Item 1.01 Entry into a Material
Definitive Agreement.
On
March 12, 2023 (“Commencement Date”), Chicken Soup for the Soul Entertainment Inc. (the “Company”),
entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln
Park” or “Investor”) (each, a “Party”, and together, the “Parties”),
which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park
up to $50,000,000 of shares (the “Purchase Shares”) of our Class A common stock, par value $0.0001 per share (the “Class
A common stock”) over the thirty-six (36) month term of the Purchase Agreement. Concurrently with entering into the Purchase
Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln
Park with certain registration rights related to the shares issued under the Purchase Agreement (the “Registration Rights Agreement”).
On
the Commencement Date we will initially sell 375,000 shares of our Class A common stock (the “Initial Purchase Shares”)
to the Investor at $4.00 per share for $1,500,000 in gross proceeds (the “Initial Purchase”) under the Purchase Agreement.
Thereafter, the Company has the right, but not the obligation, on any business day selected by the Company (the “Purchase Date”),
provided that on such day the last closing sale price per-share of our Class A common stock is above a floor price, as defined in the
Purchase Agreement, to require Lincoln Park to purchase up to 20,000 shares of Class A common stock (the “Regular Purchase Amount”)
at the Purchase Price (as defined below) per purchase notice (each such purchase, a “Regular Purchase”). Lincoln Park’s
committed obligation under each Regular Purchase shall not exceed $1,000,000, provided that the Parties may mutually agree at any time
to increase the Regular Purchase Amount on any Purchase Date at the Purchase Price, above and beyond the foregoing amounts that the Investor
is committed to purchase. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to the lesser
of: (i) the lowest sale price of the Class A common stock during the Purchase Date, or (ii) the average of the three (3) lowest closing
sale prices of the Class A common stock during the ten (10) business days prior to the Purchase Date. The Company shall have the right
to submit a Regular Purchase notice to the Investor as often as every business day. A Regular Purchase notice is delivered to the Investor
after the market has closed (i.e., after 4:00 P.M. Eastern Time) so that the Purchase Price is always fixed and known at the time
the Company elects to sell shares to Lincoln Park.
In
addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion
may require Lincoln Park on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”)
up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume
on the Accelerated Purchase Date (the “Accelerated Purchase”) at a purchase price equal to the lesser of 97% of (i)
the closing sale price on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the
“Accelerated Purchase Price”). The Parties may mutually agree to increase the number of shares of Class A common stock
sold to the Investor on any Accelerated Purchase Date at the Accelerated Purchase Price.
The
Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to
be purchased thereunder have been properly delivered to Lincoln Park in accordance with the Purchase Agreement, to make additional purchases
upon the same terms as an Accelerated Purchase (an “Additional Accelerated Purchase”).
The
purchase price of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for
a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other
similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company
can sell to Lincoln Park under the Purchase Agreement may in no case exceed 2,712,094 shares (subject to adjustment as described above)
of Class A common stock (which is equal to approximately 19.99% of the shares of the Class A common stock outstanding immediately prior
to the execution of the Purchase Agreement) (the “Exchange Cap”), unless (i) shareholder approval is obtained to issue Purchase
Shares above the Exchange Cap, in which the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of Class
A common stock to Lincoln Park under the Purchase Agreement equals or exceeds $3.47 per share (subject to adjustment as described above)
(which represents the Minimum Price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the
signing of the Purchase Agreement, such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap
limitation under applicable Nasdaq rules).
The
Purchase Agreement contains customary representations, warranties, covenants, closing conditions, indemnification and termination provisions.
Sales under the Purchase Agreement may commence only after certain conditions have been satisfied, which conditions include the delivery
to Lincoln Park of a prospectus supplement covering the shares of Class A common stock issued or sold by the Company to Lincoln Park
under the Purchase Agreement, the filing with the Nasdaq Stock Market of a Listing of Additional Shares notification with respect to
the shares and Nasdaq having raised no objection to the consummation of transactions contemplated under the Purchase Agreement, and the
receipt by Lincoln Park of a customary opinion of counsel and other certificates and closing documents.
The
Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business
day notice to Lincoln Park to terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever,
any direct or indirect short selling or hedging of the Class A common stock. On the Commencement Date we also will issue 125,000 shares
of our Class A common stock to Lincoln Park as an initial fee for its commitment to purchase shares of our Class A common stock under
the Purchase Agreement, and we may issue up to 125,000 additional shares of our Class A common stock pro-rata in connection with the purchase
of shares of our Class A common stock under the Purchase Agreement (together the “Commitment Shares”).
There
are no limitations on the use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions
on the Company’s ability to enter into a similar type of agreement or Equity Line of Credit during the Term, excluding an “at-the-market”
transaction with a registered broker-dealer), rights of first refusal, participation rights, penalties or liquidated damages in the Purchase
Agreement. The Company may deliver Purchase Notices under the Purchase Agreement, subject to market conditions, and in light of its capital
needs, from time to time and under the limitations contained in the Purchase Agreement. Any proceeds that the Company receives under
the Purchase Agreement are expected to be used for working capital and general corporate purposes.
The
issuance of the Purchase Shares and Commitment Shares have been registered pursuant to the Company’s effective shelf
registration statement on Form S-3 (File No. 333-257057) (the “Registration
Statement”), and the related base prospectus included in the Registration Statement, as supplemented by a prospectus
supplement to be filed on or around the Commencement Date (the “Prospectus
Supplement”). A copy of the legal opinion as to the legality of the Shares is filed
as Exhibit 5.1 attached hereto.
The
foregoing is a summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by its nature,
is incomplete. Copies of the Purchase Agreement and the Registration Rights Agreement are filed as Exhibits 10.1 and 10.2 attached hereto.
The foregoing descriptions of the Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference
to such exhibits. The Purchase Agreement and Registration Rights Agreement contain customary representations and warranties, covenants
and indemnification provisions that the parties made to, and solely for the benefit of, each other in the context of all of the terms
and conditions of such agreements and in the context of the specific relationship between the parties thereto. The provisions of the
Purchase Agreement and the Registration Rights Agreement, including any representations and warranties contained therein, are not for
the benefit of any party other than the parties thereto and are not intended as documents for investors and the public to obtain factual
information about the current state of affairs of the parties thereto. Rather, investors and the public should look to other disclosures
contained in the Company’s annual, quarterly and current reports it may file with the Securities and Exchange Commission (the “SEC”).
The
information contained in this Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy
the shares of the Company’s Class A common stock discussed herein, nor shall there be any offer, solicitation or sale of the shares
in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction.