INLB Item 9 Labs Corporation (CE)

On March 1, 2023, Item 9 Labs Corp., a Delaware corporation (the “Company”), and each of its wholly owned subsidiaries, 938287AZ, LLC (“938287AZ”), and 750 NV LLC, each an Arizona limited liability company (“750 NV”) (collectively, the Company, 938287AZ and 750 NV are referred to as the “Borrower”), received written notice from Pelorus Fund REIT, LLC, a Delaware limited liability company (“Pelorus”) that an event of default has occurred with respect to those certain Construction Loan and Security Agreement’s dated as of August 25, 2021 (the “Loan Agreements”) by and between 750 NV and Pelorus and 938287AZ and Pelorus (the “Pelorus Notice”). The Pelorus Notice provides that the notice was transmitted to supplement a prior default notice dated September 21, 2022, and sets forth certain Events of Default under the Loan Agreements.

The Pelorus Notice states Pelorus, in its sole discretion, may (i) refuse make any additional loans or financial accommodations of any kind to the Borrower, (ii) implement the Default Rate retroactively to August 19, 2021 and a late charge, and (iii) use the Fund Control Reserve as set forth in Section 2.6.11 of the Loan Agreement. Pursuant to the Pelorus Notice and Loan Agreements, Pelorus has made a protective advance of $2,536,589.51 (the “AZ Protective Advances”) and $399,087.80 (the “NV Protective Advances”) in order to remove certain Mechanic’s Lien Liens from the Mortgaged Properties (as defined in the Loan Agreements) and prevent the imposition of additional Liens on the Mortgaged Properties and/or the Collateral. The AZ Protective Advances and NV Protective Advances will be added to the Secured Obligations as provided in the Loan Agreement.

The Pelorus Notice indicates that Pelorus reserves all of its rights under the Loan Agreement. On March 7, 2023, Pelorus demanded payment in full of $17,860,174.

The Company previously disclosed the Loan Agreements are in default in a Form 10-Q filed with the SEC on February 14, 2023 and Form 10-K for year ended September 30, 2022 filed with the SEC on January 13, 2023.

The foregoing description of the Loan Agreements are not complete and is qualified in its entirety by reference to the full text of the Loan Agreements, a copy of which were filed as Exhibit 10.1 and 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 31, 2021, which report is incorporated herein by reference.