Grom Social Enterprises, Inc. announced that it has entered into a securities purchase agreement with L1 Capital Global Master Fund Ltd. for a private placement of 10% original issue discount senior secured convertible notes for gross proceeds of $5,310,000 on September 14, 2021. The notes will be issued at a 10% discount on the principal amount of $5,900,000. The company has agreed to reimburse L1 Capital Global Opportunities Master Fund, the non-accountable sum of $35,000 for its legal fees and expenses. The company will issue securities pursuant to Section 4(a)(2) of the Securities Act, and Rule 506 promulgated thereunder.

On the same date, the company issued a 10% original issue discount senior secured convertible note, due March 13, 2023 for proceeds of $3,960,000 in its first tranche. The note was issued at a discount of $440,000, representing 10% discount on the principal amount of $4,400,000. As a part of the tranche, the company also issued a five year common stock purchase warrant exercisable at $4.20 per share for 813,278 shares. The warrants are exercisable via cashless exercise only for so long as no registration statement covering resale of the shares is in effect. The note is convertible, at the discretion of the investor, into common shares of the company at a fixed conversion price of $4.20 per share, or approximately 1,047,619 shares. 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 volume weighted average price during the 10 consecutive trading days immediately preceding the monthly payment date, with a floor of $1.92. If the company repays the entire principal amount of the notes with stock, presuming current stock prices, an aggregate of 1,929,824 shares to repay the note over 18 months in equal installments, or in combinations of cash and stock. The repayment of note is guaranteed by certain subsidiaries of the company. As a part of the first tranche, the company paid $20,000 to L1 Capital Global Opportunities Master Fund for its legal fees and expenses. The company will raise $1,350,000 in its second tranche from the issuance of a note with a principal amount of $1,500,000. The company will also issue 277,777 warrants at the same terms, which would require stockholder approval.