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Item 1.01.
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Entry into a Material Definitive Agreement.
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On January 23, 2020, Edison Nation,
Inc. (the “Company”) entered into a loan agreement the (“Loan Agreement”) with Greentree Financial
Group, Inc. (the “Investor”), pursuant to which the Investor purchased a 10% Convertible Promissory Note (the
“Note”) from the Company, and the Company issued to the Investor a warrant (the “Warrant”) to
purchase 550,000 shares of the Company’s common stock, $0.001 per share (“Common Stock”). The proceeds from
the Note will be used for general working capital purposes and for the repayment of debt. On January 24, 2020, the Company
used $588,366.44 of the proceeds from the Note to pay off in full the 12% Convertible Promissory Note held by Labrys
Fund, LP, as described in further detail under Item 1.02, below.
On January 29, 2020, the Company and
the Investor entered into an Amendment Agreement, amending the Loan Agreement, the Note, and the Warrant to: (i) correct the
effective date set forth in the Loan Agreement, Note and Warrant to January 23, 2020, (ii) clarify the terms of the
registration right provision in the Loan Agreement, and (iii) to ensure that the total number of shares of Common Stock
issued pursuant to the Loan Agreement, the Note, and/or the Warrant, each as amended, does not exceed 17.99% of the
Company’s issued and outstanding Common Stock as of January 23, 2020.
Loan Agreement
Upon execution of the Loan Agreement, the
Company issued to the Investor 100,000 shares of Common Stock (the “Origination Shares”) as an origination fee, plus
an additional 60,000 shares of Common Stock as consideration for advisory services.
Pursuant to the Loan Agreement, the Company
agreed to pay certain costs of the Investor, including $15,000 for the Investor’s legal fees and transfer agent fees resulting
from conversion of the Note. The Loan Agreement also contains representations and warranties by the Company and the Investor, which
the Company believes are customary for transactions of this type. Furthermore, the Company is subject to certain negative
covenants under the Loan Agreement, which the Company also believes are also customary for transactions of this type.
The Loan Agreement, as amended, also contains
a registration rights provision, pursuant to which the Company is required to prepare and file a registration statement (the “Registration
Statement”) with the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of
1933, as amended, registering a total of 1,200,000 shares of Common Stock issued to the Investor pursuant to the Loan Agreement,
Note and Warrant. The Company will be required to have such Registration Statement filed within 30 days of the effective date of
the Loan Agreement (which, as amended, is January 23, 2020) and declared effective by the SEC within 105 calendar days following
the effective date of the Loan Agreement. If the Company fails to file or have declared effective the Registration Statement within
the timeframe set forth in the Loan Agreement, or certain other events occur as set forth in the Loan Agreement, the Company is
obligated to pay the Investor an amount of liquidated damages equal to $35,000 per month until such failure is cured. In addition
to the registration rights granted to the Investor, the Loan Agreement contains a “true up” provision, which requires
the Company to issue the Investor additional shares of Common Stock during the period beginning on the effective date of the Registration
Statement until the 90th day after the effective date of the Registration Statement, if the average of the 15 lowest
daily closing prices of the Common Stock is less than $2.00.
Note
Pursuant to the Loan Agreement, the
Company agreed to issue and sell to the Investor the Note, in the principal amount of $1,100,000. The Note, as amended, is
due and payable October 23, 2020 (the “Maturity Date”), and is convertible at any time at a price of $2.00 per
share, subject to certain adjustments to the conversion price set forth in the Note. The Note reiterates the registration
rights set forth in the Loan Agreement and the Warrant. There is no prepayment penalty on the Note. If the Note is not prepaid by
the 90th day after the effective date of the Registration Statement, the Investor is required to convert the
entire amount of principal and interest outstanding on the Note at that time, at a price of $2.00 per share, unless an event
of default (as such events are described in the Note) under the Note has occurred, in which case the Note would be
mandatorily converted at a price equal to 50% of the lowest trading price of the Common Stock for the last 10 trading days
immediately prior to, but not including, the date that the Note mandatorily converts. The Note also contains a conversion
limitation provision, which prohibits the Investor from converting the Note in an amount that would result in the beneficial
ownership of greater than 4.9% of the total issued and outstanding shares of Common Stock, provided that (i) such conversion
limitation may be waived by the Investor with 61 days prior notice, and (ii) the Investor cannot waive the conversion
limitation if conversion of the Note would result in the Investor having beneficial ownership of greater than 9.9% of the
total issued and outstanding shares of Common Stock.
Warrant
Pursuant to the Loan Agreement, the
Company also issued the Investor a warrant to purchase 550,000 shares of Common Stock at an exercise price of $2.00 per
share, subject to certain adjustments to the exercise price set forth in the Warrant. The Warrant, as amended, expires on
January 23, 2023. If the closing price per share of the Common Stock reported on the day immediately preceding an exercise of
the Warrant is greater than $2.00 per share, the Warrant may be exercised cashlessly, based on a cashless exercise formula.
The Warrant reiterates the registration rights set forth in the Loan Agreement and the Note. The Warrant also contains
a repurchase provision, which at any time after the Registration Statement is effective and the Common Stock has traded at a
price over $3.00 share for 20 consecutive days, gives the Company a 30-day option to repurchase any unexercised portion of
the Warrant at a price of $1.00 per share.
The foregoing descriptions of the
Loan Agreement, Note, Warrant, and Amendment Agreement do not purport to be complete and are qualified in their entirety by
reference to the full text of the Loan Agreement, Note, Warrant, and Amendment Agreement which are filed as, respectively,
Exhibits 10.1, 10.2, 10.3, and 10.4 hereto.
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Item 1.02.
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Termination of a Material Definitive Agreement.
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As reported in the Company’s
Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 29, 2019, the Company entered into
that certain securities purchase agreement (the “Labrys SPA”) with Labrys Fund, LP (“Labrys”)
pursuant to which Labrys purchased a 12% Convertible Promissory Note (the “Labrys Note”) from the Company.
Pursuant to the Labrys SPA, the Company issued the Labrys Note, in the principal amount of $560,000, with an original issue
discount in the amount of $60,000. The Labrys Note was due and payable February 26, 2020. Additionally, the Company initially
reserved 700,000 shares for issuance upon conversion of the Labrys Note and issued 181,005 shares of Common Stock to Labrys
as a commitment fee, of which 153,005 shares of Common Stock had to be returned to the Company in the event the Labrys Note
was fully paid and satisfied prior to its maturity date.
As stated above, on January 24, 2020,
the Company repaid the Labrys Note in full. Upon repayment of the Labrys Note, Labrys returned to the Company for
cancellation the 153,005 shares of Common Stock that had been originally issued to Labrys as a portion of the commitment fee
paid in connection with the Labrys Note, and allowed the Company to cancel the reservation of the 875,000 shares of Common
Stock that had been reserved pursuant to the Labrys SPA and Labrys Note.