Item 1.01
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement and Convertible Promissory Note
On January 18, 2022, Rapid Therapeutic Science Laboratories, Inc. (the “Company”, “we” or “us”), entered into a Securities Purchase Agreement (the “Purchase Agreement”), with Sixth Street Lending LLC, an accredited investor (the “Purchaser”), pursuant to which the Company agreed to sell, and the Purchaser agreed to purchase, a Promissory Note (the “Note”).
The Note was purchased for $153,750, and has an initial face amount of $173,738, when including an original issue discount of $19,988. The Note is due on January 18, 2023. A one-time interest charge of 12% of the principal amount of the Note ($20,849) was applied on the date the Note was issued. Any amount of principal or interest not paid on the Note when due accrues interest at 22% per annum until paid in full. Accrued, unpaid interest and outstanding principal under the Note is required to be paid in ten payments, each in the amount of $19,459 (a total payback to the Purchaser of $194,587), with the first payment due on March 10, 2022, and additional payments due each month thereafter, subject to a five day grace period. The Company has the right to accelerate payments or prepay in full the Note at any time with no prepayment penalty. The Note is unsecured. So long as the Company has any obligation under the Note, the Company is prohibited from selling, leasing or otherwise disposing of any significant portion of its assets outside the ordinary course of business without the prior written consent of the holder of the Note.
The Note contains certain customary events of default, including failure to pay amounts due under the Note (subject to a five day cure period); breach of the Company’s covenants under the Note, subject to a 20 day cure period; breach of the representations and warranties of the Company; the occurrence of certain bankruptcy related events; the delisting of the Company’s common stock from a national securities exchange or the OTC Markets; failure to comply with the requirements of the Securities Exchange Act of 1934, as amended; dissolution, liquidation, cessation of operations; certain financial statement restatements; replacement of the Company’s transfer agent; and certain cross-defaults of other agreements entered into with the Purchaser. Upon the occurrence of an event of default under the Note, the Note becomes immediately due and payable and we are required to pay the Purchaser 150% of the principal, accrued interest and default interest due under the Note. If such default amount is not paid within five business days of written notice thereof from the Purchaser, the Purchaser can convert the amount due to the Purchaser into common stock of the Company as discussed below.
Upon an event of default under the Note, the amounts due to the holder of the Note may be converted, in whole or part, by the holder, into common stock of the Company, at a conversion price equal to the greater of (a) $0.000075 per share; and (b) 75% of the average closing bid price of the Company’s common stock, on the principal securities exchange or market where the Company’s common stock is then quoted or traded, for the five trading days immediately prior to the date of conversion (the “Variable Conversion Rate”). We agreed to reserve six times the number of shares of common stock then issuable upon conversion of the Note, initially equal to a total of 4,192,772 shares of common stock. If we fail to deliver shares of common stock to the holder of the Note upon the conversion thereof within three business days, we agreed to pay the holder $2,000 per day in cash, to the extent such failure is not the result of a third party. The conversion of the Note is subject to a beneficial ownership limitation of 4.99%, preventing such conversion by the holder thereof, if such exercise would result in such holder and its affiliates, exceeding ownership of 4.99% of our common stock.
The closing of the transactions contemplated by the Purchase Agreement, including the sale of the Note, occurred on January 18, 2022.
The Purchase Agreement included standard and customary representations of the parties; and included certain positive and negative covenants (including obligations to indemnify the Purchaser in certain cases upon breach thereof), which included the requirement that we use the funds raised through the sale of the Note only for working capital, and that we reimburse $3,750 of the Purchaser’s attorney’s fees.
The foregoing summary of the Purchase Agreement and Note, is qualified in its entirety by reference to the full text of the Purchase Agreement and Note, which are attached hereto as Exhibits 10.1 and 10.2, respectively, and are incorporated into this Item 1.01 in their entirety, by reference.
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