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Item 1.01.
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Entry into a Material Definitive Agreement.
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On August 20, 2021, LGBTQ Loyalty Holdings, Inc. (the
“Company”) and GHS Investments, LLC (the “Purchaser”) consummated the purchase and issuance of an additional 250
shares of the Company’s Series D Convertible Preferred Stock (“Series D Preferred Stock”) at a price of $1,000 per share
pursuant to the terms of the Securities Purchase Agreement, dated as of July 13, 2021 (the “July SPA”) between the Company
and the Purchaser (the “Additional Closing”). The Series D Preferred Stock has a stated value of $1,200 per share (“Stated
Value”) and the holder of the Series D Preferred Stock has the right to receive a dividend equal to eight percent (8%) per annum,
payable quarterly, beginning on the issuance date of the Series D Preferred Stock and ending on the date that Series D Preferred Share
has been converted or redeemed. Dividends may be paid in cash or in shares of Series D Preferred Stock at the discretion of the Company.
Further, the holders of the Series D Preferred Stock have the right to receive assets in the event of liquidation, dissolution or winding
up before any distribution or payment shall be made to the holders of any securities junior to the Series D Preferred Stock.
In connection with the Additional Closing, on August
19, 2021, the Company filed a Certificate of Amendment to the Company’s Certificate of Designation of Preferences, Rights and Limitations
of Series D Convertible Preferred Stock with the Delaware Secretary of State, increasing the number of shares of authorized Series D Preferred
Stock from one thousand (1,000) shares to two thousand (2,000) shares, effective immediately (the “Amended Series D COD”).
As reported on a Current Report on Form 8-K filed
with the SEC on May 21, 2021, we filed a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred
Stock (the “May Series D COD”) with the Delaware Secretary of State to increase the number of authorized Series D Preferred
Stock to up to one thousand (1,000) shares of Series D Preferred Stock. The terms of the May Series D COD are otherwise identical to the
terms set forth in the original Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock
filed with the Delaware Secretary of State on April 7, 2021 (the “April Series D COD” and together with the May Series D COD
and Amended Series D COD, the “Series D COD”).
The conversion price (the “Conversion Price”)
for the Series D Preferred Stock is $0.008109, equal to 90% of the average VWAP for the ten (10) Trading Days immediately preceding the
date of the July SPA. The Conversion Price will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification
or similar transaction that proportionately decreases or increases the Common Stock. Following an “Event of Default,” as defined
in the July SPA, the Conversion price shall equal the lower of: (a) the then applicable Conversion Price; or (b) a price per share equaling
eighty percent (80%) of the lowest traded price for the Company’s common stock during the fifteen (15) Trading Days immediately
preceding, but not including, the Conversion Date.
Each share of Series D Preferred Stock is convertible,
at any time and from time to time, at the option of the holder thereof, into that number of shares of Common Stock (subject in each case
to a 4.99% beneficial ownership limitation) determined by dividing the Stated Value of such share of Series D Preferred Stock by the Series
D Preferred Stock Conversion Price.
Additionally, the Company shall have the right to
redeem (a “Corporation Redemption”), all (but not less than all), shares of the Series D Preferred Stock issued and outstanding
at any time after the issuance date, upon five (5) business days’ notice, at a redemption price per Series D Preferred Stock then
issued and outstanding (the “Corporation Redemption Price”), equal to the product of (i) the Premium Rate multiplied by (ii)
the sum of (x) the Stated Value, (y) all accrued but unpaid dividends, and (z) all other amount due to the holder pursuant to the Series
D COD and the SPA including, but not limited to late fees, liquidated damages and the legal fees and expenses of the holder’s counsel
relating to the Series D COD and/or the July SPA. “Premium Rate” means (a) 1.15 if all of the Series D Preferred Stock is
redeemed within ninety (90) calendar days from the issuance date thereof; (b) 1.2 if all of the Series D Preferred Stock is redeemed after
ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance date thereof; (c) 1.25 if all of the Series
D Preferred Stock is redeemed after one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the
issuance date thereof; and (iv) each share of Series D Preferred Stock shall be redeemed on the date that is one (1) calendar year from
the date of its issuance.
Pursuant to the Series D COD, we are required to reserve
and keep available out of our authorized and unissued shares of Common Stock two times the number of Common Stock needed to convert or
exercise all Series D Preferred Stock. Further, the holders of the Series D Preferred Stock are entitled to vote with all holders of the
Common Stock on an as converted or as exercised basis.
The Series D COD provides for conversion price adjustments
in the event of stock dividends, stock splits and similar transactions. It also provides for certain adjustments in connection with subsequent
rights offerings, pro rata distributions to holders of our Common Stock and fundamental transactions. Additionally, from the date of the
July SPA until the date when the holder no longer holds any Series D Preferred Stock, upon any issuance by the Company or any of its subsidiaries
of Common Stock or common stock equivalents (as defined in the Series D COD) for cash consideration, indebtedness or a combination of
units thereof (a “Subsequent Financing”), the holder may elect, in its sole discretion, to exchange (in lieu of conversion),
if applicable, all or some of the shares of Series D Preferred Stock then held for any securities or units issued in a Subsequent Financing
on a $1.00 for $1.00 basis.
Following an “Event of Default” (as defined
in the Series D COD), all outstanding shares of Series D Preferred Stock shall come immediately due for redemption and the redemption
amount shall accrue interest at the lesser of: (a) eighteen percent (18%) per annum; or (b) the maximum legal rate. Redemption following
an Event of Default shall occur at an amount equaling: 1.35 multiplied by the sum of the Stated Value, all accrued but unpaid dividends
and all other amounts due pursuant to the Series D COD for all Series D Preferred Stock outstanding. Additionally, following an Event
of Default, the Conversion Price shall equal the lower of: (a) the then applicable conversion price; or (b) a price per share equaling
eighty percent (80%) of the lowest traded price for the Company’s Common Stock during the fifteen (15) trading days preceding the
relevant conversion.
The Amended Series D COD is attached to this Current
Report as Exhibit 3.1 and the May Series D COD, April Series D COD and July SPA are incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed on May 21, 2021, Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 16, 2021
and Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 19, 2021, respectively. Descriptions of the Amended Series
D COD, the May Series D COD, the April Series D DOD and July SPA herein are qualified in their entirety to the text of Exhibits 3.1, 3.2,
3.3 and 10.1 hereto, which are incorporated herein by reference.
