Item 1.01 Entry into a Material Definitive Agreement.
Securities Purchase Agreement
On March 24, 2021, LiqTech International, Inc. (the "Company") entered into a
Securities Purchase Agreement (the "Purchase Agreement") with an institutional
investor (the "Investor") pursuant to which the Company agreed to issue and sell
a $15.0 million principal amount Senior Convertible Note due 2023 (the "Note")
and an aggregate of 80,000 shares (the "Shares" and, together with the Note, the
"Securities") of common stock, par value $0.001 per share (the "Common Stock"),
for an aggregate purchase price of $15.0 million upon the satisfaction of the
closing conditions set forth in the Purchase Agreement (the "Closing"). The
Purchase Agreement provides that the net proceeds from the sale of the
Securities shall be used for general corporate purposes, including working
capital and potential acquisitions. The Purchase Agreement contains customary
representations and warranties, including representations from the Investor
regarding its status as an "accredited investor" and its investment purpose, and
representations from the Company regarding its organization, authorization to
enter into the transaction, indebtedness, ability to conduct its business,
capitalization, absence of conflicts, compliance with law and financial
statements, among other things. The Purchase Agreement also provides that the
Company shall indemnify the Investor for all losses or damages arising out of
any breach of any representation, warranty or covenant of the Purchase Agreement
by the Company and any third party suits brought against the Investor arising
out of the Purchase Agreement and related transactions. The Purchase Agreement
includes customary covenants that require the Company to, among other things:
· timely file all reports required to be filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act");
· to secure listing the shares of Common Stock issuable pursuant to the terms
of the Note (the "Conversion Shares") and the Shares on the Nasdaq Capital
Market;
· not issue any securities for 90 days following Closing, and to not issue
certain other securities while the Note remains outstanding, including other
senior convertible notes or variable-rate securities;
· reserve shares of Common Stock for issuance as Conversion Shares and to
increase such reserve following the earlier of the Company's 2021 annual
meeting or November 1, 2021; and
· obtain stockholder approval of the issuance of the Conversion Shares in 2022
upon request of the Investor or at the Company's 2022 annual meeting.
Pursuant to the Purchase Agreement, the Company shall be required to register
the Securities pursuant to an effective registration statement within 180 days
from Closing, and the Purchase Agreement contains customary covenants with
respect to such registration rights, as well as certain liquidated damages
provisions for failing to comply with the timing obligations for the filing and
effectiveness of the registration statement and certain customary
indemnification obligations.
Convertible Note
Upon Closing, the Note will be a senior, unsecured obligation of the Company,
payable at 112% of the principal amount at maturity on October 1, 2023, or
earlier upon redemption or repurchase as set forth in the Note. The Note will be
convertible into Conversion Shares, in part or in whole, from time to time, at
the election of the Holder. The initial conversion rate will be based on 120% of
the average of the volume-weighted average price ("VWAP") for March 24, 2021 and
the five (5) trading days commencing March 26, 2021. The conversion rate is
subject to anti-dilution adjustments, and the Note has beneficial ownership
limitations such that the Company may not issue Conversion Shares in the event
that the Holder would own in excess of 4.99% of the Common Stock following such
issuance, or if all such issuances of Conversion Shares under the Note in would
in the aggregate equal 20% of the Company's outstanding Common Stock prior to
stockholder approval.
Beginning on March 1, 2022, and on the first day of each calendar month
thereafter, at the election of the Investor or other holder of the Note (the
"Holder"), the Company shall be required to redeem $840,000 of the amounts due
under the Note in cash or Common Stock at 90% of the lesser of (i) the VWAP of
the Common Stock on the trading day immediately preceding the payment date and
(ii) the average of the lowest three (3) VWAPs over the 10 days preceding the
payment date, which shall in no case be less than the floor price of $1.75 per
share (the "Market Price"). The Holder or the Company may also elect for the
Company to redeem the Notes at a 115% of the principal amount, in cash or in
Common Stock as set forth in the Note, if the Company undergoes a fundamental
change, as described in the Note. The Note has interest payable quarterly
beginning June 1, 2021 at a rate of 5% per annum. The number of shares issuable
if the Company elects to pay interest in shares of Common Stock shall be based
on the Market Price.
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The Note contains customary events of default related to payment, redemption
conversion, failure to comply with certain covenants contained in the Note, and
upon an event of default, subject to cure periods in certain cases, the interest
rate and conversion rate shall be adjusted as set forth in the Note, and the
Holder may declare amounts due under the Note immediately due and payable.
There is no material relationship between the Company or its affiliates and the
Investor other than in respect of the Purchase Agreement and the Note. The
foregoing is only a summary of the Purchase Agreement and the Note and does not
purport to be a complete description thereof. Such descriptions are qualified in
their entirety by reference to the Purchase Agreement and form of Note which are
filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form
8-K and are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Exhibit
10.1 Securities Purchase Agreement, by
and among the Company and HT
Investments MA, LLC
10.2 Form of Senior Convertible Note
due 2023
104 Cover Page Interactive Data File
(embedded within the Inline XBRL
document)
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