In connection with entering into the Loan Agreement, the Borrower entered into a Security Agreement with the Collateral Agent to which the Borrowers granted to the Collateral Agent, for the benefit of the Lender and the Collateral Agent, a security interest in substantially all current and future assets of the Borrowers to secure their obligations under the Loan Agreement (the “Security Agreement”). At the same time, the Company entered into a Parent Guaranty with the Collateral Agent, for the benefit of the Lender, to which the Company guarantees the payment and performance by the Borrowers when due (the “Guaranty”). The Company also issued a five-year warrant to purchase 1,500,000 shares of Common Stock at an exercise price of $2.50 per share to the Lender (the “Lender Warrant”). The Lender Warrant contains a cashless exercise feature by which, upon exercise, the Company will withhold a number of shares of Common Stock with a fair market value equal to the aggregate exercise price and deliver the remaining shares. The exercise price of the Lender Warrant is subject to adjustments for stock splits and similar events. Further, upon certain reorganizations, reclassifications, consolidations, mergers, asset sales or similar transactions which entitle the holders of Common Stock to receive stock, securities or assets with respect to or in exchange for Common Stock, thereafter, the Lender Warrant shall remain outstanding and be exercisable for the kind and number of shares of stock or other securities or assets resulting from such transactions in lieu of Common Stock. Also, the Company may not affect any such transaction unless the successor (if other than the Company) assumes the obligations under the Lender Warrant.
The foregoing descriptions of the Loan Agreement, the Promissory Note, the Security Agreement, the Guaranty and the Lender Warrant are qualified in their entirety by reference to the full text of those documents, copies of which are attached hereto as Exhibits 10.4, 10.5, 10.6, 10.7 and 4.1, respectively, and incorporated herein by reference.
Limitation on Representations
The representations and warranties of the Company contained in the documents describe above have been made solely for the benefit of the parties thereto. In addition, such representations and warranties (i) have been made only for purposes of the documents described above, (ii) in some cases, have been qualified by documents filed with, or furnished to, the SEC by the Company before the date of the documents described above (and stockholders and investors should read such documents in the context of the Company’s other public disclosures in order to have a materially complete understanding of the disclosures therein), (iii) are subject to materiality qualifications contained therein which may differ from what may be viewed as material by stockholders and investors, (iv) were made only as of the date of the documents described above or such other date as is specified therein, as applicable, and (v) have been included in the documents described above for the purpose of allocating risk between the contracting parties rather than establishing matters as facts.
The documents described above, the summaries of the documents described above and the other disclosures included in this Current Report on Form 8-K are intended to provide stockholders and investors with information regarding the terms of the documents described above, and not to provide stockholders and investors with any other factual information regarding the Company or its subsidiaries or their respective business. You should not rely on the representations and warranties in the documents described above or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the documents described above, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Other than as disclosed in this Current Report on Form 8-K, as of the date of this Current Report on Form 8-K, the Company is not aware of any material facts that are required to be disclosed under the federal securities laws that would contradict the representations and warranties in the documents described above. The Company will provide additional disclosure in its public reports to the extent that it is aware of the existence of any material facts that are required to be disclosed under federal securities laws and that might otherwise contradict the representations and warranties contained in the documents described above and will update such disclosure as required by federal securities laws. Accordingly, the documents described above should not be read alone, but should instead be read in conjunction with the other information regarding the Company and its subsidiaries that has been, is or will be contained in, or incorporated by reference into, the Forms 10-K, Forms 10-Q, Forms 8-K, proxy statements, registration statements and other documents that the Company files with the SEC.
2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information included in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information included in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 3.02.
The issuance of the shares of Preferred Stock to the Investor was exempt from registration under Securities Act Section 4(a)(2) and Securities Act Rule 506(b), the issuance of the shares of Preferred Stock to Dye Capital was exempt from registration under Securities Act Section 3(a)(9 and Section 4(a)(2), and the issuance of the Lender Warrant to the Lender was exempt from registration under Securities Act Section 4(a)(2). The Investor, Dye Capital and the Lender are sophisticated and represented in writing that they were accredited investors and acquired the securities for their own accounts for investment purposes. Further, Dye Capital converted its Convertible Promissory Note and Security Agreement under its terms into shares of Preferred Stock of the same issuer in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange. A legend will be placed on the certificates representing shares of Preferred Stoc and the Lender Warrant, subject to the terms of the applicable transaction documents, stating that the securities in question have not been registered under the Securities Act and cannot be sold or otherwise transferred without registration or an exemption therefrom.
Item 3.03. Material Modification to Rights of Security Holders.
The information included in Item 1.01 and Item 5.03 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 3.03.
5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On March 1, 2021 and effective as of such date, the Company filed a Certificate of Amendment to Designation (the “Designation Amendment”) with the Nevada Secretary of State to amend the Certificate of Designation of Series A Cumulative Convertible Preferred Stock (the “Certificate of Designation”) to increase the number of authorized shares of Preferred Stock from 60,000 to 110,000.
The foregoing description of the Designation Amendment is qualified in its entirety by reference to the full text of the Designation Amendment, a copy of which is attached hereto as Exhibit 3.1 and incorporated herein by reference
5.07. Submission of Matters to a Vote of Security Holders.
On March 1, 2021, holders of 43,610 shares of Preferred Stock, representing a majority of the Company’s issued and outstanding shares of Preferred Stock, executed a written consent in lieu of meeting that authorized and approved the Designation Amendment.
Item 7.01. Regulation FD Disclosure.
On March 2, 2021, the Company issued a press release, among other things, announcing the closing of some of the financing transactions described in this Current Report on Form 8-K.
The information under this Item 7.01 and the press release attached hereto as Exhibit 99.1 is being furnished by the Company to Item 7.01. In accordance with General Instruction B.2 of Form 8-K, the information contained under this Item 7.01 and the investor presentation attached hereto as Exhibit 99.1 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. In addition, this information shall not be deemed incorporated by reference into any of the Company’s filings with the Securities and Exchange Commission, except as shall be expressly set forth by specific reference in any such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
