Exchange Agreement
THIS ONE IS BEAUTIFUL TO READ- WARRANTS ARE BEAUTIFUL
On June 20, 2019, RedHawk Holdings Corp. entered into a Stock Exchange Agreement (“Exchange Agreement”) with Beechwood. G. Darcy Klug, the Company’s Chairman of the Board, Interim Chief Executive Officer and Chief Financial Officer, is the sole member and manager of Beechwood. Under the Exchange Agreement, the Company purchased from Beechwood 113,700,000 shares of the Company’s common stock, $0.001 par value per share (“Common Stock”), in exchange for 1,277 shares of the Company’s 5% Series A Preferred Stock and a Stock Purchase Warrant (“Warrant”) to acquire 113,508,450 shares of Common Stock at an exercise price of $0.005 per share (collectively, the “Transactions”). The Warrant expires June 20, 2029.
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Concurrent with the execution of the Exchange Agreement, holders of $580,108 aggregate principal amount of the Company’s 5% convertible promissory notes (“Notes”), including accrued interest, were offered and converted their Notes into 116,021,700 shares of Common Stock at a conversion price of $0.005 per share. The extinguishment of the notes and the related accrued interest for the shares of common stock resulted in a gain on extinguishment of approximately $419,000 based on the closing price of the common stock as of the exchange date.
Holders of the Series A Preferred Stock are entitled to receive cumulative dividends at a rate of 5% per annum, payable quarterly in cash, or at the Company’s option, such dividends shall be accreted to, and increase, the stated value of the issued Series A Preferred Stock (“PIK dividends”). Holders of the Series A Preferred Stock are entitled to votes on all matters submitted to stockholders at a rate of ten votes for each share of common stock into which the Series A Preferred Stock may be converted. After six months from issuance, each share of Series A Preferred Stock is convertible, at the option of the holder, into the number of shares of Common Stock equal to the quotient of the stated value, as adjusted for PIK dividends, by $0.015, as adjusted for stock splits and dividends.
Warrants
In conjunction with the Exchange Agreement, Beechwood was issued 113,508,450 warrants to purchase the Company’s common stock at a price of $0.005 per share. The warrants expire in June 2029 and are assignable.
In conjunction with the 2019 Fixed Rate Convertible Notes, the holders of the 2019 Fixed Rate Convertible Notes were issued 20,800,000 warrants to purchase the Company’s common stock at a price of $0.01 per share. The warrants expire ten years from the date of issuance.
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