Item 3.02 Unregistered Sales of Equity Securities.
On March 29, 2021 (the "Closing Date"), the Registrant entered into a Securities
Purchase Agreement (the "Purchase Agreement") with Leviston Resources LLC (the
"Purchaser") dated March 26, 2021, pursuant to which the Registrant sold to the
Purchaser, and the Purchaser purchased from the Registrant, 5,000 shares of the
Registrant's Series B Preferred Stock, par value $0.0001 per share ("Series B
Preferred Stock") with an aggregate stated value of $5,400,000 (the "Closing
Shares"), a Series B Preferred Stock Purchase Warrant to purchase 5,000 shares
of Series B Preferred Stock, having a term expiring on March 26, 2023 and a per
share exercise price (subject to adjustment for stock splits, reverse stock
splits, mergers or reorganizations, and similar changes affecting shares of the
Registrant's common stock, par value $0.0001 per share ("Common Stock") and/or
securities entitling the holder thereof to acquire shares of Common Stock, as
applicable) of $1,000 (the "Series 1 Warrant"), and a Series B Preferred Stock
Purchase Warrant to purchase 5,000 shares of Series B Preferred Stock, having a
term expiring on March 26, 2024 and a per share exercise price (subject to
adjustment for stock splits, reverse stock splits, mergers or reorganizations,
and similar changes affecting shares of Common Stock and/or securities entitling
the holder thereof to acquire shares of Common Stock, as applicable) of $1,000
(the "Series 2 Warrant" and together with the Series 1 Warrant, the "Warrants,"
and together with the Closing Shares, the "Securities"). The aggregate purchase
price for the Securities is $5,000,000, which the Purchaser will pay as follows:
$2,000,000 on the Closing Date; $500,000 on or before the date that is three
business days from the date that the Registrant files, in accordance with the
terms and provisions of the Registration Rights Agreement (as defined below), a
registration statement relating to the shares of Common Stock issuable upon
conversion of the Closing Shares and the shares of Series B Preferred Stock
issuable upon exercise of the Warrants; and $2,500,000 on or before the date
that is three business days from the date that such registration statement is
declared effective in accordance with the terms and provisions of the
Registration Rights Agreement. The Warrants are exercisable on a cashless basis
(in accordance with the formula set forth therein) if, after 60 days following
the Closing Date, there is no registration statement registering, or the
prospectus contained therein is not available for the issuance of, the shares of
Common Stock issuable upon conversion of the Series B Preferred Stock issuable
upon exercise of the Warrants. The Registrant may also force exercise of the
Series 1 Warrant if the volume-weighted average price of Common Stock ("VWAP")
exceeds 250% of the 125% Conversion Price (defined below) for five consecutive
trading days, and may force exercise of the Series 2 Warrant if the VWAP exceeds
350% of the 125% Conversion Price for five consecutive trading days.
Under the Purchase Agreement, the Registrant agreed, for a period of 12 months
from the Closing Date, not to create, incur, assume or guarantee any
indebtedness for borrowed money of any kind (other than trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice) or amend or refinance any existing indebtedness for borrowed
money of any kind, including, without limitation, a guarantee on or with respect
to any of its properties or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom. In addition, the Registrant
agreed to indemnify the Purchaser and its affiliates against claims relating to
any breach of any of the Registrant's representations, warranties, covenants or
agreement sunder the Purchase Agreement and the related transaction documents
(the "Transaction Documents"), or any action instituted against the Purchaser
and its affiliates with respect to any of the transactions contemplated under
the Transaction Documents, other than actions solely based on the Purchaser's or
its affiliates' material breach of their representations, warranties or
covenants under the Transaction Documents or other agreements among such
parties, any violation of state or federal securities laws, or any conduct
finally adjudged to constitute fraud, gross negligence or willful misconduct.
The Registrant also granted to the Purchaser, for a period of 24 months
following the Closing Date, the right to participate on the same terms,
conditions and price, in the Registrant's issuance of any shares of Common Stock
or securities entitling the holder thereof to acquire shares of Common Stock
(other than customarily excluded issuances), up to an aggregate amount of 35%.
The Registrant also agreed, for a period of 30 days after the Closing Date, not
to issue or announce the issuance or proposed issuance of any shares of Common
Stock or securities entitling the holder thereof to acquire shares of Common
Stock.
Under the Purchase Agreement, the Registrant has the right, at any time from and
after the one-month anniversary of the effective date of the registration
statement filed pursuant to and in accordance with the terms and provisions of
the Registration Rights Agreement, to repurchase shares of unconverted Series B
Preferred Stock upon 30 days' prior written notice to the Purchaser, for an
amount equal to 125% of the aggregate stated value of such shares.
On March 29, 2021, the Registrant and the Purchaser also entered into a
Registration Rights Agreement dated March 26, 2021 (the "Registration Rights
Agreement") pursuant to which the Registrant agreed, at its expense, to file (on
or before the 21st day following the Closing Date), use commercially reasonable
efforts to effectuate (on or before the 60th day following the Closing Date,
provided that in the case of a full review by the staff of the Securities and
Exchange Commission (the "Commission"), such date shall be on or before the 90th
day following the Closing Date), and use commercially reasonable efforts keep
continuously effective (until all registrable securities covered thereby have
been sold) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), covering the resale on a continuous basis pursuant to
Rule 415 promulgated under the Securities Act (and subject to the requirements
and limitations thereof), of the shares of Common Stock issuable upon conversion
of the Closing Shares and the Series B Preferred Stock issuable upon exercise of
the Warrants (collectively, the "Registrable Securities"), and to qualify
resales of such shares under applicable state securities laws. In the event the
Commission does not permit the Registrant to register all of the Registrable
Securities due to the requirements or Rule 415 promulgated under the Securities
Act, the Registrant agrees to amend the applicable registration statement (if
permissible), or file a new registration statement, or both, so as to cover at
least the shares of Common Stock issuable upon conversion of the Closing Shares
as of the trading day immediately preceding the date of the filing of such
. . .
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On March 29, 2021, the Registrant filed with the Delaware Secretary of State a
Certificate of Designation of Preferences, Rights and Limitations of Series B
Preferred Stock (the "Series B Certificate of Designation") pursuant to which
the Registrant's Board of Directors, pursuant to authority granted under the
Registrant's Amended and Restated Certificate of Incorporation, designated
20,000 shares of the 5,000,000 authorized shares of the Registrant's preferred
stock as Series B Preferred Stock.
Each share of Series B Preferred Stock has a stated value of $1,080, is entitled
to receive cumulative dividends in cash, or at the holder's option, in shares of
Series B Preferred Stock (with one share of Series B Preferred Stock issued for
each $993 in accrued dividends), at the rate of 5% per annum, payable quarterly
on January 1, April 1, July 1 and October 1 (beginning on the first such date
after the original issue date), on each conversion date (with respect to the
shares of Series B Preferred Stock being converted), and on each optional
redemption date (with respect to the shares of Series B Preferred Stock being
redeemed), and is entitled to participate in any dividend or other distribution
to holders of Common Stock to the same extent that the holder of Series B
Preferred Stock would have participated therein if such holder had held the
number of shares of Common Stock issuable upon complete conversion of such
holder's shares of Series B Preferred Stock (without regard to any limitations
on exercise thereof, including any beneficial ownership limitations) immediately
before the record date for such distribution or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined to
receive the distribution, provided that if the distribution would result in the
holder exceeding then-applicable beneficial ownership limitation, the holder
shall not be entitled to participate in such distribution to such extent and
such distribution to such extent shall be held in abeyance until such time, if
ever, as the holder's right thereto would not result in the holder exceeding the
then-applicable beneficial ownership limitation.
Each share of Series B Preferred Stock is initially convertible into a number of
shares of Common Stock determined by dividing the stated value by the base
conversion price, initially an amount equal to the lesser of (i) 125% of the
10-day VWAP immediately preceding the conversion date (the "125% Conversion
Price") and (ii) 85% of the lowest VWAP on a trading day during the 10 trading
days prior to and ending on, and including, the conversion date (as applicable,
the "Conversion Price"), provided that in no event shall the 125% Conversion
Price or the Conversion Price be lower than $1. Notwithstanding the foregoing,
the Registrant is prohibited from effecting any conversion of Series B Preferred
Stock into shares of Common Stock, and no holder of Series B Preferred Stock may
convert such shares into shares of Common Stock, if, following such conversion,
the holder and its affiliates would beneficially own a number of shares
representing more than 9.99% of the outstanding shares of Common Stock
immediately after giving effect to such conversion. Holders of Series B
Preferred Stock may, upon 60-days prior notice to the Registrant, increase or
decrease the aforementioned beneficial ownership limitation, provided that the
beneficial ownership limitation in no event exceeds 9.99% of the outstanding
shares of Common Stock immediately after giving effect to the applicable
conversion. The Conversion Price for the Series B Preferred Stock is subject to
adjustment as set forth in the Series B Certificate of Designation.
So long as shares of Series B Preferred Stock are outstanding, the Registrant is
prohibited from redeeming, purchasing or otherwise acquiring any Common Stock or
securities enabling the holders thereof to acquire Common Stock (other than
those securities which are explicitly senior or pari passu to the Series B
Preferred Stock in dividend rights or liquidation preference) (as applicable
"Junior Securities") except as permitted under the Series B Certificate of
Designation. The Registrant is also prohibited from paying or declaring any
dividend upon Junior Securities so long as any dividends due on the Series B
Preferred Stock remain unpaid. The Series B Preferred Stock have no voting
rights except as required by law provided, however, that so long as any shares
of Series B Preferred Stock are outstanding, the Registrant is prohibited from
taking the following actions without the affirmative vote of the holders of a
majority of the outstanding shares of Series B Preferred Stock: alter or change
adversely the powers, preferences or rights given to the Series B Preferred
Stock or alter or amend the Series B Certificate of Designation; authorize,
create or issue any class of stock ranking as to dividends, redemption or
distribution of assets upon a liquidation senior to, or otherwise pari passu
with, the Series B Preferred Stock; amend its certificate of incorporation or
other charter documents in any manner that adversely affects any rights of the
Series B Preferred Stock; increase the number of authorized shares of Series B
Preferred Stock; or enter into any agreement with respect to any of the
foregoing. In addition, as long as any shares of Series B Preferred Stock are
outstanding, the Registrant shall not, directly or indirectly unless the holders
of at least 51% of the stated value of the then-outstanding shares of Series B
Preferred Stock shall have otherwise given prior written consent: amend the
Registrant's charter documents in any manner that materially and adversely
affects any rights of the Series B Preferred Stock; repay, repurchase or offer
to repay, repurchase or otherwise acquire more than a de minimis number of
shares of Junior Securities other than certain permitted exclusions; pay cash
dividends or distributions on Junior Securities; enter into any transaction with
any affiliate of the Registrant which would be required to be disclosed in any
public filing with the Commission, unless made on an arm's-length basis and
expressly approved by a majority of the disinterested members of the
Registrant's Board of Directors; or enter into any agreement with respect to any
of the foregoing. Upon any liquidation, dissolution or winding up of the
Registrant (but not including any change in control, merger, asset sale, share
exchange or similar transaction), the Series B Preferred Stock is entitled to
receive an amount equal to the stated value, plus any accrued and unpaid
dividends and any other fees or liquidated damages then due and owing under the
Series B Certificate of Designation, before any distribution or payment is made
to holders of any Junior Securities.
If the Registrant conducts a rights offering, each holder of Series B Preferred
Stock will be entitled to acquire, upon the terms applicable to such rights
offering, the aggregate number of securities which the holder could have
acquired if the holder had held the number of shares of Common Stock issuable
upon complete conversion of such holder's shares of Series B Preferred Stock
(without regard to any limitations on exercise thereof, including any beneficial
ownership limitations) immediately before the record date for such rights
offering or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined to receive the rights offering, provided
that if participation in the rights offering would result in the holder
exceeding then-applicable beneficial ownership limitation, the holder shall not
be entitled to participate in such rights offering to such extent and such
rights offering to such extent shall be held in abeyance until such time, if
ever, as the holder's right thereto would not result in the holder exceeding the
then-applicable beneficial ownership limitation.
At any time after 30 days following the Closing Date, the Registrant may
irrevocably elect to redeem, on the 30th day following applicable notice and
subject to its satisfaction of all of the equity conditions set forth in the
Series B Certificate of Designation, some or all of the outstanding shares of
Series B Preferred Stock, for cash in an amount equal to the sum of 125% of the
aggregate stated value then outstanding, plus accrued but unpaid dividends, plus
all liquidated damages and other amounts due in respect of the Series B
Preferred Stock. In addition, upon the occurrence of certain Triggering Events
(as defined in the Series B Certificate of Designation) primarily based on the
Registrant's failure to comply with its obligations under the Transaction
Documents, each holder of Series B Preferred Stock shall have the right to
require the Registrant to adjust the Conversion Price such that (a) the
percentage in clause (ii) of the definition of Conversion Price is reduced from
85% to 70% of the lowest VWAP on a trading day during the 10 trading days prior
to and ending on, and including, the conversion date, and (b) on the adjustment
date for the Triggering Event to reduce the 125% Conversion Price to the lesser
of (1) the then 125% Conversion Price and (2) 70% of the lowest VWAP on a
trading day during the 10 trading days prior to and ending on, and including,
such adjustment date. If elected by the holder, upon such Triggering Event the
Registrant shall instead pay to such holder, for each share of Series B
Preferred Stock held, the sum of (a) the greater of (i) 120% of the aggregate
stated value then outstanding and (ii) the product of (y) the VWAP on the
trading day immediately preceding the date of the Triggering Event and (z) the
stated value divided by the then Conversion Price, plus (b) all accrued but
unpaid dividends thereon, plus (c) all liquidated damages and other costs,
expenses or amounts due in respect of the Series B Preferred Stock.
A copy of the Series B Certificate of Designation is filed as an exhibit to this
Current Report on Form 8-K and is incorporated herein by reference. The summary
of the Series B Certificate of Designation set forth above is qualified by
reference to such exhibit.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
3.1 Certificate of Designation of Preferences, Rights and Limitations of
Series B Preferred Stock, filed with the Secretary of State of the State of
Delaware on March 29, 2021.
10.1 Securities Purchase Agreement dated March 26, 2021, between Wizard
Brands, Inc. and Leviston Resources LLC.
10.2 Registration Rights Agreement dated March 26, 2021, between Wizard
Brands, Inc. and Leviston Resources LLC.
10.3 Series B Preferred Stock Purchase Warrant (Series 1) issued to Leviston
Resources LLC.
10.4 Series B Preferred Stock Purchase Warrant (Series 2) issued to Leviston
Resources LLC.
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