Item 1.01 Entry into a Material Definitive Agreement
Private Placement Offering
On January 27, 2023, Theralink Technologies, Inc. (the "Company") consummated
the second closing (the "Second Closing") of a private placement offering (the
"Offering") pursuant to the terms and conditions of that certain Securities
Purchase Agreement, dated as of November 29, 2022 (the "Purchase Agreement"), by
and among the Company, certain accredited investors (the "Purchasers") and
Cavalry Fund I Management LLC, a Delaware limited liability company, in its
capacity as collateral agent (the "Collateral Agent"). At the Second Closing,
the Company sold the Purchasers (i) 10% Original Issue Discount Senior Secured
Convertible Debentures (the "Debentures") in an aggregate principal amount of
$1,045,000 and (ii) warrants (the "Warrants" and together with the Debentures,
the "Underlying Securities") to purchase up to 298,571,429 shares of common
stock of the Company (the "Common Stock"), subject to adjustments provided by
the Warrants, which represents 100% warrant coverage. The Company received a
total of $950,000 in gross proceeds at the Second Offering, taking into account
the 10% original issue discount, before deducting offering expenses and
commissions.
The Purchase Agreement contains customary representations, warranties, and
covenants of the Company, including, among other things and subject to certain
exceptions, covenants that restrict the ability of the Company without the prior
written consent of the Debenture holders, to incur additional indebtedness, and
repay outstanding indebtedness, create or permit liens on assets, redeem its
Common Stock, settle outstanding litigation, or enter into transactions with
affiliates.
As previously reported on the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on December 1, 2022, the Company and
Joseph Gunnar & Co. LLC, a U.S. registered broker-dealer ("Gunnar"), entered
into a placement agency agreement (the "Placement Agency Agreement" ), pursuant
to which Gunnar agreed to act as the placement agent for the Offering (the
"Placement Agent"). Pursuant to the terms of the Placement Agency Agreement, the
Company agreed to (i) pay Gunnar a cash placement fee of 10% of the gross cash
proceeds raised in the Offering, and (ii) issue to Gunnar warrants (the "PA
Warrants") on the terms identical to the Warrants sold in the Offering in an
amount equal to 10% of the Underlying Securities sold to investors.
As a result of the foregoing, the Company paid Gunnar an aggregate commission of
$95,000 in connection with the Second Closing. The Company also paid $7,500 in
fees to Gunnar's legal counsel.
Debentures
The Debentures mature on November 29, 2023, subject to a three-month extension
at the sole discretion of the Company. The Debentures bear interest at 10% per
annum payable upon conversion or maturity. The Debentures are convertible into
shares of Common Stock at any time after the maturity date and prior to
Mandatory Conversion (as defined below) at the conversion price equal to the
lesser of: (i) $0.003 per share and (ii) 70% of the average of the VWAP (as
defined in the Debentures) (or 50% of the average of such VWAP if an event of
default has occurred and has not been cured) of the Common Stock during the ten
Trading Day (as defined in the Debentures) period immediately prior to the
applicable conversion date. The Debentures are subject to mandatory conversion
("Mandatory Conversion") in the event the Company closes a registered public
offering of its Common Stock and receives gross proceeds of not less than
$5,000,000, with such offering resulting in the listing for trading of the
Common Stock on a national exchange ("Qualified Offering"). The conversion price
per share of Common Stock in the case of a Mandatory Conversion shall be the
lesser of (i) $0.003 per share and (ii) 70% of the offering price per share in
the Qualified Offering (the "Qualified Offering Price"). Alternatively, upon a
Mandatory Conversion, the holders of the Debentures may elect to exchange their
Debentures for newly issued convertible preferred securities at a price per
share equal to the Qualified Offering Price or the five-day VWAP of the Common
Stock prior to the date that is 181 days after the closing of the Qualified
Offering.
Notwithstanding the preceding, holders of Debentures shall have the right to
require satisfaction of up to 40% of all amounts outstanding under the
Debentures, in cash, at the time of a Qualified Financing. The Debentures also
contain certain price protection provisions providing for adjustment of the
number of shares of Common Stock issuable upon conversion of the Debentures in
case of certain future dilutive events or stock-splits and dividends.
Warrants
The Warrants are exercisable for five years and six months from the earlier of
the maturity date of the Debentures and the closing of the Qualified Financing,
at an exercise price equal to (i) in the event that a Qualified Offering is
consummated prior to the exercise of the Warrant, the price per share at which
the Qualified Offering is made ("Qualified Offering Price"), or (ii) in the
event that no Qualified Offering has been consummated, the lower of: (A) $0.003
per share and (B) an amount equal to 70% of the average of the VWAP (or 50% of
the average of the VWAP if an event of default has occurred and has not been
cured) for the Common Stock over the ten Trading Days preceding the date of the
delivery of the applicable exercise notice. If there is no effective
registration statement covering the resale of the shares underlying the Warrants
within 180 days following the closing of the Qualified Offering: (i) exercise
may be via cashless exercise, and (ii) 5% additional Warrants will be issued by
the Company to the holders for any portion of each month without such effective
registration statement.
The Warrants contain certain price protection provisions providing for
adjustment of the amount of securities issuable upon exercise of the Warrants in
case of certain future dilutive events or stock-splits and dividends.
Security Agreement and Exchanges
The Company's obligations under the Purchase Agreement, the Debentures and the
Exchanged Debentures (defined below) are secured by a first priority lien on all
of the assets of the Company pursuant to that certain Security Agreement, dated
November 29, 2022 (the "Security Agreement") by and among the Company, the
Purchasers and the Collateral Agent. Additionally, in connection with the
Offering, holders of certain existing convertible notes and shares of
convertible preferred stock of the Company (the "Existing Securities") agreed
pursuant to an agreement with the Company to convert the Existing Securities
into an aggregate of approximately $13.6 million of debentures ("Exchanged
Debentures") and warrants (representing 100% coverage of their original
investment amount). Such Exchanged Debentures have the same terms as the
Debentures described above, except that the holders are only entitled to
repayment in cash of up to 10% of their outstanding amounts upon a Qualified
Financing. To incentivize the existing noteholders and holders of convertible
. . .
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
To the extent required by Item 2.03 of Form 8-K, the information contained in
Item 1.01 of this Current Report on Form 8-K is incorporated herein by
reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are filed as part of this report.
Exhibit No. Description
4.1 Form of 10% Original Issue Discount Senior Secured Convertible
Debentures* (incorporated by reference to the Company's Current
Report on Form 8-K filed on December 1, 2022)
4.2 Form of Common Stock Purchase Warrant* (incorporated by reference
to the Company's Current Report on Form 8-K filed on December 1,
2022)
4.3 Form of 10% Original Issue Discount Senior Secured Convertible
Debentures (Exchanged Debentures)* (incorporated by reference to the
Company's Current Report on Form 8-K filed on December 1, 2022)
10.1 Placement Agency Agreement by and between the Company and Joseph
Gunnar & Co. (incorporated by reference to the Company's Current
Report on Form 8-K filed on December 1, 2022)
10.2 Form of Securities Purchase Agreement* (incorporated by reference
to the Company's Current Report on Form 8-K filed on December 1,
2022)
10.3 Form of Security Agreement* (incorporated by reference to the
Company's Current Report on Form 8-K filed on December 1, 2022)
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Schedules, exhibits, and similar attachments have been omitted pursuant to Item
601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of
such omitted materials supplementally upon request by the U.S. Securities and
Exchange Commission.
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