| Item 1.01. |
Entry into a Material Definitive Agreement. |
On
May 3, 2023, American Noble Gas, Inc, a Nevada Corporation (the “Company”) entered into a Letter Agreement (the “Letter
Agreement”) by and among the Company, 3i LP, a Delaware limited partnership, Alpha Capital Anstalt, a Liechtenstein company (“Alpha”),
Ozark Capital, LLC, a Missouri limited liability company (“Ozark”), Stanton E. Ross, individually (“Mr. Ross”)
and Thomas J. Heckman, individually (“Mr. Heckman”). The transactions contemplated by the Letter Agreement are collectively
referred to as the “Transactions”.
This
Current Report on Form 8-K is being filed to describe the material terms of the Letter Agreement and certain agreements contemplated
by the Letter Agreement and entered into as of the closing date of the Transactions (the “Closing Date”).
Letter
Agreement
The
Letter Agreement provides that, upon the terms and subject to the conditions set forth therein, on the Closing Date:
| ● | Each
of 3i, Alpha and Ozark (collectively, the “Investors”) will contribute cash consideration
in the aggregate of $750,000 to the Company; |
| | | |
| ● | The
Company will issue to the Investors an aggregate of 7,500 shares of Series B Convertible
Preferred Stock, par value $0.0001 per share, at a conversion rate of $0.05 per share (the
“Series B Preferred Stock”); |
| | | |
| ● | The
Company will issue to the Investors warrants to purchase up to an aggregate of 15,000,000
shares of common stock, par value $0.0001 per share, (the “Common Stock”), at
an exercise price of $0.05 per share (the “Warrants”); |
| | | |
| ● | The
Company and the Investors agree to work together in good faith to engage an investment banking
firm reasonably acceptable to all parties to assist the parties in raising additional capital
for the Company and to facilitate an uplisting of the Company’s securities onto a national
exchange by December 31, 2023; and |
| | | |
| ● | The
parties contemplated and understood that Paul Mendell (“Mr. Mendell”) may separately
contribute to the Company approximately $300,000 of assets as set forth in the Letter Agreement,
and that Mr. Mendell will consult and advise the Company on its drilling programs in Nebraska
and Western Kansas. |
Effective
as of the Closing Date, Mr. Ross will resign as Chief Executive Officer and President of the Company and Daniel F. Hutchins will resign
as Chief Financial Officer of the Company. Mr. Heckman will become the Chief Executive Officer and the Chief Financial Officer of the
Company.
Securities
Purchase Agreement
Pursuant
to the terms of the Letter Agreement, on May 4, 2023, the Company entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with the Investors providing for an aggregate investment of $750,000 by the Investors for the issuance by
the Company to them of (i) 7,500 shares of Series B Preferred Stock, convertible into an aggregate of up to 15,000,000 shares of Common
Stock that are issuable from time to time upon conversion of such shares of Series B Preferred Stock (the “Conversion Shares”);
(ii) Warrants, with a term of five and a half (5.5) years, exercisable six (6) months after issuance, to purchase an aggregate of up
to 15,000,000 shares of Common Stock (the “Warrant Shares”) at an exercise price of $0.05 per share, subject to customary
adjustments thereunder. Holders of the Warrants may exercise them by paying the applicable cash exercise price or, if there is not an
effective registration statement for the sale of the Warrant Shares within six (6) months following the Closing Date (as such term is
defined in the Warrants), by exercising on a cashless basis pursuant to the formula provided in the Warrants. The shares of Series B
Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares are collectively referred to as the “Securities.”
Pursuant
to the provisions of the Securities Purchase Agreement and the Certificate of Designation of Preferences, Rights and Limitations of the
Series B Preferred Stock (the “Certificate of Designation”), each share of Series B Preferred Stock is convertible, at the
option of the holders thereof, at any time, subject to certain beneficial ownership limitations, into shares of Common Stock determined
on a per share basis by dividing the Stated Value of such share of Preferred Stock (as such term is defined in the Certificate of Designation)
by the Conversion Price (as such term is defined in the Certificate of Designation), which Conversion Price is subject to certain adjustments.
In addition, the Securities Purchase Agreement and the Certificate of Designation also provide for the payment of dividends, in (I) cash,
or (ii) shares of Common Stock, to the holders of the Series B Preferred Stock, of 8% per annum, based on the Stated Value, until the
earlier of (i) the date on which the shares of Series B Preferred Stock are converted to Common Stock or (ii) date the Company’s
obligations under the Certificate of Designation have been satisfied in full. The shares of Series B Preferred Stock also (i) vote on
an as-converted to Common Stock basis, subject to certain beneficial ownership limitations, (ii) are redeemable at the option of the
Company at any time, (iii) rank senior to the Common Stock and any class or series of capital stock created after the Series B Preferred
Stock and (iv) have a special preference upon the liquidation of the Company.
The
Securities Purchase Agreement also contains customary representations, warranties and agreements of the Company and the Investors and
customary indemnification rights and obligations of the parties thereto. The Investors have previously invested in securities of the
Company or otherwise had pre-existing relationships with the Company; the Company did not engage in general solicitation or advertising
with regard to the issuance and sale of the Securities. The Investors represented that they are either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act of 1933, as amended (the “Securities Act”),
or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act, and purchased the Securities
for investment and not with a view to distribution.
Registration
Rights Agreement
Pursuant
to the terms of the Letter Agreement, on May 5, 2023, the Company also entered into that certain registration rights agreement (the “Registration
Rights Agreement”), pursuant to which the Company agreed to file a registration statement within forty-five (45) days following
the Closing Date (as such term is defined in the Registration Rights Agreement) to register the Conversion Shares and the Warrant Shares
and to use its best efforts to cause such registration statement to be declared effective within forty-five (45) days after the filing
thereof, but in any event no later than the ninetieth (90th) calendar day following the Closing Date hereof; provided, however,
that in the event the Company is notified by the U.S. Securities and Exchange Commission that the registration statement will not be
reviewed or is no longer subject to further review and comments, the fifth (5th) trading day following the date on which the
Company is so notified if such date precedes the dates otherwise required above.
Pursuant
to the Registration Rights Agreement, the Company must keep such registration statement effective at all times until the Investors no
longer own any of the Securities.
Pursuant
to the Securities Purchase Agreement, the Company issued the Securities to the Investors, in a private placement pursuant to an exemption
from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder (the “Private Placement”).
The
Closing Date of the Transactions, including the Private Placement, occurred on May 5, 2023.
New
Note
On
May 5, 2023, the Company reached an agreement with one of the holders of two separate convertible notes payable in the aggregate principal
face amount of approximately $450,000, which the Company did not pay by the maturity dates.
The Company and the holder of the two convertible notes payable entered into a new convertible promissory note (the “New Note”),
exchanging the outstanding principal amount of the old convertible notes payable into the New Note, with a maturity date of September
30, 2023. Upon issuance of the New Note, the old convertible notes payable were cancelled and the repayment defaults under the prior
convertible notes payable were cured with the entry into the New Note. The interest rate and other terms of the New Note are the same
as those of the prior convertible notes payable.
The
foregoing description of the New Note does not purport to be complete and is qualified in its entirety by reference to the full text
of the Form of New Note, the form of which is attached as Exhibit 10.4 to this Current Report on Form 8-K and incorporated herein by
reference.