Item 1.01. Entry into a Material Definitive Agreement.
License Agreement
On August 1, 2016 the Company entered into a license Agreement (the
“License Agreement”) with SC Company/ProProm Mexico (“Licensee”) . Pursuant to the License Agreement the
Company granted Licensee the exclusive, non-sublicenseable and non-assignable right within Mexico, Central America and South America
and any other areas granted in the future to use the Trademarks and Other IP solely in connection with the development, manufacture,
distribution, marketing and sale of one or more “Sports Performance Drinks.
The initial term of the License Agreement is three years and provided
Licensee is not in default under the Agreement the term of the Agreement shall be automatically extended for one additional three
period upon mutually agreeable terms, unless either party notifies the other party in writing at least ninety (90) days prior to
the then-scheduled expiration of the Term that such party elects not to extend the Term.
The term the Licensee shall pay the Company royalties in the amount
of $10 a case by all sales and other transfers of licensed products and payments of $18,750 per quarter.
Pro Proms goal is to create
name recognition and brand awareness for the High Performance Sports Drink in the countries of Mexico, Central & South America,
in order to distribute and sell the product by making it synonymous with already established sports drink brands like Gatorade,
which are already available in various regions throughout Mexico and Latin America.
Per the Licensing
Agreement, a bottling company has been selected and both High Performance Beverage and Pro Prom are in the process of completing
exclusivity, non-disclosure contracts and permitting in order to commence production.
A
full
production run of High Performance Sports Drink
is
expected to start in September 2016.
The foregoing descriptions of the License Agreement referred to above
do not purport to be complete and are qualified in its entirety by reference to the Note, a copy of which are attached to this
Current Report on Form 8-K and incorporated into this Item by reference.
Settlement Agreement Payoff
On July 16, 2016 the Company fully completed our obligations under
the Settlement Agreement, dated and approved on August 5, 2015, entered into between, Overtime Marketing SE, LLC and Kenny Hansmire
(collectively the “Plaintiffs”) and High Performance Beverage Company and Toby McBride (collectively the “Defendants”)
(the “Settlement Agreement”). Under the terms of the Settlement Agreement, the Defendants were to jointly and severally
pay the Plaintiffs a certain amount (the “Settlement Payment”). As of July 16, 2016 the Company has paid 100% of the
Settlement Payment.
Convertible Promissory Note
On August 24, 2016 (the “Effective Date”), High Performance
Beverages Company, a Nevada corporation (the “Company”), sold an Original a 12% Convertible Promissory Note in the
principal amount of $50,000 (the “Note”) for cash consideration of $40,227 with $9,773 being retained by the purchase
of the Note through an original issue discount for due diligence and legal fees related to the Note purchase.
The Note may be converted into common stock of the Company at any
time after the Maturity Date at a price equal to 60% of the lowest trading price of the Company’s common stock during the
10 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note. However, If the Company
is placed on “chilled” status with the Depository Trust Company (“DTC”), the discount shall be increased
by 10%,
i
.
e
., from 40% to 50%, until such chill is remedied. If the Company is not Deposits and Withdrawal at Custodian
(“DWAC”) eligible through their Transfer Agent and DTC’s Fast Automated Securities Transfer (“FAST”)
system, the discount will be increased by 5%,
i
.
e
., from 40% to 45%. In the case of both, the discount shall be a
cumulative increase of 15%,
i
.
e
., from 40% to 55%.
Any default of the Note (as set forth in the Note) not remedied within
the applicable cure period will result in a permanent additional 10% increase,
i
.
e
., from 40% to 50%, in addition
to any other discount, to the Conversion Price discount. Additionally, if an event of default occurs (as defined in the Note),
the outstanding principal amount of the Note shall become at the holder’s electing immediately due an amount equal to 150%
of the outstanding principal amount of the Note. Commencing 5 days after the occurrence of any event of default that results in
the eventual acceleration of the Note, the Note will accrue an additional interest, in addition to the Note’s guaranteed
interest at a rate equal to the lesser of 22% per annum or the maximum rate permitted by applicable law.
The Note matures on August 16, 2017 (“Maturity Date”).
The Company may prepay the Note as follows:
|
Days Since Effective Date
|
|
Prepayment Amount
|
|
Under 30
|
|
100% of Principal Amount
|
|
31-60
|
|
110% of Principal Amount
|
|
61-90
|
|
120% of Principal Amount
|
|
91-120
|
|
130% of Principal Amount
|
|
121-150
|
|
140% of Principal Amount
|
|
151-180
|
|
150% of Principal Amount
|
After 180 days from the Effective Date the Note may not be prepaid
without written consent from holder.
The Note shall not be converted to the extent that such conversion
would result in beneficial ownership by the holder and its affiliates to own more than 9.99% of the issued and outstanding shares
of the Company’s common stock.
