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| EX-10.5 - AMENDMENT #3 TO THE CONVERTIBLE PROMISSORY NOTE ISSUED ON AUGUST 14, 2017, DATED - Exactus, Inc. | ex10-5.htm |
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): January 4,
2018
EXACTUS, INC.
(Exact Name of Registrant as Specified in Charter)
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Nevada
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000-55828
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27-1085858
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(State or Other Jurisdiction
of Incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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4870
Sadler Road, Suite 300, Glen Allen, Virginia
23060
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (804)
205-5036
N/A
(Former Name or Former Address, if Changed Since Last
Report)
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))
Indicate by check
mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of
the Securities Exchange Act of 1934.
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.
☐
Item
1.01.
Entry
into a Material Definitive Agreement
As
disclosed in the Current Report on Form 8-K filed by Exactus Inc.
(the “Company”) on August 28, 2017 (the “August
8-K”), the Company entered into a Securities Purchase
Agreement (the “Securities Purchase Agreement”) on
August 14, 2017 pursuant to which it agreed to sell certain 8%
convertible promissory notes to Morningview Financial, LLC (the
“Purchaser”).
On
August 22, 2017, pursuant to the Securities Purchase Agreement and
as disclosed in the August 8-K, the Company completed the issuance
of an 8% convertible promissory note in an aggregate principal
amount of $110,000 (the “Initial Note”) to the
Purchaser. On September 27, 2017, pursuant to Securities Purchase
Agreement and as disclosed in the October 8-K, the Company issued
an 8% convertible promissory note in an aggregate principal amount
of $27,500 to the Purchaser, with terms and conditions identical to
the Initial Note.
The
Company amended the Initial Note on October 3, 2017 (the
“First Amendment to Initial Note”), as disclosed in the
Current Report on Form 8-K filed by the Company on October 11, 2017
(the “October 8-K”), and on December 18, 2017 (the
“Second Amendment to Initial Note”), as disclosed in
the Current Report on Form 8-K filed by the Company on December 22,
2017.
On
January 4, 2018, the Company further amended the Initial Note (the
“Third Amendment to Initial Note”) to (i) increase the
aggregate principal amount of the Initial Note to $125,000 and (ii)
extend the date by which the Company is required to cause the
Registration Statement (defined below) to become effective to
February 1, 2018. The terms of the Initial Note, as amended, are
described below.
The
Initial Note is dated August 14, 2017 and provides the terms and
conditions of the Company’s obligations to the Purchaser. The
Initial Note bears interest at a rate of 8% per annum and will
mature on August 14, 2018. After giving effect to the Third
Amendment to Initial Note, the outstanding aggregate principal
amount of the Initial Note is $125,000.
After
giving effect to the Third Amendment to Initial Note, at any time
on or after the earlier of (i) the date on which there is an
effective registration statement filed by the Company with respect
to the shares of the Company’s common stock into which the
Initial Note is convertible or (ii) the 170th calendar day after
the issue date of the Initial Note, the Purchaser has the option to
convert all or any part of the outstanding and unpaid principal
amount and accrued and unpaid interest of the Initial Note into
shares of the Company’s common stock at the Conversion Price.
The “Conversion Price” will be the lesser of (i) $0.25
and (ii) 60% of the average of the three lowest trading prices of
the Company’s common stock during the twenty-day trading
period prior to the conversion. The Conversion Price is subject to
further reduction upon certain events specified in the Initial
Note.
The
following are events of default under the Initial Note that may
result in the outstanding Initial Note becoming immediately due and
payable in an amount equal to 150% (or in certain cases 200%) of
the outstanding balance of the Initial Note (including principal
and accrued and unpaid interest) plus default interest at a rate of
18% per annum:
● the Company fails
to pay the principal or interest due on the Initial Note, whether
at maturity, upon acceleration or otherwise, and the failure
continues for a period of 10 days;
● the Company fails
to satisfy its obligations relating to the conversion of the
Initial Note into shares of the Company’s common stock, and
the failure continues for a period of 2 business days;
● the Company
breaches any material covenant or other material provision of the
Initial Note, and the breach continues for a period of 10
days;
● any representation
or warranty of the Company made in the Initial Note or in any
related transaction document is false or misleading in any material
respect when made and such breach results in a material adverse
effect on the rights of the Purchaser with respect to the Initial
Note;
● the Company or any
subsidiary of the Company makes an assignment for the benefit of
creditors or applies for, or consents to, the appointment of a
receiver or trustee;
● any money judgment,
writ or similar process is entered against the Company, any
subsidiary of the Company, or any of its property or other assets
for more than $50,000, and remains unvacated, unbonded or unstayed
for a period of 20 days;
● bankruptcy,
insolvency, reorganization or liquidation proceedings or other
similar proceedings, voluntary or involuntary, are instituted
against the Company or any subsidiary of the Company;
● the Company fails
to maintain the listing or quotation of its common
stock;
● the Company fails
to comply with the reporting requirements of the Securities
Exchange Act of 1934 (the “Exchange Act”) or the
Company ceases to be subject to the reporting requirements of the
Exchange Act;
● the dissolution,
liquidation, or winding up of the Company or any substantial
portion of its business;
● the Company ceases
its operations or admits it is otherwise unable to pay its debts as
they become due;
● the Company
replaces its auditor or restates any of the Company’s
financial statements for any period within the two years prior to
the issue date of the Initial Note;
● certain events
relating to the Company replacing its transfer agent;
● the Company
breaches or defaults under any covenant or other term or other
condition contained in any other financial instrument issued by the
Company;
● the Company
attempts to provide the Purchaser with material non-public
information regarding the Company;
● the Company’s
common stock fails to maintain a trading price in its principal
trading market of at least $0.0001;
● the Company fails
to repay the Initial Note, in its entirety, after the completion of
its next completed offering of $750,000 or more; and
● the Company fails
to file a registration statement relating to the common stock of
the Company into which the Initial Note is convertible (the
“Registration Statement”) within 30 days of the issue
date of the Initial Note or to cause the registration statement to
go effective on or before February 1, 2018.
The
Company has the right to prepay the Initial Note at any time until
the 170th
calendar day after the issue date of the Initial Note, in an amount
equal to 135% of the principal amount of the Initial Note
outstanding. The Company may not prepay the Initial Note after the
170th
calendar day after the issue date of the Initial Note. The Company
will be subject to a liquidated damages charge of 25% of the
outstanding principal amount of the Initial Note if it effects
certain exchange transactions in accordance with, based upon or
related or pursuant to Section 3(a)(10) of the Securities Act or if
the Company effects a reverse stock split with respect to shares of
its common stock. In addition, the Initial Note grants the
Purchaser a right of first refusal with respect to potential future
financing offered to the Company by third parties and the right to
become a party to any future transaction document related to a
security issuance by the Company to a third party with terms more
favorable to the third party than the terms of the Initial
Note.
Any
amounts due and payable to the Purchaser under the terms of the
Initial Note, including any payment on an event of default, default
interest, or agreed upon liquidated damages may, at the
Purchaser’s option, be converted into shares of common stock
of the Company at the Conversion Price.
The
Initial Note and the underlying common stock issuable upon
conversion of the Initial Note have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent registration or an applicable exemption
from registration requirements. This report on Form 8-K does not
constitute an offer to sell, or a solicitation of an offer to buy,
any security and shall not constitute an offer, solicitation or
sale in any jurisdiction in which such offering would be
unlawful.
The
foregoing description of the Securities Purchase Agreement, the
Initial Note, the First Amendment to Initial Note, the Second
Amendment to Initial Note, and the Third Amendment to Initial Note
is a summary and is qualified in its entirety by reference the full
Securities Purchase Agreement and Initial Note, which are attached
as Exhibits 10.1 and 10.2, respectively, to the Company’s
Current Report on Form 8-K filed with the Commission on August 28,
2017, the full First Amendment to Initial Note, which is attached
as Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed with the Commission on October 11, 2017, the full Second
Amendment to Initial Note, which is attached as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed with the
Commission on December 22, 2017, and the full Third Amendment to
Initial Note, which is attached as Exhibit 10.5 to this Current
Report on Form 8-K, each of which are incorporated herein by
reference.
Item 9.01.
Financial Statements and
Exhibits.
(d)
Exhibits
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Exhibit
No.
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Description
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Securities
Purchase Agreement, dated August 14, 2017, between Exactus, Inc.
and Morningview Financial, LLC (attached as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed August 28, 2017
and incorporated herein by reference)
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Convertible
Promissory Note, dated August 14, 2017 (attached as Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed August 28,
2017 and incorporated herein by reference)
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Amendment
#1 to the Convertible Promissory Note Issued on August 14, 2017,
dated October 3, 2017 (attached as Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed October 11, 2017
and incorporated herein by reference)
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Amendment
#2 to the Convertible Promissory Note Issued on August 14, 2017,
dated December 18, 2017 (attached as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed December 22, 2017
and incorporated herein by reference)
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Amendment
#3 to the Convertible Promissory Note Issued on August 14, 2017,
dated January 4, 2018
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SIGNATURES
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.
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Exactus,
Inc.
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Date: January 10, 2018
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By:
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/s/
Philip
J. Young
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Phillip
J. Young
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CEO
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EXHIBIT INDEX
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Exhibit
No.
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Description
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Securities
Purchase Agreement, dated August 14, 2017, between Exactus, Inc.
and Morningview Financial, LLC (attached as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed August 28, 2017
and incorporated herein by reference)
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Convertible
Promissory Note, dated August 14, 2017 (attached as Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed August 28,
2017 and incorporated herein by reference)
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Amendment
#1 to the Convertible Promissory Note Issued on August 14, 2017,
dated October 3, 2017 (attached as Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed October 11, 2017
and incorporated herein by reference)
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Amendment
#2 to the Convertible Promissory Note Issued on August 14, 2017,
dated December 18, 2017 (attached as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed December 22, 2017
and incorporated herein by reference)
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Amendment
#3 to the Convertible Promissory Note Issued on August 14, 2017,
dated January 4, 2018
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