SRAX Inc. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation, Events That Accelerate or Increase a Direct Financial Obligation, Unregistered Sales of Equity Securities, Financial Statements and Exhibits
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Item 1.01 Entry into a Material Definitive Agreement.
On November 2, 2023, SRAX, Inc. (the “Company”) entered into definitive securities purchase agreements (the “Securities Purchase Agreement”) with certain accredited and institutional investors (the “Purchasers”) for the purchase and sale of an aggregate of: (i) $552,000 in principal amount of Original Issue Discount Convertible Debenture (the “Debentures”) for $460,000 (representing a 20% original issue discount) (“Purchase Price”) and (ii) warrants to purchase up to 3,680,000 shares of the Company’s Class A common stock (the “Warrants”) in a private placement (the “Offering”) exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemption provided by Rule 506(b) of Regulation D and Section 4(a)(2) of the Securities Act.
The Debentures, which mature on November 3, 2024, pay 0%, no interest per annum commencing on November 3, 2023. In the event a Purchaser converts a portion of its Debenture into Common Stock, such amount will be deducted from the principle balance.
The Debentures are convertible at the option of the holder into shares of our Class A common stock (“Common Stock”) at an initial conversion price of $0.25 per share, subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations (v) subsequent equity sales.
Conversions are limited to the “Beneficial Ownership Limitation”, which shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply
Subject to our compliance with certain equity conditions, (as more fully set forth in the Debentures), upon ten (5) trading days’ notice to the Purchasers, the Company has the right to prepay the Debentures in cash at 120% of their outstanding principal, plus accrued interest for the first 90 days of the note and 135% thereafter.
The Debentures also contain certain customary events of default provisions, including, but not limited to, default in payment of principal, changes in control of the Company. Upon the occurrence of any such event of default, the outstanding principal amount of the Debenture plus liquidated damages, interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the Purchaser’s election, immediately due and payable in cash.
The Warrants are initially exercisable at .25 per share and, are subject to cashless exercise after six months if the shares underlying the Warrants are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. (v) subsequent equity sales.
Pursuant to the terms of the Debentures and Warrants, a Purchaser will not have the right to convert any portion of the Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% or 9.99% (at the Purchaser’s option) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or exercise, as such percentage ownership is determined in accordance with the terms of the Debentures and the Warrants; provided that at the election of a holder and notice to us such percentage ownership limitation may be increased to 9.99%; provided that any increase will not be effective until the 61st day after such notice is delivered from the holder to the Company.
The Offering closed on November 3, 2023.
The securities offered have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This current report shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.
The foregoing summaries of each of the Securities Purchase Agreement, the Registration Rights Agreement, the Security Agreement, the Debentures, and the Warrants are qualified in their entirety by reference to the full text of each such document, a copy of the form of each is attached hereto as Exhibits 10.01, 10.02, 10.03, 4.01, and 4.02, respectively, and each of which is incorporated herein in its entirety by reference.
Pursuant to the rights entered into with our senior secured lender as filled in for 8K on September 14, 2023, the lender has the rights to convert any cash payments due to them into a subsequent equity offering. The lender has opted to convert $454,202 of amounts owed into the above referenced note at the same terms and conditions. The lender shall be issued 3,633,616 warrants per the agreements listed above.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth above in Item 1.01 of this current report on Form 8-K is incorporated herein by reference in its entirety.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The information set forth above in Item 1.01 of this current report on Form 8-K is incorporated herein by reference in its entirety.
Item 3.02 Unregistered Sale of Equity Securities.
The information set forth above in Item 1.01 of this current report on Form 8-K is incorporated herein by reference in its entirety.
Item 9.01 Financial Statements and Exhibits.
| Exhibit Number | Description | |
| 4.01 | Form of Original Issue Discount Convertible Debenture | |
| 4.02 | Form of Common Stock Purchase Warrant | |
| 10.01 | Form of Securities Purchase Agreement | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: November 6, 2023 | SRAX, Inc. | |
| /s/ Christopher Miglino | ||
| By: | Christopher Miglino | |
| Chief Executive Officer |