Item
1.01. Entry into a Material Definitive Agreement.
Private
Offering
As
previously disclosed in the Current Report on Form 8-K filed by Cipherloc Corporation (the “Company”, “we”
or “us”), on April 8, 2021, on March 31, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase
Agreement”), with certain accredited investors (the “Purchasers”), pursuant to which the Company, on March
31, 2021, sold the Purchasers an aggregate of 35,757,942 (a) shares of common stock (the “Shares”), and (b) warrants
to purchase shares of common stock (the “Warrants”) of the Company. The Shares and Warrants were sold at a price of
$0.18 per combined Share and Warrant (the “Offering Price”), which was equal to 80% of the closing sales price of
the Company’s common stock on the OTC Pink market on March 30, 2021, which was the last trading day prior to the entry into the
Purchase Agreement.
The
Purchase Agreement allowed for additional sales of Shares and Warrants, and additional closings, until the earlier of (a) April 30, 2021;
(b) the date that the Company had sold $10 million in Shares and Warrants; or (c) such earlier date as the Company and the Placement
Agent (defined below) may mutually agree.
Subsequent
to the original March 31, 2021 closing, additional Purchasers became party to the Purchase Agreement, and purchased an aggregate of 19,791,673
Shares (55,549,615 Shares when including Shares sold on March 31, 2021) and 19,791,673 Warrants (55,549,615 Warrants when including Warrants
sold on March 31, 2021) pursuant to the terms of the Purchase Agreement, pursuant to closings which occurred on April 7, 2021; April
9, 2021; and April 16, 2021, as follows:
Date
of Closing
|
|
Shares
Sold
|
|
Warrants
Sold
|
April
7, 2021
|
|
7,513,893
|
|
7,513,893
|
April
9, 2021
|
|
8,683,336
|
|
8,683,336
|
April
16, 2021
|
|
3,594,444
|
|
3,594,444
|
|
|
19,791,673
|
|
19,791,673
|
The
purchase price of the Shares and Warrants sold in April 2021 were the same as those sold on March 31, 2021 ($0.18 per Share and Warrant),
and the Warrants had identical terms as those sold on March 31, 2021, except that each tranche of Warrants was exercisable for five years
from the Date of Closing on which they were granted.
Total
gross proceeds from the offering of the Shares and Warrants sold in April 2021 was $3.56 million, or $10 million when added to the $6.64
million of gross proceeds from the March 31, 2021 closing. As a result, the offering is now closed.
Paulson
Investment Company, LLC (the “Placement Agent”), served as placement agent for the offering and the Company entered
into a Placement Agent Agreement with the Placement Agent in connection therewith (the “Placement Agreement”) and
an Indemnification Agreement. As partial consideration for the services provided by the Placement Agent, the Company granted the Placement
Agent and its assigns, warrants to purchase shares of common stock (the “Placement Warrants”, also discussed in greater
detail below).
The
Company also granted the Purchasers registration rights pursuant to a Registration Rights Agreement (the “RR Agreement”).
There
were no changes to the terms of the Purchase Agreement, Lock-Up Agreements, RR Agreement, the Warrants (other than the dates of exercise
as discussed above), or the Placement Agent Agreement, in connection with the April 2021 sales, versus the March 31, 2021 sales, and
the terms of such documents/securities are described in greater detail in the Current Report on Form 8-K filed by the Company
on April 8, 2021, which information is incorporated herein by reference.
Pursuant
to the terms of the Placement Agent Agreement entered into with the Placement Agent, we agreed to pay the Placement Agent a cash commission
of 13% of the gross proceeds received in the offering ($463,125 in connection with the April 2021 sales and $871,736 in connection with
the March 31, 2021 closing, or $1,334,861 in aggregate), and to grant the Placement Agent a warrant to purchase 15% of the Shares sold
in the offering (2,968,748 shares in connection with the April 2021 sales and 5,363,691 shares in connection with the March 31, 2021
closing, or warrants to purchase 8,332,439 shares in aggregate).
The
Placement Warrants are evidenced by a Placement Warrant, have a term of 10 years, an exercise price of $0.18 per share (the Offering
Price), a term of 10 years, and cashless exercise rights. We are required to pay the Placement Agent liquidated damages of $10 per day
for each $1,000 of shares not timely delivered upon the exercise of the Placement Warrants. The Placement Warrants include a weighted
average anti-dilution right in the event we issue any shares of common stock or equivalents with a value less than the then exercise
price. As a result, the effect of the anti-dilution right may cause significant dilution to existing shareholders.
*
* * * *
The
foregoing summary included or incorporated by reference above, of the Warrant Agreements, Placement Warrants, Purchase Agreement, RR
Agreement, Lock-Up Agreements, Placement Agreement and Indemnification Agreement, is qualified in its entirety by reference to the full
text of the Form of Warrant Agreement, Placement Warrant, Form of Purchase Agreement, Form of Registration Rights Agreement, Form of
Lock-Up Agreement, Placement Agreement and Indemnification Agreement, which are incorporated herein by reference as Exhibits 4.1
and 4.2 and Exhibits 10.1 through 10.5, respectively, and are incorporated into this Item 1.01 in their entirety,
by reference.
The
Company intends to use the net proceeds from the offering to build the organization needed to commercialize its existing patented technology,
pay the compensation of directors and officers (including accrued compensation), and fund additional working capital needs.
This
Current Report on Form 8-K does not constitute an offer to sell any securities or a solicitation of an offer to buy any securities, nor
shall there be any sale of any securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such state or jurisdiction.