Kartoon Studios, Inc.
04/19/2024 | Press release | Distributed by Public on 04/19/2024 15:31
Material Agreement - Form 8-K
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On April 18, 2024, Kartoon Studios, Inc. (the "Company") entered into a securities purchase agreement (the "Purchase Agreement") pursuant to which the Company agreed to issue and sell directly to certain institutional investors up to 7,000,000 shares (the "Shares") of common stock, $0.001 par value per share (the "Common Stock"), and/or pre-funded Common Stock purchase warrants (the "Pre-funded Warrants") in up to four closings (the "Offering"). In the initial closing, the Company is offering 4,000,000 Shares and/or Pre-funded Warrants. In up to three additional closings, the Company will sell up to an additional 3,000,000 Shares and/or Pre-funded Warrants to such investors pursuant to the Purchase Agreement. The date of each of the additional closings will occur no later than one hundred eighty (180) days following the date of the Purchase Agreement, at such time that is mutually agreed up on by the Company and such investors, subject to certain conditions set forth in the Purchase Agreement. The offering price per Share is $1.00. The offering price is $0.99 per Pre-funded Warrant, which is equal to the offering price per Share less $0.01.
The Shares and Pre-funded Warrants can only be purchased together in the Offering but will be issued separately and will be immediately separable upon issuance. The holders of the Pre-funded Warrants will not have the right to exercise any portion of its Pre-funded Warrants if the holder, together with its affiliates and certain related parties, would beneficially own in excess of 4.99% (or, at the election of the purchaser, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. Each Pre-funded Warrant will have an exercise price of $0.01 per share. Each Pre-funded Warrant will be exercisable upon issuance and will expire when exercised in full.
The Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Placement Agent, including for liabilities under the Securities Act of 1933, as amended (the "Securities Act"), other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Purchase Agreement and may be subject to limitations agreed upon by such parties. In the Purchase Agreement, the Company has agreed not to effect or enter into an agreement to effect any issuance of shares of Common Stockand/or warrants or any securities convertible into or exercisable or exchangeable for shares of Common Stockfor a period of 90 days from the date of the Purchase Agreement, subject to certain exceptions.
The Offering was made pursuant to the Company's effective registration statement on Form S-3 (File No. 333-276259) (the "Registration Statement") and a related prospectus and prospectus supplement, in each case to be with the Securities and Exchange Commission (the "SEC").
On April 18, 2024, the Company also entered into a placement agent agreement (the "Placement Agreement") with EF Hutton LLC, as the placement agent (the "Placement Agent"), in connection with the Offering. Pursuant to the terms of the Placement Agreement, the Placement Agent agreed to use reasonable best efforts to arrange for the sale of the Shares. The Company will (i) pay the Placement Agent a cash fee equal to 7.0% of the gross proceeds received by the Company from the sale of the Shares (ii) pay the Placement Agent a non-accountable expense reimbursement of 1% of the gross proceeds received by the Company from the sale of the Shares at each closing, with the initial closing to take place within two business days of the date of the Purchase Agreement and any subsequent closing that occurs within 180 days following the date of the Purchase Agreement and (iii) reimburse the Placement Agent for certain of its expenses in an aggregate amount up to $75,000.
The Placement Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, including for liabilities under the Securities Act, other obligations of the parties, and termination provisions. In the Placement Agreement, the Company has agreed not to effect or enter into an agreement to effect any issuance of shares of Common Stockand/or warrants or any securities convertible into or exercisable or exchangeable for shares of Common Stockfor a period of 180 days from the date of the Placement Agreement, subject to certain exceptions.
The foregoing description of the terms of the Pre-funded Warrants, the Purchase Agreement and the Placement Agreement do not purport to be complete and are each qualified in their entirety by reference to the Pre-funded Warrants, the Purchase Agreement and Placement Agreement, which are filed as Exhibits 4.1, 10.1 and 10.2 hereto, and are incorporated herein by reference.
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