Item 1.01. Entry into a Material Definitive Agreement.
On April 6, 2023, Wetrade Group Inc. (the “Company”) entered into those certain Securities Purchase Agreement (the “Securities Purchase Agreement) with certain accredited investors (the “Purchasers”), pursuant to which the Company will receive a net proceed of up to $16,500,000 in consideration of the issuance of:
| · | senior secured convertible notes in the aggregate original principal amount of $18,333,333.33 (the “Convertible Notes”); |
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| · | warrants to purchase up to 25% of the number of the Company’s shares of common stock (the “Common Stock”) underlying the aggregate face value of the Convertible Notes at the initial conversion price of $0.24 per share until on or prior to 11:59 p.m. (New York time) on the five-year anniversary of the closing date at an initial exercise price of $1.00 per share (the “Warrants”). |
The closing of the transaction underlying the Securities Purchase Agreement is subject to certain closing conditions.
The Convertible Notes bear interest at an interest rate of 5% per annum payable on each installment date commencing on the original date of issuance. If an Event of Default (as defined in the Notes) has occurred and is continuing, interest would accrue at the rate of 18% per annum, compounding monthly. The Convertible Notes are convertible into shares of common stock, beginning after the original date of issuance at an initial conversion price of $0.24 per share. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of common sock, or securities convertible, exercisable or exchangeable for, common stock at a price below the then-applicable conversion price (subject to certain exceptions).
The Warrants contain provisions permitting cashless exercise subject to certain conditions.
The Convertible Notes and the Warrants contain conversion limitations providing that a holder thereof may not convert the Convertible Notes or exercise the Warrants to the extent (but only to the extent) that, if after giving effect to such conversion or exercise, the holder or any of its affiliates would beneficially own in excess of 4.99% the ordinary shares immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
The Company has also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) to file with the Securities and Exchange Commission (the “SEC”) a registration statement covering the resale of all of the registrable securities under the Registration Rights Agreement.
The Convertible Notes will rank senior to all outstanding and future indebtedness of the Company and its Subsidiaries (as defined in the Securities Purchase Agreement), and will be secured by a first priority perfected security interest in all of the existing and future assets of the Company and each Subsidiary Guarantor (as defined in the Security and Pledge Agreement), as evidenced by (i) a security agreement to be entered into at closing (the “Security Agreement”), (ii) a deposit account control agreement (the “Deposit Account Control Agreement”) entered into with respect to certain accounts described in the Convertible Note and the Security Agreement, and (iii) a guaranty to be executed by certain subsidiaries of the Company (the “Subsidiary Guarantee”) pursuant to which each of them will guaranty the obligations of the Company under the Convertible Notes and the other transaction documents.
Pursuant to the Securities Purchase Agreement, the Company agreed to seek the approval of its shareholders for the issuance of all shares of common stock issuable upon conversion of the Convertible Notes and the exercise of the Warrants, in compliance with the rules of the Nasdaq Capital Market (the “Shareholder Approval”). It is a condition to the closing that the Company enter into voting agreements (the “Voting Agreements”) with certain significant shareholder of the Company (each, a “Shareholder”), pursuant to which each Shareholder will agree, with respect to all of the voting securities of the Company that such Shareholder beneficially owns as of the date thereof or thereafter, to vote in favor of the Shareholder Approval.
The Company also agrees to enter into a placement agent agreement with Univest Securities LLC (the “Placement Agent”) at the closing, pursuant to which the Company will engage the Placement Agent to act as the Company’s placement agent in connection with the transaction and agree to pay the Placement Agent (i) a cash fee equal to 7% of the gross proceeds received by the Company from the sale of the securities at the closing of the offering; and (ii) $150,000 in out-of-pocket expenses, including the reasonable fees and expenses of Placement Agent’s counsel and due diligence analysis.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Convertible Notes, the Securities Purchase Agreement, the Form of Warrants, the Registration Rights Agreement, the Security Agreement, the Subsidiary Guaranty, the Voting Agreement, the Placement Agency Agreement, and the Deposit Account Control Agreement attached hereto as Exhibits 4.1, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8, respectively, each of which are incorporated herein by reference.