Item 2. Unregistered Sales of Equity Securities
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 9, 2021, the Company entered into a securities purchase agreement with an effective date of February 8, 2021 pursuant to which the Company has agreed to sell and issue to the purchasers thereunder in a private placement pursuant to Rule 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder a total of up to $17 million in principal amount of convertible promissory notes of the Company for a purchase price equal to the principal amount thereof. As of March 31, 2021, we had sold approximately $14.5 million of the convertible promissory notes. Of the net proceeds from the sale of the convertible promissory notes, $6.2 million was used to prepay the outstanding 10% Senior Secured Convertible Debentures as described above.
Commencing one year from the original issue date, the convertible promissory notes will be convertible at the option of the holder into shares of our common stock at an initial conversion price of $1.48 per share, which equaled the “Average VWAP” (as defined) of our common stock on the effective date. The initial conversion price will be adjusted as of the end of each three-month period following the original issue date, commencing May 31, 2021, to equal the Average VWAP as of the end of such three-month period if such Average VWAP is less than the then-conversion price. The conversion price will be subject to further adjustment in the event of a stock split, reverse stock split or certain other events specified in the convertible promissory notes.
The exchange of the newly Amended and Restated 10% Senior Secured Convertible Debentures of EMI and newly amended and restated warrants of the Company for the Former Debentures and the Former Warrants was made without registration under the Securities Act of 1933, as amended (the “Act”), in reliance upon the exemption from registration afforded by Section 3(a)(9) of the Act for securities exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is given directly or indirectly for soliciting such exchange.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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