Quarterly report pursuant to Section 13 or 15(d)

SUBSEQUENT EVENTS

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SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2022
SUBSEQUENT EVENTS.  
SUBSEQUENT EVENTS

NOTE 12: SUBSEQUENT EVENTS

Management’s Evaluation

On July 22, 2022, the Company and various purchasers (the “July Investors”) executed a Securities Purchase Agreement (the “July SPA”) whereby the Investors purchased from the Company 20% Original Issue Discount (the “OID”) promissory notes (the “July Notes”) in the aggregate principal amount of $1,250,000 (with an aggregate subscription amount of $1,000,000).

The July Notes are due and payable on October 31, 2022 (the “Maturity Date”). The Company will also have the option to prepay the July Notes with no penalties at any time prior to the Maturity Date. If the Company or any subsidiary of the Company completes a debt or equity financing of less than $4,000,000, the Company is required to repay 50% of the remaining balance of the July Notes.

Following such 50% repayment, the Company must also use any proceeds from any subsequent debt or equity financing to repay the July Notes. Upon the closing of any debt or equity financing of $4,000,000 or greater, the Company is required to repay 100% of the July Notes with no penalties. If the July Notes are not repaid in full by the Maturity Date or if any other event of default occurs, (1) the face value of the July Notes will be automatically increased to 120%; (2) the July Notes will begin generating an annual interest rate of 20%, which will be paid in cash monthly until the default is cured; and (3) if such default continues for 14 or more calendar days, at the Investors’ discretion, the July Notes shall become convertible at the option of the Investors into shares of the Company’s common stock at a conversion price equal to the Nasdaq closing price of the Company’s common stock on the date of the note conversion.

On July 28, 2022, the Company, the existing investors and a new investor executed an Amendment to the July SPA (the “Amendment SPA”), whereby the new investor purchased from the Company a 20% original issue discount promissory note in the aggregate principal amount of $1,875,000 (with an aggregate subscription amount of $1,500,000) in substantially the same form as issued to the existing investors under the July SPA dated July 22, 2022. Pursuant to the Amendment SPA, the Company will also issue warrants to the new investor in substantially the same form as issued to the existing investors on July 22, 2022.

In connection with the July SPA, the Company issued to the Investors an aggregate of 4,112,500 five-year warrants exercisable for shares of common stock at an exercise price equal to $0.152.

On July 29, 2022, the Company entered into an amendment to the May 2021 purchase agreement with the H&J Seller based on the ultimate settlement of the H&J contingent consideration. Pursuant to the amendment, on May 18, 2023, the Company shall deliver to the H&J Seller additional shares of common stock. The number of shares of common stock to be delivered to H&J Seller shall be calculated as follows: $7,899,356 minus any cash payments received by Seller from any capital raises, divided by the average common stock closing price per share based on the thirty-day trading period preceding May 19, 2023.