on October 8, 2021, the “Articles”) of RiskOn International, Inc. (the “Corporation”):

 

WHEREAS, Article IV of the Articles authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.001 per share, of the Corporation (“Preferred Stock”) in one or more series, and expressly authorizes the Board of Directors of the Corporation (the “Board”), subject to limitations prescribed by law, to provide, out of the unissued shares of Preferred Stock, one or more series of Preferred Stock, and, with respect to each such series, to establish and fix the number of shares to be included in any series of Preferred Stock and the designation, rights, preferences, powers, restrictions and limitations of the shares of such series;

 

WHEREAS, it is the desire of the Board to establish and fix the number of shares to be included in a new series of Preferred Stock and the designation, rights, preferences and limitations of the shares of such new series; and

 

WHEREAS, the Board, pursuant to the authority conferred upon it by Article IV of the Articles and in accordance with Section 78.1955 of the NRS at meetings held on February 1 and 9, 2024, adopted the following resolutions:

 

RESOLVED, that a new series of Preferred Stock of the Corporation, designated as “Series E Convertible Preferred Stock,” be, and it hereby is, created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the Series E Convertible Preferred Stock (the “Series E Preferred Stock”), and the qualifications, limitations or restrictions thereof are as set forth in such Certificate of Designations of Rights, Preferences and Limitations of the Series E Preferred Stock (the “Certificate”), as filed with the Nevada Secretary of State in accordance with the Corporation’s Articles, its Bylaws and the NRS; and be it further

 

RESOLVED, that the statements contained in the foregoing resolutions creating and designating the said shares and fixing the number, limited powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the Articles of Incorporation of the Corporation; and be it further

 

RESOLVED, that the Board does hereby approve the adoption of the Certificate, and does hereby determine that the adoption of the Certificate is in the best interests of the shareholders; and be it further

 

RESOLVED, this Certificate and of the rights and preferences created are subject to the approval of the Corporation’s shareholders at a meeting in accordance with the NRS and is also subject to compliance with the Rules of the Nasdaq Stock Market; and be it further

 

RESOLVED, that each of the Chief Executive Officer and the Chief Financial Officer of the Corporation are hereby authorized and directed to take all actions necessary to prepare and file the Certificate with the Secretary of State of the State of Nevada as they, in consultation with legal counsel, deem either necessary or appropriate to proceed with any such sale.

 

Section 1.      Number of Shares and Designation. This series of Preferred Stock shall be designated as the “Series E Convertible Preferred Stock,” par value $0.001 per share (the “Series E Preferred Stock”). The Series E Preferred Stock shall be perpetual, subject to the provisions of Section 6 hereof, and the authorized number of shares of the Series E Preferred Stock shall be 200,000. The number of shares of Series E Preferred Stock may be increased from time to time subject to the provisions of Section 5 and Section 15 hereof and any such additional shares of Series E Preferred Stock shall form a single series with the Series E Preferred Stock. Each share of Series E Preferred Stock shall have the same designations, rights, preferences, powers, restrictions and limitations as every other share of Series E Preferred Stock.

 

 

Section 2.      Certain Definitions. The following words and terms shall have the meanings defined in this Section 2. All capitalized words and terms not defined, have the meaning in the Securities Purchase Agreement:

 

“Affiliate” shall have the meaning ascribed to such term in Rule 405 of the Securities Act.

 

“Articles” means the Corporation’s Articles of Incorporation, as amended.

 

“Business Day” means any day, other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law, regulation, or executive order to close.

 

“Capital Stock” means any and all shares (however designated) of the Corporation’s capital stock.

 

“Certificate” means this Certificate of Designations of Rights, Preferences and Limitations of Series E Convertible Preferred Stock.

 

“Change of Control Event” shall mean the occurrence of any of the following in one or a series of related transactions:

 

(i)

one or more acquisitions after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act), resulting in a majority or more of the voting rights or equity interests in the Corporation being transferred to such Persons or their Affiliates;

 

(ii)

a replacement of more than a majority of the members of the Board that is not approved by (i) those individuals who are members of the Board on the date hereof (or other directors previously approved by such individuals) and (ii) the Majority Holder;

 

(iii)

a merger or consolidation of the Corporation or any one or more Subsidiaries owning a majority of the consolidated assets of the Corporation and all Subsidiaries with another entity, or a sale of all or substantially all of the assets of the Corporation and its consolidated Subsidiaries in one or a series of related transactions, unless following such transaction or series of transactions, the Holders of the Corporation’s securities immediately prior to the first such transaction continue to hold at least a majority of the voting rights and equity interests in the surviving entity or acquirer of such assets;

 

(iv)

a recapitalization, reorganization or other transaction involving the Corporation that constitutes or results in a transfer of a majority or more of the voting rights or equity interests in the Corporation to any Persons; or

 

(v)

the execution by the Corporation or its controlling shareholders of an agreement providing for any of the foregoing events.

 

Notwithstanding the foregoing, the closing of the transactions contemplated by the Securities Purchase Agreement shall not be deemed to be a Change of Control for the purposes of this Certificate.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means (i) the common stock, $0.001 par value, of the Corporation and (ii) any Capital Stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

“Common Stock Equivalents” means any securities of the Corporation or any of its Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Conversion Date” shall have the meaning set forth in Section 6(b)(ii) hereof.

 

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as in effect at the time.

 

“Fundamental Transaction” means that (i) the Corporation shall, directly or indirectly, in one or more related transactions, (A) consolidate or merge with or into (whether or not the Corporation or any of its Subsidiaries is the surviving corporation) any other Person, or (B) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (C) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Corporation (not including any shares of Voting Stock of the Corporation held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (D) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Corporation (not including any shares of Voting Stock of the Corporation held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (E) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Corporation. Provided, however, that neither (i) the spin-off or dividend of common stock of a Subsidiary, nor (ii) any transaction with an Affiliate or a related party of the Majority Holders, shall be deemed to be a Fundamental Transaction.

 

“Holder” or “Holders” shall mean each holder of shares of Series E Preferred Stock.

 

“Initial Conversion Date” means the date upon which no more than an aggregate of $250,000 of principal face amount remains outstanding of senior secured notes, issued on April 27, 2023.

 

“Issuance Date” means the date(s) that the Corporation issues shares of Series E Preferred Stock pursuant to the Securities Purchase Agreement.

 

“Liquidation Preference Per Share” shall mean $100.00.

 

“Majority Holders” means any Holder(s) of a majority of the then outstanding shares of Series E Preferred Stock.

 

“NRS” means the Nevada Revised statutes, as amended.

 

“Notice of Conversion” shall have the meaning set forth in Section 6(b)(i) hereof.

 

“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on a Trading Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

“Person” means an individual, a corporation, a partnership, an association, a limited liability company, an unincorporated business organization, a trust or other entity or organization, and any government or political subdivision or any agency or instrumentality thereof.

 

 “Principal Market” means the Nasdaq Capital Market.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as in effect at the time.

 

“Securities Purchase Agreement” means collectively, each Securities Purchase Agreement related to the issuance of Series E Preferred Stock by and among the Corporation and the original Holders, the first of which was dated as of February 21, 2024, as amended, modified or supplemented from time to time in accordance with its terms.

 

 

“Senior Stock” shall have the meaning set forth in Section 4 hereof.

 

“Share Delivery Date” shall have the meaning set forth in Section 6(b)(ii) hereof.

 

“Stated Value” means $100 per share of Series E Preferred Stock.

 

“Subsidiary” or “Subsidiaries” of any Person means (i) any corporation with respect to which more than 50% of the issued and outstanding voting equity interests of such corporation is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries, or (ii) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner.

 

“Successor Entity” means the Person (or, if so elected by the Majority Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Majority Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

“Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; the New York Stock Exchange; the NYSE American; any level of the OTC Markets operated by OTC Markets Group, Inc. (or any successors to any of the foregoing).

 

“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 

Section 3.      Dividends. The Series E Preferred Stock shall not accrue dividends.

 

Section 4.      Liquidation Preference. Upon the occurrence of (i) liquidation, (ii) dissolution (other than a dissolution arising from the failure to make a routine filing with the Nevada Secretary of State), or (iii) winding-up, then, before any distribution or payment shall be made to the holders of any Common Stock, the Corporation shall first redeem all shares of Series E Preferred, out of the Corporation’s assets legally available for distribution to shareholders, the Liquidation Preference Per Share. After payment of the full amount of the liquidating distributions to which they are entitled, the Holders will have no right or claim to any of the Corporation’s remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the Corporation’s available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series E Preferred Stock and the corresponding amounts payable on all class or series of capital stock specifically ranking, by its terms, senior to the Series E Preferred Stock (collectively, “Senior Stock”), then after payment of the liquidating distribution on all outstanding Senior Stock, the holders of the Series E Preferred Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.

 

Section 5.      Voting Rights. The shares of Series E Preferred Stock shall not be entitled to vote, except as required by the provisions of the NRS and the Rules of the Principal Market.

 

 

Section 6      Conversion of Series E Preferred Stock.

 

(a)       Optional Conversion. Each share of Series E Preferred Stock shall become convertible, in whole or in part and at the option of the Holder, commencing on the Initial Conversion Date, into such number of fully paid and non-assessable shares of Common Stock determined by dividing the Stated Value of the Series E Preferred Stock being converted by the then applicable Conversion Price (as defined below, the “Conversion Price”). The Conversion Price shall be subject to adjustment as provided in Section 6(d) below. No conversion shall be permitted to the extent that it violates the Rules of the Principal Market including the issuance of more than 19.99% of a class of equity security without shareholder approval.

 

For purposes hereof, the term “Conversion Price” shall mean (i) prior to March 1, 2024, $0.10, subject to adjustment as provided in Section 6(d) below and (ii) on and after March 1, 2024, the greater of (A) $0.025 per share (the “Floor Price”), which Floor Price shall be adjusted as provided in Section 6(d) below and (B) the average closing price of the Common Stock during the two (2) consecutive Trading Days period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Notice of Conversion (as hereinafter defined).

 

(b)       Mechanics of Conversion.

 

(i)       Before any Holder of Series E Preferred Stock shall be entitled to convert the same into shares of Common Stock pursuant to Section 6(a) hereof, such Holder shall give written notice to the Corporation at its principal corporate office of the election to convert shares of Series E Preferred Stock, the number of shares of Series E Preferred Stock to be converted, the number of shares of Series E Preferred Stock owned subsequent to the conversion at issue, and the name or names in which the certificate or certificates for shares of Common Stock are to be issued, substantially in the form attached hereto as Exhibit A (each, a “Notice of Conversion”). No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Series E Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Series E Preferred Stock to the Corporation unless all of the shares of Series E Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Series E Preferred Stock promptly following the Conversion Date at issue.

 

(ii)       Shares of Series E Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and shall not be reissued. The Corporation shall, as soon as practicable after delivery of the Notice of Conversion, in the case of a conversion pursuant to Section 6(a) hereof, and as soon as practicable after delivery of the certificate(s) evidencing the Series E Preferred Stock, within three (3) Business Days thereafter (the “Share Delivery Date”), issue and deliver or cause to be delivered to such Holder or Holders, or to the nominee or nominees thereof, a certificate or certificates representing the number of validly issued, fully paid and non-assessable shares of Common Stock to which such Holder or Holders shall be entitled as aforesaid. Conversion under this Section 6 shall be deemed to have been made immediately prior to the close of business on the date of delivery of the Notice of Conversion, unless a later date is specified in the Notice of Conversion, and the Person or Persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date (such date, the “Conversion Date”). If, in the case of any conversion of the Series E Preferred Stock pursuant to this Section 6, such shares of Common Stock are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such shares of Common Stock, to rescind such conversion, in which event the Corporation shall promptly return to the Holder any original Series E Preferred Stock certificate delivered to the Corporation. The Corporation’s obligation to issue and deliver the shares of Common Stock upon conversion of Series E Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such shares of Common Stock. In the event a Holder shall elect to convert any or all of the shares of its Series E Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Series E Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Series E Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue shares of Common Stock and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such shares of Common Stock pursuant to this Section 6 by the Share Delivery Date applicable to such conversion and no injunction or similar court order is in effect, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $10,000 of Stated Value of Series E Preferred Stock being converted, $50 per Business Day (increasing to $100 per Business Day on the third Business Day and increasing to $200 per Business Day on the sixth Business Day after such damages begin to accrue) for each Business Day after the Share Delivery Date until such Shares of Common Stock are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver shares of Common Stock within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

 

(c)       Fractional Shares; Computation Certificates.

 

(i)       No fractional shares shall be issued upon conversion of the Series E Preferred Stock into shares of Common Stock and the number of shares of Common Stock to be issued shall be rounded up to the nearest whole share for any shares in excess of one-half (1/2) or otherwise rounded down.

 

(ii)       Upon the occurrence of each adjustment of the Conversion Price of Series E Preferred Stock pursuant to this Section 6, the Corporation, at its expense, shall promptly compute such adjustment in accordance with the terms hereof and prepare and furnish to each Holder of Series E Preferred Stock a statement, signed by its independent registered public accounting firm, setting forth such adjustment and showing in reasonable detail the facts upon which such adjustment is based. The Corporation shall, upon the written request at any time of any Holder of Series E Preferred Stock, furnish or cause to be furnished to such Holder a like certificate setting forth (A) such adjustment, (B) the Conversion Price for such Series E Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of such Series E Preferred Stock.

 

(d)       Adjustments of the Conversion Price. The Conversion Price of the Series E Preferred Stock shall be subject to adjustment from time to time as follows:

 

(i)       Adjustments for Recapitalization. If at any time or from time to time there shall be a recapitalization of the Common Stock, provision shall be made so that the Holders shall thereafter be entitled to receive upon conversion of the Series E Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the Holders after the recapitalization to the end that the provisions of this Section 6 (including, without limitation, provisions for adjustments of the Conversion Price and the number of shares of Common Stock issuable upon conversion of the Series E Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

 

(ii)       Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Issuance Date effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Issuance Date combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective. Notwithstanding the foregoing, in no event shall the Conversion Price be less than the Floor Price.

 

(iii)       Adjustments for Distribution. In addition to any adjustments pursuant to Section 6(d) hereof, in the event the Corporation shall declare a distribution payable in Common Stock, Common Stock Equivalents or other securities of the Corporation, evidences of indebtedness issued by the Corporation, assets (or rights to acquire assets), or options, rights or other property not referred to in Section 6(e) hereof to the holders of Common Stock, in each case whether by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (each, a “Distribution”), then, in each such case for the purpose of this Section 6(d), the Holders shall be entitled to a proportionate share of any such Distribution as though they were the holders of the number of shares of Common Stock of the Corporation into which their shares of Series E Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such Distribution.

 

 

(iv)       Adjustment for Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the Corporation or a Change of Control Event, shall be effected while any shares of Series E Preferred Stock are outstanding in such a manner that holders of shares of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, or Change of Control Event, lawful and adequate provision shall be made whereby each Holder who has not received the amounts to be distributed to such holder in accordance with this Certificate shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon conversion of Series E Preferred Stock, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore so receivable had such reorganization, reclassification or Change of Control Event not taken place, and in such case appropriate provision shall be made with respect to the rights and interests of the Holders to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price, Conversion Rate and the number of shares of Common Stock issuable upon conversion of the Series E Preferred Stock) shall thereafter be applicable, as nearly as may be possible, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of such shares of Series E Preferred Stock. Prior to or simultaneously with the consummation of any such reorganization, reclassification or Change of Control Event, the survivor or successor corporation (if other than the Corporation) resulting from such reorganization, reclassification or Change of Control Event shall assume by written instrument executed and mailed or delivered to each Holder, the obligation to deliver to such Holders such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to receive, and containing the express assumption by such successor corporation of the due and punctual performance and observance of every provision of this Certificate to be performed and observed by the Corporation and of all liabilities and obligations of the Corporation hereunder with respect to the Series E Preferred Stock.

 

(v)       Reserved.

 

(e)       Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than five (5) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series E Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any Holder (but in any event not later than five (5) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series E Preferred Stock.

 

(f)        Good Faith Assistance. The Corporation will not, by amendment of its Articles or Bylaws or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holders against impairment.

 

(g)        Notice of Record Taking. In the event of any taking by the Corporation of a record of the Holders of any class of securities for the purpose of determining the Holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each Holder, at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

(h)       Reservation of Shares. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series E Preferred Stock, 200% of the number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series E Preferred Stock (the “Required Reserve Amount”); and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to enable the Corporation to satisfy its obligation to have available for issuance upon conversion of the Series E Preferred Stock at least a number of shares of Common Stock equal to the Required Reserve Amount, then, in addition to such other remedies as shall be available to the Holder, the Corporation will immediately take all such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, using its best efforts to obtain the requisite Shareholder Approval of any necessary amendment to these provisions as soon as possible. For avoidance of doubt, because the Corporation does not have sufficient authorized Common Stock as of the Issuance Date, it will reserve the maximum number of shares of Common Stock that it legally can and seek Shareholder Approval as provided in the Securities Purchase Agreement.

 

 

(i)       Payment of Taxes. The Corporation shall pay all documentary, stamp or other transactional taxes (exclusive of income taxes) attributable to the issuance or delivery of shares of capital stock of the Corporation upon conversion of any shares of Series E Preferred Stock; provided, however, that the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of the shares of Series E Preferred Stock in respect of which such shares are being issued.

 

(j)       Status of Shares. All shares of Common Stock that may be issued in connection with the conversion provisions set forth herein will, upon issuance by the Corporation, be validly issued, fully paid and non-assessable and free from all taxes, Liens or charges with respect thereto.

 

(k)       Notice. Any notice required by the provisions of this Section 6 to be given to the Holders of shares of Series E Preferred Stock shall be deemed given upon hand delivery, one (1) Business Day after the notice is sent by overnight courier or three (3) Business Days after the notice is deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the stock books of the Corporation. The Corporation shall provide each Holder with prompt written notice of all actions taken pursuant to the terms of this Certificate, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Corporation shall give written notice to each Holder (i) promptly following any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least ten (10) days prior to the date on which the Corporation closes its books or takes a record (A) with respect to any dividend or Distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Common Stock, Common Stock Equivalents, assets or other property to all holders of shares of Common Stock as a class or (C) for determining rights to vote with respect to any matter on which the holders of Common Stock shall have the right to vote.

 

(l)       Cancellation of Series E Preferred Stock. In the event any shares of Series E Preferred Stock shall be converted pursuant to this Section 6 or otherwise reacquired by the Corporation, the shares so converted or reacquired shall be canceled and may not be reissued. The Articles of the Corporation may be appropriately amended from time to time to effect the corresponding reduction in the Corporation’s authorized capital stock.

 

(m)       Conversion Disputes.  In the case of any dispute with respect to a conversion, the Corporation shall promptly issue such number of shares of Common Stock in accordance with Section 6(b) above as are not disputed.  If such dispute involves the calculation of the Conversion Price, and such dispute is not promptly resolved by discussion between the relevant Holder and the Corporation, the Corporation shall submit the disputed calculations to an independent outside accountant within ten (10) Business Days of receipt of notice of such dispute. The accountant, at the Corporation’s sole expense, shall promptly audit the calculations and notify the Corporation and the Holder of the results no later than ten (10) Business Days from the date it receives the disputed calculations.  The accountant’s calculation shall be deemed conclusive, absent manifest error.  The Corporation shall then issue the appropriate number of shares of Common Stock in accordance with Section 6(c) above. If the accountant determines the Corporation’s calculations are correct, the Holder shall reimburse the Corporation for the accountant’s expense.

 

(n)       Limitations on Conversions. Notwithstanding anything to the contrary contained herein, shares of Series E Preferred Stock shall not be convertible by a Holder into shares of Common Stock, and the Corporation shall not effect any conversion of shares of Series E Preferred Stock into or otherwise issue any shares of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such Conversion or other share issuance hereunder the Holder (together with its Affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock. To the extent the above limitation applies, the determination of whether shares of Series E Preferred Stock shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its Affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder and its Affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission for conversion or exercise (as the case may be). Under no circumstances can the Maximum Percentage limitation be amended on less than 61 days’ notice, if, as a result of such amendment, the Maximum Percentage is amended to be above 9.99%. No prior inability to convert shares of Series E Preferred Stock, or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. For any reason at any time until the shares of Series E Preferred Stock has been converted, upon the written or oral request of a Holder, the Corporation shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion, exchange or exercise of convertible or exercisable securities into Common Stock, including, without limitation, shares of Series E Preferred Stock.

 

 

Section 7.      Status of Acquired Shares. All shares of Series E Preferred Stock converted by its Holder in accordance with Section 6 hereof, or acquired by the Corporation, shall be restored to the status of authorized but unissued shares of undesignated Preferred Stock of the Corporation.

 

Section 8.      Ranking. The Series E Preferred Stock will rank: (i) senior to (A) all of the Corporation’s Common Stock, and (B) junior to all existing equity securities and any other equity securities that the Corporation may issue in the future, in each case with respect to payment of amounts upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

 

Section 9.      Redemption by the Corporation.

 

(a)       Optional Redemption. The Corporation shall have the right, to elect to redeem (an “Optional Redemption”) all or a portion of the outstanding shares of Series E Preferred Stock at a price per share of Series E Preferred Stock equal to the Stated Value (the “Redemption Price”). The provisions of this Section 9(a) shall not be deemed to restrict the ability of a Holder to convert the Series E Preferred Stock pursuant to the provisions of Section 6 at any time and from time to time before such Holder receives the Redemption Price.

 

(b)       Exercise of Optional Redemption.  If the Corporation elects to effect an Optional Redemption, the Corporation shall provide notice of Optional Redemption to each Holder (such notice, a “Notice of Optional Redemption”). The Notice of Optional Redemption shall state the date of redemption (the “Redemption Date”) and the number of shares of Series E Preferred Stock that the Corporation has elected to redeem. The Redemption Date shall be no less than five (5) days after the date on which the Company provides the Notice of Optional Redemption to the Holders.

 

Section 10.      Redemption by the Holder.

 

(a)       Redemption Upon Triggering Event. In addition to all other rights of the Holders of Series E Preferred Stock contained in this Certificate, after a Triggering Event (as defined in Section 10(b) below), each Holder of Series E Preferred Stock shall have the right in accordance with Section 10(c), at such Holder’s option, to require the Corporation to redeem all or a portion of such Holder’s Series E Preferred Stock at the Redemption Price. The provisions of this Section 10(a) shall not be deemed to restrict the ability of a Holder to convert the Series E Preferred Stock pursuant to the provisions of Section 6 at any time and from time to time before such Holder receives the Redemption Price.

 

(b)       Triggering Event.  A “Triggering Event” shall be deemed to have occurred at such time as any of the following events:

 

(i)       the Corporation’s Common Stock is not listed or quoted for trading on a Trading Market for ten (10) consecutive Trading Days;

 

(ii)       bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Corporation and, if instituted against the Corporation by a third party, shall not be dismissed within sixty (60) days of their initiation;

 

 

(iii)        the commencement by the Corporation of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Corporation in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Corporation in furtherance of any such action or the taking of any action by any Person to commence a UCC foreclosure sale or any other similar action under federal, state or foreign law; or

 

(iv)        the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Corporation of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Corporation as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Corporation under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days.

 

(c)       Mechanics of Redemption Upon Triggering Event.  Within three (3) Business Days after the occurrence of a Triggering Event, the Corporation shall deliver written notice to each Holder (a “Notice of Triggering Event”).  At any time after receipt of a Notice of Triggering Event, any Holder may require the Corporation to redeem all or any portion of its Series E Preferred Stock by delivering written notice thereof (each a ”Notice of Voluntary Redemption Upon Triggering Event”) to the Corporation, which Notice of Voluntary Redemption Upon Triggering Event shall indicate the number of shares of Series E Preferred Stock that such Holder is requesting redemption.

 

Section 11.      Payment of Redemption Price. The Corporation shall deliver the Redemption Price to such Holder (i) on the Redemption Date upon an Optional Redemption or (ii) within ten (10) days after receipt of the Notice of Voluntary Redemption Upon Triggered Event. If a Holder submits a Notice of Voluntary Redemption Upon Triggered Event, until the Corporation pays such unpaid Redemption Price in full to such Holder, Holder shall have the option (the “Void Redemption Option”) to, in lieu of redemption, require the Corporation to promptly return to such Holder all of the Series E Preferred Stock that were submitted for redemption by such Holder under Section 10 and for which the Redemption Price has not been paid, by sending written notice thereof to the Corporation (the “Void Redemption Notice”). Upon the Corporation’s receipt of such Void Redemption Notice and prior to payment of the full Redemption Price to each Holder, (i) the Notice of Voluntary Redemption Upon Triggering Event shall be null and void with respect to those shares of Series E Preferred Stock submitted for redemption and for which the Redemption Price has not been paid, and (ii) the Corporation shall immediately return any Series E Preferred Shares submitted to the Corporation by each such Holder for redemption under Section 10 and for which the Redemption Price has not been paid.

 

Section 12.      Record Holders. The Corporation and its transfer agent shall deem and treat the record Holder of any shares of Series E Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor its transfer agent shall be affected by any notice to the contrary.

 

Section 13.      Sinking Fund. The Series E Preferred Stock shall not be entitled to the benefits of any retirement or sinking fund.

 

Section 14.      Amendment of Resolution. The Board reserves the right, subject to the terms of this Certificate, from time to time to increase (but not in excess of the total number of authorized shares of Preferred Stock or designated shares of Series E Preferred Stock) or decrease (but not below the number of shares of Series E Preferred Stock then outstanding) the number of shares that constitute the Series E Preferred Stock by further resolution adopted by the Board or a duly authorized committee of the Board and by the filing of a certificate pursuant to the provisions of the NRS stating that such increase or decrease, as the case may be, has been so authorized and in other respects to amend this Certificate within the limitations provided by law, this resolution and the Articles. Provided, however, that no increase contemplated by this Section 14 shall be made without the consent of the Majority Holders.

 

Section 15.      Restriction and Limitations. Except as expressly provided herein or as required by law so long as at least twenty-five percent (25%) of the total shares of Series E Preferred Stock issued pursuant to the Securities Purchase Agreement (regardless of such dates of issuance) remain outstanding, the Corporation shall not, without the vote or written consent of the Majority Holders, take any action which would adversely and materially affect any of the preferences, limitations or relative rights of the Series E Preferred Stock.

 

 

Section 16.      Waiver. Any right or privilege of the Series E Preferred Stock may be waived (either generally or in a particular instance and either retroactively or prospectively) by and only by the written consent of the Corporation and the Majority Holders and any such waiver shall be binding upon each holder of Series E Preferred Stock or other securities exercisable for or convertible into Series E Preferred Stock. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

 

Section 18.      Lost or Stolen Certificates. Upon receipt by the Corporation of evidence reasonably satisfactory to the Corporation of the loss, theft, destruction or mutilation of any certificates representing Series E Preferred Stock (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of an indemnification undertaking by the applicable Holder to the Corporation in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of the certificate(s), the Corporation shall execute and deliver new certificate(s) of like tenor and date.

 

Section 18.      Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate shall be cumulative and in addition to all other remedies available under this Certificate and any of the other transaction documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure by the Corporation to comply with the terms of this Certificate. The Corporation covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required, to the extent permitted by applicable law. The Corporation shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Corporation’s compliance with the terms and conditions of this Certificate.

 

Section 19.      Non-circumvention. The Corporation hereby covenants and agrees that the Corporation will not, by amendment of its Articles, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate, and will at all times in good faith carry out all the provisions of this Certificate and take all action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision of this Certificate, the Corporation (i) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any shares of Series E Preferred Stock above the Stated Value then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Series E Preferred Stock and (iii) shall, so long as any shares of Series E Preferred Stock are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series E Preferred Stock, the Required Reserve Amount, subject to this Certificate.

 

Section 20.      Transfer of Series E Preferred Stock. A Holder may transfer some or all of its shares of Series E Preferred Stock without the consent of the Corporation. Any such transfer shall comply with all applicable securities laws.

 

Section 21.      Register. The Corporation shall maintain at its principal executive offices (or such other office or agency of the Corporation as it may designate by notice to the Holders), a register for the shares of Series E Preferred Stock, in which the Corporation shall record the name, address and facsimile number of the Persons in whose name the shares of Series E Preferred Stock have been issued, as well as the name and address of each transferee. The Corporation may treat the Person in whose name any shares of Series E Preferred Stock is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any properly made transfers.

 

Section 22.      Amendment. This Certificate or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called for such purpose, or by written consent without a meeting in accordance with the NRS, of the Majority Holders, voting separately as a single class, and with such other shareholder approval, if any, as may then be required pursuant to the NRS and the Corporation’s Articles and Bylaws.

 

 

Section 23.      Severability. If any provision of this Certificate is invalid, illegal or unenforceable, the balance of this Certificate shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

 

Section 24.      Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

Section 25.      Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate and shall not be deemed to limit or affect any of the provisions hereof.

 

Section 26.      Principal Market Compliance. Notwithstanding anything to the contrary, if while the Common Stock is listed on the Principal Market any of the terms, provisions, rights, covenants and restrictions set forth in this Certificate are determined by the Principal Market to be in violation of any of the Principal Market Rules, then such terms, provisions, rights, covenants or restrictions shall be of no force and effect to the extent of such noncompliance, and shall otherwise be interpreted to the extent possible in a manner consistent with compliance with such Principal Market Rules. In the event the immediately preceding sentence applies, the remainder of the terms, provisions, rights, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, RiskOn International, Inc. has caused this Certificate to be signed by the undersigned as of the date first written above.

 

	RISKON INTERNATIONAL, INC.
	By:
	Name:		Milton C. Ault, III
	Title:		Chief Executive Officer

 

 

 

[Signature Page to Series E Certificate of Designations]

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

The undersigned hereby elects to convert the number of shares of Series E Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of RiskOn International, Inc., a Nevada corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: _________________________________________________

Number of shares of Series E Preferred Stock owned prior to Conversion: __________________

Number of shares of Series E Preferred Stock to be Converted: __________________________

Stated Value of shares of Series E Preferred Stock to be Converted: ______________________

Number of shares of Common Stock to be Issued: ___________________________

Applicable Conversion Price:____________________________________________

Number of shares of Series E Preferred Stock subsequent to Conversion: ________________

Address for Delivery: ______________________

Or

DWAC Instructions:

Broker no: _________

Account no: ___________

 

HOLDER:

	By:
		Name:
		Title:

 

 

 

 

 

 

Exhibit 10.1

 

AMENDMENT AND EXCHANGE AGREEMENT

 

 

THIS AMENDMENT AND EXCHANGE AGREEMENT (this “Agreement”), dated as of February 21, 2024, is entered into by and among RiskOn International, Inc. (f/k/a BitNile Metaverse, Inc.), a Nevada corporation (the “Company”), and the undersigned holder (or holders) of securities of the Company (each, a “Holder Entity”, and collectively, the “Holder”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Securities Purchase Agreement (as defined below).

 

RECITALS

 

A.        The Company and the Holder are parties to that certain Securities Purchase Agreement, dated as of April 27, 2023 (the “Securities Purchase Agreement”), pursuant to which each Holder Entity (or an affiliate thereof) and one or more other investors (each, an “Other Holder”) purchased from the Company, among other things, certain Senior Secured Convertible Notes (the “Notes”) and warrants to purchase Common Stock (the “Warrants”).

 

B.       As of the date hereof, the Holder holds warrants to purchase such aggregate number of shares of Common Stock as set forth on the signature page of the Holder attached hereto (without regard to any limitations on exercise of the Warrant) (collectively, the “Holder Warrant”).

 

C.        The Company desires to (i) consummate a Subsequent Placement, pursuant to which the Company shall issue up to $20 million of shares of Series E Convertible Preferred Stock, the rights and preferences of which shall be governed by the certificate of designation of rights, preferences and limitations of Series E Preferred Stock (the “New Preferred Shares”, as converted, the “New Conversion Shares”), in the form attached hereto as Exhibit A (the “New Certificate of Designations”), but which shall not be convertible or exchangeable into Common Stock (or any other securities of the Company), directly or indirectly, until no more than $250,000 of principal amount of the Notes issued to the Holder Entities, in the aggregate, are no longer outstanding (the “Non-Convertibility Condition”, and the date such condition no longer applies, the “Non-Convertibility Release Date”), as set forth in the New Certificate of Designations (the “Proposed Preferred Offering”) and (ii) as of the date hereof, to consummate a Subsequent Placement with an investor pursuant to which the Company shall, and such Investor shall purchase, 1,000 shares of Common Stock at a price of $0.15 per share (the “Proposed Common Offering”);

 

 

D.       The Company further desires (a) subject to obtaining the prior consent (or no-objection) of the Principal Market (the “Exchange Condition”), to exchange (the “Exchange”), in part, such aggregate portion of the Holder Warrant exercisable into 100 shares of Common Stock (the “Exchange Warrant”) for (i) such aggregate number of shares of Common Stock as set forth on the signature page of the Holder attached hereto (the “New Common Shares”) and (ii) if applicable, one or more rights (each a “Right”, and together with the New Common Shares, the “New Primary Securities”) to acquire such aggregate number of shares of Common Stock as set forth on the signature page of the Holder attached hereto (the “Right Shares”, and the New Common Shares, the “New Shares”, and together with the Right, the “New Securities”) in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), (b) effective upon the later of (x) the time of consummation of the Proposed Common Offering and (y) the time of consummation of the Exchange, to waive, solely with respect to the Proposed Preferred Offering, and not with respect to any other Subsequent Placement, and, prior to the Non-Convertibility Release Date, solely to the extent the Non-Convertibility Condition remains satisfied in full (and is not waived, amended or modified in any respect, or circumvented in any manor prior to the Non-Convertibility Release Date), (I) to waive, in part, Section 7(a) of the Notes, such that the Proposed Preferred Offering shall not be a Dilutive Issuance (as defined in the Notes) thereunder (and, for such purpose, the definition of “Excluded Securities” shall be deemed to include the New Preferred Shares and the New Conversion Shares to the extent issued pursuant to the New Certificate of Designations) and (II) any and all rights and prohibitions contained in the Transaction Documents relating to the issuance by the Company of the New Preferred Shares and the New Conversion Shares, including, but not limited to, rights of participation, most favored nation status and the application of proceeds from the sale of New Preferred Shares to repay the Notes (the “Preferred SPA Waiver”), (c) to waive, in part, (x) Section 2(b) of the Warrant such that the Share Purchase shall only decrease the Exercise Price of the Warrant to $0.20 and (y) Section 2(c) of the Warrant such that the Share Purchase shall only increase the shares of Common Stock issuable upon exercise of the Exchange Warrant to such aggregate number of shares of Common Stock as set forth on the signature page of the Holder attached hereto (the “Adjusted Exchange Warrant Amount”, and such waiver, the “Proposed Common Offering Warrant Waiver”), (d) effective as of the date hereof, the Holder hereby waives any adjustment to the Conversion Price (as defined in the Notes) of the Notes or the Exercise Price (as defined in the Holder Warrant) of the Warrants arising solely as a result of the Exchange (the “Exchange Waiver”) and (e) upon the later of (x) the time of consummation of the Proposed Common Offering and the time of consummation of the Exchange, Section 2(c) of the Exchange Warrant of the Exchange Warrant shall be waived, in part, such that thereafter the aggregate number of Warrant Shares that may be purchased upon exercise of the Exchange Warrant shall only be increased or decreased proportionately pursuant to Section 2(c) of the Exchange Warrant pursuant to the provisions of Section 2(a) of the Exchange Warrant (the “Exchange Warrant Adjustment Waiver”, and together with the Proposed Common Offering Warrant Waiver, the Exchange Waiver, the Preferred SPA Waiver and the Exchange, collectively, the “Transactions”).

 

NOW, THEREFORE, in consideration of the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Holder hereby agree as follows:

 

Section 1. The Transactions; Amendments. As of the date hereof, the Holder hereby grants the Company the Exchange Waiver and the Proposed Common Offering Warrant Waiver. On the first (1^st) Trading Day after the Company shall have satisfied the Exchange Condition (the “Exchange Date”), pursuant to Section 3(a)(9) of the 1933 Act, the Company and the Holder shall consummate the Exchange and exchange the Exchange Warrant for the New Primary Securities. On the Exchange Date, the following transactions shall occur:

 

 

1.1       Upon delivery by the Company to the Company’s transfer agent (the “Transfer Agent”) of instructions to issue the New Common Shares in accordance with Section 1.2 and, if applicable, the Rights hereunder (the “Delivery Time”), all of the Holder’s rights under the Exchange Warrant shall be extinguished.

 

1.2       On or prior to the second (2nd) Trading Day after the Exchange Date, the Company shall credit the New Common Shares to the Holder or its designee’s balance account with the Depository Trust Company (“DTC”) in accordance with the DTC instructions set forth on the signature page of the Holder attached hereto (or otherwise delivered by the Holder in writing to the Company on or prior to the date hereof). On the Exchange Date, the Holder shall be deemed for all corporate purposes to have become the holder of record of the New Primary Securities, irrespective of the date such New Common Shares are credited to the Holder’s or its designee’s balance account with DTC in accordance herewith or such Rights are delivered to the Holder (or its designee).

 

1.3       Effective as of Delivery Time, the Holder hereby grants the Preferred SPA Waiver and the Exchange Warrant Adjustment Waiver.

 

1.4       The Company and the Holder shall execute and/or deliver such other documents and agreements as are customary and reasonably necessary to effectuate the Transactions.

 

1.5       Effective as of the date hereof, the Securities Purchase Agreement is hereby amended as follows:

 

1.7.1 “Warrants” are hereby amended to include the Rights.

 

1.7.2 “Warrant Shares” are hereby amended to include the New Shares.

 

1.7.3 “Transaction Documents” are hereby amended to include this Agreement.

 

1.6       Ratifications. Except as otherwise expressly provided herein, the Securities Purchase Agreement and each other Transaction Document, is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the date hereof: (i) all references in the Securities Purchase Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Initial Securities Purchase Agreement shall mean the Securities Purchase Agreement as amended by this Agreement, and (ii) all references in the other Transaction Documents to the “Securities Purchase Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Securities Purchase Agreement shall mean the Securities Purchase Agreement as amended by this Agreement.

 

 

Section 2. Representations and Warranties of the Company. The Company represents and warrants to the Holder that:

 

2.1 Organization and Qualification. The Company is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company, nor any subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and its subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company, taken as a whole (a “Material Adverse Effect”).

 

2.2 Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the Transactions contemplated by this Agreement and the Rights (collectively, the “Exchange Documents”) and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Exchange Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s shareholders in connection herewith or therewith. This Agreement and each other Exchange Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

2.3 Issuance of New Securities. The issuance of the Rights by the Company is duly authorized and, upon conveyance in accordance with the terms hereof, the Rights shall be validly issued, fully paid and non-assessable and free from all free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, rights, proxies, equity or other adverse claim thereto (collectively, “Liens”). Upon issuance in accordance herewith, the New Common Shares, when issued, will be validly issued, fully paid and nonassessable and free from all Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Upon issuance in accordance herewith or pursuant to the Rights, the Rights Shares, as applicable, when issued, will be validly issued, fully paid and nonassessable and free from all Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of the representations and warranties of the Holder set forth in Section 3 of this Agreement, upon issuance and conveyance in accordance herewith, the conveyance by the Company of the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) is exempt from the registration requirements of the Securities Act under Section 3(a)(9) of the Securities Act. The New Shares shall not bear any restrictive legend and shall be freely tradeable by the Holder. Upon consummation of the Proposed Common Offering, the Conversion Price of the Notes shall be $0.15 and the Exercise Price of the Warrants shall be $0.20 (in each case, as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events).

 

2.4 No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Exchange Documents to which it is a party, the issuance of the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) and the consummation by it of the transactions contemplated hereby and thereby do not and will not conflict with or violate any provision of the Company’s articles of incorporation, bylaws or other organizational or charter documents.

 

2.5 Acknowledgment Regarding the Exchange. The Company acknowledges and agrees that the Holder is acting solely in the capacity of an arm’s length third party with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges the Holder is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby, and any advice given by the Holder or any of its representatives or agents in connection with this Agreement is merely incidental to the Exchange.

 

2.6 No Commission. The Company has not paid or given, and has not agreed to pay or give, directly or indirectly, any commission or other remuneration for soliciting the Transaction.

 

2.7 3(a)(9) Representation. The Company has not, nor to its knowledge, has any person acting on its behalf, directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the Transactions and the issuance of the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from delivering the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) to the Holder pursuant to Section 3(a)(9) of the Securities Act, nor will the Company take any action or steps that would cause the Exchange, issuance and delivery of the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) to be integrated with other offerings to the effect that the delivery of the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) to the Holder would be seen not to be exempt pursuant to Section 3(a)(9) of the Securities Act.

 

 

2.8 No Third-Party Advisors. Other than legal counsel, the Company has not engaged any third parties to assist in the solicitation with respect to the Transactions.

 

2.9 SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  

 

2.10 Filings, Consents and Approvals.  Other than as set forth in any filings required to be made with the SEC or any state securities commission, in connection with the transactions contemplated under this Agreement, the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Exchange Documents.

 

2.11 Capitalization.  The capitalization of the Company is as set forth in the SEC Reports.  No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Exchange Documents.  Except as set forth in the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, Options or Convertible Securities. The issuance of the New Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Holder) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance of the New Securities.¹  There are no stockholders’ agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

 

2.12 DTC Eligibility. The Company, through the Transfer Agent, currently participates in the DTC Fast Automated Securities Transfer (FAST) Program and the Common Stock can be transferred electronically to third parties via the DTC Fast Automated Securities Transfer (FAST) Program.

 

2.13 Litigation.  Other than as set forth in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Exchange Documents or the New Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  

 

2.14 Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Exchange Documents.

 

2.15 No Integrated Offering. Assuming the accuracy of the Holder’s representations and warranties set forth in Section 3, neither the Company, nor any of its Affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Exchange to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Eligible Market on which any of the securities of the Company are listed or designated.

 

2.16 Acknowledgment Regarding Holder’s Exchange of the Exchange Warrants. To the knowledge of the Company, the Holder is acting solely in the capacity of an arm’s length party with respect to the Exchange Documents and the transactions contemplated thereby.

 

Section 3. Representations and Warranties of the Holder. The Holder represents and warrants to the Company that:

 

 

3.1 Ownership of the Holder Warrant. The Holder is the legal and beneficial owner of the Exchange Warrants. One or more Holder Entities paid for the Exchange Warrants and one or more Holder Entities have held the Exchange Warrants since its purchase. The Holder owns the Exchange Warrants outright and free and clear of any options, contracts, agreements, liens, security interests, or other encumbrances.

 

3.2 No Public Sale or Distribution. The Holder is acquiring the New Securities in the ordinary course of business for its own account and not with a view toward, or for resale in connection with, the public sale or distribution thereof; provided, however, that by making the representations herein, the Holder does not agree to hold any of the New Securities, for any minimum or other specific term and reserves the right to dispose of the New Securities at any time in accordance with an exemption from the registration requirements of the Securities Act and applicable state securities laws. Except as contemplated herein, the Holder does not presently have any agreement or understanding, directly or indirectly, with any person to distribute, or transfer any interest or grant participation rights in, the Exchange Warrant or the New Securities.

 

3.3 Accredited Investor and Affiliate Status. The Holder is an “accredited investor” as that term is defined in Rule 501 of Regulation D under the Securities Act. The Holder is not, and has not been, for a period of at least three months prior to the date of this Agreement (a) an officer or director of the Company, (b) an “affiliate” of the Company (as defined in Rule 144) (an “Affiliate”) or (c) a “beneficial owner” of more than ten percent (10%) of the common stock (as defined for purposes of Rule 13d-3 of the Exchange Act).

 

3.4 Reliance on Exemptions. The Holder understands that the Exchange is being made in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to complete the Exchange and to acquire the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable).

 

3.5 Information. The Holder, and its advisors, if any, has been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the Transactions which have been requested by the Holder. The Holder and its advisors, if any, has been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by the Holder and its advisors, if any, or its representatives shall modify, amend or affect the Holder’s right to rely on the Company’s representations and warranties contained herein. The Holder acknowledges that all of the documents filed by the Company with the SEC under Sections 13(a), 14(a) or 15(d) of the Exchange Act that have been posted on the SEC’s EDGAR site are available to the Holder, and the Holder has not relied on any statement of the Company not contained in such documents in connection with the Holder’s decision to enter into this Agreement and the Transactions.

 

 

3.6 Risk. The Holder understands that its investment in the New Securities involves a high degree of risk. The Holder is able to bear the risk of an investment in the New Securities including, without limitation, the risk of total loss of its investment. The Holder has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to the Exchange and its acquisition of the New Primary Securities.

 

3.7 No Governmental Review. The Holder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement in connection with the Exchange or the fairness or suitability of the investment in the New Securities nor have such authorities passed upon or endorsed the merits of the New Securities.

 

3.8 Organization; Authorization. The Holder is duly organized, validly existing and in good standing under the laws of its state of formation and has the requisite organizational power and authority to enter into and to consummate the Transactions contemplated by the Exchange Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

 

3.9 Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder in accordance with its terms. The execution, delivery and performance of this Agreement by the Holder and the consummation by the Holder of the Transactions (including, without limitation, the irrevocable surrender of the Exchange Warrant) will not result in a violation of the organizational documents of the Holder.

 

3.10 Prior Investment Experience. The Holder acknowledges that it has prior investment experience, including investment in securities of the type being exchanged, including the Exchange Warrant and the New Securities, and has read all of the documents furnished or made available by the Company to it and is able to evaluate the merits and risks of such an investment on its behalf, and that it recognizes the highly speculative nature of this investment.

 

3.11 Tax Consequences. The Holder acknowledges that the Company has made no representation regarding the potential or actual tax consequences for the Holder which will result from entering into the Agreement and from consummation of the Exchange. The Holder acknowledges that it bears complete responsibility for obtaining adequate tax advice regarding the Agreement and the Exchange.

 

 

3.12 No Registration, Review or Approval. The Holder acknowledges, understands and agrees that the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) are being exchanged hereunder pursuant to an exchange offer exemption under Section 3(a)(9) of the Securities Act. By virtue of Rule 3(a)(9) under the Securities Act, the Right (and upon exercise of the Right, the Right Shares) will have a Rule 144 (as defined below) holding period that will be deemed to have commenced as of April 27, 2023, the date of the original issuance of the Exchange Warrant to the Holder. At any time on and after the date hereof and prior to April 27, 2024, if no Current Public Information Failure (as defined in the Registration Rights Agreement) then exists, or otherwise and at any time on or after April 27, 2024, as applicable, none of the New Securities shall be required to bear any restrictive legend and shall be freely transferable by the Holder pursuant to and in accordance with Rule 144 of the Securities Act (“Rule 144”), provided, for the avoidance of doubt, that the Holder shall not be an affiliate of the Company and shall not have been an affiliate during the 90 days preceding the date of any transfer.

 

3.13 No Other Consideration. The New Primary Securities (and upon exercise of the New Warrants, the New Warrant Shares and upon exercise of the Rights, the Rights Shares, as applicable) are being conveyed exclusively for the exchange of the Holder Warrant and no other consideration has or will be paid by the Holder for the New Securities.

 

Section 4. Right to Issue Shares.

 

4.1 General. In the Exchange, the Company shall issue the Holder the Rights to receive the Rights Shares, which Rights shall have such terms and conditions as set forth in this Section 4. The Company and the Holder hereby agree that no additional consideration is payable in connection with the issuance of the Rights or the exercise of the Rights.

 

4.2 Exercise of Right of Issuance of Shares. Subject to the terms hereof, the exercise of the Rights may be made, in whole or in part, at any time or times on or after the date hereof by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed PDF copy of the Notice of Issuance Form annexed hereto as Exhibit B (each, a “Notice of Issuance”, and the corresponding date thereof, the “Exercise Date”). Partial exercises of the Rights resulting in issuances of a portion of the total number of Rights Shares available thereunder shall have the effect of lowering the outstanding number of Rights Shares purchasable thereunder in an amount equal to the applicable number of Rights Shares issued. The Holder and the Company shall maintain records showing the number of Rights Shares issued and the date of such issuances. The Company shall deliver any objection to any Notice of Issuance Form within one (1) Trading Day of receipt of such notice. The Holder acknowledges and agrees that, by reason of the provisions of this paragraph, following each exercise of the Rights issued hereunder and the issuance of a portion of the Rights Shares pursuant thereto, the number of Rights Shares available for issuance pursuant to the Rights issued hereunder at any given time may be less than the amount stated in the recitals hereof.

 

 

4.3 Delivery of Rights Shares. The Rights Shares issued hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with DTC through its Deposit/Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Rights Shares to or resale of the Rights Shares by the Holder or (B) the Rights Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Issuance by the date that is two (2) Trading Days after the delivery to the Company of the Notice of Issuance (such date, the “Share Delivery Deadline”). The Rights Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become the holder of record of such shares for all purposes, as of the date the Rights have been exercised.

 

4.4 Charges, Taxes and Expenses. Issuance of Rights Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Issuance.

 

4.5 Authorized Shares. The Company covenants that, during the period the Rights are outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Rights Shares upon the exercise of the Rights. The Company further covenants that its issuance of the Rights shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Rights Shares upon the due exercise of the Rights. The Company will take all such reasonable action as may be necessary to assure that such Rights Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. The Company covenants that all Rights Shares which may be issued upon the exercise of the Rights represented by this Agreement, the Rights, will, upon exercise of the Rights be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, Liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

 

4.6 Impairment. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder as set forth in this Agreement against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Rights Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Rights Shares upon the exercise of the Rights and (iii) use reasonable best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Agreement.

 

4.7 Authorizations. Before taking any action which would result in an adjustment in the number of Rights Shares for which the Rights provides for, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

 

4.8 Limitations on Exercise. The Company shall not effect the exercise of any Rights, and the Holder shall not have the right to exercise any portion of any Rights pursuant to the terms and conditions of this Agreement and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties (as defined below) collectively would beneficially own in excess of 4.99% (the “Beneficial Ownership Limitation”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of the Rights issued hereunder with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of the Rights beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 4.8. For purposes of this Section 4.8 beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”). For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of the Rights without exceeding the Beneficial Ownership Limitation, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives a Notice of Issuance from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Notice of Issuance would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 4.8, to exceed the Beneficial Ownership Limitation, the Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Notice of Issuance. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Rights, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of the Rights results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Beneficial Ownership Limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Beneficial Ownership Limitation to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Beneficial Ownership Limitation will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Rights that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of the Rights hereunder in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise any Rights pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4.8 to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 4.8 or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of Rights. For the purpose of this Agreement: (x) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the date hereof, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Beneficial Ownership Limitation, (y) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder and (z) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

 

4.9 Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of the Rights, pursuant to the terms hereof.

 

4.10 Stock Dividends and Splits. If the Company, at any time while the Rights exist: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the number of Rights Shares issuable upon exercise of the Rights shall be proportionately adjusted. Any adjustment made pursuant to this Section 4.10 shall become effective immediately upon the record date for the determination of stockholders entitled to receive such dividend or distribution (provided that if the declaration of such dividend or distribution is rescinded or otherwise cancelled, then such adjustment shall be reversed upon notice to the Holder of the termination of such proposed declaration or distribution as to any unexercised portion of the Rights at the time of such rescission or cancellation) and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

 

4.11 Compensation for Buy-In on Failure to Timely Deliver Rights Shares. If the Company shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, either (x) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or, (y) if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of a Right (a “Delivery Failure”), then, in addition to all other remedies available to such Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 1% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Deadline and to which the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and ending on the applicable Share Delivery Deadline, and (Y) the Holder, upon written notice to the Company, may void its Notice of Issuance with respect to, and retain or have returned, as the case may be, all, or any portion, of such Rights that has not been exercised pursuant to such Notice of Issuance; provided that the voiding of a Notice of Issuance shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 4.11 or otherwise. In addition to the foregoing, if a Delivery Failure occurs and if on or after such Share Delivery Deadline the Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Delivery Failure (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within two (2) Business Days after receipt of the Holder’s request and in the Holder’s discretion, either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of Rights hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of Rights hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price (as defined below) of the Common Stock on any Trading Day during the period commencing on the date of the applicable Notice of Issuance and ending on the date of such issuance and payment under this clause (II). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the exercise of the Rights as required pursuant to the terms hereof. “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, L.P., or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, L.P., or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, L.P., or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, L.P., the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.

 

4.12 Subsequent Rights Offerings. Except with respect to any adjustments pursuant to Section 4.10 above, if at any time the Company grants, issues or sells any Convertible Securities, Options or rights to purchase stock, warrants, securities or other property pro rata to the record Holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of the Rights (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record Holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

 

4.13 Fundamental Transaction. If, at any time while the Rights remain outstanding, a Fundamental Transaction occurs, then, upon any subsequent exercise of the Rights, the Holder shall have the right to receive, for each Rights Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 4.8 on the exercise of the Right), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such Fundamental Transaction by a Holder of one share of Common Stock. Upon the occurrence of any such Fundamental Transaction, the any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Agreement and the other Exchange Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Agreement and the other Exchange Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

4.14 Notice to Allow Exercise of Right. If at any time while the Rights remain outstanding, (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all Holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the Holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise the Rights during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

 

4.15 No Rights as Stockholder Until Exercise. Each Right does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof.

 

4.16 Transferability. Subject to compliance with any applicable securities laws, the Rights and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon written assignment in a form reasonably acceptable to the Company duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer of this Agreement delivered to the principal office of the Company or its designated agent. Upon such assignment and, if required, such payment, the Company shall enter into a new agreement with the assignee or assignees, as applicable, and this Agreement shall promptly be cancelled. Any Right, if properly assigned in accordance herewith, may be exercised by a new Holder for the issue of Rights Shares without having a new agreement executed.

 

Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be construed under the laws of the State of Nevada, without regard to principles of conflicts of law or choice of law that would permit or require the application of the laws of another jurisdiction. The Company and the Holder each hereby agrees that all actions or proceedings arising directly or indirectly from or in connection with this Agreement shall be litigated only in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York located in New York County, New York. The Company and the Holder each consents to the exclusive jurisdiction and venue of the foregoing courts and consents that any process or notice of motion or other application to either of said courts or a judge thereof may be served inside or outside the State of New York or the Southern District of New York by generally recognized overnight courier or certified or registered mail, return receipt requested, directed to such party at its or his address set forth below (and service so made shall be deemed “personal service”) or by personal service or in such other manner as may be permissible under the rules of said courts. THE COMPANY AND THE HOLDER EACH HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT.

 

Section 6. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

 

Section 7. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

Section 8. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

Section 9. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

Section 10. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Holder, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Holder. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.

 

Section 11. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement shall be given in accordance with the terms and conditions of the Securities Purchase Agreement.

 

Section 12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Rights or the New Shares. Subject to its compliance with applicable federal and state securities laws, the Holder may assign some or all of its rights hereunder without the consent of the Company, in which event such assignee shall be deemed to be the Holder hereunder with respect to such assigned rights.

 

Section 13. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

Section 14. Survival of Representations. The representations and warranties of the Company and the Holder contained in Sections 2 and 3, respectively, will survive the closing of the transactions contemplated by this Agreement.

 

 

Section 15. Disclosure of Transaction. The Company shall, on or before 9:30 a.m., New York City time, on or prior to the first (1st) business day after the date of this Agreement, file a Current Report on Form 8-K describing the terms of the transactions contemplated hereby in the form required by the 1934 Act and attaching the Exchange Documents, to the extent they are required to be filed under the 1934 Act, that have not previously been filed with the Securities and Exchange Commission by the Company (including, without limitation, the New Certificate of Designations and this Agreement) as exhibits to such filing (including all attachments, the “8-K Filing”). From and after the filing of the 8-K Filing, the Company shall have disclosed all material, non-public information (if any) provided up to such time to the Holder by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents. In addition, effective upon the filing of the 8-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement with respect to the transactions contemplated by the Exchange Documents or as otherwise disclosed in the 8-K Filing, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Holder or any of their affiliates, on the other hand, shall terminate. Neither the Company, its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Holder, to make a press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith or (ii) as is required by applicable law and regulations (provided that in the case of clause (i) the Holder shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise.

 

Section 16. Fees. The Company shall reimburse Kelley Drye & Warren, LLP (counsel to the Holder) in an aggregate non-accountable amount of $15,000 for costs and expenses incurred by it in connection with drafting and negotiation of this Agreement. Each party to this Agreement shall bear its own expenses in connection with the structuring, documentation, negotiation and closing of the transactions contemplated hereby, except as provided in the previous sentence and except that the Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, Depository Trust Company fees relating to or arising out of the transactions contemplated hereby. In addition to, but not in limitation of, any other rights of the Holder hereunder, if (a) this Agreement or any of the New Securities are placed in the hands of an attorney for collection of any indemnification or other obligation hereunder or thereunder then outstanding or enforcement or any such obligation is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Agreement or any of the New Securities or to enforce the provisions of this Agreement or any of the New Securities or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Agreement or any of the New Securities, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, reasonable attorneys’ fees and disbursements.

 

 

Section 17. Listing. The Company shall use reasonable best efforts to promptly secure the listing or designation for quotation (as the case may be) of all of the New Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain such listing or designation for quotation (as the case may be) of all New Shares from time to time issuable under the terms of the Exchange Documents on such national securities exchange or automated quotation system. The Company shall use reasonable best efforts to maintain the Common Stock’s listing or authorization for quotation (as the case may be) on one (or more) of The New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or suspension of the shares of Common Stock so that they are not listed or admitted for trading on any Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 17.

 

Section 18. Holding Period. For the purposes of Rule 144, the Company acknowledges that the holding period of the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) may be tacked onto both the holding period of the Exchange Warrant, and the Company agrees not to take a position contrary to this Section 18. The Company acknowledges and agrees that, subject to the Holder’s representations and warranties contained in Section 3 of this Agreement, the New Primary Securities (and upon exercise of the Rights, the Rights Shares, as applicable) shall not be required to bear any restrictive legend and shall be freely transferable by the Holder pursuant to and in accordance with Rule 144, provided, for the avoidance of doubt, that the Holder shall not be an affiliate of the Company and shall not have been an affiliate during the 90 days preceding the date of any transfer.

 

Section 19. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

 

Section 20. Independent Nature of Holder’s Obligations and Rights. The obligations of the Holder under this Agreement are several and not joint with the obligations of any Other Holder, and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holder under any other agreement with the Company (each, an “Other Agreement”). Nothing contained herein or in any Other Agreement, and no action taken by the Holder pursuant hereto, shall be deemed to constitute the Holder and Other Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holder and Other Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement and the Company acknowledges that, to the best of its knowledge, the Holder and the Other Holders are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement. The Company and the Holder confirm that the Holder has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose.

 

 

 

[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment and Exchange Agreement as of the date first written above.

 

	RISKON INTERNATIONAL, INC. (F/K/A BITNILE METAVERSE, INC.)
	By:
		Name:  Milton C. Ault, III
		Title:  Chief Executive Officer

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

Aggregate Warrant Shares Issuable		Arena Special Opportunities Fund, LP
Upon Exercise of Holder Warrant*:		Arena Special Opportunities Partners II, LP
		Arena Finance Markets, LP
1,145,948		Arena Special Opportunities (Offshore)
		Master, LP
Aggregate Number of New Common		Arena Special Opportunities (Cayman
Shares to be Issued:		Master) II, LP
0
		By:
Adjusted Exchange Warrant Amount*		Name:	Lawrence Cutler
		Title:	Authorized Signatory
1,145,948
Aggregate Number of Right Shares Underlying the Rights (if any) to be Issued*:
3,437,844

 

 

 

DTC Instructions:
*Without regard to any limitations on exercise of the Holder Warrant or the Rights

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

Aggregate Warrant Shares Issuable		WALLEYE OPPORTUNITIES
Upon Exercise of Holder Warrant*:		MASTER FUND LTD
954,956
		By:
Aggregate Number of New Common Shares to be Issued:		Name:
		Title:
1,709,737
Adjusted Exchange Warrant Amount*
954,956
Aggregate Number of Right Shares Underlying the Rights (if any) to be Issued*:
1,155,131

 

DTC Instructions:
*Without regard to any limitations on exercise of the Holder Warrant or the Rights

 

 

EXHIBIT A

 

CERTIFICATE OF DESIGNATIONS

 

 

EXHIBIT B

NOTICE OF ISSUANCE

 

The undersigned holder hereby exercises the rights (the “Rights”) to receive _________________ of the shares of Common Stock (the “Rights Shares”) of RiskOn International, Inc. (f/k/a BitNile Metaverse, Inc.), a Nevada corporation (the “Company”), established pursuant to that certain Amendment and Exchange Agreement, dated February 21, 2024, by and between the Company and the investors signatory thereto (the “Exchange Agreement”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Exchange Agreement.

 

The Company shall deliver to Holder, or its designee or agent as specified below, __________ Rights Shares in accordance with the terms of the Rights. Delivery shall be made to Holder, or for its benefit, as follows:

 

¨     Check here if requesting delivery as a certificate to the following name and to the following address:

 

Issue to:

 

               ¨        Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

 

DTC Participant:
DTC Number:
Account Number:

 

 

Date: _____________ __,   _______________________ Name of Registered Holder

By: ________________________ Name: Title:   Tax ID:____________________________   Facsimile:__________________________   E-mail Address:_____________________

 

 

 

 

 

 

Exhibit 10.2 

 

MeetKai, Inc.

 

Master Services Agreement

 

This Master Services Agreement (“Agreement”) is entered into as of February 21, 2024, by and between MeetKai, Inc. (“MeetKai”), and RiskOn International, Inc. (“Customer”).

 

 

 

 

 

 

 

 

 

 

 

 

[signature page follows]

 

 

In Witness Whereof, the parties hereto have executed this Agreement as of the date first written above:

 

RiskOn International, Inc.			MeetKai, Inc.
By:			By:
Name: Milton C. Ault, III			Name:
Title: Chief Executive Officer			Title:
Address: 11411 Southern Highlands Pkwy., Suite 240			Address:
Las Vegas, NV 89141
Email:			Email:

 

 

Exhibit A

 

SOW#1

 

 

 

 

 

 

 

 

Exhibit B

 

Service Levels and Support

 

Introduction

 

This Service Level Agreement (“SLA”) is an exhibit to the Master Services Agreement (“Agreement”) entered into as of February 21, 2024 by and between MeetKai, Inc. (“MeetKai”), and RiskOn International, Inc. (“ROI”). The SLA sets forth additional terms and conditions of the Services to provided by MeetKai to ROI pursuant to the Agreement. In the event of any conflicts between this SLA and the Agreement, the terms of this SLA shall govern. Any capitalized terms used in this SLA but not otherwise defined shall have the meaning set forth in the Agreement.

 

Service Availability

 

·

Uptime Commitment: MeetKai will ensure a minimum of 99.9% Platform availability monthly.

 

Support and Maintenance

 

·

Support Hours: 24/7 customer support, by telephone or email, as set forth in the applicable SOW.

 

·

Response Time: Initial response within one (1) minute.

 

·

Maintenance: Scheduled maintenance by MeetKai shall be communicated in writing in advance to ROI at least 72 hours in advance, and shall be scheduled at times to minimize the distruption to ROI and its End Users. In the event that a scheduled maintenance would be disruptive to ROI or its End Users, ROI shall notify MeetKai not less than 24 hours prior to the start of the scheduled maintenance, and MeetKai shall delay such scheduled maintenance. ROI may not delay any scheduled maintenance for more than 72 hours from the original scheduled start time.

 

Performance Metrics

 

·

API Response Time: Average response time should not exceed 2 seconds.

 

·

Data Ingestion Latency: Real-time data ingestion should occur within 55 minutes of data availability.

 

Security and Compliance

 

·

Data Security: MeetKai will adhere to industry-standard best practices security protocols.

 

·

Compliance: All Services, including the Platform, shall comply with relevant data protection and privacy laws.

 

Review and Audit

 

·

Regular Review: MeetKai and ROI shall review the terms of this SLA not less than annually, and MeetKai shall include such changes as reasonably requested by ROI.

 

·

Audit Rights: MeetKai shall grant ROI the right to audit compliance with the terms of this SLA, and utilize its best efforts to assist ROI to complete such audit at times and as requested by ROI.

 

 

2

 

 

 

Exhibit 10.3

 

 

STATEMENT OF WORK #1

 

In the case of conflict with any other term or condition in this Statement of Work (this “SOW”) and the Master Services Agreement (the “Agreement”) dated February 21, 2024 by and between RiskOn International, Inc. (“ROI”) and MeetKai, Inc. (“MeetKai”), the terms of this SOW shall govern. Any capitalized terms used in this SOW but not defined shall have the meaning ascribed to them in the Agreement.

 

Summary:

 

This SOW outlines the rights and obligations relating to MeetKai granting ROI rights (which shall be exclusive for the first five years) to use, sub-license and/or resell MeetKai's generative AI platform, as further described on Exhibit A hereto (the “Platform”), during the term, within the territory of North America (the United States of America and all its territories, Canada and Mexico) (the “Territory”) under white-labeling (the “Licensing”), subject to the terms and conditions set forth herein.

 

License Pricing:

 

The license fee (the “Licensing Fee”) for the license of the Platform (subject to continued payment of the Maintenance Fee below) during the Term (as hereinafter defined) and in the Territory will be $15,000,000 and paid as follows: $10,000,000 due at the Effective Time; $3,000,000 on the first anniversary of the Effective Time; and $2,000,000 on the second anniversary of the Effective Time. In addition, ROI shall pay MeetKai an annual maintenance fee (the “Maintenance Fee” and together with the Licensing Fee, the “Fees”) for the maintenance of the Platform starting in the fourth year of the Term, which will be due thirty (30) days after the third and subsequent anniversaries of the Effective Time (the “Maintenance Period”).

 

ROI and MeetKai acknowledge and agree that both parties shall incur fees and expenses in connection with the Licensing (the “Expenses”), with ROI incurring fees and expenses relating to, among other items, marketing and sales of the Platform. ROI and MeetKai further acknowledge and agree that it is the belief of both parties that the Revenue Share (as hereinafter defined) is expected to be a material component of this SOW and will be sufficient to cover all the Expenses during the Maintenance Period. The parties shall review the Revenue Share 30 days prior to the beginning of year during the Maintenance Period, and if the Revenue Share has not become material, regardless of the cause, and/or MeetKai believes that the Revenue Share is not reasonable in relation to Expenses during the upcoming year and determines that a Maintenance Fee is required for the upcoming year, the parties shall use good faith efforts to determine if a Maintenance Fee is required, and if so, what is an appropriate Maintenance Fee. In the event that ROI and MeetKai cannot agree on whether a Maintenance Fee is required or the amount of such Maintenance Fee, the parties agree to submit the dispute to binding arbitration, the fees and expenses of which shall be borne equally by the parties.

 

The Licensing Fee and the Maintenance Fee, if any, will be paid through the issuance of shares of preferred stock of ROI having a stated value equal to the Fees (the “Preferred Stock”). ROI and MeetKai shall enter into a securities purchase agreement (the “SPA”) simultaneously with this SOW, pursuant to which ROI shall agree to issue and sell to MeetKai the Preferred Stock. The rights, privileges and preferences of the Preferred Stock shall be set forth in the certificate of designation relating to the Preferred Stock (the “COD”). In addition, ROI agrees to pay MeetKai a share of revenue from the Platform, as set forth on Exhibit B hereto (the “Revenue Share”).

 

 

Term:

 

This SOW shall commence on the Effective Time and, unless otherwise terminated herein or in the Agreement, continue in perpetuity (the “Term”). This SOW may be terminated by (i) either party (A) upon written notice to the other party if ROI and MeetKai fail to execute SOW #2 for the development of the End User-facing interface incorporating the Platform within 30 days after the Effective Time (the “SOW #2 Failure”), (B) at any time, if the other party materially breaches this SOW and fails to cure such breach within such timeframes as set forth in Exhibit A from receipt of written notice thereof (provided that the notice provides sufficient details regarding the breach and expressly states the intent to terminate if not cured), or (C) at any time after the fifth anniversary of the from the Effective Time, for any or no reason, upon sixty (60) days prior written notice to the other party or (ii) by ROI at any time after 34 months from the Effective Time, for any or no reason, upon sixty (60) days prior written notice to MeetKai.

 

In the event that either party terminates this SOW because of the SOW #2 Failure, then MeetKai shall return all Fees received. In the event that ROI terminates this SOW because of a material breach by MeetKai that is not cured as set out in subsection (i) above, then the Fees shall be pro-rated for the period of time for that year, and MeetKai shall, at its election, either: (i) return a pro-rata amount of Preferred Stock for the amount of the Fees from the date of termination through the end of the annual period (the “Refund Period”), (ii) pay ROI in cash equal to the stated value of the number of shares of Preferred Stock that are required to be returned for the Refund Period, or (iii) a combination of (i) and (ii).

 

Without limiting MeetKai’s other termination rights in the Agreement or herein, this SOW may be terminated by MeetKai at any time, if ROI fails to issue any shares of Preferred Stock due (that is not contested by ROI in good faith) and then fails to issue such shares within ten (10) days after receipt of two (2) written late notices (delivered to ROI at least five (5) days apart), expressly stating the intent to terminate if the shares of Preferred Stock are not received.

 

Rights and Obligations:

 

·

ROI will have the (i) right (which shall be exclusive during the first five years of the Term, and non-exclusive thereafter) to use, sub-license and/or resell the Platform on a “white-labeled basis” to ROI’s end customer (the “End User”), provided that such end customers are headquartered within the Territory and (ii) non-exclusive right to use, sub-license and/or resell the Platform to an End User outside the Territory.

 

·

MeetKai shall ensure that it and any other customer of MeetKai, shall not use, sub-license, resell and/or all make available the Platform to any party that is headquartered within the Territory.

 

·

ROI must ensure that each End user agrees (email is sufficient) to MeetKai’s terms and conditions, as provided by MeetKai to ROI in writing, and may be revised, from time to time, by MeetKai, upon not less than five (5) days advance written notice to ROI.

 

·

ROI is responsible for collecting payment from End Users and shall use commercially reasonable efforts to promptly collect any such due amounts.

 

·

Upon written request, ROI will promptly provide MeetKai with all information MeetKai reasonably requests with respect to ROI’s marketing and sales activities related to the Platform. For clarity, ROI shall only provide access to the Platform on a “white label” basis and, as such, there is no right to use MeetKai’s name or logo in any marketing or promotional materials without MeetKai’s written consent in each instance (email is sufficient).

 

·

ROI and MeetKai represent and warrant that all its activities pursuant to this SOW shall comply with all laws, regulations, and third-party rights.

 

 

Our Agreement:

 

This SOW, including the exhibits attached hereto, form our entire agreement for this scope of work. The parties may amend or modify this SOW on mutual written agreement. ROI and MeetKai hereto have caused this SOW to be executed by their duly authorized representatives below indicating acceptance of said SOW.

 

[signature page follows]

 

 

AGREED AND ACCEPTED:

 

RISKON INTERNATIONAL, INC.

 

 

Name:	Milton C. Ault, III
Title:	Chief Executive Officer

 

 

MEETKAI, INC.

 

 

Name:
Title:

 

 

Exhibit A: Description of Platform

 

 

1. Introduction

 

This exhibit summarizes the Generative AI platform to be provided by MeetKai to ROI. For purposes of the SOW, “Generative AI” refers to artificial intelligence technologies that can generate new content, whether it be text, images, music, or other forms of media, which encompasses any type of technologies and methods, including, but not limited to, deep learning models like neural networks, and is not limited to any specific type of content or application.

 

2. Provision of Generative AI Platform

 

2.1 Platform Development and API Provision

 

·

Continuous Enhancement: MeetKai commits to the ongoing development of the Platform's capabilities during the Term, and shall provide regular updates to ROI as to the status of development and planned enhancements.

 

·

Application Programming Interface (“API”) Features:

 

·

Large langue model (“LLM”) API compatible with OpenAI clients.

 

·

Functionalities including completion, streaming, async completion, and more.

 

3. Document Retrieval Platform

 

·

File Storage and Retrieval: Capability to store and intelligently retrieve various file types.

 

·

Custom Embedding and Search: Personalized organizational level search for any collection of files.

 

·

Hybrid Search Capabilities: Incorporating search functionalities for non-textual features.

 

4. Data Ingestion Support

 

·

Data Ingestion: Facilitating the ingestion of data from various external sources, in real-time or batched.

 

5. MeetKai Obligations

 

5.1 Access to MeetKai Developed LLMs

 

·

Resources Provided: Weights and Datasets for the Platform.

 

5.2 Continuous Development

 

·

Platform Capabilities: Ongoing enhancement of the platform, including:

 

·

Various LLM API functionalities (completion, streaming, async completion, async streaming, embedding, etc.).

 

·

Document retrieval platform with support for a wide range of file types (including, but not limited to, .eml, .html, .json, .md, .txt, .xml, image files, video files, and more). MeetKai shall incorporate other file types as requested by ROI.

 

 

·

Custom embedding and personalized search capabilities.

 

·

Hybrid search capabilities.

 

·

Data ingestion support from various platforms (Airtable, Box, Confluence, Discord, Dropbox, Elasticsearch, and more). MeetKai shall incorporate other platforms as reasonably requested by ROI.

 

Service Levels Agreement

 

1.

Critical or High-Priority Issues:

 

·

Definition: These are issues that critically impact the functionality of the Platform, such as significant downtimes or major operational malfunctions.

 

·

Response Time: MeetKai will respond to critical issues within one (1) hour of notification.

 

·

Resolution Time: MeetKai will resolve critical issues within a timeframe of one (1) to four (4) hours from the initial notification. In sectors where continuous operation is essential, efforts will be made to expedite resolution, potentially within minutes.

 

·

Communication: MeetKai will provide ongoing updates every hour until the issue is fully resolved.

 

2.

Medium-Priority Issues:

 

·

Definition: These issues are important but do not critically disrupt the overall operation of the Platform, such as minor functional glitches.

 

·

Response Time: MeetKai will respond to medium-priority issues within eight (8) hours of notification.

 

·

Resolution Time: MeetKai will resolve medium-priority issues within eight (8) to twenty-four (24) hours from notification.

 

·

Communication: Status updates will be provided every four (4) hours or earlier upon significant progress.

 

3.

Low-Priority Issues:

 

·

Definition: These are minor issues that have minimal impact on the Platform's operations, such as cosmetic bugs.

 

·

Response Time: MeetKai will respond to low-priority issues within twenty-four (24) hours of notification.

 

·

Resolution Time: MeetKai will resolve low-priority issues within one (1) to three (3) business days from notification.

 

·

Communication: Updates will be provided at least once every business day until the issue is resolved.

 

 

4.

Planned Maintenance:

 

·

Definition: Scheduled maintenance activities necessary for the optimal performance and security of the Platform.

 

·

Notice: will be given a minimum of 72 hours' notice prior to any planned maintenance activities.

 

·

Scheduling: Maintenance will be conducted during off-peak hours to minimize disruption.

 

·

Communication: Clients will be notified before and after maintenance activities, detailing the work completed and the current status of the Platform.

 

5. Breach and Remediation:

 

·

Material Breach: - A material breach of this SOW shall be considered to have occurred if MeetKai fails to meet the service levels as outlined in Item 1: Critical or High-Priority Issues, including, but not limited to, MeetKai failing to respond within the stipulated 1-hour response time or fails to resolve such issues within the 1 to 4-hour resolution timeframe. In the event of a material breach, ROI is entitled to Service Credits (as hereinafter defined) as set forth herein. In the event that MeetKai materially breaches this SOW three (3) times in any thirty (30) day period, ROI shall have the right to terminate this SOW upon five (5) days written notice delivered to MeetKai within ten (10) days from the end of such thirty (30) day period.

·

Non-Material Breaches: - Failures to meet service levels for Medium-Priority Issues (Item 2) and Low-Priority Issues (Item 3) are considered non-material breaches. While these failures do not constitute a material breach, MeetKai is committed to addressing and resolving such issues within the specified timeframes. In instances of non-material breaches, ROI may be entitled to Service Credits as set forth herein.

·

Remediation Process: - Upon identification of any breach, ROI shall notify MeetKai in writing. MeetKai will have a defined period, as set forth herein, to cure the breach. - If MeetKai remedies the breach within the cure period, then the breach will be considered cured, and no further action will be necessary. - If MeetKai fails to remedy a material breach within the cure period, the client may pursue further remedies as outlined in the MSA, including contract termination if applicable.

·

Documentation and Review: - All breaches and remediation efforts will be documented. Both parties agree to review these incidents periodically to identify areas for service improvement and to prevent future occurrences.

6. ROI Obligations

 

6.1 ROI will act in good faith to support overall service availability and must maintain the following:

 

·

ROI is utilizing MeetKai’s current version of the Platform;

 

·

Connected applications integrated into the MeetKai deployment must be:

 

      - Current on payments

 

 

      - Access and authorization to systems available at all times

 

      - Network availability to applications available at all times.

 

·

Prompt access to ROI personnel or relevant 3rd party personnel who have access and authorization to act upon requests from MeetKai to reduce or resolve the impact of any unavailability event.

 

7. Exclusions

 

7.1 The following conditions are excluded from the calculation of monthly unavailability events:

 

·

Features which are not under published general availability

 

·

Features specifically designated as excluded from the SLA, such as custom integrations

 

·

Actions or inaction on the part of ROI or 3rd party authorized to act on behalf of ROI that hinder or prevent restoration of service availability

 

·

Factors which are outside of MeetKai’s reasonable control

 

·

Cloud provider or integrated application provider (other than MeetKai) unavailability or outage events

 

8 Service Credits

 

In the event MeetKai is unable to meet the availability target for a calendar month ROI shall be entitled to a return of a portion of the Preferred Stock issued as Fees (“Service Credits”) from MeetKai.  MeetKai agrees to hold and not convert a portion of the Preferred Stock it receives as the Fees (the “Holdback Shares”) until the end of the eleventh (11^th) month after the Fees are paid (the “Holdback Period”) in the event it needs to issue Service Credits to ROI. The Amount of Holdback Shares shall be ten percent (10%) during the first year of the Term (10,000 shares of Preferred Stock), five percent (5%) during the second year of the Term (1,500 shares of Preferred Stock), three percent (3%) during the third year of the Term (600 shares of Preferred Stock) and three percent (3%) during the fourth and each subsequent year of the Term (300 shares of Preferred Stock). As the Preferred Stock will be issued in book entry format by ROI, MeetKai acknowledges and agrees that MeetKai shall have no right, and ROI no obligation, to convert any of the Holdback Shares prior to the completion of the Holdback Period. Service Credits shall be paid by MeetKai to ROI, whereby ROI shall cancel the corresponding number of Holdback Shares equal to the value of the Service Credits, upon delivery by ROI of written notice to MeetKai with specificity (including calculations) regarding the failure to meet the required service level requirements. In the event that the number of Holdback Shares are insufficient to satisfy Service Credits, ROI shall have the right, in its sole discretion, to (i) cancel a corresponding number of other shares of Preferred Stock issued to MeetKai as the Fees that are still outstanding, if any, (ii) cancel a corresponding number of shares of Preferred Stock to be issued to MeetKai in a subsequent year as the Fees, or (iii) a combination of (i) and (ii). In no event shall MeetKai be required to pay Service Credits in cash or any other manner other than by a return/cancellation of Preferred Stock.

 

 

Calculation of Credits:

 

Credits are based on a percentage of the Fees paid for the calendar month in which MeetKai failed to meet the availability target. Fees for a calendar month are 1/12^th of the Fees paid for the then-current contract year.

 

Monthly System Availability	Service Credit (a percentage of monthly contract fees)
Less than 99.9% but equal to or greater than 99.0%	10%
Less than 99.0% but equal to or greater than 97.0%	20%
Less than 97.0%	30%

 

9. Definitions

 

For purposes of this SOW, the following terms shall be defined as follows:

 

“Service Credits” shall mean means the sums referred to below as being payable by MeetKai to ROI in response to MeetKai’s failure to meet a service level in accordance with this SOW.

 

“System Availability” means the total number of minutes in a month, minus the number of minutes of Downtime in a month, divided by the total number of minutes in a month.

 

“Downtime” means the period of time in whole minutes where the MeetKai service is unavailable to ROI and/or its End Users. Downtime does not include:

 

·

Scheduled or Emergency Maintenance

 

·

Any Exclusions (see above)

 

Any period of downtime less than half of one minute will not be counted as Downtime.

 

“Scheduled Maintenance” means the period of time in minutes of unavailability of the Platform that is used to conduct service maintenance activities. Scheduled maintenance excludes normal operating maintenance activities that do not incur service downtime which affects ROI.

 

“Emergency Maintenance” means the period of time in minutes of unavailability of the Platform that is used to conduct maintenance activities which cannot be planned and may be used to address a security issue, prevent Service disruption, prevent data corruption, or comply with legislative requirements.

 

 

Exhibit B: Revenue Share

 

Sales

 

-

MeetKai shall be entitled to receive 50% of “net revenue” received by ROI from Licensing of the Platform to End Users. For purposes herein, “net revenue” shall be defined as gross revenue minus fees and expenses paid for payment processing fees. To the extent that ROI needs to return any such revenue to End Users, either in the form of cash or service credits (a “Refund”), then such Refund shall be an offset shared equally by MeetKai and ROI against future payments under this section.

 

 

 

 

 

 

Exhibit 10.4

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of February 21, 2024, between RiskOn International, Inc., a Nevada corporation (the “Company”) and MeetKai, Inc., a Delaware corporation (the “Purchaser”).

 

PREAMBLE

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to the Purchaser, and the Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement (the “Transaction”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement, the Transaction will be conducted in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1       Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

 

“Action” shall have the meaning ascribed to such term in Section 3.1(m).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“BHCA” shall have the meaning ascribed to such term in Section 3.1(y).

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Certificate” shall mean the Certificate of Rights, Preferences, and Limitations of the Series E Convertible Preferred Stock in the form attached hereto as Exhibit A.

 

“Closing” shall have the meaning ascribed to such term in Section 2.1.

 

“Closing Date” shall mean each Trading Day on which a particular Closing is held, and shall mean the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto related to such Closing Date, and all conditions precedent to (i) the Purchaser’s obligations to pay the Subscription Amount at such Closing and (ii) the Company’s obligations to deliver the Securities to be issued and sold at such Closing, in each case, have been satisfied or waived. The first Closing Date shall occur at the Effective Time; the second Closing Date shall occur on the first anniversary of the Effective Time; and the third Closing Date shall occur on the second anniversary of the Effective Time.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

 

“Conversion Price” shall have the meaning ascribed to such term in the Certificate.

 

“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Series E Preferred Stock.

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

“Disqualification Event” shall have the meaning ascribed to such term in Section 3.1(q).

 

“Effective Time” means immediately after the Delivery Time, as defined in the Exchange Agreement, pursuant to which the holders of the Notes grant the Company the Preferred SPA Waiver, as defined in the Exchange Agreement, permitting the Company to issue and sell the Series E Preferred Stock pursuant to this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exchange Agreement” means that amendment and exchange agreement, dated February 21, 2024, by and among the Company and the holders of the Notes.

 

“Exchange Approval” means approval of the issuance of Common Stock contemplated by this Agreement by the Principal Market, which approval shall be obtained (i) in the case of the initial Conversion Shares in a number equal to the Exchange Cap and (ii) in the case of the remaining Conversion Shares, no later than five (5) calendar days after the Company shall have obtained Shareholder Approval to issue such Conversion Shares.

 

“Exchange Cap” shall mean that number of shares of Common Stock or Common Stock Equivalents pursuant to this Agreement and the other Transaction Documents to the extent that after giving effect thereto, the aggregate number of shares of Common Stock that would be issued as well as permitted to vote pursuant to this Agreement and such Transaction Documents would not exceed 19.99% of the Company’s outstanding shares of Common Stock as of the date hereof.

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“Federal Reserve” shall have the meaning ascribed to such term in Section 3.1(y).

 

“First Closing” shall mean the issuance of 100,000 shares of Series E Preferred Stock as of the first Closing Date.

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(p).

 

“Governmental Entity” means any nation, state, county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local, municipal, foreign, or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), multi-national organization or body; or body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature or instrumentality of any of the foregoing, including any entity or enterprise owned or controlled by a government or a public international organization or any of the foregoing

 

“Issuer Covered Person” shall have the meaning ascribed to such term in Section 3.1(q).

 

“Knowledge” means, with respect to any Person, (x) such Person is actually aware of such fact or matter or (y) such Person should reasonably have been expected to discover or otherwise become aware of such fact or matter after reasonable investigation, and for purposes hereof it shall be assumed that such Person has conducted a reasonable investigation of the accuracy of the representations and warranties set forth herein.

 

“Law” means any federal, state, local, municipal, foreign, multi-national or other law, common law, statute, constitutions, ordinances, rules, regulations, codes, Orders, or legally enforceable requirements enacted, issued, adopted, promulgated, enforced, ordered, or applied by any Governmental Entity

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

 

“Liens” means any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement, interest or other right or claim of third parties, whether perfected or not perfected, voluntarily incurred or arising by operation of law, and including any agreement (other than this Agreement) to grant or submit to any of the foregoing in the future.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(n).

 

“Material Agreement” means any material loan agreement, financing agreement, equity investment agreement or securities instrument to which Company is a party, any agreement or instrument to which Company and Purchaser or any Affiliate of Purchaser is a party, and any other material agreement listed, or required to be listed, on any of Company’s reports filed or required to be filed with the SEC, including without limitation Forms 10-K, 10-Q and 8-K.

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(s).

 

“Money Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(u).

 

“MSA” means the Master Services Agreement, entered into between the Company and the Purchaser, simultaneously with this Agreement.

 

“Notes” means the senior secured notes, issued on April 27, 2023, by the Company.

 

“Officer’s Certificate” has the meaning set forth in the Section 2.3(b)(i) hereof.

 

“Order” means any order, writ, assessment, decision, injunction, decree, ruling, or judgment of a Governmental Entity or arbitrator, whether temporary, preliminary, or permanent.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Preferred Shares” means the shares of Series E Preferred Stock issuable to the Purchaser pursuant to this Agreement.

 

“Principal Market” shall mean the NASDAQ Capital Market.

 

“Principal Market Rules” means the rules and regulations of the Principal Market.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Conversion Shares covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and any “free writing prospectus” as defined in Rule 405 under the Securities Act.

 

“Register,” “Registered” and “Registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement or document.

 

“Registration Statement” means any registration statement of the Company filed under the Securities Act, including the Prospectus and amendments and supplements to such Registration Statement, and including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

 

“Removal Date” means the date that all of the issued Conversion Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information requirements under Rule 144 and without volume or manner-of-sale restrictions.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the conversion of the Preferred Shares, ignoring any conversion limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 200% of the then Conversion Price on the Trading Day immediately prior to the date of determination.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(p).

 

“Second Closing” shall mean the issuance of 30,000 shares of Series E Preferred Stock as of the second Closing Date.

 

“Securities” means the Preferred Shares and the Conversion Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Series E Preferred Stock” means the Series E Convertible Preferred Stock of the Company, par value $0.001 per share, to be issued and sold by the Company to the Purchaser hereunder.

 

“Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Principal Market Rules (or the applicable rules and regulations of any successor entity) from the shareholders of the Company with respect to the transactions contemplated by this Agreement and the other Transaction Documents, including the issuance of all of the Conversion Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.

 

“SOW#1” means the first statement of work to the MSA, entered into between the Company and the Purchaser, simultaneously with this Agreement, pursuant to which Purchaser is providing certain licensing and hosting fees and services to the Company, the cost of which represents the purchase price of the Series E Preferred Stock pursuant to this Agreement.

 

“Subscription Amount” means up to $15,000,000, representing the Company’s commitment to issuing shares purchase to SOW#1.

 

“Subsidiary” means any subsidiary of the Company and shall, where applicable and with regard to future events, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Third Closing” shall mean the issuance of 20,000 shares of Series E Preferred Stock as of the third Closing Date.

 

“Trading Day” means a day on which the Principal Market is open for trading; provided, that in the event that the Common Stock is not listed or quoted for trading on a Trading Market on the date in question, then Trading Day shall mean a Business Day.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange, OTCQB, OTCQX, or the OTC Pink (or any successors to any of the foregoing). Notwithstanding the foregoing, term “Trading Market” shall only include the OTC Pink for any interim period of time required upon the Company’s delisting from any other Trading Market provided that the Company shall be required to list its Common Stock for trading or quotation on another Trading Market (excluding the OTC Pink) promptly upon such delisting and the failure to do so shall constitute a default under the terms of this Agreement and the other Transaction Documents.

 

“Transaction” shall have the meaning ascribed to such term in the Preamble.

 

“Transaction Documents” means this Agreement all exhibits and schedules thereto and hereto, the Certificate, the MSA, SOW#1 and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

 

“Transfer Agent” means Pacific Stock Transfer Company, and any successor transfer agent of the Company or, if the Company has not appointed a Transfer Agent, the Company.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the Common Stock is not then listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported on the OTC Pink Marketplace maintained by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent closing price per share of the Common Stock so reported, or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchaser of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

ARTICLE II

PURCHASE AND SALE

 

2.1       Closing. On each Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchaser agrees to purchase, the Securities for the Subscription Amount (such purchase and sale being a “Closing”). At each such Closing, the Subscription Amount consists of the Company’s obligations under SOW#1. The Company shall, on each Closing Date, deliver to the Purchaser a certificate representing the number of Preferred Shares purchased by the Purchaser at the particular Closing as determined pursuant to Section 2.2(a). The Company and the Purchaser shall also deliver the other items set forth in Section 2.2 deliverable at the particular Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3 and receipt of the Subscription Amount by the Company, the Closing shall occur at the principal offices of the Company or such other location as the parties shall mutually agree.

 

2.2       Deliveries.

 

(a)       On or prior to each Closing Date, the Company shall deliver or cause to be delivered to the Purchaser the following:

 

(i)       this Agreement duly executed by the Company;

 

(ii)       a certificate evidencing a number of Preferred Shares equal to (i) for the First Closing, 100,000, (ii) for the Second Closing, 30,000, and (iii) for the Third Closing, 20,000, each registered in the name of the Purchaser;

 

(iii)       the Certificate;

 

(iv)       an Officer’s Certificate (as hereinafter defined), executed by an officer of the Company; and

 

(v)       all documents, instruments and other writings required to be delivered by the Company to the Purchaser on or before the applicable Closing Date pursuant to any provision of this Agreement or in order to implement and effect the transactions contemplated hereby.

 

(b)       On or prior to each Closing Date, the Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i)       this Agreement duly executed by the Purchaser.

 

2.3       Closing Conditions.

 

(a)       The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)       the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchaser contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

 

(ii)       all obligations, covenants and agreements of the Purchaser under this Agreement required to be performed at or prior to the applicable Closing Date shall have been performed in all material respects;

 

(iii)       the delivery by the Purchaser of the items set forth in Section 2.2(b) of this Agreement; and

 

(iv)      the Company shall have received the executed signature page to this Agreement from the Purchaser and cancellation of the Advances in an amount representing the Subscription Amount from the Purchaser.

 

(b)       The obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)       each and every representation and warranty of the Company shall be true and correct in all material respects as of the date when made and as of the applicable Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the applicable Closing Date, including, without limitation the issuance of all Securities on the Closing Date as required by the Transaction Documents and the Company has a sufficient number of duly authorized shares of preferred stock and Common Stock reserved for issuance as may be required to fulfill its obligations pursuant to the Transaction Documents and the Purchaser shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Purchaser in the form acceptable to Purchaser (the “Officer’s Certificate”);

 

(ii)       the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iii)       All necessary actions to be taken by the Company in connection with the Transaction and all documents incident thereto shall be satisfactory in form and substance to the Purchaser, and the Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it or they may request;

 

(iv)       there is no breach of any obligations, covenants and agreements under the Transaction Documents and no existing event which, with the passage of time or the giving of notice, would constitute a breach under the Transaction Documents;

 

(v)       there shall have been no Material Adverse Effect with respect to the Company since the date hereof;

 

(v)       All consents, authorizations, orders and approvals of, and filings and registrations with, any Governmental Authority which are required for or in connection with the execution and delivery of this Agreement and the consummation by each Party hereto of the Transactions shall have been obtained or made;

 

(vii)       from the date hereof to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing; and

 

(viii)       the Company shall have received the executed signature page to this Agreement from the Purchaser and the Company shall have received payment in the form of the Advances representing the Subscription Amount from the Purchaser.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1       Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or warranty made herein only to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby represents and warrants to the Purchaser that the following representations and warranties are true and correct as of the date of this Agreement and the Closing Date:

 

 

(a)       Organization and Qualification. The Company is an entity duly organized, validly existing and in good standing under the laws of its state of incorporation or formation. The Company is duly qualified to do business, and is in good standing in the states required due to (i) the ownership or lease of real or personal property for use in the operation of the Company’s business or (ii) the nature of the business conducted by the Company, except where the failure to so qualify would not, individually or in the aggregate, have a Material Adverse Effect. The Company has all requisite power, right and authority to own, operate and lease its properties and assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party, and to carry out the transactions contemplated hereby and thereby, subject to the Required Approvals. All actions on the part of the Company and its officers and directors necessary for the authorization, execution, delivery and performance of this Agreement and the other Transaction Documents, the consummation of the transactions contemplated hereby and thereby, and the performance of all of the Company’s obligations under this Agreement and the other Transaction Documents have been taken or will be taken prior to the Closing. This Agreement has been, and the other Transaction Documents to which the Company is a party on the Closing will be, duly executed and delivered by the Company, and this Agreement is, and each of the other Transaction Documents to which it is a party on the Closing will be, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

 

(b)       Issuance of Securities. The issuance of each of the Preferred Shares and the Conversion Shares have been duly authorized and, upon issuance in accordance with the terms of this Agreement and the Certificate, as applicable, will be validly issued, fully paid and non-assessable and free and clear of all liens, Encumbrances and rights of refusal of any kind, subject to the Required Approvals.

 

(c)       Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder, subject to the Required Approvals. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s shareholders in connection herewith or therewith other than in connection with the Required Approvals, a Form 8-K, Shareholder Approval and notification regarding the listing of additional shares. This Agreement and each other Transaction Documents to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d)       No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not, except as set forth on Schedule 3.1(d): (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e)       Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Sections 4.2 and 4.12 of this Agreement; (ii) the notice and/or application(s) to the Principal Market, and the receipt of Shareholder Approval required for the issuance and sale of the Preferred Shares and the listing of the Conversion Shares for trading thereon in the time and manner required thereby; and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

 

(f)       No Financial Advisor. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Securities and the transactions contemplated hereby. The Company further acknowledges that Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Purchaser or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchaser’s purchase of the Securities. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(g)       Reserved.

 

(h)       Reserved.

 

(i)       Private Placements. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchaser as contemplated hereby.

 

(j)       Investment Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Preferred Shares will neither be nor be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

(k)       Listing and Maintenance Requirements; Principal Market Regulation.

 

(i)       The Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its Knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the SEC Reports, the Company has not, in the twelve (12) months preceding the date hereof, received notice from any Principal Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Principal Market.

 

(ii)       The Company shall not permit the Preferred Shares to have any conversion or voting rights or sell any shares of Common Stock or Common Stock Equivalents pursuant to this Agreement and the other Transaction Documents to the extent that after giving effect thereto, the aggregate number of shares of Common Stock that would be issued pursuant to this Agreement and such Transaction Documents would exceed the Exchange Cap, unless and until the Company obtains Shareholder Approval of the transactions contemplated by this Agreement and such Transaction Documents and the shareholders of the Company as well as, subsequently, the Principal Market have in fact approved the transactions contemplated by this Agreement and such Transaction Documents in accordance with the applicable rules and regulations of the applicable Principal Market, and the Articles of Incorporation and bylaws of the Company. The Company agrees to submit the application to the Principal Market to obtain Exchange Approval within three (3) days of the Closing Date. The Company shall file a preliminary proxy statement on Schedule 14A (the “PRE 14A”) with the Commission as soon as practicable but in any event no later than six (6) months following the initial Closing Date for a special meeting of its stockholders (or its annual meeting of its stockholders) in order to obtain all necessary approvals of the sale and issuance of the remaining Conversion Shares not subject to the Exchange Cap (it being acknowledged and agreed that the Preferred Shares shall be issued immediately but their ability to be converted is limited prior to receipt of Shareholder Approval therefor) consistent with the rules and regulations of the Principal Market, including, but not limited to, Listing Rule 5635 of The Nasdaq Stock Market, LLC. In addition, the PRE 14A shall include the unanimous recommendation of the Board of Directors that such proposal be approved, and the Company shall solicit proxies from its shareholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal including, if requested by the Purchaser, the retention and utilization of a nationally known proxy solicitation firm. The Company shall use its reasonable best efforts to: (i) promptly clear any comments received by the Commission on the PRE 14A and thereafter file a definitive proxy statement on Schedule 14A related to the meeting of its shareholders, and (ii) obtain such Shareholder Approval. If the Company does not obtain Shareholder Approval at the first such meeting, the Company shall call a meeting every four (4) months thereafter to seek Shareholder Approval until the earlier of the date on which Shareholder Approval is obtained or the Securities are no longer outstanding.

 

 

(l)       Shell Company Status. The Company is not and has not been a “shell company,” as such term is defined in Rule 144 under the Securities Act, since January 1, 2022.

 

(m)       Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the Knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties except as set forth in Schedule 3.1(m), or against or affecting the Company’s current or former officers or directors in their capacity as such, before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company that is likely to lead to action that can reasonably be expected to result in a Material Adverse Effect. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.

 

(n)       Employee Relations. The Company is not a party to any collective bargaining agreement or employs any member of a union.  The Company believes that its relations with its employees are good.  The Company is in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except as disclosed in Schedule 3.1(n) or where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company to perform any of its obligations under any of the Transaction Documents.

 

(o)       Tax Status. The Company (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.  The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

(p)       SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two (2) years preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). Except as disclosed on Schedule 3.1(p), as of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

 

(q)       No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the Transaction contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.

 

(r)       General Solicitation. None of the Company, any of its Affiliates or any person acting on behalf of the Company or such Affiliate will solicit any offer to buy or offer or sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D, including: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio; and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

 

(s)       Regulatory Permits. The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(t)       Office of Foreign Assets Control. Neither the Company nor to the Company’s Knowledge, any director, officer, agent, employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.

 

(u)       Money Laundering. The operations of the Company are and have been conducted at all times in compliance in all material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened.

 

(v)       Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(w)       No Integrated Transaction. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of: (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable stockholder approval provisions of the Principal Market on which any of the securities of the Company are listed or designated.

 

(x)       Foreign Corrupt Practices. Neither the Company nor to the Knowledge of the Company, any agent or other person acting on behalf of the Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of FCPA.

 

(y)       Bank Holding Company Act. Neither the Company nor any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

 

(z)       Accountants and Lawyers. The Company’s independent registered public accounting firm is RBSM LLP. To the Knowledge and belief of the Company, such accounting firm: (i) is an independent registered public accounting firm and (ii) has expressed its opinion with respect to the financial statements included in the Company’s Annual Report for the fiscal year ended March 31, 2023. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

(aa)    Promotional Stock Activities. Neither the Company, its officers, its directors, nor any Affiliates or agents of the Company have engaged in any stock promotional activity that could give rise to a complaint, inquiry, or trading suspension by the Commission alleging (i) a violation of the anti-fraud provisions of the federal securities laws, (ii) violations of the anti-touting provisions, (iii) improper “gun-jumping; or (iv) promotion without proper disclosure of compensation.

 

(bb)    Reporting Requirements. The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d), as applicable, of the Exchange Act.

 

(cc)    Survival. The foregoing representations and warranties shall not survive the Closing Date.

 

3.2       Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company that the following representations and warranties are true and correct as of the date of this Agreement and the Closing Date:

 

(a)       The Purchaser has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized, if applicable, and this Agreement constitutes a valid and legally binding obligation of the Purchaser, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

 

(b)       The Purchaser acknowledges its understanding that the Transaction and sale of the Securities is intended to be exempt from registration under the Securities Act, by virtue of Section 4(a)(2) of the Securities Act. In furtherance thereof, the Purchaser represents and warrants to the Company as follows:

 

(i)       The Purchaser realizes that the basis for the exemption from registration may not be available if, notwithstanding the Purchaser’s representations contained herein, the Purchaser is merely acquiring the Securities for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Purchaser does not have any such intention.

 

(ii)       The Purchaser realizes that the basis for exemption would not be available if the Transaction is part of a plan or scheme to evade registration provisions of the Securities Act or any applicable state or federal securities laws, except sales pursuant to a registration statement or sales that are exempted under the Securities Act.

 

(iii)       The Purchaser is acquiring the Securities solely for the Purchaser’s own beneficial account, for investment purposes, and not with a view towards, or resale in connection with, any distribution of the Securities.

 

(iv)       The Purchaser has the financial ability to bear the economic risk of the Purchaser’s investment, has adequate means for providing for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.

 

(v)       The Purchaser and the Purchaser’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, the “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of a prospective investment in the Securities. The Purchaser has not been organized solely for the purpose of acquiring the Securities.

 

(vi)       The Purchaser (together with its Advisors, if any) has received all documents requested by the Purchaser, if any, and has carefully reviewed them and understands the information contained therein, prior to the execution of this Agreement.

 

 

(c)       The Purchaser is not relying on the Company or any of its employees, agents, sub-agents or advisors with respect to the legal, tax, economic and related considerations involved in this investment. The Purchaser has relied on the advice of, or has consulted with, only its Advisors.

 

(d)       The Purchaser has carefully considered the potential risks relating to the Company and a purchase of the Securities, and fully understands that the Securities are a speculative investment that involves a high degree of risk of loss of the Purchaser’s entire investment.

 

(e)       The Purchaser will not sell or otherwise transfer any Securities without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that the Purchaser must bear the economic risk of its purchase because, among other reasons, the Securities have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states, or an exemption from such registration is available. In particular, the Purchaser is aware that the Securities are “restricted securities,” as such term is defined in Rule 144, and may not be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The Purchaser understands that any sales or transfers of the Securities are further restricted by state securities laws and the provisions of this Agreement.

 

(f)       No oral or written representations or warranties have been made, or information furnished, to the Purchaser or its Advisors, if any, by the Company or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries in connection with the Transaction, other than any representations of the Company contained herein, and in subscribing for the Securities, the Purchaser is not relying upon any representations other than those contained herein.

 

(g)       The Purchaser’s overall commitment to investments that are not readily marketable is not disproportionate to the Purchaser’s net worth, and an investment in the Securities will not cause such overall commitment to become excessive.

 

(h)       The Purchaser understands and agrees that the certificates for the Securities shall bear substantially the following legend:

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE OR EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

(i)       Certificates evidencing Securities shall not be required to contain the legend set forth in Section 3.2(h) above or any other legend (i) while a registration statement covering the resale of such Securities is effective under the Securities Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 (provided that the Purchaser provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of the Purchaser’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Purchaser provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the Securities Act or (v) if such legend is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the Commission). If a legend is not required pursuant to the foregoing, the Company shall no later than three (3) business days following the delivery by the Purchaser to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Purchaser as may be required above in this Section 3.2(i), as directed by the Purchaser, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and the Securities are Conversion Shares, credit the aggregate number of Conversion Shares to which the Purchaser shall be entitled to the Purchaser’s or its designee’s balance account with DTC through its Deposit and Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the Purchaser, a certificate representing such Securities that is free from all restrictive and other legends, registered in the name of the Purchaser or its designee. The Company shall be responsible for any transfer agent fees, fees of legal counsel to the Company or DTC fees with respect to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith.

 

 

(j)       Neither the Commission nor any state securities commission has approved the Securities or passed upon or endorsed the merits of the Transaction. There is no government or other insurance covering any of the Securities.

 

(k)       The Purchaser has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Agreement or the transactions contemplated hereby.

 

(l)       The Purchaser is not relying on the Company or any of its employees, agents, or advisors with respect to the legal, tax, economic and related considerations of an investment in the Securities, and the Purchaser has relied on the advice of, or has consulted with, only its own Advisors.

 

(m)       No oral or written representations have been made, or oral or written information furnished, to the Purchaser or its Advisors, if any, in connection with the Transaction that are in any way inconsistent with the information contained herein.

 

(n)       The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the Transaction, and has so evaluated the merits and risks of such investment. The Purchaser has not authorized any person or entity to act as its Purchaser Representative (as that term is defined in Regulation D of the General Rules and Regulations under the Securities Act) in connection with the Transaction. The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

 

4.1       Transfer Restrictions.

 

(a)       The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of the Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of such transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the other applicable Transaction Documents and shall have the rights and obligations of the Purchaser under this Agreement.

 

(b)       The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on the Securities in the following form:

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE OR EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

 

The Company acknowledges and agrees that, the Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the other applicable Transaction Documents and, if required under the terms of such arrangement, the Purchaser may transfer pledged or secured Securities into the name of the pledgees or secured parties, in their respective capacities as such.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

(c)       Certificates evidencing the Conversion Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of any such securities are effective under the Securities Act; (ii) following any sale of such Conversion Shares pursuant to Rule 144; if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall upon request of the Purchaser and at the Company’s sole expense cause its counsel (or at the Purchaser’s option, counsel selected by the Purchaser) to issue a legal opinion reasonably satisfactory to the Company to the Transfer Agent promptly after any of the events described in (i)-(ii) in the preceding sentence if required by the Transfer Agent to effect the removal of the legend hereunder (with a copy to the applicable Purchaser and its broker). If all or any portion of any Preferred Shares is converted at a time when there is an effective registration statement to cover the resale of the Conversion Shares, or if such Conversion Shares may be sold under Rule 144 or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Conversion Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 4.1(c), it will, no later than 9:00 AM the next Trading Day following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Conversion Shares issued with a restrictive legend (such Trading Day, the “Legend Removal Date”), instruct the Transfer Agent to deliver or cause to be delivered to the Purchaser a certificate representing such shares of Common Stock that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for the Conversion Shares that are subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by the Purchaser.

 

(d)       In lieu of delivering physical certificates representing the unlegended shares, upon request of the Purchaser, so long as the certificates therefor do not bear a legend and the Purchaser is not obligated to return such certificate for the placement of a legend thereon and provided it is commercially reasonable for the Company to do so, the Company shall cause its transfer agent to electronically transmit the unlegended shares by crediting the account of Purchaser’s prime broker with the Depository Trust Company through its DWAC system, provided that the Company’s Common Stock is DTC eligible and the Company’s transfer agent participates in the Deposit Withdrawal at Custodian system and such Securities are Conversion Shares. Such delivery must be made on or before the Legend Removal Date.

 

(e)       In the event the Purchaser shall request delivery of unlegended shares as described in this Section 4.1 and the Company is required to deliver such unlegended shares, the Company may not refuse to deliver unlegended shares based on any claim that the Purchaser or anyone associated or affiliated with the Purchaser has not complied with Purchaser’s obligations under the Transaction Documents, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining and or enjoining delivery of such unlegended shares shall have been sought and obtained by the Company and the Company has posted a surety bond for the benefit of the Purchaser in the amount of the greater of (i) 120% of the amount of the aggregate stated value of the Conversion Shares which is subject to the injunction or temporary restraining order, or (ii) the VWAP of the Common Stock on the trading day before the issue date of the injunction multiplied by the number of unlegended shares to be subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to the Purchaser to the extent Purchaser obtains judgment in Purchaser’s favor.

 

4.2       Furnishing of Information. From the Closing Date until no Purchaser holds any Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

4.3       Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities by the Company in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.

 

 

4.4       Publicity.  The Company and the Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld, delayed, denied or conditioned, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser in any filing with the Commission or any regulatory agency or Trading Market unless the name of the Purchaser is already included in the body of the Transaction Documents, without the prior written consent of the Purchaser, except: (a) as required by federal or state securities law in connection with the filing of final Transaction Documents with the Commission, or (b) to the extent such disclosure is required by law or Principal Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).

 

4.5       Certain Limitations. Notwithstanding anything contained in any Transaction Document to the contrary, the parties covenant and agree that the Purchaser shall not convert any Preferred Shares, or sell any Conversion Shares, unless and until the Company obtains Exchange Approval and, if applicable, Shareholder Approval of the Transaction in accordance with the Principal Market Rules. The Purchaser further covenants and agrees not to vote any of its Conversion Shares at the meeting of the shareholders held for the purpose of obtaining such Shareholder Approval.

 

4.6       Primary Market Compliance. Notwithstanding anything in this Agreement or any other Transaction Document to the contrary, the parties shall use commercially reasonable efforts to comply with the Principal Market Rules, including the listing requirements, and as long as the Common Stock remains listed on the Principal Market the parties shall not enforce any provision of any Transaction Document which does not comply with the Principal Market Rules.

 

4.7       Reservation of Common Stock. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in amount equal to the Required Minimum. If, on any date including the Effective Time, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s Articles of Incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75^th day after such date; provided that the Company will not be required at any time to authorize a number of shares of Common Stock greater than the maximum remaining number of shares of Common Stock that could possibly be issued after such time pursuant to the Transaction Documents.

 

4.8       Listing of Common Stock. At all times subsequent to the Closing Date, the Company hereby agrees to maintain the listing of the Common Stock on the Trading Market on which it is listed, and following the Closing, Shareholder Approval and final Exchange Approval, the Company, shall apply to list all of the Conversion Shares on such Trading Market and promptly secure the listing of all of the Conversion Shares a on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Conversion Shares, and will take such other action as is necessary to cause all of the Conversion Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action necessary to continue the listing or quotation and trading of its Common Stock on a Trading Market until five years after the Closing Date and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market until at least five years after the Closing Date.

 

4.9       Notice of Disqualification Events. The Company will notify the Purchaser in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person not otherwise disclosed herein.

 

4.10       Acknowledgment of Dilution.  The Company acknowledges that the issuance of the Conversion Shares upon conversion of the Preferred Shares may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Conversion Shares pursuant to the Transaction Documents, are unconditional and absolute, but subject to the terms and conditions of the Transaction Documents, and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against the Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.

 

 

4.11       DTC Program. For a period of two (2) years from the Closing Date, the Company will employ as the transfer agent for the Common Stock a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common Stock to be transferable pursuant to such program.

 

4.12       Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the sale of the Securities by the Company under this Agreement as required under Regulation D. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchaser at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Purchaser.

 

4.13       Preservation of Corporate Existence. The Company shall preserve and maintain its corporate existence, rights, privileges and franchises in the jurisdiction of its then-incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary in view of its business or operations and where the failure to qualify or remain qualified might reasonably have a Material Adverse Effect upon the financial condition, business or operations of the Company taken as a whole.

 

4.14       Conversion Procedures. The form of Notice of Conversion included in the Certificate sets forth the totality of the procedures required of the Purchaser in order to convert the Preferred Shares. No legal opinion, other information or instructions shall be required of the Purchaser to convert its Preferred Shares. The Company shall promptly honor conversions of the Preferred Shares and shall deliver the Conversion Shares in accordance with the terms, conditions and time periods set forth in the Certificate.

 

4.15       Conduct of Business. The business of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.

 

4.16       Passive Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

4.17       Registration Rights.

 

(a)       Registration Statement. The Company shall use commercially reasonable efforts to prepare and file, within sixty (60) days following the first Closing Date, a Registration Statement with the Commission covering the resale of all of the Conversion Shares underlying any shares of Series E Preferred Stock owned by the Purchaser. The foregoing Registration Statement shall be filed on Form S-3 or any successor forms thereto.

 

(b)       Expenses. Except as otherwise expressly provided herein, the Company will pay all fees and expenses incident to the performance of or compliance with this Section 4.17, including all fees and expenses associated with effecting the registration of the Conversion Shares, including all filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Conversion Shares for sale under applicable state securities laws, listing fees, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Conversion Shares being sold.

 

(c)       Effectiveness. The Company shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after filing thereof. The Company shall notify the Purchaser by e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after the Registration Statement is declared effective and shall simultaneously provide the Purchaser with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.

 

(d)       Piggyback Registration Rights. If the Company at any time determines to file a registration statement under the Securities Act to register the offer and sale, by the Company, of Common Stock (other than (x) on Form S-4 or Form S-8 under the Securities Act or any successor forms thereto, (y) an at-the-market or equity line of credit offering, or (z) a registration of securities solely relating to an offering and sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit plan arrangement), the Company shall, as soon as reasonably practicable, give written notice to the Purchaser of its intention to so register the offer and sale of Common Stock and, upon the written request, given within two (2) Business Days after delivery of any such notice by the Company, of Purchaser to include in such registration its Conversion Shares (which request must specify the number of Conversion Shares proposed to be included in such registration), the Company shall cause all such Conversion Shares to be included in such registration statement on the same terms and conditions as the Common Stock otherwise being sold pursuant to such registered offering.

 

 

(e)       Company Obligations. The Company will use its best efforts to effect the registration of the Conversion Shares in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

 

(i)       use its commercially reasonable efforts to cause the Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the first date on which all Conversion Shares are either covered by the Registration Statement or may be sold without restriction, including volume or manner-of-sale restrictions, pursuant to Rule 144 or have been sold by the Purchaser (the “Effectiveness Period”) and advise the Purchaser in writing when the Effectiveness Period has expired;

 

(ii)

prepare and file with the Commission such amendments and post-effective amendments and supplements to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the Securities Act and the Exchange Act with respect to the distribution of all of the Conversion Shares covered thereby;

 

(iii)

provide copies to and permit the Purchaser to review all amendments and supplements to the Registration Statement no fewer than two (2) Business Days prior to its filing with the Commission and not file any document to which Purchaser reasonably objects;

 

(iv)

furnish to the Purchaser, without charge, (i) promptly after the same is prepared and publicly distributed, filed with the Commission, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may be) one copy of the Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the Commission or the staff of the Commission, and each item of correspondence from the Commission or the staff of the Commission, in each case relating to the Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as the Purchaser may reasonably request in order to facilitate the disposition of the Conversion Shares that are covered by the related Registration Statement;

 

(v)

immediately notify the Purchaser of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information;

 

(vi)

use its commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment and notify the Company of the issuance of any such order and the resolution thereof, or its receipt of notice of the initiation or threat of any proceeding for such purpose;

 

(vii)

prior to any public offering of Conversion Shares, use its commercially reasonable efforts to register or qualify or cooperate with the Purchaser in connection with the registration or qualification of such Conversion Shares for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Purchaser and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Conversion Shares covered by the Registration Statement and the Company shall promptly notify the Purchaser of any notification with respect to the suspension of the registration or qualification of any of such Conversion Shares for sale under the securities or blue sky laws of such jurisdictions or its receipt of notice of the initiation or threat of any proceeding for such purpose;

 

(viii)

immediately notify the Purchaser, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Registration Statement or Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Prospectus, in light of the circumstances in which they were made), and promptly prepare, file with the Commission and furnish to such holder a supplement to or an amendment of such Registration Statement or Prospectus as may be necessary so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of such Prospectus, in light of the circumstances in which they were made);

 

 

(ix)

otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act;

 

(x)

hold in confidence and not make any disclosure of information concerning the Purchaser provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to complete the Registration Statement or to avoid or correct a misstatement or omission in the Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement, and upon learning that disclosure of such information concerning the Purchaser is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Purchaser and allow the Purchaser, at the Purchaser’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information; and

 

(xi)

take all other reasonable actions necessary to expedite and facilitate disposition by the Purchaser of all Conversion Shares pursuant to the Registration Statement.

 

 

ARTICLE V

TERMINATION

5.1       Termination.

 

(a)       The Purchaser may elect to terminate this Agreement upon the occurrence of any of the following:

 

(i)       if at any time the Company has filed for and/or is subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company;

 

(ii)       the Company is in breach or default of any Material Agreement, which breach or default could reasonably be expected to have a Material Adverse Effect;

 

(iii)       the Company is in breach or default of this Agreement, any Transaction Document, or any agreement with any Purchaser or any Affiliate of the Purchaser; or

 

(iv)       upon the occurrence of a Fundamental Transaction.

 

(b)       This Agreement will automatically terminate upon the expiration, or earlier termination, of SOW#1.

 

5.2       Effect of Termination. Notwithstanding anything to the contrary above, nothing contained in this Section 5 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

 

ARTICLE VI

MISCELLANEOUS

 

6.1       Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever the Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of any Preferred Share, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to the Purchaser of the aggregate exercise price paid to the Company for such shares.

 

 

6.2       Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its Advisors, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all Transfer Agent fees, DTC fees, stamp taxes and other similar taxes and duties levied in connection with the delivery of any Securities to the Purchaser in addition to paying the cost of any counsel or other expenses incurred in rendering Rule 144 opinions of any the Purchaser upon request.

 

6.3       Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

6.4       Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by email, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by email, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of express courier service, fully prepaid, addressed to such address, or upon actual receipt of such delivery, whichever shall first occur. The addresses for such communications shall be: (i) if to the Company, to: RiskOn International, Inc., 11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141, Attn. Milton C. Ault, III, CEO, email: ______________ with a copy by e-mail only (which shall not constitute notice) to: RiskOn International, Inc., 100 Park Avenue, Suite 1658 New York, NY 10017, Attn: Henry Nisser, Esq., email: ______________, and (ii) if to the Purchaser, to: the addresses and email address indicated on the signature pages hereto.

 

6.5       Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

6.6       Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

6.7       Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser.  The Purchaser may assign any or all of its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

6.8       No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth herein.

 

 

6.9       Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

6.10       Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

6.11       Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

6.12       Replacement of Securities.  If any certificate or instrument evidencing any of the Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon surrender and cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft, destruction, or mutilation, and of the ownership of such Security.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity and bonds) associated with the issuance of such replacement Securities.

 

6.13       Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchaser and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

6.14       Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

6.15       Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

6.16       WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

6.17       Equitable Adjustment. Trading volume amounts, price/volume amounts and similar figures in the Transaction Documents shall be equitably adjusted (but without duplication) to offset the effect of stock splits, similar events and as otherwise described in this Agreement, if such events shall occur between the date of this Agreement and Closing. 

 

(Signature Pages Follow)

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

 

RISKON INTERNATIONAL, Inc.
By:
	Name: Milton C. Ault, III Title: Chief Executive Officer

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

 

PURCHASER SIGNATURE PAGE TO RISKON INTERNATIONAL, INC.

SECURITIES PURCHASE AGREEMENT

 

IN WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement to be duly executed by its duly authorized signatory as of the date first indicated above.

 

Name of Purchaser: MeetKai, Inc.

 

Signature of Authorized Signatory of Purchaser: __________________________________

Name of Authorized Signatory:

Title of Authorized Signatory:

Email Address of Authorized Signatory:

 

Address for Notice to Purchaser:

 

 

 

Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

______________________________________________________________________________

 

______________________________________________________________________________

 

______________________________________________________________________________

 

 

Subscription Amount:

 

Series E Convertible Preferred Stock:

 

EIN Number:

 

 

EXHIBIT A

 

Certificate of Designation of Rights, Preferences and Limitations of Series E Convertible Preferred Stock

 

 

 

 

 

 

 

 

v3.24.0.1

Cover	Feb. 22, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 22, 2024
Entity File Number	001-40701
Entity Registrant Name	RISKON INTERNATIONAL, INC.
Entity Central Index Key	0001437491
Entity Tax Identification Number	30-0680177
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	11411 Southern Highlands Parkway
Entity Address, Address Line Two	Suite 240
Entity Address, City or Town	Las Vegas
Entity Address, State or Province	NV
Entity Address, Postal Zip Code	89141
City Area Code	(800)
Local Phone Number	762-7293
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	ROI
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

---