Madison Technologies Inc. 10-Q

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS On February 17, 2021, the Company entered into a securities purchase agreement with funds affiliated with Arena Investors LP (the “Investors”) pursuant to which we issued convertible notes in an aggregate principal amount of $16.5 million for an aggregate purchase price of $15 million (collectively, the “Notes”). In connection with the issuance of the Notes, the Company issued to the Investors warrants to purchase an aggregate of 192,073,017 shares of Common Stock (collectively, the “Warrants”) and 1,000 shares of series F convertible preferred stock (the “Series F Preferred Stock”). The Notes each have a term of thirty-six months and mature on February 17, 2023, unless earlier converted. The Notes accrue interest at a rate of 11% per annum, subject to increase to 20% per annum upon and during the occurrence of an event of default. Interest is payable in cash on a quarterly basis beginning on March 31, 2021. Notwithstanding the above, at the Company’s election, any interest payable on an applicable payment date may be paid in registered Common Stock of the Company (rather than cash) in an amount equal (A) the amount of the interest payment due on such date, divided by (B) an amount equal to 80% of the average VWAP of the Common Stock for the five (5) days immediately preceding the date of conversion. On September 24, 2021, the Company and the Investors amended the Notes. The Notes are convertible at any time, at the holder’s option, into shares of our common stock equal to $0.02 per share subject to adjustment. Notwithstanding the foregoing, at any time during the continuance of any Event of Default, the Conversion price in effect shall be equal to the alternate conversion price. If at any time the conversion price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the conversion price hereunder may equal such par value for such conversion and the conversion amount for such conversion may be increased to include Additional Principal, where Additional Principal means such additional amount to be added to the principal amount of this Note to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the conversion price not been adjusted by the Holder to the par value price, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The conversion price is also subject to adjustment due to certain events, including stock dividends, stock splits and in connection with the issuance by the Company of common stock or common stock equivalents at an effective price per share lower than the conversion price then in effect. The Notes may not be redeemed by the Company As part of the agreement with Arena, the Company issued 192,073,016 warrants. On September 24, 2021, the Company and the Investor amended the warrant agreement such that each Warrant is exercisable for a period of five (5) years from the date of issuance at an initial exercise price equal to $0.025 per share, subject to adjustment herein, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and recapitalizations. The Holder may be eligible for cashless exercise. The Series F Preferred Stock have no voting rights and shall convert into approximately 192,073,017 shares of common stock upon Shareholder Approval. Subsequent to the period ended September 30, 2021, the 1,000 Series F Preferred Stock were converted to 192,073,017 common shares. On November 8, 2021, the Series F Preferred Shareholders entered into an Exchange Agreement to exchange 39,895,000 common shares for 39,895 Series H Preferred Shares. Each of the Series H Preferred Shares converts to 1,000 common shares. A total of 39,895 Series H Preferred Shares were issued. During the three months ended September 30, 2021, the Company entered into Subordinated Loan Agreements for gross proceeds of $1,200,000, of which $350,000 was paid off subsequent to the quarter end. The Loans were not registered under the Securities Act or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The investors in such securities are each an “accredited investor” as such term is defined in Regulation D promulgated under the Securities Act. On November 2, 2021, the subscribers of $4,600,000 for Series G Preferred Shares were issued an aggregate of 255,555,556 common shares. Proceeds from the financing will be used for operations and general working capital. On November 24, 2021, 75,000 Preferred Series D shares were converted to 75,000,000 common shares. ITEM 3. DEFAULTS UPON SENIOR SECURITIES No report required. - 41 - ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No report required.