| Item 1.01 |
Entry into a Material Definitive Agreement |
On January 31, 2023, Grom Social Enterprises, Inc. (the “Company”)
consummated a private placement (the “Private Placement”) pursuant to a Securities Purchase Agreement, dated January
25, 2023 (the “Securities Purchase Agreement”), with an institutional investor (the “Purchaser”)
for the purchase of an aggregate of (i) 100,000 shares (the “Shares”) of common stock, par value $0.001 per share (the
“Common Stock”), of the Company; (ii) 1,327,434 warrants (the “Purchase Warrants”) to purchase an
aggregate of 2,323,010 shares of Common Stock; and (iii) 1,227,434 prefunded warrants (the “Prefunded Warrants” and
together with the Purchase Warrants, the “Warrants”) to purchase 1,227,434 shares of Common Stock.
The purchase price of each Share and associated
Purchase Warrant was $2.26. The purchase of each Prefunded Warrant and associated Purchase Warrant was $2.25. The aggregate gross proceeds
of the Private Placement were approximately $3 million, before deducting fees to the placement agent and other expenses payable by the
Company. EF Hutton, division of Benchmark Investments, LLC, acted as the exclusive placement agent in connection with the Private Placement.
The Company has agreed to use the net proceeds for general working capital purposes.
The Purchase Warrants are immediately exercisable for $2.26 per share
of Common Stock, subject to certain adjustments, including with respect to stock dividends, splits,
subsequent rights offerings, pro rata distributions and a Fundamental Transaction (as defined in the Purchase Warrant) and until
the fifth anniversary of the original issuance date (the “Expiration Date”). The Prefunded Warrants are exercisable
immediately for $0.01 per share of Common Stock, subject to certain adjustments, including with
respect to stock dividends, splits, subsequent rights offerings, pro rata distributions and a Fundamental Transaction (as defined in the
Prefunded Warrant) until all of the Prefunded Warrants are exercised in full. The exercise of the Warrants are subject to beneficial
ownership blockers.
Pursuant to the Securities Purchase Agreement,
the Company is obligated to hold a special stockholders’ meeting no later than 60 days following the date of the Securities Purchase
Agreement to solicit the approval of the issuance of the Securities in compliance with the rules of the Nasdaq Stock Market (without regard
to any limitations on exercise set forth in the Warrants or the Prefunded Warrants). Pursuant to the Purchase Warrant, in the event stockholder
approval under the Securities Purchase Agreement has not occurred on or prior to the six month anniversary of the initial exercise date
(the “Initial Exercise Date”), at any time during the period beginning on the six month anniversary of the Initial
Exercise Date and ending on the Expiration Date, the holder of the Purchase Warrant (the “Holder”) may deliver one
or more written notices (each, an “Holder Optional Redemption Notice”) to the Company indicating that the Holder is
electing to require the redemption (each, a “Holder Optional Redemption”), in cash, of up to such portion of the Purchase
Warrant as set forth in the Purchase Warrant Agreement (the “Warrant Agreement”) (each, a “Holder Optional
Redemption Warrant Amount”). Upon receipt of a Holder Optional Redemption Notice, the Company shall promptly, but in any event
within one (1) business day of receipt of such notice, pay an aggregate cash amount (each, a “Holder Optional Redemption Price”)
as set forth in the Warrant Agreement. Upon the Holder’s receipt of the Holder Optional Redemption Price with respect to a Holder
Optional Redemption, the applicable Holder Optional Redemption Warrant Amount of the Purchase Warrant with respect thereto shall be redeemed
by the Company and cancelled and any remaining portion of the Purchase Warrant shall remain in full force and effect in accordance herewith.
Registration Rights Agreement
In connection with the Private Placement, the Company entered into
a Registration Rights Agreement with the Purchasers, dated January 25, 2023 (the “Registration Rights Agreement”).
The Registration Rights Agreement provides that the Company shall file a registration statement covering the resale of all of the Registrable
Securities (as defined in the Registration Rights Agreement) with the Securities and Exchange Commission (the “SEC”)
no later than the 7th calendar day following the date of the Registration Rights Agreement, and have the registration statement declared
effective by the SEC as promptly as possible after the filing thereof, but in any event no later than the 30th calendar day following
the date of the Registration Rights Agreement, or in the event of a “full review” by the SEC, the 45th day following the date
of the Registration Rights Agreement.
The
Waiver with L1 Capital Global Opportunities Master Fund
In connection with the Private Placement, the
Company entered into a waiver agreement (the “Waiver”) with L1 Capital Global Opportunities Master Fund (“L1”)
waiving certain provisions of a securities purchase agreement, dated as of September 14, 2021 (the “2021 SPA”), by
and between the Company and L1. Pursuant to the terms of the Waiver, L1 waived certain provisions of the 2021 SPA and in consideration
thereof, the Company (i) issued 150,000 purchase warrants substantially similar to the Purchase Warrants issued in connection with the
Securities Purchase Agreement; and (ii) paid a cash fee of $50,000 to L1.
The foregoing summaries of the Securities Purchase
Agreement, the Purchase Warrant, the Prefunded Warrant, the Registration Rights Agreement and Waiver are qualified in their entirety by
reference to the full text of those documents which are filed as exhibits to this Form 8-K and are incorporated by reference herein.
