Item 1.01 Entry into a Material Definitive
Agreement.
Securities
Purchase Agreement and Promissory Note
On
November 28, 2022, Digerati Technologies, Inc. (the “Company”), entered into a securities purchase agreement (the “SPA”)
with Mast Hill Fund, L.P. (the “Investor”). Although the SPA and other transaction documents are dated November 22, 2022,
the SPA and other transaction documents were signed on November 28, 2022. The closing of the transaction took place on November 29, 2022.
Pursuant to the SPA,
the Investor purchased, and the Company issued, an unsecured promissory note (the “Note”) in the aggregate principal amount
totaling approximately $1,670,000 (the “Principal Amount”) with an original issue discount of $250,500. The gross proceeds
the Company received prior to payment of transaction expenses was $1,419,500. The Note’s maturity date is November 22, 2023 (the
“Maturity Date”). The Note requires the Company to make amortization payments to the Investor of $200,000 to $400,000 every
three (3) months starting in February 2023, and then on November 22, 2023, the Company makes amortization payments to the Investor consisting
of all remaining amounts owed under the Note. Moody Capital Solutions, Inc. served as placement agent for the Note transaction. The SPA
contains customary representations and warranties and contains agreements and covenants including,
without limitation, a prohibition on variable rate transactions and the Company granting the Investor a right of participation in future
financings and most-favored nation status. The variable rate transactions prohibition and right of participation and most favored nation
provisions are all applicable for the life of the Note.
While
the Company intends to repay the Note in full in conjunction with the closing of the Merger (as defined in this paragraph), the Investor
will have the right to convert all or any portion of the amount the Company owes pursuant to the Note into shares of the Company’s
common stock, $0.001 par value per share (the “Common Stock”) at any time on or following the earlier of (i) March 22, 2023
or (ii) sixty (60) calendar days after the closing of the contemplated merger (the “Merger”) of MEOA Merger Sub, Inc., a wholly
owned subsidiary of Minority Equality Opportunities Acquisition Inc. (“MEOA”), with and into the Company, with the Company
as the surviving company in the merger and, after giving effect to such merger, the Company being a wholly-owned subsidiary of MEOA. The
Investor will not convert the Note if such conversion would result in the Investor together with the Investor’s affiliates and any
other persons acting as a group together with the Investor or any of the Investor’s affiliates beneficially owning more than 4.99%
of the shares of Common Stock then outstanding. The shares of Common Stock issuable upon conversion of the Note are referred to herein
as the “Conversion Shares.”
When
the Note is convertible, the Note’s conversion price will be $0.0956 per share (the “Conversion Price”), subject to
adjustment for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar transaction that proportionately
decreases or increases the amount of Common Stock shares outstanding. The Note contains a dilutive issuance provision such that the Conversion
Price is subject to a downward adjustment if the Company issues securities with an effective purchase price lower than the conversion
price then in effect.
The Company
shall at all times reserve a certain amount of shares of common with regard to the shares issuable upon conversion of the Note (the “Reserved
Amount”). Not maintaining the Reserved Amount is an event of default under the Note.
The Company
can, at its option, prepay the amount the Company owes pursuant to the Note without a penalty. Subject to the date limitations for conversion,
the Investor is allowed to convert the Note into Conversion Shares for a period of seven (7) trading days following the Company submitting
a prepayment notice to the Investor.
The Investor
can require the Company to repay all or any portion the amount the Company owes pursuant to the Note via a payment of up to fifty percent
(50%) of all cash proceeds the Company receives from the issuance of equity or debt, the conversion of outstanding warrants, or the sale
of assets. Regarding any cash proceeds the Company receives at the closing of the Merger, the Investor can require the Company to repay
all or any portion the amount the Company owes pursuant to the Note via a payment of up to the greater of (i) $1,000,000.00 or (ii) 20%
of such proceeds.
The
Note is a long-term debt obligation that is material to the Company. The Note contains covenants and events of default including if the
Company is delinquent in its periodic report filings with the SEC and increases in the amount of the principal and interest rates under
the Note in the event of such defaults.
The
Company used a portion of the net proceeds to make a deposit in the amount of $83,333.33 into the MEOA trust account on November 30, 2022
to extend the period for MEOA to complete an initial business combination for an additional one month from November 30, 2022. The Company
was required to make this payment pursuant to the Merger transaction documents. In addition, the Company plans to deposit approximately
$416,666 in an escrow account. These funds will be used, as necessary, for further payments that the Company is required to make to extend
the period for MEOA to complete an initial business combination. In addition, the Company will use approximately $360,000 of the net proceeds
to pay for (i) certain additional amounts owed pursuant to the Merger transaction documents and (ii) an agreed upon percentage of MEOA’s
expenses with regard to the November 29, 2022 special meeting of MEOA’s stockholders (the “Special Meeting”). At the
Special Meeting, MEOA’s stockholders were asked to vote on a proposal to amend MEOA’s amended and restated certificate of
incorporation to give MEOA the right to extend the date by which MEOA must complete an initial business combination for up to six (6)
one-month extensions to May 30, 2023. MEOA’s stockholders voted in favor of this proposal. The balance of the net proceeds of the
transaction will be used as working capital.
Commitment
Shares and Warrant
In connection
with the purchase of the Note and pursuant to the SPA, the Company issued (i) 2,100,000 shares of Common Stock to the Investor (the “Commitment
Shares”) and (ii) a warrant to the Investor to purchase up to 10,500,000 shares of Common Stock (the “Warrant”). The
Warrant can be exercised through November 22, 2027, has an exercise price of $0.1195 (the “Exercise Price”), under a cash
or cashless exercise provision at the option of the Investor. The Exercise Price and the amount of warrant shares is subject to adjustment
for any stock dividend, stock split, stock combination or other similar transaction that proportionately decreases or increases the amount
of Common Stock shares outstanding. If the Company does not make the Note amortization payments, the Exercise Price could be subject to
a downward adjustment pursuant to dilutive issuance provision in the Warrant that is similar to the one provided for in the Note. The
Investor will not exercise the Warrant if such exercise would result in the Investor together with the Investor’s affiliates and
any other persons acting as a group together with the Investor or any of the Investor’s affiliates beneficially owning more than
4.99% of the shares of Common Stock then outstanding.
The Company can force
the exercise of the Warrant if, among other requirements, (i) the VWAP (as defined in the Warrant) of the Common Stock during each of
the ten (10) trading days prior to the date on which the Company will deliver shares to the Investor pursuant to the forced exercise (the
“Forced Exercise Shares”) equals or exceed 250% of the Exercise Price and (ii) the trading volume of the Common Stock equals
or exceeds the Forced Exercise Share amount during each of the ten (10) trading days prior to the date of delivery of such shares.
Registration
Rights Agreement
In
connection with the signing of the SPA and the issuance of the Note and Warrant, the Company and the Investor entered into a Registration
Rights Agreement (the “RRA”) with regard to the Commitment Shares, the Conversion Shares, and the shares of Common Stock issuable
pursuant to the exercise of the Warrant (the “Warrant Shares” and, together with the Commitment Shares and the Conversion
Shares, the “Registrable Securities”). Pursuant to the RRA, the Company is obligated to file a registration statement with
the Securities and Exchange Commission to register the Registrable Securities under the Securities Act of 1933, as amended (the “Securities
Act”) for resale by the Investor. The RRA’s deadline to file the resale registration statement is within one hundred fifty
(150) days of November 22, 2022 with the effectiveness deadline being within one hundred eighty (180) days of November 22, 2022. Failure
to meet these deadlines constitutes an event of default under the Note.
The
foregoing summary of the SPA, the Note, the Warrant, and the RRA contains only a brief description of the material terms of each such
document and such description is qualified in its entirety by reference to the full text of the SPA, the Note, the Warrant, and the RRA,
filed herewith as Exhibits 10.1, 4.1, 4.2, and 10.2, respectively, and each such document is
incorporated by reference herein.
