Material Agreement - Form 8-K

Item 1.01 Entry into a Material Definitive Agreement.

Closing of Loan Transaction

On March 22, 2024 (the "Closing Date"), NetBrands Corp., a Delaware corporation (the "Company"), entered into a Securities Purchase Agreement (the "Purchase Agreement") with Cove Funding LP, a Delaware limited partnership ("Cove Funding"), pursuant to which Cove Funding agreed to loan the Company up to $300,000, in two tranches (the "Cove Loan"), and the Company issued Cove Funding a 12% Senior Secured Convertible Promissory Note (the "Convertible Note") to evidence the Cove Loan. The initial principal amount of the Convertible Note is $187,777 (the "First Tranche"), from which the Company received net proceeds of $150,000 (after deducting a 5% commitment fee, a 5% diligence fee, and Cove Funding's fees and expenses related to the transaction, including attorney's fees). The difference between the amount of the First Tranche and $300,000 (less a 5% commitment fee, a 5% diligence fee, and Cove Funding's fees and expenses related to the transaction, including attorney's fees) may be funded in a second tranche (the "Second Tranche" and, together with the First Tranche, the "Principal Amount"), upon the Company's written request, and subject to certain conditions. The Company will use the net proceeds received from the Cove Loan for working capital and general corporate purposes.

Pursuant to the terms of Purchase Agreement, as additional consideration for the Cove Loan, the Company agreed to issue Cove Funding (subject to a 4.99% beneficial ownership limitation) (a) $285,000 in shares of the Company's common stock, par value $0.0001 per share ("Common Stock"), in two tranches, plus (b) certain additional shares, in accordance with the terms and conditions of the Purchase Agreement (collectively, the "Commitment Shares"). The Commitment Shares will be issued in two tranches, with the first being in an amount of $187,778 in shares of the Company's Common Stock, to be issued upon funding of the First Tranche, and the second being in an amount of the balance of the Principal Amount in shares of the Company's Common Stock, to be issued upon funding of the Second Tranche.

The Convertible Note has a stated maturity date of July 21, 2024 (as such date may be extended by the parties, the "Maturity Date"), and an interest rate of 12% per annum ("Interest"). Interest began to accrue on the First Tranche on the Closing Date and will begin to accrue on the Second Tranche if and when such amount is funded by Cove Funding. Any Principal Amount that is not paid when due will bear interest at a rate of the lesser of (a) 24% per annum, or (b) the maximum amount permitted by law. The Convertible Note may not be prepaid in whole or in part, except as otherwise set forth in the Convertible Note. Pursuant to the terms of Convertible Note, if the Cove Loan is not repaid on or before the Maturity Date, the Company is required to issue Cove Funding shares of its Common Stock, on a monthly basis (subject to a 4.99% beneficial ownership limitation), with a value of 16.67% of the principal amount of the Cove Loan outstanding as of each issuance date, plus a commitment fee equal to 5% of such outstanding principal amount, until the Cove Loan is repaid in full (collectively, the "Penalty Shares"). In addition, commencing on the Maturity Date, Cove Funding may (subject to a 4.99% beneficial ownership limitation) convert amounts due under the Convertible Note into shares of the Company's Common Stock (collectively, the "Conversion Shares") at a conversion price equal to the lesser of (a) $0.07, or (b) the five-trading day closing price average immediately prior to the conversion date. The number of Conversion Shares issuable upon conversion of the Convertible Note will be subject to adjustment from time-to-time in the event of any combination, extraordinary distribution, dilutive issuance, or similar event. Upon the occurrence of an event of default under the Convertible Note, 125% of the amounts due under the Convertible Note will become immediately due and payable. In addition, as long as the Company has any obligations outstanding under the Convertible Note, the Company may not (among other things), without Cove Funding's written consent, incur any senior or pari passu indebtedness, sell a significant amount of the Company's assets, or issue equity securities in an amount greater than 10% of the Company's outstanding Common Stock, subject to certain exceptions.