Item 1.01 Entry into a Material Definitive
Agreement.
Convertible
Promissory Note
On
January 24, 2023, Digerati Technologies, Inc. (the “Company”), issued two unsecured convertible promissory notes (the “Convertible
Notes”) to two accredited investors (the “January Investors”). The closing of the transactions took place on January
25 and January 26, 2023.
Each
January Investor lent $600,000 to the Company for total gross proceeds of $1.2 million. Each Convertible Note has a principal amount of
$660,000, a ten percent (10%) per annum interest rate and mature on May 24, 2023 (such date, the “Convertible Note Maturity Date”).
The Company is obligated to make monthly interest only payments and is obligated to pay the principal amount plus any accrued interest
on the Convertible Note Maturity Date. The Company can, at its option, prepay the amount the Company owes pursuant to the Convertible
Notes without a penalty.
The
Convertible Note Maturity Date can be extended for up to four (4) additional thirty (30) day periods at the option of the Company in consideration
for the issuance to each January Investor of 165,000 shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock”) for each thirty (30) day extension period.
The
Company issued 660,000 shares of Common Stock to each of the January Investors. These 1.32 million shares of Common Stock (the “Convertible
Notes Commitment Shares”) were issued as additional consideration for the purchase of the Convertible Notes.
While
the Company intends to repay the Convertible Notes in full in conjunction with the closing of the Merger (as defined in this paragraph),
the January Investors will have the right to convert all or any portion of the principal amount the Company owes pursuant to the Convertible
Notes into shares of Common Stock at any time on or following the earlier of (i) one hundred twenty (120) calendar days after each Convertible
Note was funded 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.
When
the Convertible Notes are convertible, the conversion price will be $0.10 per share, 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
total amount of shares of Common Stock issuable pursuant to the conversion of the Convertible Notes is equal to 13.2 million shares (the
“Convertible Notes Conversion Shares”).
The
Convertible Notes are a short-term debt obligation that is material to the Company.
The
foregoing summary of the Convertible Notes contains only a brief description of the material terms of such documents and such description
is qualified in its entirety by reference to the full text of the form of Convertible Note, filed herewith as Exhibit 4.1 which is incorporated
by reference herein.
Securities
Purchase Agreement and Promissory Note
In
December 2022, the Company entered into securities purchase agreements (the “SPAs”) with a total of three (3) accredited investors
(the “December Investors”). The closing of the third of these transactions took place on December 29, 2022. With the largest
of these three transaction consisting of a loan in the principal amount of $188,235, each individual transaction was not material to the
Company. The combined amount owed pursuant to these three loans, however, is material to the Company.
Pursuant
to the SPAs, the December Investors purchased, and the Company issued, unsecured promissory notes (the “Notes”) in the aggregate
principal amount totaling approximately $482,354 (the “Principal Amount”) with an original issue discount totaling approximately
$72,354. The gross proceeds the Company received prior to payment of transaction expenses was $410,000. Each Note’s Maturity Date
is twelve (12) months after issuance (the “Maturity Dates”). The Notes have a ten percent (10%) per annum interest rate. The
Notes requires the Company to make total amortization payments to the Investors of approximately: (a) $58,000 in March 2023; (b) $87,000
in June 2023; and (c) $116,000 in September 2023. On the Maturity Dates, the Company will be required to make amortization payments to
the December Investors consisting of all remaining amounts owed under the Notes. Moody Capital Solutions, Inc. served as placement agent
for the Notes transactions. The SPAs contain customary representations and warranties and contains agreements and covenants including,
without limitation, a prohibition on variable rate transactions and the Company granting the December Investors 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 Notes.
While
the Company intends to repay the Notes in full in conjunction with the closing of the Merger, the December Investors 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) four (4) months after the issuance
date of the Notes or (ii) sixty (60) calendar days after the closing of the Merger. The December Investors will not convert the Notes
if such conversion would result in a December Investor together with such December Investor’s affiliates and any other persons acting
as a group together with such December Investor or any of such December 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 Notes are referred to herein
as the “Notes Conversion Shares.”
When
the Notes are convertible, the 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 total amount of Notes Conversion Shares, based on the Principal Amount alone, is 5,045,544 shares.
The
Company shall at all times reserve a certain amount of shares of common with regard to the shares issuable upon conversion of the Notes
(the “Reserved Amount”). Not maintaining the Reserved Amount is an event of default under the Notes.
The
Company can, at its option, prepay the amount the Company owes pursuant to the Notes without a penalty. Subject to the date limitations
for conversion, each December Investor is allowed to convert its Note into Notes Conversion Shares for a period of seven (7) trading days
following the Company submitting a prepayment notice to such December Investor.
The
December Investors can require the Company to repay all or any portion the amount the Company owes pursuant to the Notes 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 December Investors
can require the Company to repay all or any portion the amount the Company owes pursuant to the Notes via a payment of up to the greater
of (i) $1,000,000.00 or (ii) 20% of such proceeds.
The
Notes 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 Notes in the event of such defaults.
Notes
Commitment Shares and Warrant
In
connection with the purchase of the Notes and pursuant to the SPAs, the Company issued a total of (i) 606,907 shares of Common Stock to
the Investor (the “Notes Commitment Shares”) and (ii) warrants to the December Investors to purchase up to 3,034,535 shares
of Common Stock (the “Warrants”). The Warrants can be exercised for five (5) years from the date of issuance, have an exercise
price of $0.1195 (the “Exercise Price”), under a cash or cashless exercise provision at the option of the December Investors.
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 Notes amortization payments, the Exercise Price could be subject to a downward adjustment pursuant to dilutive issuance provision
in the Warrants that is similar to the one provided for in the Notes. Each December Investor will not exercise its Warrant if such exercise
would result in such December Investor together with such December Investor’s affiliates and any other persons acting as a group
together with such December Investor or any of such December 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 Warrants if, among other requirements, (i) the VWAP (as defined in the Warrants) 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 December Investors 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 SPAs and the issuance of the Notes and Warrants, the Company and the December Investors entered into
Registration Rights Agreements (the “RRAs”) with regard to the Notes Commitment Shares, the Notes Conversion Shares, and the
shares of Common Stock issuable pursuant to the exercise of the Warrants (the “Warrant Shares” and, together with the Notes
Commitment Shares and the Notes 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 December Investors. The RRA’s deadline to file the
resale registration statement is within one hundred fifty (150) days of the date of the SPAs with the effectiveness deadline being within
one hundred eighty (180) days of the date of the SPAs. Failure to meet these deadlines constitutes an event of default under the Notes.
The
foregoing summary of the SPAs, the Notes, the Warrants, and the RRAs 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 form of SPA, the form of Note, the form
of Warrant, and the form of RRA, filed herewith as Exhibits 10.1, 4.2, 4.3, and 10.2, respectively, and each such document is incorporated
by reference herein.
