FTEL Fitell Corporation

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of January 2024

 

Commission File Number 001-41774

 

Fitell Corporation

(Translation of registrant’s name into English)

 

23-25 Mangrove Lane

Taren Point, NSW 2229

Australia

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ☒ Form 40-F ☐

 

 

 

Private Placement of Note and Warrant

 

On January 15, 2024, Fitell Corporation, a Cayman Islands exempted company with limited liability (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with Flying Height Consulting Services Limited (the “Investor”). Pursuant to the Purchase Agreement, the Company issued to the Investor a three-year 8% senior unsecured convertible promissory note in the principal amount of $3,600,000, with an 8% original issue discount (the “Note”) and, as additional consideration for the purchase of the Note, a stock purchase warrant to purchase 5,645,455 Ordinary Shares (the “Warrant”), for the funding amount of $3,312,000. The proceeds from the sale of the Note and Warrant shall be used by the Company for general working capital.

 

Pursuant to the Note, the Investor may convert all or any part of the remaining outstanding principal amount of the Note and unpaid interest on the date of conversion (the “Conversion Amount”) into fully paid and non-assessable ordinary shares, par value $0.0001 per share of the Company (the “Ordinary Shares”) at any time after the issuance of the Note until the later of (i) January 15, 2027, the maturity date of the Note and (ii) the date of payment upon any event of default. The conversion price of the Note is equal to the lowest closing price for the Company’s Ordinary Shares as reported on The Nasdaq Capital Market during the five (5) trading days immediately preceding the date of conversion, provided, however, that the Conversion Price shall not be lower than $0.80 per share (the “Floor Price”). The Conversion Price and the Floor Price are subject to equitable adjustments for stock splits, stock dividends, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. In addition to voluntary conversion rights of the Investor, the Company will have the right, but not the obligation, at any time after six months following the date of the issuance of the Note, to require the Investor to convert the outstanding principal amount of the Note and unpaid interest into Ordinary Shares if the closing price per share of Ordinary Shares exceeds $10.00 per share as reported on The Nasdaq Capital Market.

 

The Warrant entitles the Investor to purchase up to 5,645,455 Ordinary Shares of the Company, commencing on January 15, 2024, the date of the issuance of the Warrant, and ending on the date that is sixty (60) months from the date of the issuance of the Warrant (the “Exercise Period”) at an exercise price of $1.056 per share, subject to customary adjustments. The Warrant includes a cashless exercise option.

 

The issuances of the Note and Warrant were, and, upon conversion of the Note and exercise of the Warrant to Ordinary Shares, will be, exempt from registration requirements in reliance upon Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506(b) of Regulation D (“Regulation D”) and/or Regulation S, as promulgated by the Securities and Exchange Commission (the “SEC”) thereunder. At the time of their issuance, the Note and the Warrant were deemed to be restricted securities for purposes of the Act and will bear restrictive legends to that effect.

 

The foregoing descriptions of the Note, the Purchase Agreement, and the Warrant are not complete and are qualified in their entirety by reference to the full text of the Note, the Purchase Agreement, and the Warrant, copies of which are attached as Exhibits 4.1, 10.1, and 10.2, respectively, to this Current Report on Form 6-K and incorporated herein by reference.

 

 

EXHIBIT LIST

 

Exhibit No.		Description
4.1		Senior Unsecured Convertible Promissory Note dated January 15, 2024, in the principal amount of $3,600,000 issued by Fitell Corporation to Flying Height Consulting Services Limited.
10.1		Securities Purchase Agreement dated January 15, 2024, by and between Fitell Corporation and Flying Height Consulting Services Limited.
10.2		Warrant dated January 15, 2024, issued by Fitell Corporation to Flying Height Consulting Services Limited

 

 

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, thereunto duly authorized.

 

Date: January 18, 2024	FITELL CORPORATION
	By:	/s/ Yinying Lu
		Yinying Lu
		Chief Executive Officer and Director
		(Principal Executive Officer)

 

 

Exhibit 4.1

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE SECURITIES LAWS.

 

FITELL CORPORATION

 

SENIOR UNSECURED CONVERTIBLE PROMISSORY NOTE

 

Note Principal Amount:	$3,600,000
Date of Note:	January 15, 2024

 

FOR VALUE RECEIVED, Fitell Corporation, a Cayman Islands exempted company (the “Company”), promises to pay to Flying Height Consulting Services Limited (“Investor”), or its registered assigns, in lawful money of the United States of America the principal sum as set forth above, together with simple interest accrued on the unpaid and unconverted principal balance at a rate of eight percent (8%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days from the date of this Senior Unsecured Convertible Promissory Note (this “Note”) as set forth above (the “Issue Date”) until January 15, 2027, which is thirty-six (36) months from the Issue Date (the “Maturity Date”) or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. This Note is one in a series of similar senior unsecured convertible promissory notes (collectively, the “Notes”) issued pursuant to the Securities Purchase Agreement, dated January 15, 2024 (as may be amended from time to time and including the exhibits thereto, the “Purchase Agreement”) by and among the Company and Investors indicated on the signature pages thereto. All capitalized terms used herein, and not otherwise defined, shall have the meaning ascribed thereto in the Purchase Agreement. This Note was issued with an 8% original issue discount in the amount of $288,000.

 

The following is a statement of the rights of Investor and the conditions to which this Note is subject, and to which Investor, by the acceptance of this Note, agrees.

 

ARTICLE I. PAYMENT AND PREPAYMENT

 

1.1 Interest. Accrued interest on the unpaid principal amount of this Note shall be due and payable on each anniversary of the Effective Date and on the Maturity Date.

 

1.2 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Company shall have the right to prepay all or any portion of the outstanding balance on this Note (principal, accrued interest), (such elected amount being the “Optional Prepayment Amount”), in accordance with this Section 1.2 at any time following the Issue Date. To exercise this right, the Company shall deliver written notice (the “Optional Prepayment Notice”) to the Investor five business days prior to the date of the Optional Prepayment Amount, at the Investor’s registered addresses, stating: (1) that the Company is exercising its right to prepay the Note; (2) the date of prepayment which shall be not more than five (5) business days from the date of the Optional Prepayment Notice; and (3) the amount of the Optional Prepayment Amount that the Company is paying. Notwithstanding receipt of the Optional Prepayment Notice by the Investor, the Investor may convert, or continue to convert the Note in whole or in part until the Optional Prepayment Amount is paid to the Investor. On the date fixed for prepayment (the “Optional Prepayment Date”), the Company shall make payment of the Optional Prepayment Amount to or upon the order of the Investor as specified by the Investor in writing to the Company at least one (1) business day prior to the Optional Prepayment Date.

 

 

1.3 Payment. All payments of each transaction under this Note shall be paid in lawful money of the United States of America to the Investor, made by wire transfer of immediately available funds to the bank account designated by the Investor in a written notice delivered to the Company.

 

ARTICLE II. CONVERSION RIGHTS

 

2.1 Voluntary Conversion. Subject to the Company’s right, but not the obligation, to elect Mandatory Conversion, as described in Section 2.2 below, the Investor shall have the right from time to time, and at any time following the Issue Date and ending on the later of: (i) the Maturity Date and (ii) the date of payment upon any Event of Default (as defined in Articles III), to convert all or any part of the remaining outstanding principal amount of the Note and unpaid interest on the date of conversion (the “Conversion Amount”) into fully paid and non-assessable Ordinary Shares, at the Conversion Price (as defined below) by delivering to the Company in writing the conversion notice in the form attached hereto as Exhibit A (the “Notice of Conversion”). The number of Ordinary Shares to be issued upon each voluntary conversion of this Note shall be determined by dividing the Conversion Amount by the applicable Conversion Price then in effect on the date specified in the Notice of Conversion. Subject to the adjustments described herein, the conversion price with respect to the voluntary conversion under this Section 2.1 (the “Conversion Price”) shall be equal to the price per share of the lowest closing price for the Company’s Ordinary Shares as reported on The Nasdaq Capital Market during the five (5) trading days immediately preceding the date of conversion, provided, however, that the Conversion Price shall not be lower than $0.80 per share (the “Floor Price”). The Conversion Price and the Floor Price will be subject to equitable adjustments for stock splits, stock dividends, combinations, recapitalization, reclassifications, extraordinary distributions and similar events.

 

2.2 Mandatory Conversion. Notwithstanding anything to the contrary set forth in Section 2.1 above, the Company will have the right, but not the obligation, at any time after the six month anniversary of the Issue Date, to require the Investor to convert the outstanding principal amount of the Note and unpaid interest into Ordinary Shares if the closing price per share of Ordinary Shares exceeds $10.00 per share at any time after the six month anniversary of the Issue Date as reported on The Nasdaq Capital Market.

 

2.3 Surrender of Note Upon Conversion. Upon conversion of this Note in accordance with the terms hereof, the Investor shall not be required to physically surrender this Note to the Company unless the entire unpaid principal amount of this Note is converted. The Investor and the Company shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Investor and the Company, so as not to require physical surrender of this Note upon each such conversion.

 

2.4 Authorized Shares. The Company covenants that during the period the conversion right exists, the Company will reserve from its authorized and unissued Ordinary Shares a sufficient number of shares, free from preemptive rights, to provide for the issuance of Ordinary Shares upon the full conversion of this Note issued pursuant to the Purchase Agreement.

 

 

2.5. Delivery of Ordinary Shares Upon Conversion. Upon receipt by the Company of a Notice of Conversion, the Investor shall be deemed to be the holder of record of the Ordinary Shares issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Ordinary Shares or other securities, cash or other assets, as herein provided, on such conversion. If the Investor shall have given a Notice of Conversion as provided herein, the Company’s obligation to issue and deliver the certificates for Ordinary Shares, or if the Ordinary Shares to be issued are in uncertificated form, the statements reflecting the ownership of the Ordinary Shares by the Investor shall be absolute and unconditional, irrespective of the absence of any action by the Investor to enforce the same, any waiver or consent with respect to any provision thereof, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Investor in connection with such conversion.

 

2.6 Restricted Shares. The number of Ordinary Shares issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Securities Act or (ii) the Company or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Ordinary Shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) in case such shares are transferred to an “affiliate” (as defined in Rule 144) of the Investor who agrees to sell or otherwise transfer the shares only in accordance with this Section 2.6 and who is an Accredited Investor (as defined in Rule 501(a) of the Securities and Exchange Commission).).

 

2.7. Fractional Shares; Effect of Conversion. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Investor upon the conversion of this Note, the fractional share will be rounded to the nearest whole Ordinary Share. Upon payment of this Note in full or the conversion of this Note in full and the payment of the amounts specified in this paragraph, as the case may be, the Company shall be forever released from all its obligations and liabilities under this Note and this Note shall be deemed of no further force or effect, whether or not the original of this Note has been delivered to the Company for cancellation.

 

ARTICLE III. EVENTS OF DEFAULT

 

The occurrence of any of the following shall constitute an “Event of Default” under this Note and the other Subscription Documents:

 

3.1 Failure to Pay Principal and Interest. The Company shall fail to pay (i) when due any principal payment on the due date hereunder, or (ii) any interest payment or other payment required under the terms of this Note on the date due and such payment shall not have been made within five (5) business days of the due date thereof; or

 

3.2 Breach of Covenants. The Company shall default in the performance of, or violate any material covenants and agreements contained in this Note or the Purchase Agreement and such breach continues for a period of twenty (20) business days after written notice thereof to the Company from the Investor; or

 

3.3 Breach of Representation or Warranties. Any representation, warranty or certification made by or on behalf of the Company in this Note or the Purchase Agreement shall have been false and misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Investor with respect to this Note or the Purchase Agreement; or

 

 

3.4 Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or

 

3.5 Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within forty-five (45) days of commencement; or

 

3.6 Conversion and the Shares. The Company fails to issue Ordinary Shares to the Investor (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Investor of the conversion rights of the Investor in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for Ordinary Shares issued to the Investor upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Company directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Ordinary Shares to be issued to the Company upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any number of Ordinary Shares issued to the Investor upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for five (5) business days after the Investor shall have delivered a Notice of Conversion; or

 

3.7 Delisting of Ordinary Shares. The Company shall fail to maintain the listing of the Ordinary Shares on at the Principal Market, which includes The Nasdaq Capital Market where currently the Company’s Ordinary Shares are listed; or

 

3.8 Failure to Comply with the Exchange Act. The Company shall fail to comply with the reporting requirements of the Exchange Act; and/or the Company shall cease to be subject to the reporting requirements of the Exchange Act; or

 

3.9 Rights of Investor upon Default. Upon the occurrence of any Event of Default (and at any time thereafter during the continuance of such Event of Default, Investor may by written notice to the Company, declare all outstanding payment obligations under the Note payable by the Company hereunder to be immediately due and payable without any other presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Subscription Documents to the contrary notwithstanding. Following an Event of Default, interest shall accrue at rate of 8% annually until paid. In addition to the foregoing remedies, upon the occurrence and during the continuance of any Event of Default, the Investor shall have the right, at its option, at any time after the requisite Rule 144 holding period, to require the Company, upon written notice, to immediately convert all or any outstanding amount of the principal and accrued interest thereon into a number of Ordinary Shares based on the conversion price equal to the price per share of the lowest closing price for the Company’s Ordinary Shares as reported on The Nasdaq Capital Market during the five (5) trading days immediately preceding the date of conversion, provided, however, that the Conversion Price shall not be lower than the Floor Price, without restrictive legend of any nature. Upon the occurrence of any Event of Default, the Investor (at its discretion) shall have the right to receive at 100% of the outstanding balance immediately due prior to such Event of Default.

 

 

ARTICLE IV. SENIORITY

 

The indebtedness evidenced by this Note and the payment of the principal and accrued interest thereof shall be Senior (as hereinafter defined) to, and have priority in right of payment over, all indebtedness of the Company, now outstanding or hereinafter incurred. “Senior” as used herein shall be deemed to mean that, in the event of any default in the payment of the obligations represented by this Note (after giving effect to “cure” provisions, if any) or of any liquidation, insolvency, bankruptcy, reorganization, or similar proceedings relating to the Company, all sums payable on this Note shall first be paid in full, with interest, if any, before any payment is made upon any other indebtedness, now outstanding or hereinafter incurred, and, in any such event, any payment or distribution of any character which shall be made in respect of any other indebtedness of the Company, to the Investor for application to the payment hereof, unless and until the obligations under this Note (which shall mean the principal and other obligations arising out of, premium, if any, interest on, and any costs and expenses payable under, this Note) shall have been paid and satisfied in full.

 

ARTICLE V. MISCELLANEOUS

 

5.1 Successors and Assigns; Transfer of this Note or Securities Issuable on Conversion Hereof. Subject to the restrictions on transfer described in this Section 5.1, the rights and obligations of the Company and Investor shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company as provided in the Purchase Agreement. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary. Any transfer of this Note may be effected only pursuant to the Purchase Agreement and by surrender of the Note to the Company and reissuance of a new Note to the transferee. Investor and any subsequent holder of this Note receives this Note subject to the foregoing terms and conditions and agrees to comply with the foregoing terms and conditions (and any and all terms and conditions set forth in the Purchase Agreement) for the benefit of the Company and the other Investors. Each transferee of this Note must be an “accredited investor.”

 

5.2 Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and mailed, sent via e-mail or delivered to each party at the respective addresses of the parties as set forth in the Purchase Agreement, or at such other address or e-mail address as the Company shall have furnished to Investor in writing. All such notices and communications will be deemed effectively given upon the earliest of (i) receipt, (ii) delivery in person or by e-mail, (iii) one business day after deposit with an overnight courier service of recognized standing and (iv) five days after being deposit in the U.S. mail, first class with postage prepaid.

 

 

5.3 Usury. In the event any interest paid on this Note is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

5.4 Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law provisions thereof that would otherwise require the application of the laws of a different jurisdiction.

 

5.5 Waiver of Jury Trial; Judicial Reference. By acceptance of this Note, each Investor hereby waives its rights to a jury trial of any claim or cause of action based upon or arising out of this Note, the other Subscription Documents or the subject matter hereof or thereof. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter set forth in the Subscription Documents, including, without limitation, contract claims, tort claims (including negligence), breach of duty claims, and all other common law and statutory claims. This section and these provisions will not be subject to any exceptions. Each Investor hereto hereby further warrants and represents that such party has reviewed this waiver with its legal counsel, and that such party knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.

 

5.6 Investment Representations. This Note has been issued subject to certain investment representations of the Investor set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

 

5.7 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Investors that hold the Notes issued under the Purchase Agreement representing more than 50% of the aggregate amount of principal then outstanding under the Notes. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

[Signature pages follow]

 

 

The Company has caused this Note to be issued as of the date first written above.

 

	Fitell Corporation
	By:	/s/ Jieting Zhao
	Name:	Jieting Zhao
	Title:	Director

 

 

EXHIBIT A — NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $_____________ principal amount of the Note (defined below) into that number of Ordinary Shares to be issued pursuant to the conversion of the Note (the “Shares”) as set forth below, of Fitell Corporation, a Cayman Islands limited company (the “Company”) according to the conditions of the convertible note of the Investor dated as of ______ (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

[ ]~~The undersigned hereby requests that the Company issue a certificate or certificates for the number of Ordinary Shares set forth below (which numbers are based on the Investor’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

[Insert Name and Address of Investor Here]

 

	Date of conversion:	__________
	Applicable Conversion Price:	$ _________
	Number of Ordinary Shares to be issued
	pursuant to conversion of the Notes:	__________
	Amount of Principal Balance due remaining
	under the Note after this conversion:	__________

 

 

 

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January 15, 2024, by and among FITELL CORPORATION, a Cayman Islands exempted company (the “Company”), and the investors listed on the signature pages thereto (each an “Investor” and collectively, the “Investors”).

 

RECITALS

 

The Company desires to offer and sell to the Investors, and the Investors desire to purchase from the Company, in one or more closings (the “Offering”), in reliance upon an exemption from securities registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506(b) of Regulation D (“Regulation D”) and/or Regulation S (in case of an offshore transaction that was negotiated outside the United States that will be consummated and closed outside the United States in reliance upon an exemption from securities registration pursuant to Regulation S), as promulgated by the Securities and Exchange Commission (the “SEC”) thereunder, a minimum of $3,000,000.00 (the “Minimum Amount”) and a maximum amount of $4,000,000.00 (the “Maximum Amount”) of certain 8% Senior Unsecured Convertible Promissory Notes, substantially in the form attached as Exhibit A hereto, with a 8% original issue discount (each a “Note” and collectively, the “Notes”), convertible into ordinary shares, par value $0.0001 per share of the Company (the “Ordinary Shares”), upon the terms and subject to the limitations and conditions set forth in such Note. In addition, the Company will issue to each Investor as additional consideration for the purchase of the Note, a stock purchase warrant to purchase 5,645,455 Ordinary Shares (the “Warrant”), exercisable for a period of five (5) years, at an exercise price of 120% per share (the “Exercise Price”) of the closing price of an Ordinary Share at each Closing Date (as defined below), and on other terms and conditions as set forth on the Warrant, substantially in the form attached hereto as Exhibit B.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

 

1. Purchase and Sale of Notes.

 

1.1 Issuance and Sale of Notes. Subject to the terms and conditions of this Agreement, the Investor[s severally and not jointly] agree to purchase at the Closing (as hereafter defined), and the Company agrees to issue and sell to the Investors at the Closing, the Notes and Warrants in principal amount set forth on each Investor’s signature page hereto, which will be reflected opposite such Investor’s name of the Schedule of Investors attached hereto.

 

1.2 Closing.

 

(a) First Closing. Subject to the terms and conditions set forth in this Agreement and at such time as the Company and Investors mutually agree, the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company at the first closing, the Notes in principal amount as set forth on the signature page attached hereto, which will be reflected opposite such Investor’s name on the Schedule of Investors attached hereto (the “First Closing”). The date of the First Closing is hereinafter referred to as the “First Closing Date”.

 

 

(b) Subsequent Closing(s). Subject to the terms and conditions set forth in this Agreement, the Company may have subsequent closings at which the Company shall issue and sell to each Investor, and each such Investor shall, severally and not jointly, purchase from the Company on the Subsequent Closing Date (as hereafter defined) the Notes in the principal amount as set forth on the signature pages attached hereto, which will be reflected opposite such Investor’s name on Schedule of Investors attached hereto (a “Subsequent Closing”). There may be more than one Subsequent Closing. The date of any Subsequent Closing is hereinafter referred to as a “Subsequent Closing Date”). Notwithstanding the foregoing, the maximum principal amount of the Notes to be sold at the First Closing and all Subsequent Closings shall be the Maximum Offering Amount, and the date upon which the Notes are sold hereunder shall be referred to as the “Final Closing Date.” The First Closing and any applicable Subsequent Closings are each referred to in this Agreement as a “Closing.” The First Closing Date, any Subsequent Closing Dates and the Final Closing Date are sometimes referred to herein as a “Closing Date.” The Company may sell the Notes through January 16, 2024 (as such date may be extended by the Company, the “Offering Period”).

 

(c) Closing Location. All Closings shall occur remotely via the exchange of documents and signatures.

 

(d) Acceptance of Subscriptions. Each Investor understands and agrees that the Company, in its sole and absolute discretion, reserves the right to accept or reject any subscription for the Notes, in whole or in part. If the subscription is rejected in whole or the Offering is terminated, all funds in whole or in part, in its sole discretion, subject to the obligation to return to the Investor, without interest or deduction, any funds paid by the Investor with respect to a rejected subscription or portion thereof. If this subscription is rejected in part, the funds for the rejected portion of this subscription will be returned without interest or offset, and this subscription will continue in full force and effect to the extend this subscription was accepted.

 

1.3 Form of Payment. Each Investor shall pay the purchase price equal to the principal amount of the Note less the 8% original discount of the principal amount of the Note being subscribed for (the “Purchase Price”), to be issued and sold to it at the Closing (as defined below), by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Notes, and (ii) the Company shall deliver such duly executed Note and Warrant on behalf of the Company, to each Investor, against delivery of such Purchase Price.

 

1.4 Warrant. On or before the Closing Date, the Company shall issue the Warrant to the Investors pursuant to the terms contained therein, which shall be earned in full as of each Closing Date.

 

2. Representations and Warranties of the Company. The Company represents and warrants to the Investors as of the Closing Date that:

 

2.1 Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or formed, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Subsidiaries of the Company and the jurisdiction in which each is incorporated is set forth on Exhibit 21.1 to the Company’s Registration Statement on Form F-1 (Registration No. 333-267778) filed with the Securities and Exchange Commission on July 26, 2023. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

 

2.2 Authorization; Enforcement. The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note, the Warrant and to consummate the transactions contemplated hereby and thereby and to issue the Note, the shares of Ordinary Shares (the “Conversion Shares”) issuable upon due conversion of the Note, the Warrant and the shares of Ordinary Shares (the “Warrant Shares”) convertible upon due exercise of the Warrant (collectively, the Note, the Warrant, the Conversion Shares and the Warrant Shares, the “Securities”), in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement and the Securities by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and Warrant, as well as the issuance and reservation for issuance of the Conversion Shares and the Warrant Shares issuable upon conversion of the Note and/or exercise of the Warrant) have been duly authorized and approved by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, its shareholders, or its debt holders is required, except that in accordance with Nasdaq Marketplace Rule 5635, prior to the issuance of equity securities equal to or greater than 20% of the outstanding share capital of the Company, the Company shall obtain approval from holders of the Company’s equity securities; (iii) this Agreement, the Note and Warrant (together with any other instruments executed in connection herewith or therewith) have been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement, the Note and Warrant and the other instruments documents executed in connection herewith or therewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note and Warrant, each of such instruments will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, , except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

2.3 Capitalization; Governing Documents. As of the Closing Date, the Company is authorized to issue 500,000,000 Ordinary Shares with a par value $0.0001 each. All of such outstanding shares of capital stock of the Company are, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, other than as publicly announced prior to such date and reflected in the SEC Documents of the Company (as defined below) (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the Securities Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of any of the Securities.

 

 

2.4 Issuance of Conversion Shares and Warrant Shares. The Conversion Shares and Warrant Shares are duly authorized and reserved for issuance and, upon conversion of the Note and/or exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

2.5 Issuance of Warrant. The issuance of the Warrant is duly authorized and will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

2.6 Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect of the Conversion Shares and the Warrant Shares to the Ordinary Shares upon the conversion of the Notes and/or exercise of the Warrant. The Company further acknowledges that its obligation to issue, upon conversion of the Notes and/or exercise of the Warrant, the Conversion Shares and/or Warrant Shares, are absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

2.7 No Conflicts. Conditioned upon the representations and warranties of Investors in Section 3 hereof being true and correct, the execution, delivery and performance of this Agreement and the Note and the Warrant by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a material breach of, or conflict with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s Memorandum and Articles of Association (as the same may be amended or restated from time to time, the “Charter”); or (iii) violate any existing applicable law, rule, regulation, judgment, order or regulations of any self-regulatory organizations applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, or (iv) trigger any anti-dilution provision contained in any other contract in which the Company is a party thereto or any security issued by the Company. Neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the Securities Act or Principal Market (as defined below), the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement and the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and, upon conversion of the Note and/or exercise of the Warrant, issue Conversion Shares and/or Warrant Shares as applicable. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Ordinary Shares are listed on the NASDAQ Capital Market, and the Company is not in violation of the listing requirements of NASDAQ Capital Market, and has taken no action designed to, or likely to have the effect of, delisting the Ordinary Shares, nor has the Company received any written notification that the Principal Market is contemplating terminating such listing. Principal Market (as defined herein) and does not reasonably anticipate that the Ordinary Shares will be delisted by the Principal Market in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The “Principal Market” shall mean the principal securities exchange or trading market where such Common Stock is listed or traded, including but not limited to any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.

 

 

2.8 SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to June 30, 2023, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the Exchange Act. The Company has never been a “shell company” as described in Rule 144(i)(1)(i).

 

2.9 No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Investors. The issuance of the Securities to the Investors will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

2.10 No Brokers; No Solicitation. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby. The Company acknowledges and agrees that neither the Investor nor its employee(s), member(s), beneficial owner(s), or partner(s) solicited the Company to enter into this Agreement and consummate the transactions described in this Agreement. The Company represents and warrants that neither the Investor nor its employee(s), member(s), beneficial owner(s), or partner(s) is required to be registered as a broker-dealer under the Exchange Act in order to (i) enter into or consummate the transactions encompassed by this Agreement, the Note, Warrants, and the related subscription documents entered into in connection herewith (the “Subscription Documents”), (ii) fulfill the Investor’s obligations under the Subscription Documents, or (iii) exercise any of the Investors’ rights under the Subscription Documents (including but not limited to the sale of the Securities).

 

 

3. Representations and Warranties of Investors. Each of the Investors, severally and not jointly, hereby represents and warrants that:

 

3.1 Authorization. Investor (i) if a natural person, represents that Investor has reached the age of 21 and has full power and authority to execute and deliver this Agreement and all other Subscription Documents and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Securities; such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Agreement and all other Subscription Documents and to carry out the provisions hereof and thereof and to purchase and hold the Securities and the execution and delivery of this Agreement has been duly authorized by all necessary action, this Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Agreement in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom Investor is executing this Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Agreement and make an investment in the Company, and represents that this Agreement constitutes a legal, valid and binding obligation of such entity.

 

3.2 Purchase Entirely for Own Account. The Note and Warrant to be purchased by the Investor, and the Conversion Shares issuable upon conversion of the Notes and the Warrant Shares issuable upon exercise of Warrant will be acquired for investment for the Investor’s own account and not with a view to the resale or distribution of any part thereof, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. Such Investor does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participation to any person with respect to any of the Securities.

 

3.3 Accredited Investor. Such Investor is, and will be at the time of the conversion of the Notes, if any, an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated by the Commission under the Securities Act is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States privately-owned companies in the early stages of development in private placements in the past and, with its representatives, if any, has such knowledge and experience in financial, tax and other business matters as to enable such Investor to utilize the information made available by the Company to evaluate the merits and risks of, and to make an informed investment decision with respect to, the proposed purchase, which such Investor hereby agrees represents a speculative high-risk investment. Such Investor has the authority and is duly and legally qualified to purchase and own the Notes and Warrants. Such Investor is and acknowledges that it is able to fend for itself, able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. Investor represents that it is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, as evidenced on the Accredited Investor Certification, completed by the Investor, attached hereto as Schedule 1.

 

 

3.4 Restricted Securities. Such Investor understands that the Securities have not been registered under the Securities Act, are and will be characterized as “Restricted Securities” under federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and such Investor shall not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities unless pursuant to an effective registration statement under the Securities Act, or unless an exemption from registration is available. Notwithstanding anything to the contrary contained in this Agreement, such Investor may transfer (without restriction and without the need for an opinion of counsel) such securities to its Affiliates, provided that each such Affiliate is an “accredited investor,” as such term is defined under Regulation D, and such Affiliate agrees in writing to be bound by the terms and conditions of this Agreement. For the purposes of this Agreement, an “Affiliate” of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. For purposes of this definition, “control” means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

3.5 High Risk and Speculative Investment. Investor recognizes that the purchase of the Notes and the Warrants involve a high degree of risk including, but not limited to, the Risk Factors contained in the Company Annual Report on Form 20-F and other SEC Documents and the following: (a) the Company is likely to require funds in addition to the proceeds of the Offering; (b) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the securities offered in this Offering; (c) the Investor may not be able to liquidate its investment; (d) transferability of the Securities is extremely limited and (e) the Company may issue additional securities in the future which have rights and preferences that are senior to those of the Notes, and the other Securities. Investor has reviewed, or had the opportunity to review, all the SEC Documents and all Risk Factors and Forward-Looking Statements disclaimers contained therein.

 

3.6 General Solicitation. The offer to sell the Notes and the Warrant was directly communicated to such Investor by the Company. Investor is not purchasing the Notes and the Warrant as a result of any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or the Internet (including, without limitation, internet “blogs,” bulletin boards, discussion groups and social networking sites) in connection with the Offering and is not subscribing for the Notes and did not become aware of the Offering through or as a result of any seminar or meeting to which the Investor was invited by, or any solicitation of a subscription by, a person not previously known to the Investor.

 

3.7 Legends. It is understood that the Securities will bear the following legend or a legend substantially similar in scope:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN [THIS CERTIFICATE] [THIS NOTE]. THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.”

 

 

3.8 Disqualification. Such Investor represents that neither such Investor nor any person or entity with whom such Investor shares beneficial ownership of the Securities is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act.

 

3.9 Representations in Reliance on Regulation S. Investor understands that in order to rely on an exemption from the registration requirements of United States federal and state securities laws under Regulation S promulgated under the Securities Act, the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the applicability of such exemptions and the suitability of the Investor to acquire the Securities. In this regard, the Investor represents, warrants and agrees that:

 

(i) The Investor is not a U.S. Person ¹ and is not an affiliate (as defined in Rule 50l(b) under the Securities Act) of the Company and is not acquiring the Securities, including the Notes and Warrants, for the account or benefit of a U.S. Person;

 

(ii) At the time of the origination of contact concerning this Agreement and the date of the execution and delivery of this Agreement, the Investor was outside of the United States.

 

(iii) The Investor will not, during the period commencing on the date of issuance of the Notes and ending on the six month anniversary of such date, or such shorter period as may be permitted by Regulation S or other applicable securities law (the “Restricted Period”), offer, sell, pledge or otherwise transfer the Securities in the United States, or to a U.S. Person for the account or for the benefit of a U.S. Person, or otherwise in a manner that is not in compliance with Regulation S.

 

(iv) The Investor will, after expiration of the Restricted Period, offer, sell, pledge or otherwise transfer the Securities only pursuant to registration under the Securities Act or an available exemption therefrom and, in accordance with all applicable state and foreign securities laws.

 

(v) The Investor was not in the United States, engaged in, and prior to the expiration of the Restricted Period will not engage in, any short selling of or any hedging transaction with respect to the Securities, including without limitation, any put, call or other option transaction, option writing or equity swap, unless in compliance with the Securities Act.

 

(vi) Neither the Investor nor or any person acting on his or its behalf has engaged, nor will engage, in any directed selling efforts to a U.S. Person with respect to the Securities and the Investor and any person acting on his or its behalf have complied and will comply with the “offering restrictions” requirements of Regulation S under the Securities Act.

 

¹ A “U.S. Person” means any one of the following: (a) any natural person resident in the United States of America; (b) any partnership or corporation organized or incorporated under the laws of the United States of America; (c) any estate of which any executor or administrator is a U.S. person; (d) any trust of which any trustee is a U.S. person; (e) any agency or branch of a foreign entity located in the United States of America; (f) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (g) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States of America; and (h) any partnership or corporation if: (1) organized or incorporated under the laws of any foreign jurisdiction; and (2) formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

 

 

(vii) The transactions contemplated by this Agreement have not been pre-arranged with a buyer located in the United States or with a U.S. Person and are not part of a plan or scheme to evade the registration requirements of the Securities Act.

 

(viii) Neither the Investor nor any person acting on his or its behalf has undertaken or carried out any activity for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States, its territories or possessions, for any of the Securities. The Investor agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities, except such advertisements that include the statements required by Regulation S under the Securities Act, and only offshore and not in the U.S. or its territories, and only in compliance with any local applicable securities laws.

 

(ix) Each certificate representing the Securities shall be endorsed with the following legends, in addition to any other legend required to be placed thereon by applicable federal or state securities laws:

 

“THE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

3.10 Additional Agreements. Investor acknowledges, understands and agrees that if the Investor receives any Conversion Shares or Warrant Shares, Investor may be required to enter and Investor agrees to enter into certain documents, instruments and agreements in connection with the receipt of such Conversion Securities as further described in the Note. Such documents, instruments and agreements may contain restrictions on transferability and other terms, conditions and provisions in addition to those described herein.

 

4. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS.

 

4.1 Best Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 5 of this Agreement.

 

4.2 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities if Securities are sold and issued under Regulation D and to provide a copy thereof to the Investors promptly after such filing. If the sale of Securities to Investors at any Closing were sold in any state of the United States, the Company agrees to file notices under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Investors.

 

4.3 Use of Proceeds. The Company shall use the proceeds for working capital purposes.

 

 

4.4 No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

4.5 Disclosure of Transactions and Other Material Information. Promptly, but not more that within four (4) business days of the First Closing, the Company shall file a report on Form 6-K (if required) describing the terms of the transactions contemplated by this Agreement in the form required by the Exchange Act and attaching this Agreement, the form of Note (the “6-K Filing”). From and after the filing of the 6-K Filing with the SEC, the Investor shall not be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents that is not disclosed in the 6-K Filing. In addition, effective upon the filing of the 6-K Filing, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and the Investors or any of its affiliates, on the other hand, shall terminate.

 

4.6 Non-Public Information. The Company covenants and agrees that neither it, nor any other person acting on its behalf will provide each Investor or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto the Investors shall have consented to the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and confirms that the Investor shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to the Investor without such Investor’s consent, the Company hereby covenants and agrees that such Investor shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or affiliates, not to trade on the basis of, such material, non- public information, provided that the Investors shall remain subject to applicable law. To the extent that any notice provided, information provided, or any other communications made by the Company, to the Investors, constitutes or contains material non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice or other material information with the SEC pursuant to a Current Report on Form 6-K.

 

4.7. Transfer Agent Instructions. The Company shall issue irrevocable instructions to the Company’s transfer agent to issue certificates and/or issue shares electronically at each Investor’s option, registered in the name of the Investor or its nominee, upon conversion of the Notes and/or exercise of the Warrant, in such amounts as specified from time to time by the Investor to the Company in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserved shares of Common Stock in the number required for the issuance of the Conversion Shares and the Warrant Shares signed by the successor transfer agent to the Company and the Company.

 

5. CLOSING CONDITIONS

 

5.1 Conditions Precedent to the Obligations of the Investors. The obligations of the Investors to purchase the Notes and acquire the Warrants at each Closing are subject to the satisfaction or waiver by each Investor, at or before the Closing of each of the following conditions:

 

(a) Execution of the Agreement. The Company shall have executed this Agreement and delivered the same to each Investor.

 

 

(b) Delivery of the Note and Warrant. The Company shall have delivered to each Investor the duly executed Note and Warrant in such denominations as each Investor shall purchase and in accordance with Section 1(b) above.

 

(c) Representations and Warranties. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of Closing Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

(d) No litigation. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(e) No Material Adverse Effect. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the Exchange Act reporting status of the Company or the failure of the Company to be timely in its Exchange Act reporting obligations.

 

(f) No Suspension. Trading in the Common Stock on the Principal Market shall not have been suspended by the SEC, or the Principal Market.

 

(g) Officer’s Certificate. The Company shall have delivered to the Investors (i) a certificate executed by the Company’s officer evidencing the formation and good standing of the Company and each of its Subsidiaries in such entity’s jurisdiction of formation issued by the Registrar of Corporations (or comparable office) of such jurisdiction, as of a date within ten (10) days of the Closing Date and (ii) resolutions adopted by the Company’s Board of Directors at a duly called meeting or by unanimous written consent authorizing this Agreement and all other documents, instruments and transactions contemplated hereby.

 

(h) Trading Market Approval. The Company shall have submitted a Listing of Additional Shares Notification Form with NASDAQ relating to the issuance of the Warrants, and, upon conversion of the Notes, the Conversion Shares, and upon exercise of the Warrants, the applicable Warrant Shares at least 15 days prior to the First Closing and the issuance of the Notes and the Warrant; and the shareholders of the Company approved the issuance of 20% or more of the Company’s issued and outstanding share capital in this Offering, as required by and Nasdaq Marketplace Rule 5635.

 

(i) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Subscription Documents to be performed, satisfied or complied with by it at or prior to each Closing.

 

(j) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Subscription Documents.

 

 

5.2 Conditions Precedent to the Obligations of the Company. The obligations of the Company to issue the Notes and the Warrants are subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

 

(a) Execution of the Agreement and Payment of the Purchase Price. Each Investor shall have executed this Agreement, and delivered the same to the Company and shall have delivered the Purchase Price in accordance with Section 1(b) above.

 

(b) Representations and Warranties. The representations and warranties of each Investor contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date;

 

(c) Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Subscription Documents to be performed, satisfied or complied with by the Investor at or prior to each Closing; and

 

(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Subscription Documents.

 

6. Miscellaneous.

 

(a) Governing Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby shall be brought in the State of New York or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Columbia. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

(b) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile or email/.pdf transmission shall be deemed validly delivery thereof.

 

 

(c) Construction; Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Investors and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

(d) Severability. In the event that any provision of this Agreement, the Note, or any other agreement or instrument delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement, the Note, or any other agreement, certificate, instrument or document contemplated hereby or thereby.

 

(e) Entire Agreement; Amendments. This Agreement, the Note, the Warrant and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor each Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement or any agreement or instrument contemplated hereby may be waived or amended other than by an instrument in writing signed by such Investor.

 

(f) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company, to:

 

FITELL CORPORATION

23-25 Mangrove Lane

Taren Point, NSW 2229

Australia

Attention:

 

If to the Investor:

 

FLYING HEIGHT CONSULTING SERVICES LIMITED

Flat/Rm 7022, Block D, 7/F

Tak Wing Ind Building 3

Tsun Wen Road, Tuen Mun NT

Hong Kong

Attention:

 

To the address indicated on the signature page to this Agreement.

 

 

(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Investors shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Investor may assign its rights hereunder to any person that purchases Securities in a private transaction from the Investor or to any of its “affiliates,” as that term is defined under the Exchange Act, without the consent of the Company.

 

(h) Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

(i) Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Investors. Each Investor agrees to indemnify and hold harmless the Company and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Investors of any of their representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

(j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(k) No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

(l) Indemnification. In consideration of each Investor’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold harmless the Investors and their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of such Investor or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, this Securities Purchase Agreement is executed as of the 15th day of January, 2024.

 

Principal Amount of Note:		$3,600,000
Actual Amount of Purchase Price of Note:		$3,312,000
Warrant:		5,645,455
Signature of Investor:		/s/ Qian Sun
Name of Investor:		Flying Height Consulting Services Limited
Name of Authorized Signatory:		Qian Sun
Address of Investor		Flat/Rm 7022, Block D, 7/F, Tak Wing Ind Building 3, Tsun Wen Road, Tuen Mun NT, Hong Kong

 

ACCEPTED BY:

FITELL CORPORATION

 

Signature of Authorized Signatory:		/s/ Jieting Zhao
Name of Authorized Signatory:		Jieting Zhao
Date of Acceptance:		January 15, 2024

 

 

Schedule 1

 

ACCREDITED INVESTOR CERTIFICATION

 

For Individual Investors Only

(all Individual Investors must INITIAL where appropriate):

 

Initial _______ I have an individual net worth, or joint net worth with my spouse or spousal equivalent, as of the date hereof in excess of $1 million. For purposes of calculating net worth under this category, (i) the undersigned’s primary residence shall not be included as an asset, (ii) indebtedness that is secured by the undersigned’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability, (iii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iv) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to the execution of this Subscription Agreement, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability.

 

Initial _______ I have had an annual gross income for the past two years of in excess of $200,000 (or $300,000 jointly with my spouse or spousal equivalent) and expect my income (or joint income, as appropriate) to reach the same level in the current year.

 

Initial _______ I am a director or executive officer of Fitell Corporation.

 

Initial _______ I am a holder in good standing of the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Licensed Investment Adviser Representative license (Series 65), each as issued by the Financial Industry Regulatory Authority, Inc.

 

Initial ______ I/we, am/are the grantor(s) of a revocable trust who meets one of the above categories (check all that apply).

 

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):

 

Initial _______ The investor certifies that it is a partnership, corporation, limited liability company or business trust that is 100% owned by persons who meet at least one of the criteria for Individual Investors set forth above.

 

Initial _______ The investor certifies that it is a partnership, corporation, limited liability company or any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.

 

Initial _______ The investor certifies that it is an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, whose investment decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is a bank, savings and loan association, insurance company or registered investment adviser.

 

Initial _______ The investor certifies that it is an employee benefit plan whose total assets exceed $5,000,000 as of the date of this Agreement.

 

Initial _______ The investor certifies that it is a self-directed employee benefit plan whose investment decisions are made solely by persons who meet either of the criteria for any Individual Investors.

 

Initial _______ The investor certifies that it is a U.S. bank, U.S. savings and loan association or other similar U.S. institution acting in its individual or fiduciary capacity.

 

Initial _______ The investor certifies that it is a broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934, as amended.

 

 

Initial _______ The investor certifies that it is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of investing in the Company, and whose purchase is directed by a person with such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

 

Initial _______ The investor certifies that it is a plan established and maintained by a state or its political subdivisions, or any agency or instrumentality thereof, for the benefit of its employees, and which has total assets in excess of $5,000,000.

 

Initial _______ The investor certifies that it is an insurance company as defined in §2(13) of the Securities Act.

 

Initial _______ The investor certifies that it is an investment company registered under the Investment Company Act of 1940, as amended, or a business development company as defined in Section 2(a)(48) of that Act.

 

Initial _______ The investor certifies that it is a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended.

 

Initial _______ The investor certifies that it is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.

 

Initial ________ The investor certifies that it is an investment adviser registered pursuant to Section 203 of the Investment Advisers Act of 1940, as amended, or registered pursuant to the laws of a state, or an investment adviser relying on the exemption from registering with the SEC under Section 203(l) or (m) of the Investment Advisers Act of 1940, as amended.

 

Initial ________ The investor certifies that is a Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act of 1972, as amended.

 

Initial ________ The investor certifies that (A) it is a “family office” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, as amended, (i) with assets under management in excess of $5,000,000, (ii) not formed for the specific purpose of acquiring the securities offered and (iii) whose investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment or (B) that it is a “family client” as defined in Rule 202(a)(11)(G)-1 of the Investment Advisers Act of 1940, as amended, of a family office meeting the criteria specified above. ²

 

Initial ___/s/ QS_____ The investor certifies that it is an entity not listed above that owns “investments,”³ in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered. ⁴

 

² “Family offices” are generally defined under 275.202(a)(11)(G)-1 as private advisory entities established by families to manage their assets, plan for their families’ financial future, provide other services to family members, and do not hold themselves out to the public as investment advisers. The SEC has previously observed that single family offices generally serve families with at least $100 million or more of investable assets.

³ Generally defined by Rule 2a51-1(b) under the Investment Company Act of 1940, as amended, as investments in independently controlled companies meeting certain minimum requirements and held for investment purposes.

⁴ Such additional forms of entities covered by this clause include, but are not limited to, Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries.

 

 

EXHIBIT A

 

FORM OF NOTE

 

[attached hereto]

 

 

EXHIBIT B

 

FORM OF WARRANT

 

[attached hereto]

 

 

Schedule of Investors

 

FLYING HEIGHT CONSULTING SERVICES LIMITED

Flat/Rm 7022, Block D, 7/F

Tak Wing Ind Building 3

Tsun Wen Road, Tuen Mun NT

Hong Kong

 

Principal Amount of Note: $3,600,000

Actual Amount of Purchase Price of Note: $3,312,000

Warrant: 5,645,455

 

 

 

Exhibit 10.2

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SUCH SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN ACCORDANCE WITH SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.

 

Warrant No. 1

 

No. of Ordinary Shares: 5,645,455

 

WARRANT

to Purchase Ordinary Shares of

 

Fitell Corporation

a Cayman Islands Exempted Company

 

This Warrant certifies that Flying Height Consulting Services Limited (“Holder”), is entitled to purchase from Fitell Corporation, a Cayman Islands exempted company (the “Company”), 5,645,455 ordinary shares of the Company (or any portion thereof) at an exercise price of $1.056 per share (the “Exercise Price”) , all on the terms and conditions hereinafter provided. The Exercise Price represents 120% of the per share price of an Ordinary Share of the Company as reported on The Nasdaq Capital Market on January 15, 2024 (the “Issuance Date”).

 

Section 1. Certain Definitions. All capitalized terms used herein shall have the meaning ascribed thereto in the Securities Purchase Agreement, dated January 15, 2024 (as may be amended from time to time and including the exhibits thereto, the “Purchase Agreement”) by and among the Company and Investors indicated on the signature pages thereto. In addition, the following terms used in this Warrant, shall have the following meaning:

 

“Memorandum and Articles” shall mean the Memorandum and Articles of Association of the Company, as in effect from time to time.

 

“Exercise Price” shall mean the exercise price per ordinary share set forth above, as adjusted from time to time pursuant to Section 3 hereof.

 

“Exercise Period” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. Eastern Standard Time on the five-year anniversary thereof. The date on which the Exercise Period will terminate will be the “Expiration Day.”

 

“Warrant” shall mean this Warrant and all additional or new warrants issued upon division or combination of, or in substitution for, this Warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of ordinary shares for which they may be exercised.

 

“Warrant Shares” shall mean the Ordinary Shares purchasable by the holder of this Warrant upon the exercise of such Warrant.

 

Section 2. Exercise of Warrant.

 

(a) At any time during the Exercise Period, the Holder may at any time and from time to time exercise this Warrant, in whole or in part.

 

(b) The Holder shall exercise this Warrant by means of delivering to the Company at its principal office (i) a written notice of exercise, including the number of shares of Warrant Shares to be delivered pursuant to such exercise, (ii) this Warrant and (iii) payment equal to the Exercise Price. In the event that any exercise shall not be for all shares of Warrant Stock purchasable hereunder, the Company shall deliver to the Holder a new Warrant registered in the name of the Holder, of like tenor to this Warrant and for the remaining shares of Warrant Stock purchasable hereunder, within ten (10) days of any such exercise. Such notice of exercise shall be in the Subscription Form set out at the end of this Warrant. The Holder may elect to pay the Exercise Price to the Company either by cash, certified check or wire transfer, and by cashless exercise, if applicable, pursuant to Section 2(c) below. Upon exercise of this Warrant and delivery of the Subscription Form with proper payment relating thereto, the Company shall cause to be executed and delivered to the Holder a certificate or certificates representing the aggregate number of fully-paid and nonassessable ordinary shares issuable upon such exercise.

 

 

(c) Unless the Warrant Shares are registered for resale by an effective non-stale registration statement of the Company which contains a prospectus that complies with Section 5(b) and Section 10 of the Securities Act within one (1) year after the Issuance Date that covers the Holder’s immediate resale of all of the Warrant Shares at prevailing market prices without any limitation, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this Warrant and delivering the Subscription Form, in which event the Company shall issue to Holder a number of Ordinary Shares computed using the following formula:

 

X = Y (A-B)

       A

 

	Where	X =	the number of Shares to be issued to Holder.
		Y =	the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation).
		A =	the market price per Ordinary Share on the day before the Exercise Notice is delivered to the Company (at the date of such calculation).
		B =	Exercise Price (as adjusted to the date of such calculation).

 

(d) No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.

 

(e) The stock certificate or certificates for Warrant Shares to be delivered in accordance with this Section 2 shall be in such denominations as may be specified in said notice of exercise and shall be registered in the name of the Holder or such other name or names as shall be designated in said notice. Such certificate or certificates shall be deemed to have been issued and the Holder or any other person so designated to be named therein shall be deemed to have become the holder of record of such shares, including to the extent permitted by law the right to vote such shares or to consent or to receive notice as stockholders, as of the time said notice is delivered to the Company as aforesaid.

 

(f) The Company shall pay all expenses payable in connection with the preparation, issue and delivery of stock certificates under this Section 2, including any transfer taxes resulting from the exercise of the Warrant and the issuance of Warrant Shares hereunder.

 

(g) All shares of Warrant Stock issuable upon the exercise of this Warrant in accordance with the terms hereof shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances thereon, other than liens or other encumbrances created by the Holder.

 

Section 3. Adjustment of Exercise Price and Warrant Shares.

 

(a) If, at any time prior to the Expiration Date, the number of outstanding ordinary shares is (i) increased by a stock dividend payable in ordinary shares or by a subdivision or split-up of ordinary shares, or (ii) decreased by a combination of ordinary shares, then, following the record date fixed for the determination of holders of ordinary shares entitled to receive the benefits of such stock dividend, subdivision, split-up, or combination, the Exercise Price shall be adjusted to a new amount equal to the product of (I) the Exercise Price in effect on such record date and (II) the quotient obtained by dividing (x) the number of ordinary shares outstanding on such record date (without giving effect to the event referred to in the foregoing clause (i) or (ii)), by (y) the number of ordinary shares which would be outstanding immediately after the event referred to in the foregoing clause (i) or (ii), if such event had occurred immediately following such record date.

 

 

(b) Upon each adjustment of the Exercise Price as provided in Section 3 (a), the Holder shall thereafter be entitled to subscribe for and purchase, at the Exercise Price resulting from such adjustment, the number of shares of Warrant Shares equal to the product of (i) the number of shares of Warrant Shares existing prior to such adjustment and (ii) the quotient obtained by dividing (I) the Exercise Price existing prior to such adjustment by (II) the new Exercise Price resulting from such adjustment.

 

Section 4. Division and Combination. This Warrant may be divided or combined with other Warrants upon presentation at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall pay all expenses in connection with the preparation, issue and delivery of Warrants under this Section 4, including any transfer taxes resulting from the division or combination hereunder. The Company agrees to maintain at its aforesaid office books for the registration of the Warrants.

 

Section 5. Reclassification, Etc. In case of any reclassification or change of the outstanding ordinary shares of the Company (other than as a result of a subdivision, combination or stock dividend), or in case of any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the outstanding ordinary shares of the Company) at any time prior to the Expiration Date, then, as a condition of such reclassification, reorganization, change, consolidation or merger, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right prior to the Expiration Date to purchase, at a total price not to exceed that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation or merger by a holder of the number of ordinary shares of the Company which might have been purchased by the Holder immediately prior to such reclassification, reorganization, change, consolidation or merger, in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including provisions for the adjustment of the Exercise Price and of the number of shares purchasable upon exercise of this Warrant) shall thereafter be applicable in relation to any shares of stock and other securities and property thereafter deliverable upon exercise hereof.

 

Section 6. Reservation and Authorization of Capital Stock. The Company shall at all times reserve and keep available for issuance such number of its authorized but unissued ordinary shares as will be sufficient to permit the exercise in full of all outstanding Warrants.

 

Section 7. Stock and Warrant Books. The Company will not at any time, except upon dissolution, liquidation or winding up, close its stock books or Warrant books so as to result in preventing or delaying the exercise of any Warrant.

 

Section 8 Limitation of Liability. No provisions hereof, in the absence of affirmative action by the Holder to purchase Warrant Stock hereunder, shall give rise to any liability of the Holder to pay the Exercise Price or as a stockholder of the Company (whether such liability is asserted by the Company or creditors of the Company).

 

Section 9. Transfer. Subject to compliance with the Securities Act and the applicable rules and regulations promulgated thereunder, this Warrant and all rights hereunder shall be transferable in whole or in part. Any such transfer shall be made at the office or agency of the Company at which this Warrant is exercisable, by the registered holder hereof in person or by its duly authorized attorney, upon surrender of this Warrant together with the assignment hereof properly endorsed, and promptly thereafter a new warrant shall be issued and delivered by the Company, registered in the name of the assignee. Until registration of transfer hereof on the books of the Company, the Company may treat the Holder as the owner hereof for all purposes.

 

 

Section 10. Investment Representations; Restrictions on Transfer of Warrant Stock. The Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of Warrant Stock acquired upon exercise hereof, such Holder will deliver to the Company a written statement that the securities acquired by the Holder upon exercise hereof are for the account of the Holder or are being held by the Holder as trustee, investment manager, investment advisor or as any other fiduciary for the account of the beneficial owner or owners for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any portion thereof).

 

Section 11. Loss, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity and/or security satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of ordinary shares.

 

Section 12. Amendments. The terms of this Warrant may be amended, and the observance of any term herein may be waived, but only with the written consent of the Company and the Holder.

 

Section 13. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and mailed, sent via e-mail or delivered to each party at the respective addresses of the parties as set forth in the Purchase Agreement, or at such other address or e-mail address as the Company shall have furnished to Investor in writing. All such notices and communications will be deemed effectively given upon the earliest of (i) receipt, (ii) delivery in person or by e-mail, (iii) one business day after deposit with an overnight courier service of recognized standing and (iv) five days after being deposit in the U.S. mail, first class with postage prepaid.

 

Section 14. Successors and Assigns. This Warrant shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns.

 

Section 15. Governing Law. In all respects, including all matters of construction, validity and performance, this Warrant and the obligations arising hereunder shall be governed by, and construed and enforced in accordance with the laws of the State of New York.

 

[Signature pages follow]

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and issued as of the date first written above.

 

	FITELL CORPORATION
	By:	/s/ Jieting Zhao
	Print name:	Jieting Zhao
	Title:	Director

 

 

SUBSCRIPTION FORM

(to be executed only upon exercise of Warrant)

 

To:	Fitell Corporation

 

The undersigned, pursuant to the provisions set forth in the attached Warrant (No. __ ), hereby irrevocably elects to purchase __________ ordinary shares covered by such Warrant. Please issue a certificate or certificates representing said ordinary shares in the name of the undersigned or in such other name as is specified below:

 

	(Name)
	(Address)
	Social Security or Tax Identification Number

 

Dated:

 

	Signature
	Print Name

 

 

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