GROM SOCIAL ENTERPRISES, INC. Item 1.01 Entry Into Material Definitive Agreement.
Entry into Convertible Debt Financing of up to
Effective as of
EF Hutton, division of
2nd Tranche Pending Shareholder Approval
The Company and Investor have agreed, subject to certain conditions, to a second
tranche (the "2nd Tranche") in the amount of
Note Terms
The initial Note of
The Conversion Price is subject to full ratchet anti-dilution protections only
in the event of financings that are below the Conversion Price with a floor of
In the event of an Event of Default, if the stock price is below the Conversion Price at time of default and only for so long as a default is continuing, the Notes would be convertible at a rate of 80% of the lowest VWAP in the ten prior trading days, provided, that if the default is cured the default conversion rate elevates back to the normal Conversion Price.
The Notes are repayable in 18 equal monthly installments with certain deferments
or an acceleration of up to 3 months' payments as more fully detailed in the
Note. The Company will have the right to repay the Notes either in cash each
month, or, at its option, with stock at a price of the lesser of the Conversion
Price or 95% of the lowest daily VWAP during the 10 consecutive trading days
immediately preceding the monthly payment date, with a floor of
Repayment of the Note is guaranteed by certain subsidiaries of the Company pursuant to a subsidiary guaranty (the "Guaranty").
The foregoing description of the Purchase Agreement, Note and Subsidiary Guaranty are a summary only and does not purport to be complete and, is qualified in its entirety by reference to the full text of such documents, the forms of which is attached hereto as Exhibit 10.1, 10.2 and 10.4 respectively, and incorporated herein by reference.
2 Warrant Terms
Pursuant to the Purchase Agreement, at the Closing the Investor was issued
813,278 Warrants, exercisable at
Lockup Agreements
The Purchase Agreement provides for the continuation of the existing lockup
agreements entered into between various executive officers, directors through
Registration Rights
The Company is required to file a registration statement with the
Security Agreement
The Company entered into a Security Agreement with the Investor pursuant to which the Investor was granted a security interest in all of the assets of the Company and certain of its subsidiaries (the "Security Agreement"). As part of the entry into the Security Agreement, certain pre-existing secured creditors agreed to give up their exclusive senior security interest in our TDH subsidiary assets, in exchange for a shared senior secured interest with the Investor on a pari pasu basis on all assets of the Company. The foregoing description of the Security Agreement and Intercreditor Agreement are a summary only and do not purport to be complete and is qualified in its entirety by reference to the full text of such documents, the forms of which is attached hereto as Exhibit 10.6 and 10.7 respectively, and incorporated herein by reference.
Item 3.02 Unregistered Sales of
The information contained in Item 1.01 above is incorporated herein by reference.
The Notes and Warrants described in Item 1.01 above were offered and sold in reliance upon an exemption from registration pursuant to Section 4(1) and Regulation D of the Securities Act of 1933, as amended.
Item 7.01 Regulation FD Disclosure.
On
The information in this Item 7.01, attached hereto, is being furnished as exhibit 99.1 hereto, and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed incorporated by reference in any filing of ours under the Securities Act, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Form 8-K in such filing.
3 Cautionary Statements
This filing includes "forward-looking statements." All statements other than
statements of historical facts included or incorporated herein may constitute
forward-looking statements. Actual results could vary significantly from those
expressed or implied in such statements and are subject to a number of risks and
uncertainties. Although the Company believes that the expectations reflected in
the forward-looking statements are reasonable, the Company can give no assurance
that such expectations will prove to be correct. The forward-looking statements
involve risks and uncertainties that affect the Company's operations, financial
performance, and other factors as discussed in the Company's filings with the
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. Exhibit No. Description
9.1 Voting Agreement
10.1 Securities Purchase Agreement, Dated as of September 14, 2021
("Closing Date"), between Grom Social Enterprises, Inc. , a Florida
corporation (the "Company"), and L1 Capital Global Master Fund ("L1
Capital ").
10.2 Form of $4,400,000 Principal Amount, 10% Original Issue discount
Senior Secured Convertible Note issued to L1 Capital , due March 14,
2023 .
10.3 Form of Common Stock Purchase Warrant issued to L1 Capital ,
exercisable at $4.20 for 813,278 shares of the Company's Common
Stock.
10.4 Form of Subsidiary Guaranty executed by Company subsidiaries, in
favor of L1 Capital .
10.5 Form of Registration Rights Agreement, dated September 14, 2021 ,
between the Company and L1 Capital .
10.6 Form of Security Agreement, dated as of September 14, 2021 , between
the Company and L1 Capital .
10.7 Form of Intercreditor Agreement, dated as of September 14, 2021 ,
between the Company, L1 Capital and certain pre-existing creditors of
the Company.
99.1 Press Release Dated September 14, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GROM SOCIAL ENTERPRISES, INC.
Date:
Darren Marks Chief Executive Officer
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