UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
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Item 1.01 Entry Into A Material Definitive Agreement.
On December 21, 2021, Brain Scientific Inc. (the “Company”), consummated the second closing (the “Second Closing”) of a private placement offering (the “Offering”) whereby the Company entered into a Securities Purchase Agreement (the “SPA”) with three accredited investors (the “Holders”), pursuant to which the Investors purchased from the Company, for an aggregate purchase price of $900,000 (the “Purchase Price”) Convertible Promissory Notes in the principal amount of $900,000 (the “Notes”).
The Note accrues interest at a rate of ten percent (10%) per annum and matures on April 1, 2023 (the “Maturity Date”). Each Investor, provided that the Note is still then outstanding, will be issued, on the earlier of (i) the date, if any, upon which the Company’s common stock is listed for trading on the NASDAQ stock exchange (the “Uplist”), and (ii) the date that is eighteen months from the date of issuance, a warrant (the “Warrants” and together with the Notes, the “Securities”) to purchase an amount of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), equal to such Holder’s Warrant Share Amount. For purposes of the foregoing, an Holder’s “Warrant Share Amount” means (i) if such Warrant is issued in connection with the Uplist, one half of the initial principal balance of such Holder’s Note at issuance divided by the lesser of (A) $0.40, and (B) and the greater of (x) $0.20 and (y) one hundred twenty percent (120%) of the closing price for the Company’s common stock on the trading day prior to the date of the Uplist, and (ii) if such Warrant is issued otherwise than in connection with the Uplist, the initial principal balance of such Holder’s Note, divided by the lesser of (A) $0.40, and (B) and the greater of (x) $0.20 and (y) one hundred twenty percent (120%) of the volume weighted average price (“VWAP”) for the Company’s common stock over the five consecutive trading days immediately preceding the date that is eighteen months from the date of issuance.
The Notes contain mandatory and voluntary conversion features as follows:
(a) Mandatory Conversion.
(i) The Notes automatically convert into shares of the Company’s common stock or Units, as provided below, immediately upon the earliest to occur of (a) the Uplist, and (b) a Subsequent Qualified Financing Date. For purposes of the Notes, a “Unit” means the combination of common stock and warrants to purchase common stock offered by the Company in any financing occurring simultaneously with the Uplist (“Simultaneous Uplist Unit Offering”). For purposes of a Note, “Subsequent Qualified Financing Date” means the date on which the Company has received proceeds in excess of $5,000,000 from a transaction or series of related transactions occurring prior to the maturity date of the Note, including, but not limited to, equity financings, business combinations or other issuances of the Company’s equity securities (not including the transactions contemplated by the SPA for the Offering).
(ii) If a Note is being converted in connection with an Uplist, and no Simultaneous Uplist Unit Offering has occurred, the Note will be convertible into a number of shares of Company common stock equal to the quotient of (I) the outstanding aggregate principal amount of the Note plus accrued but unpaid interest thereon, divided by (II) the lesser of (a) $0.40 and (b) the greater of (x) $0.20 and (y) eighty percent (80%) of closing price for the Company’s common stock on the trading day prior to the date of the Uplist.
(iii) If a Note is being converted in connection with an Uplist, and a Simultaneous Uplist Unit Offering has occurred, the Note will be convertible into a number of Units equal to the quotient of (I) the outstanding aggregate principal amount of the Note plus accrued but unpaid interest thereon, divided by (II) the lesser of (a) $0.40 and (b) the greater of (x) $0.20 and (y) eighty percent (80%) of the per Unit price in the Simultaneous Uplist Unit Offering, .
(iv) If a Note is being converted upon a Subsequent Qualified Financing Date, the Note will be convertible into a number of shares of Company common stock equal to the quotient of (I) the outstanding aggregate principal amount of the Note plus accrued but unpaid interest thereon, divided by (II) the lesser of (a) $0.40 and (b) the greater of (x) $0.20 and (y) eighty percent (80%) of the VWAP for the common stock for the five consecutive trading days immediately preceding such Subsequent Qualified Financing Date.
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(b) Voluntary Conversion.
(i) The Holder of a Note has the right (subject to the conversion limitations set forth therein) from time following the date of issuance to convert all or any part of the outstanding and unpaid principal and interest then due under the Note into fully paid and non-assessable shares of the Company’s common stock, as such common Stock exists on the date of issuance, or any shares of capital stock or other securities of the Company into which such common stock may thereafter be changed or reclassified at the Voluntary Conversion Price (as defined below).
(ii) If a Note is being converted pursuant to Section 3(b) of the Note, the Note shall be convertible into a number of shares of Common Stock equal to the quotient of (I) the outstanding aggregate principal amount of the Note plus accrued but unpaid interest thereon, divided by (II) the lesser of (a) $0.40 and (b) the greater of (x) $0.20 and (y) eighty percent (80%) of the VWAP for the Common Stock for the five (5) consecutive Trading Days immediately preceding the applicable conversion date (the “Voluntary Conversion Price”).
The first closing of the Offering occurred on October 1, 2021 as reported in a Current Report on Form 8-K filed on October 7, 2021. At the first closing, an aggregate of $8,762,312 in notes was closed on. At that same time, (i) an aggregate of $4,328,407 of debt of Piezo Motion Corp. (the Company’s wholly owned subsidiary following the merger described in the October 7th 8-K) and an aggregate of $1,483,905 of debt of the Company was converted into notes. The October 1st issuance of the notes is referred to as the “First Closing.”
Pursuant to the terms of the SPA that was entered into in connection with the First Closing, holders of the Company’s notes (in the principal amount of $8,762,312) issued in the First Closing and the warrants to be issued in connection with the First Closing will be entitled to receive the same terms included in the Notes issued in the Second Closing and Warrants to be issued in connection with Second Closing.
Item 1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of SPA, the Note and the Warrant, and does not purport to be a complete description of the rights and obligations of the parties thereunder, and such descriptions are qualified in their entirety by reference to the full text of the SPA, the Note and the Warrant, the forms of which are attached as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K, and are incorporated herein by reference.
Item 3.02 Entry Into A Material Definitive Agreement.
The applicable information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference in this Item 3.02. The Notes and Warrants were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and/or Regulation D of the Securities Act. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, the investor had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since the investor agreed to, and received, the securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number |
Description | |
| 10.1 | Form Securities Purchase Agreement | |
| 10.2 | Form Convertible Promissory Note | |
| 10.3 | Form Common Stock Purchase Warrant | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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.
| BRAIN SCIENTIFIC INC. |
| Dated: December 28, 2021 | By: | /s/ Hassan Kotob |
| Hassan Kotob | ||
| Chief Executive Officer |
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