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UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
8-K
CURRENT REPORT
Pursuant to Section
13 OR 15(d) of The Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported):
June 21, 2022
GALAXY NEXT GENERATION, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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000-56006
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61-1363026
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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Galaxy Next Generation, Inc.
285 Big A
Road
Toccoa,
Georgia 30577
(Address of principal executive offices and zip code)
(706) 391-5030
(Registrant’s telephone number including area code)
N/A
(Former Name and Former Address)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of registrant under
any of the following provisions:
☐ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐ Soliciting
material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR
240.14a-12)
☐ Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
☐ Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Securities registered
pursuant to Section 12(b) of the Act: None.
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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N/A
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N/A
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N/A
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter). Emerging growth company
☐
If an emerging growth company, indicate by checkmark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
-1-
Item 1.01. Entry into a Material Definitive
Agreement.
On June 21, 2021, Galaxy Next Generation, Inc. (the “Company”)
entered into a Securities Purchase Agreement (the “Securities
Purchase Agreement”) with an investor pursuant to which the Company
issued a 12% promissory note in the principal amount of $600,000
(the “Note”) for gross proceeds of $540,000, together with a
warrant (the “Warrant”) to purchase 600,000 shares of the Company’s
common stock (the “Warrant Shares”) and 1,800,000 shares of the
Company’s common stock issued to the investor as commitment fee
shares (the “Commitment Fee Shares”) in respect of a $450,000
commitment fee (the “Commitment Fee”).
The Note bears interest at 12% per annum and is due and payable on
December 31, 2022 (the “Maturity Date”). The Maturity Date may be
extended at the sole discretion of the Company for a period of up
to six months. In the event that the Maturity Date is extended, the
Note will bear interest at 15% per annum for any period following
the original Maturity Date. Any amount of principal or interest on
the Note which is not paid when due will bear default interest at
the rate of the lesser of (i) eighteen percent (18%) per annum and
(ii) the maximum amount permitted under law. In the event the
Company receives gross proceeds of at least $5,000,000 in
connection with any debt or equity financing, the Company has
agreed to apply a portion of the proceeds from such financing to
repay the Note in full.
The Note is convertible in the event of a default into common stock
at a conversion price (the “Conversion Price”) equal to the lowest
trading price (i) during the previous twenty (20) trading day
period ending on the date of issuance of the Note, or (ii) during
the previous twenty (20) trading day period ending on the
conversion date. If in the case that the Company’s
common stock is not deliverable by DWAC, an additional 10% discount
will apply for all future conversions until DWAC delivery becomes
available. If in the case that the Company’s common stock is
“chilled” for deposit into the DTC system and only eligible for
clearing deposit, an additional 15% discount will apply for all
future conversions under all Note until such chill is lifted.
Additionally, if the Company ceases to be a 1934 Act reporting
company or if the Note cannot be converted into free trading shares
after one hundred eighty-one (181) days from the issue date (other
than as a result of the holder’s status as an affiliate of the
Company), an additional 15% discount will be attributed to the
conversion price. If the Company fails to maintain its
status as “DTC Eligible” for any reason, the principal amount of
the Note will increase by $5,000 and the conversion price will be
redefined to mean 70% multiplied by the market price of the common
stock.
So long as the Note is outstanding, upon any issuance by the
Company or any of its subsidiaries of any security with any term
more favorable to the holder of such security or with a term in
favor of the holder of such security that was not similarly
provided to the holder of the Note, then the Company shall notify
the holder of such additional or more favorable term and such term,
at holder’s option, will become a part of the transaction documents
with the holder. If while the Note is outstanding a third party has
the right to convert monies owed into common stock at a discount to
market greater than the Conversion Price in effect at that time
(before all other applicable adjustments in the Note), then the
holder, in holder’s sole discretion, may utilize such greater
discount percentage. In no event will the holder be entitled to
convert any portion of the Note in excess of that portion which
would result in beneficial ownership by the holder and its
affiliates of more than 4.99% of the outstanding shares of common
stock.
So long as the Company shall have any obligation under the Note,
the Company may not, without the holder’s written consent, create,
incur, assume guarantee, or otherwise become liable upon the
obligation of any person or entity, except by the endorsement of
negotiable instruments for deposit or collection, or suffer to
exist any liability for borrowed money, except (a) borrowings in
existence or committed on the date the Note was issued and of which
the Company has informed holder, (b) indebtedness to trade
creditors financial institutions or other lenders incurred in the
ordinary course of business, (c) borrowings, the proceeds of which
shall be used to repay the Note, or (d) borrowings which are
expressly subordinated to the Note.
Upon the occurrence of certain events of default specified in the
Note, such as a failure to honor a conversion request, failure to
maintain the Company’s listing or the Company’s failure to comply
with its obligations under Securities Exchange Act of 1934, as
amended, 200% of all amounts owed to holder under the Note,
including default interest if any, shall then become due and
payable. Upon the occurrence of other events of default specified
in the Note, such as a breach of the Company’s representations or
covenants or the failure register the Commitment Fee Shares as
required by the Securities Purchase Agreement or the Warrant Shares
as required by the Warrant, all amounts owed to holder under the
Note, including default interest if any, shall then become due and
payable. Further, if the Company shall fail to maintain its
listing, fail to comply with its obligations under Securities
Exchange Act of 1934, as amended, or lose the “bid” price for its
common stock for a period of five (5) days after written notice
thereof to the Company, after the nine-month anniversary of the
Note, then the principal amount of the Note will increase by
$15,000 and the holder shall be entitled to use the lowest trading
price during the delinquency period as a base price for the
conversion and the conversion price shall be redefined to mean
forty percent (40%) multiplied by the market price of the common
stock.
The Warrant is exercisable for a period of five years at an initial
exercise price of $.50, subject to adjustment for stock splits,
stock dividends or similar events. In addition, if while the
Warrant is outstanding, the Company issues or sells, or is deemed
to have issued or sold, any warrant or option to purchase common
stock and/or common stock equivalents other than in connection with
an exempt issuance (as defined), with a purchase price per share
less than the exercise price in effect immediately prior to such
issuance or sale or deemed issuance or sale, then immediately after
such issuance or sale or deemed issuance or sale, the exercise
price then in effect will be reduced to an amount equal to the new
issuance price. In the event the Company fails to timely file a
registration statement for the shares issuable upon exercise of the
Warrant the Warrant may be exercised on a cashless basis. In no
event will the holder be entitled to exercise any portion of the
Warrant in excess of that portion which would result in beneficial
ownership by the holder and its affiliates of more than 4.99% of
the outstanding shares of common stock.
The Company has agreed to include the shares exercisable upon
exercise of the Warrant and the Commitment Fee Shares in the next
succeeding registration statement filed by the Company with respect
to a public offering of its securities and to provide the investor
the option to include in such registration statement the shares
issuable upon conversion of the Note. If no such registration
statement is filed or if the Company fails to include such shares
in such registration statement, then no later than the date that is
the eighteen (18) month anniversary of the issuance of the Warrant,
the Company has agreed to file and cause to be declared effective a
registration statement including all shares issuable upon exercise
of the Warrant.
-2-
The Securities Purchase Agreement provides that if the Company
issues any shares of common stock at a price per share of less than
$0.25 during the period beginning on the date which is the six (6)
month anniversary of the closing date and ending on the date which
is the thirty-six (36) month anniversary of the closing date (the
“Adjustment Period”), the Company will issue to investor additional
Commitment Fee Shares such that the price per share of the
aggregate amount of Commitment Fee Shares (including such
additional Commitment Fee Shares) equals such lower price per
share. The Securities Purchase Agreement further provides that the
investor may elect during the Adjustment Period to the Company a
reconciliation statement showing the net proceeds actually received
from the sale of the Commitment Fee Shares (the “Sale
Reconciliation”). If, as of the date of the delivery by investor of
the Sale Reconciliation, the investor has not realized net proceeds
from the sale of such Commitment Fee Shares equal to at least the
Commitment Fee, then the Company is obligated to pay, within five
(5) business days, the applicable shortfall amount in cash or
immediately take all required action necessary to cause the
issuance of additional shares of common stock to the investor in an
amount sufficient such that, when sold and the net proceeds thereof
are added to the net proceeds from the sale of any of the
previously issued and sold Commitment Fee Shares, the investor will
have received total net funds equal to the Commitment Fee. In the
event that the Note has been repaid in full (including accrued and
unpaid interest) on or prior to its Maturity Date (without
extension), the Securities Purchase Agreement provides that the
Company shall have the right to redeem 1,000,000 of the Commitment
Fee Shares (as adjusted for stock splits, stock dividends or
similar events) which were originally issued for one dollar ($1.00)
paid in cash. In the event the Company receives gross proceeds of
at least $5,000,000 in connection with any debt or equity
financing, the Company agrees that it will apply a portion of the
proceeds to repay the Note in full.
The Securities Purchase Agreement provides the investor with a
right of first refusal with respect to future equity financings by
the Company for a period of twelve months following the closing
date.
The Securities Purchase Agreement contains customary
representations, warranties, conditions and indemnification
obligations of the parties. The representations, warranties and
covenants contained in such agreements were made only for purposes
of such agreements and as of specific dates, were solely for the
benefit of the parties to such agreements and may be subject to
limitations agreed upon by the contracting parties.
The shares of the Company’s common stock issued, and the shares to
be issued, under the Securities Purchase Agreement, the Note and
the Warrant were, and will be, sold pursuant to an exemption from
the registration requirements under Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and Rule
506 of Regulation D promulgated thereunder. The investor is an
accredited investor who has purchased the securities as an
investment in a private placement that did not involve a general
solicitation. The shares of common stock not been registered
under the Securities Act and may not be offered or sold in the
United States in the absence of an effective registration statement
or exemption from the registration requirements.
The foregoing descriptions of the terms of the Securities Purchase
Agreement, the Note and the Warrant are qualified in their entirety
by reference to the full text of the Securities Purchase Agreement,
the Note and the Warrant, copies of which are filed as Exhibits
10.1, 4.1 and 4.2, respectively, to this Current Report on Form 8-K
and incorporated herein by reference.
Item
2.03 Creation of a Direct Financial Obligation or an
Obligation Under an Off-balance Sheet Arrangement of a
Registrant.
The
information set forth under Item 1.01 above of this Current Report
on Form 8-K is incorporated by reference in this Item 2.03.
Item
3.02. Unregistered Sales of Equity Securities.
The
information set forth under Item 1.01 above of this Current Report
on Form 8-K is incorporated by reference in this Item 3.02. The
shares of the Company’s common stock issued, and the shares to be
issued, under the Securities Purchase Agreement, the Note and the
Warrant were, and will be, sold pursuant to an exemption from the
registration requirements under Section 4(a)(2) of the Securities
Act and Rule 506 of Regulation D promulgated thereunder. The
investor is an accredited investor who has purchased the securities
as an investment in a private placement that did not involve a
general solicitation. The shares of common stock not been
registered under the Securities Act and may not be offered or sold
in the United States in the absence of an effective registration
statement or exemption from the registration requirements.
Item
9.01. Financial Statements and Exhibits.
(d)
Exhibits.
The following exhibits are filed with this Current Report on Form
8-K:
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Exhibit Number
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Description
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4.1
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Promissory Note, dated June 21, 2022, in the principal amount of
$600,000
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4.2
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Warrant, dated June 21, 2022
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10.1
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Securities Purchase Agreement, dated June 21, 2022
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104
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Cover Page Interactive Data File (the cover page XBRL tags
are embedded within the inline XBRL document)
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-3-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
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GALAXY NEXT GENERATION, INC.
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Dated: July 11, 2022
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By:
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/s/ Magen McGahee
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Magen McGahee, Secretary
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-4-
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