SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 16, 2020
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction||(Commission||(IRS Employer|
|of incorporation)||File Number)||Identification No.)|
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (808) 457-1400
Securities registered pursuant to Section 12(b) of the Act: None
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 (see General Instruction A.2. below):
|[ ]||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))|
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On March 16, 2020, Cardax, Inc. (the “Company”) entered into two securities purchase agreements with certain accredited investors for the issuance of two convertible promissory notes by the Company in the aggregate principle amount of $500,000 with aggregate gross proceeds of $460,000 as outlined below. The terms and conditions of each of the securities purchase agreements and convertible promissory notes were substantially similar.
Securities Purchase Agreement #1
The Company entered into a Securities Purchase Agreement (the “Purchase Agreement #1”) with an accredited investor (the “Lender #1”) for the purchase of a convertible promissory note in the aggregate principle amount of $250,000 (the “Note #1”). As a commitment fee, the Company issued 5,000 shares of its common stock, par value $0.001 per share (the “Common Stock”) to the Lender #1. The Purchase Agreement #1 provided that the Company shall use the proceeds from the sale of the Note #1 first for the full repayment the convertible promissory note issued by the Company on April 18, 2019, in the original principal amount of $150,000, and second for working capital and other general corporate purposes.
Convertible Promissory Note #1
The Company issued the Note #1 to the Lender #1, which included the following terms:
|●||Principal Amount: $250,000, which included an original issue discount of $20,000 and gross proceeds to the Company of $230,000.|
|●||Issue Date: March 16, 2020|
|●||Maturity Date: September 16, 2020|
|●||Interest Rate: 10% per annum from the date the Note #1 was fully funded by the Lender #1, such date being March 17, 2020|
|●||Conversion: The Lender #1 may convert any or all obligations of the Note #1, including any outstanding and unpaid principal amount and interest, into shares of Common Stock at $4.50 per share, subject to customary adjustments for stock splits or similar transactions, for six (6) calendar months following the Issue Date. Thereafter, the Note #1 may be converted at a price per share equal to 70% multiplied by the average of the two (2) lowest trading prices for the Common Stock during the fifteen (15) trading day period prior to the date of conversion, wherein “trading price” means the volume weighted average price of the Common Stock on the OTCQB or applicable trading market. The conversion price is also subject, at the discretion of the Lender #1, to full ratchet anti-dilution in the event the Company issues any Common Stock at a per share price lower than the conversion price then in effect.|
|●||Share Reserve: The Company agreed to maintain a reserve of its unissued shares of Common Stock that is not less than five (5) times the number of shares actually issuable under the Note #1.|
|●||Beneficial Ownership Limitation: The number of shares of Common Stock that may be issued upon conversion is subject to specified limitations of beneficial ownership that are set forth in Note #1 of 4.99% or, at the option of the Lender #1, 9.99% of the issued and outstanding shares of Common Stock, which limitations may be decreased or terminated in the sole discretion of the Lender #1 upon 61 days’ notice to the Company.|
|●||The Company may prepay the Note for six (6) calendar months following the Issue Date, without penalty or premium.|
|●||Returnable Shares: The Company issued 27,777 shares of Common Stock to the Lender #1, which must be returned to the Company if the Note #1 is fully repaid or fully converted within six (6) calendar months following the Issue Date.|
The Purchase Agreement #1 and the Note #1 also included customary representations, warranties, covenants, and events of default.
Securities Purchase Agreement #2
The Company entered into a Securities Purchase Agreement (the “Purchase Agreement #2”) with an accredited investor (the “Lender #2”) for the purchase of a convertible promissory note in the aggregate principle amount of $250,000 (the “Note #2”). As a commitment fee, the Company issued 5,000 shares of Common Stock to the Lender #2. The Purchase Agreement #2 provided that the Company shall use the proceeds from the sale of the Note #2 for working capital and other general corporate purposes.
Convertible Promissory Note #2
The Company issued a Convertible Promissory Note (the “Note #2”) to Lender #2 in the same amount and on substantially similar terms and conditions as the Note #1.
The terms and conditions of each of the Purchase Agreements #1 and #2 and the Notes #1 and #2 were substantially similar.
Forms of the Purchase Agreement #1, Note #1, Purchase Agreement #2, and Note #2 are filed as Exhibits 10.1, 10.2, 10.3, and 10.4, respectively, to this Current Report on Form 8-K. Each such agreement or document has additional customary representations, warranties, and covenants.
The description of the transactions contemplated by these agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the documents filed as exhibits hereto and incorporated herein by reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
|10.1||Form of Securities Purchase Agreement by and among Cardax, Inc. and an Accredited Investor #1|
|10.2||Form of Convertible Promissory Note issued by Cardax, Inc. to an Accredited Investor #1|
|10.3||Form of Securities Purchase Agreement by and among Cardax, Inc. and an Accredited Investor #2|
|10.4||Form of Convertible Promissory Note issued by Cardax, Inc. to an Accredited Investor #2|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: March 20, 2020
|By:||/s/ David G. Watumull|
David G. Watumull
Chief Executive Officer and President