Item 1.01 Entry into a Material Definitive Agreement.
On April 20, 2022, Charge Enterprises, Inc. (sometimes referred to herein as “we,” “us,” “our” or similar terms) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an investment vehicle controlled by Island Capital Group LLC (the “Investor”), pursuant to which we agreed to issue (i) a minimum of 1,071,430 shares of our common stock, par value $0.0001 per share (“Common Stock”) and a maximum of 1,428,575 shares of Common Stock, and (ii) common stock purchase warrants (the “Common Stock Purchase Warrants”) to purchase a minimum of 1,500,000 and a maximum of 2,000,000 shares of Common Stock (the “Warrant Shares”, which with the Common Stock and Common Stock Purchase Warrants are collectively the “Securities”).
The amount of offering proceeds to us, and the number of shares of Common Stock and the Warrant Shares underlying the Common Stock Purchase Warrants to be issued to the Investor, all within the ranges as specified above, was conditioned upon, among typical conditions to closing for transactions of this type, the Investor’s option, on or prior to the closing, to elect to purchase up to the maximum amount but in no event less than the minimum amount.
On April 26, 2022, we and the Investor closed the transactions contemplated by the Purchase Agreement.
The Securities sold pursuant to the Purchase Agreement are issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D promulgated thereunder. The Investor represented that it is an accredited investor and that it is acquiring the Securities for investment purposes and not with a view to any distribution of the Securities in violation of the United States federal securities laws. Neither this Current Report on Form 8-K, nor any Exhibit attached hereto, is an offer to sell or the solicitation of an offer to buy the securities described herein.
Reference to Transaction Documents
The following descriptions of the Purchase Agreement, the Common Stock Purchase Warrants and the Registration Rights Agreement (the “Registration Rights Agreement”), and the transactions contemplated thereby, do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement, the Common Stock Purchase Warrants, and the Registration Rights Agreement (collectively, the “Transaction Documents”), copies of which are filed as Exhibits to this Current Report on Form 8-K.
The representations, warranties and covenants contained in the Transaction Documents were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to the Transaction Documents, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Transaction Documents are incorporated herein by reference only to provide information regarding the terms of the Transaction Documents, and not to provide any other factual information regarding us or our business, and should be read in conjunction with the disclosures in our periodic reports and other filings with the Securities and Exchange Commission (“SEC”).
The Purchase Agreement
On April 26, 2022, we consummated the transactions contemplated by the Purchase Agreement to raise aggregate gross proceeds of $10,000,025 from the Investor to provide us with additional working capital by the issuance and sale to the Investor of (i) 1,428,575 shares of Common Stock, and (ii) the Common Stock Purchase Warrants to purchase 2,000,000 Warrant Shares.
In addition to representations, warranties and covenants typical for transactions similar to those contemplated by the Purchase Agreement, we have granted to the Investor the right to participate until February 25, 2025 in any offer and sale we conduct of our Common Stock, including securities convertible into or exchangeable for Common Stock, or debt securities. The Investor (when aggregated with its affiliates) shall have the right to participate in up to 25% of any such future financing on the same terms, conditions and price provided for in such financing.
The Common Stock Purchase Warrants
Pursuant to the Purchase Agreement, we issued to the Investor the Common Stock Purchase Warrants which entitles the holder to purchase until April 26, 2025, up to 2,000,000 Warrant Shares, exercisable at an exercise price of $8.50 per Warrant Share subject to adjustment due to certain events, including stock dividends, stock splits and in connection with the issuance by us of our Common Stock or Common Stock equivalents at an effective price per share lower than the exercise price then in effect. The holder will be prohibited from exercising Common Stock Purchase Warrants into shares of Common Stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of our Common Stock then issued and outstanding (the “Beneficial Ownership Limitation”). The holder may reset the Beneficial Ownership Limitation to a higher or lower number upon providing written notice to us. Such notice will be effective 61 days after delivery to us.
The Registration Rights Agreement
The Registration Rights Agreement was executed in connection with the issuance of the shares of Common Stock and the Common Stock Purchase Warrants to the Investor requiring us to file no later than October 23, 2022, and cause to be declared effective by the SEC as promptly as possible thereafter, a resale Securities Act registration statement for the offer and resale of (i) the shares of Common Stock issued pursuant to the Purchase Agreement, and (ii) the Warrant Shares issuable upon exercise of the Common Stock Purchase Warrants. If we fail to have it filed by such date, or if we fail to maintain the effectiveness of the registration statement until all of such shares of Common Stock and Warrant Shares have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any volume or manner of sale restrictions, then we will be obligated to pay liquidated damages to the holders of such securities of $75,000, in addition to any other rights such holders may have, upon the occurrence of any such event and on each monthly anniversary thereafter until the event is cured. The Registration Rights Agreement also contains mutual indemnifications by us and the holders of registrable securities thereunder, which we believe are customary for transactions of this type.