Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
As previously reported on November 18, 2021, the Company entered into a
Securities Purchase Agreement (the "SPA") with two institutional investors (each
an "Institutional Investor" and collectively the "Institutional Investors") to
sell them a series of senior convertible notes with an original issue discount
of 20% and ranking senior to all outstanding and future indebtedness of the
Company (the "Convertible Notes") in a private placement (the "Private
Placement"). On November 22, 2021, two Convertible Notes in an aggregate
original principal amount of $7,800,000 were issued to the Institutional
Investors in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"),
and Rule 506(b) of Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the 1933 Act,
together with the issuance of warrants (the "Warrants" and, together with the
Convertible Notes, the "Securities") to acquire common stock of the Company (the
"Common Stock"), as described below. Each of the Convertible Notes has a face
amount of $3,900,000 for which each Institutional Investor paid $3,250,000 in
cash. Additional Convertible Notes in an aggregate original principal amount not
to exceed $3,900,000 may also be issued to the Institutional Investors at a
later date under certain circumstances. The Convertible Notes do not bear
interest except upon the occurrence of an event of default.
The Convertible Notes mature in18 months and are payable by the Company in
installments and are convertible at the election of the Institutional Investors
as more fully described below.
Under the terms of the Convertible Notes:
The Convertible Notes are convertible at the option of the holders thereof, at
any time after the receipt of stockholders' approval of their issuance, into
shares of Common Stock at a rate equal to the amount of principal, interest (if
any) and unpaid late charges (if any), divided by a conversion price of $0.65.
Commencing six (6) month after the closing date, the Convertible Notes will
amortize in stock, subject to the satisfaction of certain equity conditions, or,
at the Company's option, in cash. Amortization of the Convertible Notes in
stock will be consummated at an amortization conversion price of 82% of the sum
of (A) the two (2) lowest VWAPs of the Common Stock on any Trading Day during
the ten (10) consecutive Trading Day period ending and including the Trading Day
immediately preceding the applicable Installment Date, divided by (B) two (2),
subject to a floor of $0.1557.
Under the terms of the Warrants:
The Warrants to purchase 900,000 shares of Common Stock are exercisable at the
option of the holders thereof into shares of the Common Stock at an exercise
price of $0.71 per share.at any time or times in whole or in part, after
stockholder approval of their issuance has been obtained.
Notwithstanding the foregoing, as further described below, the holders of the
Securities are prohibited from converting the Convertible Notes or exercising
the Warrants, and any payments of interest and principal in shares of the Common
Stock will be held in abeyance, to the extent a holder would beneficially own
more than 4.99% (or 9.99%, if the holder elects the higher threshold) of the
Company's outstanding shares of Common Stock after such conversion or payment.
The placement agent for the Private Placement, FT Global Capital Inc. also
received a warrant to purchase up to 8% of the aggregate number of shares of
Common Stock placed in the offering, subject to adjustment based on the number
of shares of Common Stock issued pursuant to the Convertible Notes placed in the
offering.
A Registration Rights Agreement and other transaction agreements were also
delivered to satisfy the conditions to the Closing.
The foregoing description is qualified in its entirety by reference to the full
text of the SPA, the Convertible Notes, the Warrants, the Registration Rights
Agreement and the other transaction agreements, which were filed as Exhibits
10.1 through 10.4 to the Registrant's Current Report on Form 8-K dated November
18, 2021 and are incorporated in this Report by reference.
Item 3.02 Unregistered Sale of Equity Securities.
The information required to be reported under this Item is incorporated by
reference to Item 2.01 of this Current Report on Form 8-K.
1
© Edgar Online, source Glimpses