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Table of Contents
As filed with the Securities and Exchange Commission
on December 27, 2023
Registration No. ______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GROM SOCIAL ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida |
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7370 |
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46-5542401 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(Primary Standard Industrial Classification Code Number) |
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(IRS Employer
Identification Number) |
2060 NW Boca Raton Blvd., Suite #6
Boca Raton, Florida 33431
(561) 287-5776
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
Darren Marks
Chief Executive Officer
Grom Social Enterprises, Inc.
2060 NW Boca Raton Blvd., Suite #6
Boca Raton, Florida 33431
(561) 287-5776
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Please send copies of all communications to:
Joseph M. Lucosky, Esq.
Soyoung Lee, Esq.
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Woodbridge, New Jersey 08830
(732) 395-4400
Approximate date of commencement
of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If the only securities being
registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being
registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, other
than securities offered only in connection with dividend or interest reinvestment plans, check the following box: ☒
If this Form is filed
to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration
statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective
amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☒ |
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Smaller reporting company |
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☒ |
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Emerging growth company |
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☐ |
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If an emerging growth company, indicate by check
mark 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 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends
this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.
The information in this prospectus is not complete
and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state
or other jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS |
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SUBJECT TO COMPLETION |
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DATED
DECEMBER 27, 2023 |
Up to 6,861,666 Shares of Common Stock
![](https://www.sec.gov/Archives/edgar/data/1662574/000168316823009097/image_001.jpg)
GROM
SOCIAL ENTERPRISES, INC.
This prospectus relates to
the offer and resale, from time to time, of up to an aggregate of 6,861,666 shares of our common stock, par value $0.001 per share, consisting
of:
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(i) |
5,347,594 shares of common stock issuable upon the conversion of a convertible promissory note of the Company (the “Note”), having an initial principal amount of $4,000,000, sold in a private placement offering (the “Offering”) pursuant to a securities purchase agreement, dated November 9, 2023 and as amended November 20, 2023 (the “SPA”), entered into by and between the Company and the purchaser named therein (the “Selling Stockholder”); and |
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(ii) |
(a) 757,036 shares of common stock issuable upon the exercise of 757,036 warrants at an exercise price of $1.78 per share of common stock (the “Warrant As”) issued in the Offering to the Selling Stockholder; and (b) 757,036 shares of common stock issuable upon the exercise of 757,036 warrants at an exercise price of $0.001 per share of common stock (the “Warrant Bs”, together with the Warrant As, the “Warrants”) issued in the Offering to the Selling Stockholder. |
We are not selling any securities
under this prospectus and we will not receive proceeds from the sale of the shares of our common stock by the Selling Stockholder. However,
we may receive proceeds from the cash exercise of the Warrants, which if exercised in cash at the current exercise price with respect
to all Warrants, would result in gross proceeds to us of approximately $1.3 million.
We
will pay the expenses of registering the shares of common stock offered by this prospectus, but all selling and other expenses incurred
by the Selling Stockholder will be paid by the Selling Stockholder. The Selling Stockholder may sell our shares of common stock offered
by this prospectus from time to time on terms to be determined at the time of sale through ordinary brokerage transactions or through
any other means described in this prospectus under “Plan of Distribution.” The prices at which the Selling Stockholder may
sell shares will be determined by the prevailing market price for our common stock or in negotiated transactions.
Our common stock is quoted
on The Nasdaq Capital Market, or Nasdaq, under the symbol “GROM.” On December 26, 2023, the last reported sale price for our
common stock on Nasdaq was $1.12 per share.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 8
of this prospectus for a discussion of information that should be considered
in connection with an investment in our securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is _______________,
2023.
GROM SOCIAL ENTERPRISES, INC.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of
a registration statement on Form S-1 that we filed with the U.S. Securities and Exchange Commission (the “SEC”). You should
read this prospectus and the information and documents incorporated herein by reference carefully. Such documents contain important information
you should consider when making your investment decision. See “Where You Can Find Additional Information”
and “Incorporation of Certain Documents by Reference” in this prospectus.
You should rely only on
the information contained in or incorporated by reference into this prospectus. Neither we nor the selling stockholder named herein (the
“Selling Stockholder”) have authorized anyone to provide you with information different from, or in addition to, that contained
in or incorporated by reference into this prospectus. This prospectus is an offer to sell only the securities offered hereby but only
under circumstances and in jurisdictions where it is lawful to do so. The information contained in or incorporated by reference into this
prospectus is current only as of their respective dates or on the date or dates that are specified in those documents. Our business, financial
condition, results of operations and prospects may have changed since those dates.
The Selling Stockholder is
not offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer or sale is not permitted. Neither
we nor the Selling Stockholder have done anything that would permit this offering (the “Offering”) or possession or distribution
of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the
jurisdiction of the United States who come into possession of this prospectus are required to inform themselves about and to observe any
restrictions relating to this Offering and the distribution of this prospectus applicable to that jurisdiction.
If required, each time the
Selling Stockholder offers shares of common stock, we will provide you with, in addition to this prospectus, a prospectus supplement that
will contain specific information about the terms of that offering. We may also authorize the Selling Stockholder to use one or more free
writing prospectuses to be provided to you that may contain material information relating to that offering. We may also use a prospectus
supplement and any related free writing prospectus to add, update or change any of the information contained in this prospectus or in
documents we have incorporated by reference. This prospectus, together with any applicable prospectus supplements, any related free writing
prospectuses and the documents incorporated by reference into this prospectus, includes all material information relating to this Offering.
To the extent that any statement that we make in a prospectus supplement is inconsistent with statements made in this prospectus, the
statements made in this prospectus will be deemed modified or superseded by those made in a prospectus supplement. Please carefully read
both this prospectus and any prospectus supplement together with the additional information described below under the section entitled
“Incorporation of Certain Documents by Reference” before buying any
of the securities offered.
Unless the context otherwise
requires, the terms “the Company,” “we,” “us” and “our” refer to Grom Social Enterprises,
Inc. and our subsidiaries.
Unless otherwise indicated,
information contained in this prospectus or incorporated by reference herein concerning our industry and the markets in which we operate
is based on information from independent industry and research organizations, other third-party sources (including industry publications,
surveys and forecasts), and management estimates. Management estimates are derived from publicly available information released by independent
industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing
such data and our knowledge of such industry and markets, which we believe to be reasonable. Although we believe the data from these third-party
sources is reliable, we have not independently verified any third-party information. In addition, projections, assumptions and estimates
of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk
due to a variety of factors, including those described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed
in the estimates made by the independent parties and by us.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
When used in this prospectus,
including the documents that we have incorporated by reference, in future filings with the SEC or in press releases or other written or
oral communications, statements which are not historical in nature, including those containing words such as “believe,” “expect,”
“anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,”
“may” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events
or trends and which do not relate solely to historical matters, are intended to identify “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)). In particular, statements pertaining to our trends, liquidity and capital resources, among others,
contain forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Examples of forward-looking statements include, but are not limited to, statements about the following:
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our prospects, including our future business, revenues, expenses, net income, earnings per share, gross margins, profitability, cash flows, cash position, liquidity, financial condition and results of operations, our targeted growth rate and our goals for future revenues and earnings; |
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the potential impact of COVID-19 on our business and results of operations; |
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the effects on our business, financial condition and results of operations of current and future economic, business, market and regulatory conditions; |
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the effects of fluctuations in sales on our business, revenues, expenses, net income, earnings per share, margins, profitability, cash flows, capital expenditures, liquidity, financial condition and results of operations; |
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our products and services, including their quality and performance in absolute terms and as compared to competitive alternatives, and their ability to meet our customers’ requirements, and our ability to successfully develop and market new products, services, technologies and systems; |
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our markets, including our market position and our market share; |
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our ability to successfully develop, operate, grow and diversify our operations and businesses; |
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our business plans, strategies, goals and objectives, and our ability to successfully achieve them; |
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our ability to maintain, protect, and enhance our brand and intellectual property; |
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the sufficiency of our capital resources, including our cash and cash equivalents, funds generated from operations, availability of borrowings under our credit and financing arrangements and other capital resources, to meet our future working capital, capital expenditure, lease and debt service and business growth needs; |
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the value of our assets and businesses, including the revenues, profits and cash flows they are capable of delivering in the future; |
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the effects on our business operations, financial results, and prospects of business acquisitions, combinations, sales, alliances, ventures and other similar business transactions and relationships; |
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industry trends and customer preferences and the demand for our products and services; and |
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the nature and intensity of our competition, and our ability to successfully compete in our markets. |
These statements are necessarily
subjective, are based upon our current plans, intentions, objectives, goals, strategies, beliefs, projections and expectations, and involve
known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or
industry results, to differ materially from any future results, performance or achievements described in or implied by such statements.
Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct
measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of
the publicly-available information with respect to the factors upon which our business strategy is based, or the success of our business.
Forward-looking statements
should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the
times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time
those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties
that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Important factors that may cause actual results, our performance or achievements, or industry results to differ materially from those
contemplated by such forward-looking statements include, without limitation, those discussed under the caption “Risk Factors” in this prospectus as well as other risks and factors identified from time to time in our SEC filings.
PROSPECTUS SUMMARY
This summary highlights
information contained elsewhere or incorporated by reference in this prospectus. This summary is not complete and does not contain all
of the information that you should consider before investing in our common stock. We urge you to read this entire prospectus and the documents
incorporated by reference herein carefully, including the financial statements and notes to those financial statements incorporated by
reference herein and therein. Please read the section of this prospectus entitled “Risk Factors”
for more information about important risks that you should consider before investing in our common stock. All share and per share information
in this prospectus reflects the reverse stock split of our outstanding common stock at a ratio of 1-for-20 effected on September 7, 2023
unless noted otherwise.
Overview
We were incorporated in the
State of Florida on April 14, 2014 under the name “Illumination America, Inc.”
On August 17, 2017, we acquired
Grom Holdings, Inc., a Delaware corporation (“Grom Holdings”), pursuant to a share exchange agreement (the “Share Exchange
Agreement”) entered into on May 15, 2017 (the “Share Exchange”). In connection with the Share Exchange, the Company
acquired 100% of the outstanding shares of capital stock of Grom Holdings from Grom Holdings’ stockholders in exchange for an aggregate
of 5,774 shares of common stock, par value $0.001 per share, of the Company. As a result of the Share Exchange, the stockholders of Grom
Holdings acquired approximately 92% of the Company’s then-issued and outstanding shares of common stock and Grom Holdings became
a wholly-owned subsidiary of the Company. In connection with the Share Exchange, on August 17, 2017, we changed our name to Grom Social
Enterprises, Inc.
We are a media, technology
and entertainment company that focuses on (i) delivering content to children under the age of 13 years in a safe secure platform that
is compliant with the Children’s Online Privacy Protection Act (“COPPA”) and can be monitored by parents or guardians,
(ii) creating, acquiring, and developing the commercial potential of Kids & Family entertainment properties and associated business
opportunities, (iii) providing world class animation services, and (iv) offering protective web filtering solutions to block unwanted
or inappropriate content. We conduct our business through our following subsidiaries:
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Grom Social, Inc. (“Grom Social”), incorporated in the State of Florida on March 5, 2012, operates our social media network designed for children under the age of 13 years. |
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TD Holdings Limited (“TD Holdings”), incorporated in Hong Kong on September 15, 2005, operates through its two wholly-owned subsidiaries: (i) Top Draw Animation Hong Kong Limited, a Hong Kong corporation (“Top Draw HK”), and (ii) Top Draw Animation, Inc., a Philippines corporation (“Top Draw Philippines”). The group’s principal activities are the production of animated films and television series. |
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Grom Educational Services, Inc. (“GES”), incorporated in the State of Florida on January 17, 2017, operates our web filtering services provided to schools and government agencies. |
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Grom Nutritional Services, Inc. (“GNS”), incorporated in the State of Florida on April 19, 2017, intends to market and distribute nutritional supplements to children. GNS has been nonoperational since its inception. |
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Curiosity Ink Media, LLC (“CIM”), organized in the State of Delaware on January 5, 2017, develops, acquires, builds, grows and maximizes the short, mid and long-term commercial potential of kids and family entertainment properties and associated business opportunities. |
We own 100% of each of Grom
Social, TD Holdings, GES and GNS, and 80% of CIM.
Recent Developments
PIPE Offering and Related Waiver
On January 25, 2023, we consummated a private
placement (the “PIPE Offering”) pursuant to the terms of the Securities Purchase Agreement, dated as of January 25, 2023 (the
“2023 SPA”) that we entered into with institutional investors, in which we issued (i) 5,000 shares of common stock; (ii) 66,372
purchase warrants (the “Purchase Warrants”) to purchase an aggregate of 116,151 shares of common stock; and (iii) 61,372 pre-funded
warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 61,372 shares of common stock. The purchase price of each
share of common stock and associated Purchase Warrant was $45.20. The purchase price of each Pre-Funded Warrant was $45.00. The aggregate
gross proceeds of the PIPE Offering was approximately $3.0 million, before deducting fees to the placement agent and other expenses payable
by us. EF Hutton, division of Benchmark Investments, LLC, acted as the exclusive placement agent in connection with the PIPE Offering.
In connection with the PIPE Offering, we entered
into a Waiver (the “Waiver”) with L1 Capital Global Opportunities Master Fund (“L1”) waiving certain provisions
of the Securities Purchase Agreement, dated as of September 14, 2021 (the “2021 SPA”), by and between us and L1. Pursuant
to the terms of the Waiver, L1 waived certain provisions of the 2021 SPA and in consideration thereof, we (i) issued 7,500 purchase warrants
substantially similar to the Purchase Warrants issued in connection with the 2023 SPA; and (ii) paid a cash fee of $50,000 to L1.
Pursuant to the 2023 SPA, we were obligated to
hold a special stockholders’ meeting no later than 60 days following the date of the Purchase Agreement to solicit the approval
of the issuance of the shares, Warrants and the shares of common stock underlying the Warrants in compliance with the rules of The Nasdaq
Stock Market LLC (without regard to any limitations on exercise set forth in the Warrants or the Pre-Funded Warrants. On March 27, 2023,
we held a special meeting of stockholders and the stockholders approved the PIPE Offering.
In connection with the PIPE Offering, we entered
into a Registration Rights Agreement with the investors, dated January 25, 2023 (the “PIPE Registration Rights Agreement”).
The PIPE Registration Rights Agreement provided that we shall file a registration statement covering the resale of all of the Registrable
Securities (as defined in the PIPE Registration Rights Agreement) with the SEC. The Registration Statement was filed and declared effective
by the SEC on February 9, 2023.
Registered Offering
On September 7, 2023, we sold an aggregate 946,000
units (the “Units”) at a price of $3.00 per Unit and 54,000 pre-funded units (the “Pre-Funded Units”) at a price
of $2.999 per Pre-Funded Unit, with (a) each Unit consisting of: (i) one share of common stock, par value $0.001 per share; (ii) one Series
A Warrant (the “Series A Warrant”); and (iii) one Series B Warrant. (“Series B Warrant,” together with Series
A Warrant, the “Registered Offering Warrants”), each Registered Offering Warrant to purchase one share of common stock at
$3.00 per share (100% of the offering price per Unit); and (b) each Pre-Funded Unit consisting of: (i) one pre-funded warrant (the “Pre-Funded
Warrant”) exercisable for one share of common stock at $0.001; (ii) one Series A Warrant; and (iii) one Series B Warrant, identical
to the Registered Offering Warrants in the Unit. The Registered Offering Warrants are immediately exercisable and will expire on the fifth
anniversary of the original issuance date. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until
all of the Pre-Funded Warrants are exercised in full. We received approximately $3.0 million in gross proceeds from the Offering, prior
to deducting the underwriting discount and commission and other estimated offering expenses payable by us.
Pursuant to the Underwriting Agreement, we granted
the Underwriter a 45-day option to purchase up to 150,000 shares of Common Stock and/or Pre-Funded Warrants to purchase 150,000 shares
of common stock and/or Registered Offering Warrants to purchase 150,000 shares of common stock to cover over-allotments.
The Underwriting Agreement contains customary
representations and warranties by us, conditions to closing, indemnification obligations of our Company and the underwriters, “lock-up”
agreements where we and each officers, directors and 5% shareholders of our Company have agreed with the Underwriter not to offer for
sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into Common Stock
for a period of 90 days from the commencement of sale under the final prospectus relating to the Offering.
Notice of Delisting of Failure to Satisfy
a Continued Listing Rule or Standard
On April 10, 2023, we received a deficiency letter
(the “Notice”) from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”)
notifying us that, based upon the closing bid price of our common stock for the last 30 consecutive business days, we were not in compliance
with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing
Rule 5550(a)(2) (the “Minimum Bid Requirement”). The Notice had no immediate effect on the continued listing status of our
common stock on Nasdaq, and, therefore, our listing remained fully effective. We were provided a compliance period of 180 calendar days
from the date of the Notice, or until October 9, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2).
On September 21, 2023, we received a compliance
letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC notifying us that the closing bid price of our common
stock had been at $1.00 per share or greater for the last 10 consecutive business days and thus we have regained compliance with Listing
Rule 5550(a)(2) and the matter is now closed.
Reverse Stock Split
On June 23, 2023, our Board and shareholders approved
the granting of authority to the Board to amend our articles of incorporation to effect a reverse stock split of the issued and outstanding
shares of our common stock, by a ratio of no less than 1-for-2 and no more than 1-for-20, with the exact ratio to be determined by the
Board in its sole discretion, and with such reverse stock split to be effective at such time and date, if at all, as determined by the
Board in its sole discretion. On September 7, 2023, our Board effected a 1-for-20 reverse stock split in connection with the continued
listing of our common stock on Nasdaq.
The reverse stock split will not have any impact
on the number of authorized shares of common stock, which shall remain at 500,000,000 shares.
Entry into a Securities Purchase Agreement
with Generating Alpha
On November 9, 2023, we entered into the SPA (as
amended on November 20, 2023) with Generating Alpha Ltd., the Selling Stockholder, pursuant to which we have agreed to sell two convertible
promissory notes, with each note having an initial principal amount of $4,000,000, for a price of $3,640,000 per note. In connection with
the purchase and sale of the notes, we have agreed to issue to the Selling Stockholder warrants to acquire a total of 3,028,146 shares
of our common stock.
On December 21, 2023, we consummated the Offering
pursuant to the SPA with the Selling Stockholder for the purchase of (1) the Note, having an initial principal amount of $4,000,000,
and (2) an aggregate of (i) 757,036 Warrant As to purchase up to an aggregate of 757,036 shares of common stock at an exercise price
of $1.78 per share of common stock; and (ii) 757,036 Warrant Bs to purchase up to an aggregate of 757,036 shares of common stock at an
exercise price of $0.001 per share of common stock. The purchase price of the Note was $3,640,000. The aggregate gross proceeds of the
Offering was approximately $3.6 million, before deducting fees to the placement agent and other expenses payable by us.
In connection with the SPA, we entered into a
Registration Rights Agreement with the investor, dated December 21, 2023 (the “SPA Registration Rights Agreement”). The SPA
Registration Rights Agreement provided that we shall file a registration statement covering the resale of all of the Registrable Securities
(as defined in the SPA Registration Rights Agreement) with the SEC.
EF Hutton LLC, is acting as placement agent for
the financing. For information about the SPA, see “Description of Securities - The Note and the Warrants Offered in this
Offering.”
Strategic Partnership
We continue to evaluate strategic acquisition
opportunities to help accelerate our growth and complement our existing business. We recently entered into a strategic advisory partnership
with an association of churches to achieve the highest possible social impact by utilizing all metrics available for values-based investors,
including a biblically responsible investing (or “BRI”) score for us and our operations. Once we have established a rating,
together we will create a program to increase our exposure and market our services to their member organizations and other affiliates.
Our Corporate Information
Our principal executive offices
are located at 2060 NW Boca Raton, Suite #6, Boca Raton, Florida 33431. Our telephone number is (561) 287-5776. Our website address is
www.gromsocial.com. Information contained in, or that can be accessed through, our website is not incorporated by reference into this
prospectus, and you should not consider information on our website to be part of this prospectus.
Smaller Reporting Company
We are a “smaller reporting
company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take
advantage of certain of the scaled disclosure available for smaller reporting companies.
The Offering
Securities offered by the Selling Stockholder: |
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Up to an aggregate of 6,861,666 shares of
our common stock, par value $0.001 per share, consisting of: |
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(i) |
5,347,594 shares of common stock issuable upon the conversion of a convertible promissory note of the Company (the “Note”),
having an initial principal amount of $4,000,000, sold in a private placement offering (the “Offering”) pursuant to a securities
purchase agreement, dated November 9, 2023 and as amended November 20, 2023 (the “SPA”), by and between the Company and the
purchaser named therein (the “Selling Stockholder”); and |
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(ii) |
(a) 757,036 shares of common stock issuable upon the exercise of 757,036 warrants at an exercise price of $1.78 per share of common stock
(the “Warrant As”) issued in the Offering to the Selling Stockholder; and (b) 757,036 shares of common stock issuable upon
the exercise of 757,036 warrants at an exercise price of $0.001 per share of common stock (the “Warrant Bs”, together with
the Warrant As, the “Warrants”) issued in the Offering to the Selling Stockholder. |
Common stock outstanding prior to the Offering: |
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1,970,404 shares. |
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Common stock to be outstanding after the Offering assuming conversion of the Note and exercise of all of the Warrants (1): |
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8,832,070 shares. |
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Use of Proceeds: |
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We will not receive any proceeds from the sale by the Selling Stockholder of the shares of common stock being offered by this prospectus. However, we may receive proceeds from the cash exercise of the Warrants, which if exercised in cash at the current exercise price with respect to all Warrants, would result in gross proceeds to us of approximately $1.3 million. The proceeds from such Warrant exercises, if any, will be used for working capital and general corporate purposes. |
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Risk Factors: |
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Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth in the “Risk Factors” section on page 8 before deciding to invest in our securities. |
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Trading Symbol: |
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Our common stock and registered warrants are currently quoted on The Nasdaq Capital Market under the trading symbol “GROM” and “GROMW,” respectively. |
(1) The shares of common stock outstanding and
the shares of common stock to be outstanding after this offering is based on 1,970,404 shares outstanding as of December 19, 2023. The
number excludes an aggregate of up to approximately 11,356,439 shares of common stock based upon the following:
| (i) | 347 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $1,788.00 per share; |
| (ii) | 1,347,983 shares of common stock issuable upon the exercise of
outstanding common stock purchase warrants at a weighted average exercise price of $16.81; |
| (iii) | 53 shares of common stock issuable upon the conversion by convertible
promissory note holders of all of the outstanding principal amount and accrued and unpaid interest due, totaling $177,509; |
| (iv) | 8,056 shares of common stock issuable upon the conversion of
9,281,809 shares of Series C Stock; and |
| (v) | 10,000,000 shares of common stock reserved for issuance under
our Amended and Restated 2020 Equity Incentive Plan (the “Plan”). |
Except as otherwise indicated herein, all information
in this prospectus assumes no exercise of the Warrants or conversion of the Note and no exercise of options issued under our Plan or of
warrants described above.
RISK FACTORS
Investing in our securities
involves a high degree of risk. Before investing in our Common Stock and warrants, you should carefully consider the risks described below,
as well as the other information in this prospectus, including our consolidated financial statements and the related notes. In addition,
we may face additional risks and uncertainties not currently known to us, or which as of the date of this registration statement we might
not consider significant, which may adversely affect our business. If any of the following risks occur, our business, financial condition
and results of operations could be materially adversely affected. In such case the trading price of our Common Stock and warrants could
decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks Related to This Offering and Ownership
of Our Securities
Our independent auditors concurred with
our management’s assessment that raises concern as to our ability to continue as a going concern.
On a consolidated basis, we
have incurred significant operating losses since inception. Our financial statements do not include any adjustments that might result
from the outcome of this uncertainty. As of September 30, 2023, we have an accumulated deficit of $90,233,723 million.
Because we do not expect that
existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about our ability
to continue as a going concern. Therefore, we will need to raise additional funds and are currently exploring alternative sources of financing.
Historically, we have raised capital through private placements of our equity securities and convertible notes and through officer loans
as an interim measure to finance working capital needs and may continue to raise additional capital through the sale of common stock or
other securities and by obtaining short-term loans. We will be required to continue to do so until our consolidated operations become
profitable.
These factors, among others,
raise substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient funding, our business,
prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as
a going concern.
If we are unable to maintain compliance
with all applicable continued listing requirements and standards of Nasdaq, our Common Stock could be delisted from Nasdaq.
Our Common Stock is listed
on The Nasdaq Capital Market under the symbol “GROM.” In order to maintain that listing, we must satisfy minimum financial
and other continued listing requirements and standards, including those regarding director independence and independent committee requirements,
minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that
we will be able to remain in compliance with Nasdaq’s listing standards or if we do later fail to comply and subsequently regain
compliance with Nasdaq’s listing standards, that we will be able to continue to comply with the applicable listing standards. If
we are unable to maintain compliance with these Nasdaq requirements, our Common Stock will be delisted from Nasdaq.
In the event that our Common
Stock is delisted from Nasdaq due to our failure to continue to comply with any requirement for continued listing on Nasdaq, and is not
eligible for quotation on another market or exchange, trading of our Common Stock could, again, be conducted in the over-the-counter market
or on an electronic bulletin board established for unlisted securities such as the OTC Pink or the OTCQB tiers of the OTC marketplace.
In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our Common Stock, and it would likely
be more difficult to obtain coverage by securities analysts and the news media, which could cause the price of our Common Stock to decline
further. Also, it may be difficult for us to raise additional capital if we are not listed on a national exchange.
Future capital raises may dilute our existing
stockholders’ ownership and/or have other adverse effects on our operations.
If we raise additional capital
by issuing equity securities, our existing stockholders’ percentage ownership may decrease, and these stockholders may experience
substantial dilution. If we raise additional funds by issuing debt instruments, these debt instruments could impose significant restrictions
on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may
be required to relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable to us or could
diminish the rights of our stockholders.
We do not anticipate paying any cash dividends
on our Common Stock in the foreseeable future; therefore, capital appreciation, if any, of our Common Stock, will be your sole source
of gain for the foreseeable future.
We have never declared or
paid cash dividends on our Common Stock. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition,
future loan arrangements, if any, may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our
Common Stock. As a result, capital appreciation, if any, of our Common Stock, will be your sole source of gain for the foreseeable future.
Our board of directors may authorize and
issue shares of new classes of stock that could be superior to or adversely affect you as a holder of our Common Stock.
Our Board has the power to
authorize and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations
and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further
shareholder approval which could adversely affect the rights of the holders of our Common Stock. In addition, our board could authorize
the issuance of a series of preferred stock that has greater voting power than our Common Stock or that is convertible into our Common
Stock, which could decrease the relative voting power of our Common Stock or result in dilution to our existing shareholders.
Any of these actions could
significantly adversely affect the investment made by holders of our Common Stock. Holders of our Common Stock could potentially not receive
dividends that they might otherwise have received. In addition, holders of our Common Stock could receive less proceeds in connection
with any future sale of the Company, whether in liquidation or on any other basis.
The voting and conversion rights of our
issued and outstanding shares of Series C Stock will have the effect of diluting the voting power of existing common stockholders.
Our authorized capital stock
includes 25,000,000 shares of preferred stock, of which 2,000,000 shares are designated as Series A Stock, 10,000,000 shares are designated
as Series B Stock, and 10,000,000 shares are designated as Series C Stock. As of September 30, 2023, no shares of our Series A Stock or
Series B Stock, and 9,281,809 shares of Series C Stock, are issued and outstanding. The holders of our outstanding shares of Series C
Stock may at any time, after the 6-month anniversary of the issuance of their shares of Series C Stock on May 20, 2021, convert such shares
into shares of our Common Stock at a conversion price equal to $1,152.00. In addition, the Company may, at any time, require conversion
of all or any of the Series C Stock then outstanding at a conversion price equal to $1,152.00. The conversion of shares of our Series
C Stock will dilute your interests. If all of the shares of our Series C Stock were converted, we would have 8,056 additional shares of
Common Stock issued and outstanding, which, based on the 1,490,071 shares outstanding as of September 30, 2023, would represent approximately
0.5% and 0.1% of our shares of Common Stock outstanding prior to and after the Offering (assuming conversion of the Note and exercise
of the Warrants), respectively, if all of the shares of our Series C Stock were converted.
In addition, the holders of
shares of our Series C Stock vote together as a single class with the holders of shares of our Common Stock, with each share entitling
the holder to 1.5625 votes per share. Therefore, as of September 30, 2023, the holders of our 9,281,809 shares of Series C Stock, have
an aggregate of approximately 14,502,826 votes, representing approximately 91% of our voting power.
The effects of the voting
and conversion rights tied to shares of our Series C Stock may affect the rights of our common stockholders by, among other things, restricting
dividends on our Common Stock, diluting the voting power of our common stockholders, reducing the market price of our Common Stock, or
impairing the liquidation rights of our Common Stock.
Our Board of Directors may issue and fix
the terms of shares of our Preferred Stock without stockholder approval, which could adversely affect the voting power of holders of our
Common Stock or any change in control of our Company.
Our Articles of Incorporation
authorize the issuance of up to 25,000,000 shares of "blank check" preferred stock, with such designations rights and preferences
as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to
issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting
power or other rights of the holders of our common stock. In the event of such issuances, the preferred stock could be used, under certain
circumstances, as a method of discouraging, delaying, or preventing a change in control of our Company.
Our officers, directors and principal stockholders
have significant voting power over our stock and will be able to exert significant control over matters subject to stockholder approval.
Our directors, executive officers
and significant stockholders will continue to have substantial control over us after this offering and could delay or prevent a change
in corporate control. Our directors, executive officers and holders of more than 5% of our Common or Preferred Stock, together with their
affiliates, currently beneficially own, in the aggregate, 0.5% of our outstanding Common Stock and 77.3% of our voting power beneficially
and through proxies, and after this offering (assuming conversion of the Note and exercise of the Warrants) will beneficially own, in
the aggregate, 0.1% of our outstanding Common Stock and 54.6% of our voting power beneficially and through proxies. As a result, these
stockholders, acting together, would have the ability to control the outcome of matters submitted to our stockholders for approval, including
the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders,
acting together, would have the ability to control the management and affairs of our Company. Accordingly, this concentration of ownership
might adversely affect the market price of our Common Stock by:
| · | delaying,
deferring or preventing a change in control of the Company; |
| · | impeding a merger, consolidation, takeover, or other business
combination involving us; or |
| · | discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company. |
Substantial future sales of shares of our Common Stock could
cause the market price of our Common Stock to decline.
The market price of shares
of our Common Stock could decline as a result of substantial sales of our Common Stock, particularly sales by our directors, executive
officers and significant stockholders, or a large number of shares of our Common Stock becoming available for sale or the perception in
the market that holders of a large number of shares intend to sell their shares. After the Offering, assuming exercise of all Warrants
and conversion of the Note, we will have 8,351,737 shares outstanding of our Common Stock, based on the 1,490,071 shares outstanding as
of September 30, 2023. This includes the shares included in this offering, which may be resold in the public market immediately without
restriction, unless purchased by our affiliates or existing stockholders.
In the event that our Common Stock is delisted
from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our Common Stock because they may be considered
penny stocks and thus be subject to the penny stock rules.
The SEC has adopted a number
of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. These rules
may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price
of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on Nasdaq if current
price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares of Common
Stock constitute “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements
imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our Common Stock, which could
severely limit the market liquidity of such shares of Common Stock and impede their sale in the secondary market.
A U.S. broker-dealer selling
penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with a net worth
in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability
determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer
or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver,
prior to any transaction involving a “penny stock,” a disclosure schedule prepared in accordance with SEC standards relating
to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also
required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities.
Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny
stock” held in a customer’s account and information with respect to the limited market in “penny stocks.”
Stockholders should be aware
that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such
patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler
room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters
and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the
abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior
of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to our securities.
There is no public market for the Note and the Warrants.
There is no public trading
market for the Note and the Warrants offered by this prospectus, and we do not expect a market to develop. In addition, we do not intend
to apply to list the Warrants on any national securities exchange or other nationally recognized trading system, including Nasdaq. Without
an active market, the liquidity of the Note and the Warrants will be limited.
The Warrants are speculative in nature.
The Warrants offered in this
offering do not confer any rights of Common Stock ownership on their holders, such as voting rights or the right to receive dividends,
but rather merely represent the right to acquire shares of our Common Stock at a fixed price for a limited period of time. Specifically,
commencing on the date of issuance, holders of the Warrants may exercise their right to acquire the Common Stock and pay an exercise price
of $1.78 per share for Warrant A and $0.001 per share for Warrant B, from time to time, until the 5th anniversary from the date of issuance,
after which date any unexercised warrants will expire and have no further value. In addition, there is no established trading market for
the Warrants.
Since the Warrants are executory contracts,
they may have no value in a bankruptcy or reorganization proceeding.
In the event a bankruptcy
or reorganization proceeding is commenced by or against us, a bankruptcy court may hold that any unexercised warrants are executory contracts
that are subject to rejection by us with the approval of the bankruptcy court. As a result, holders of the warrants may, even if we have
sufficient funds, not be entitled to receive any consideration for their warrants or may receive an amount less than they would be entitled
to if they had exercised their warrants prior to the commencement of any such bankruptcy or reorganization proceeding.
The Warrants may have an adverse effect
on the market price of our Common Stock and make it more difficult to effect a business combination.
We will be issuing warrants
to purchase shares of Common Stock as part of this offering. To the extent we issue shares of Common Stock to effect a future business
combination, the potential for the issuance of a substantial number of additional shares upon exercise of the warrants could make us a
less attractive acquisition vehicle in the eyes of a target business. Such warrants, when exercised, will increase the number of issued
and outstanding shares of Common Stock and reduce the value of the shares issued to complete the business combination. Accordingly, the
warrants may make it more difficult to effectuate a business combination or increase the cost of acquiring a target business. Additionally,
the sale, or even the possibility of a sale, of the shares of Common Stock underlying the warrants could have an adverse effect on the
market price for our securities or on our ability to obtain future financing. If and to the extent the warrants are exercised, you may
experience dilution to your holdings.
If securities or industry analysts do not
publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our
Common Stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Several
analysts may cover our stock. If one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about
our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish
reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
The market price for our Common Stock is
particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, and lack of profits,
which could lead to wide fluctuations in our share price.
The market for our Common
Stock is characterized by significant price volatility when compared to the shares of larger, more established companies that have large
public floats, and we expect that our share price will continue to be more volatile than the shares of such larger, more established companies
for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our Common
Stock is, compared to the shares of such larger, more established companies, sporadically and thinly traded. The price for our Common
Stock could, for example, decline precipitously in the event that a large number of our Common Stock is sold on the market without commensurate
demand. Secondly, we are a speculative or “risky” investment due to our lack of profits to date. As a consequence of this
enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news
or lack of progress, be more inclined to sell their shares of Common Stock on the market more quickly and at greater discounts than would
be the case with the stock of a larger, more established company that has a large public float. Many of these factors are beyond our control
and may decrease the market price of our Common Stock regardless of our operating performance.
If and when a larger trading market for
our Common Stock develops, the market price of our Common Stock is still likely to be highly volatile and subject to wide fluctuations.
The market price of our Common
Stock may be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control,
including, but not limited to:
| · | variations
in our revenues and operating expenses; |
| · | actual
or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding our Common
Stock, other comparable companies or our industry generally; |
| · | market
conditions in our industry, the industries of our customers and the economy as a whole; |
| · | actual
or expected changes in our growth rates or our competitors’ growth rates; |
| · | developments
in the financial markets and worldwide or regional economies; |
| · | announcements
of innovations or new products or services by us or our competitors; |
| · | announcements
by the government relating to regulations that govern our industry; |
| · | sales
of our Common Stock or other securities by us or in the open market; |
| · | changes
in the market valuations of other comparable companies; and |
| · | other
events or factors, many of which are beyond our control, including those resulting from such events, or the prospect of such events,
including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the
recent outbreak of COVID-19, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate
conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers
or result in political or economic instability. |
In addition, if the market
for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our Common Stock could
decline for reasons unrelated to our business, financial condition or operating results. The trading price of our Common Stock might also
decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these
factors, among others, could harm the value of your investment in our Common Stock. In the past, following periods of volatility in the
market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could
result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our
business, operating results and financial condition.
USE OF PROCEEDS
We are not selling any securities
under this prospectus and will not receive any proceeds from the sale of the common stock offered by this prospectus by the Selling Stockholder.
However, we may receive proceeds from the cash exercise of the Warrants. The Warrants, if exercised in cash at the current exercise price
with respect to all Warrants, would result in gross proceeds to us of approximately $1.3 million. The proceeds from such Warrant exercises,
if any, will be used for working capital and general corporate purposes. We cannot predict when or whether the Warrants will be exercised,
and it is possible that some or all of the Warrants may expire unexercised. For information about the Selling Stockholder, see “Selling Stockholders.”
The Selling Stockholder will
pay any underwriting discounts and commissions and expenses incurred by the Selling Stockholder for brokerage or legal services or any
other expenses incurred by the Selling Stockholder in disposing of the shares of common stock offered hereby. We will bear all other costs,
fees and expenses incurred in effecting the registration of the shares of common stock covered by this prospectus, including all registration
and filing fees and fees and expenses of our counsel and accountants.
SELLING STOCKHOLDERS
On December 21, 2023, we consummated
the Offering pursuant to the SPA with the Selling Stockholder for the purchase of (1) the Note, having an initial principal amount of
$4,000,000, and (2) an aggregate of (i) 757,036 Warrant As to purchase up to an aggregate of 757,036 shares of common stock at an exercise
price of $1.78 per share of common stock; and (ii) 757,036 Warrant Bs to purchase up to an aggregate of 757,036 shares of common stock
at an exercise price of $0.001 per share of common stock. The purchase price of the Note was $3,640,000.
The Selling Stockholder may
offer and sell, from time to time, up to an aggregate of 6,861,666 shares of our common stock, par value $0.001 per share, consisting
of:
|
(i) |
5,347,594 shares of common stock issuable upon the conversion of the Note, having an initial principal amount of $4,000,000, sold in the Offering pursuant to the SPA, entered into by and between the Company and the Selling Stockholder; and |
|
(ii) |
(a) 757,036 shares of common stock issuable upon the exercise of 757,036 Warrant As issued in the Offering to the Selling Stockholder; and (b) 757,036 shares of common stock issuable upon the exercise of 757,036 Warrant Bs issued in the Offering to the Selling Stockholder. |
The shares of common stock being offered by the
Selling Stockholder are those issuable to the Selling Stockholder, upon conversion of the Note or exercise of the Warrants. For additional
information regarding the issuances of the Note and the Warrants, see “Prospectus Summary – Recent Developments – Entry
into a Securities Purchase Agreement with Generating Alpha” and “Description of Securities” in this prospectus. We are
registering the shares of common stock in order to permit the Selling Stockholder to offer the shares for resale from time to time. Except
for the ownership of the Note and the Warrants, the Selling Stockholder has not had any material relationship with us within the past
three years.
The table below lists the
Selling Stockholder and other information regarding the beneficial ownership of the shares of common stock of the Selling Stockholder.
The second column lists the number of shares of common stock beneficially owned by the Selling Stockholder prior to the Offering, based
on its ownership of the shares of common stock and warrants, if any, as of December 19, 2023, assuming exercise of the Warrants or conversion
of the Notes held by the Selling Stockholder on that date, if any, without regard to any limitations on exercises.
The third column lists the
shares of common stock being offered by this prospectus by the Selling Stockholder.
In accordance with the terms
of a registration rights agreement with the Selling Stockholder, this prospectus generally covers the resale of the sum of (i) the number
of shares of common stock issuable to the Selling Stockholder upon conversion of the Note based on an assumed conversion price of $0.748
per share of common stock, and (ii) the maximum number of shares of common stock issuable upon exercise of the Warrants, determined as
if the outstanding Warrants were exercised in full as of the trading day immediately preceding the date this registration statement was
initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination and all subject to
adjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the Warrants. The fourth
column assumes the sale of all of the shares offered by the Selling Stockholder pursuant to this prospectus.
Under the terms of the Warrants
and other warrants, if any, held by the Selling Stockholder, the Selling Stockholder may not exercise any such warrants to the extent
such exercise would cause the Selling Stockholder, together with its affiliates and attribution parties, to beneficially own a number
of shares of common stock which would exceed 9.99%, or 4.99% in certain cases, of our then outstanding common stock following such exercise,
excluding for purposes of such determination shares of common stock issuable upon exercise of such warrants which have not been exercised.
The number of shares in the fourth column do not reflect this limitation. The Selling Stockholder may sell all, some or none of their
shares in this offering. See "Plan of Distribution."
Name of Selling Stockholder |
Number of shares
of Common Stock Owned Prior to Offering (1) |
Maximum Number
of shares of Common Stock to be Sold Pursuant
to this Prospectus (3) |
Number of
shares of Common Stock Owned After Offering
(4) |
Generating Alpha Ltd. (5) |
6,861,666 (2) |
6,861,666 |
0 |
|
|
(1) |
This column lists the number of shares of common stock beneficially owned by the Selling Stockholder, as of December 21, 2023 and consists of (i) 5,347,594 shares issuable upon the conversion of the Note (at an assumed conversion price of $0.748 per share) and (ii) 1,514,072 shares issuable upon the exercise of the Warrants. |
|
|
(2) |
Without regard to the beneficial ownership blocker of 9.99% or 4.99%, the Selling Stockholder would beneficially own an aggregate number of 6,861,666 shares of our common stock consisting of (i) 5,347,594 shares issuable upon the conversion of the Note (at an assumed conversion price of $0.748 per share) and (ii) 1,514,072 shares issuable upon the exercise of the Warrants. |
|
|
(3) |
For the purposes of the calculations of common stock to be sold pursuant to the prospectus, we are assuming the conversion of the Note in full (at an assumed conversion price of $0.748 per share) and the exercise of all the Warrants held by the Selling Stockholder. |
|
|
(4) |
This column lists the number of shares of common stock beneficially owned by the Selling Stockholder without giving effect to the applicable beneficial ownership blocker of 9.99% or 4.99%. This column represents the amount of shares that will be held by the Selling Stockholder after completion of this offering based on the assumptions that (a) all securities registered for sale by the registration statement of which this prospectus is part of will be sold, (b) no other shares of common stock are acquired or sold by the Selling Stockholder prior to completion of this offering, and (c) the securities previously acquired, if any, will not be sold. However, the Selling Stockholder is not obligated to sell all or any portion of the shares of our common stock offered pursuant to this prospectus. |
(5) |
Generating Alpha Ltd. has voting and investment power over these securities.
All voting and dispositive power for Generating Alpha Ltd. is held by Maria Cano. Each of Generating Alpha Ltd. and Maria Cano disclaims
beneficial ownership over these securities. The address of Generating Alpha Ltd. is Hunkins Waterfront Plaza, Suite 556, Main Street,
Charlestown, KN0802, Saint Kitts and Nevis. |
|
|
Material Relationships with the Selling Stockholder
Other than in connection with
the transactions described above and elsewhere in this registration statement, we have not had any material relationships with the Selling
Stockholder in the last three (3) years.
PLAN OF DISTRIBUTION
The Selling Stockholder and
any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby
on the Nasdaq Capital Market or any other stock exchange, market or trading facility on which the securities are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods
when selling securities:
|
· |
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
· |
block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
|
· |
purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
· |
an exchange distribution in accordance with the rules of the applicable exchange; |
|
· |
privately negotiated transactions; |
|
· |
settlement of short sales; |
|
· |
in transactions through broker-dealers that agree with the Selling Stockholder to sell a specified number of such securities at a stipulated price per security; |
|
· |
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
|
· |
a combination of any such methods of sale; or |
|
|
|
|
· |
any other method permitted pursuant to applicable law. |
The Selling Stockholder may
also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities
Act”), if available, rather than under this prospectus.
Broker-dealers engaged by
the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts
from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to
be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary
brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance
with FINRA Rule 2121.
In connection with the sale
of the securities or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling
Stockholder may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities
to broker-dealers that in turn may sell these securities. The Selling Stockholder may also enter into option or other transactions with
broker- dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer
or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution
may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholder and
any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning
of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities
Act. The Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the securities.
The Company is required to
pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify
the Selling Stockholder against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
We agreed to keep this prospectus
effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholder without registration and
without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance
with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities
have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities
will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in
certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and
regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement
of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholder
or any other person. We will make copies of this prospectus available to the Selling Stockholder and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act).
DESCRIPTION OF SECURITIES
The following description
of our capital stock is only a summary and is qualified in its entirety by the provisions of our articles of incorporation, as amended
and bylaws, which have been filed as exhibits to the registration statement of which this prospectus forms a part.
Authorized Capitalization
We have authorized capital
stock consisting of 500,000,000 shares of common stock, par value $0.001 per share, and 25,000,000 shares of preferred stock, par value
$0.001 per share, of which 2,000,000 shares have been designated as Series A 10% Convertible Preferred Stock (the “Series A Stock”),
10,000,000 shares have been designated as Series B 8% Convertible Preferred Stock (the “Series B Stock”), and 10,000,000 shares
have been designated as Series C 8% Convertible Preferred Stock (the “Series C Stock”).
As of December 19, 2023, we
had 1,970,404 shares of common stock and 9,281,809 shares of Series C Stock, issued and outstanding and no shares of Series A Stock or
Series B Stock were issued and outstanding.
Common Stock
The holders of outstanding
shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such
times and in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders. There is no cumulative voting of the election of directors then standing for
election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution
or winding up of our Company, the assets legally available for distribution to stockholders are distributable ratably among the holders
of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors and senior
ranked securities.
Preferred Stock
Series A Stock
Voting. The holders
of our Series A Stock have the right to vote together with the holders of our common stock on an as-converted basis, with five votes for
each share of Series A Stock, except that so long as any shares of Series A Stock are outstanding, we may not take any actions that would
amend the rights, preferences or privileges of our Series A Stock without the approval of the holders of a majority of the issued and
outstanding Series A Stock, voting separately as a single class. Fractional votes by the holders of Series A Stock are not permitted and
any fractional voting rights will be rounded to the nearest whole number, with one-half being rounded upward.
Maturity. The Series
A Stock has no maturity and is not subject to any sinking fund or redemption and will remain outstanding indefinitely unless and until
converted by the holder or we redeem or otherwise repurchase the Series A Stock.
Ranking. The Series
A Stock ranks, with respect to the payment of dividends and/or the distribution of assets in the event of any liquidation, dissolution
or winding up of the Company, (i) senior to all classes or series of common stock, (ii) on parity with all equity securities issued by
us with terms specifically providing that those equity securities rank on parity with the Series A Stock; (iii) junior to all equity securities
issued by us with terms specifically providing that those equity securities rank senior to the Series A Stock; and (iv) effectively junior
to all existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) of the Company.
Dividends. Cumulative
dividends accrue on each share of Series A Stock at the rate of 10% (the “Dividend Rate”) of the stated value of $1.00,
commencing on the date of issuance.
Dividends are payable monthly
in arrears, beginning on March 31, 2019 and thereafter on the last calendar day of each month, and, at our discretion, may be paid in
cash or in stock (the “PIK Dividend”) with such shares being valued at $0.25 per share (as may be adjusted as a result of
stock splits, reverse splits, combinations, or similar transactions from time to time). Any fractional shares of a PIK Dividend may, at
our discretion, be paid in cash or rounded up to the nearest share. All shares of common stock issued in payment of a PIK Dividend will
upon issuance thereof, be duly authorized, validly issued, fully paid and non-assessable. Dividends will accumulate whether or not we
have earnings.
Liquidation Preference.
In the event of a merger, sale of substantially all assets or stock, voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of shares of Series A Stock will be entitled to be paid out of the assets we have legally available for
distribution to our shareholders, subject to the preferential rights of the holders of any class or series of our capital stock we may
issue ranking senior to the Series A Stock with respect to the distribution of assets upon liquidation, dissolution or winding up, a liquidation
preference equal to the (i) aggregate number of shares of Series A Stock outstanding multiplied by its stated value per share; and (ii)
any accrued but unpaid dividends before any distribution of assets is made to holders of common stock or any other class or series of
our capital stock that we may issue that ranks junior to the Series A Stock as to liquidation rights. If our assets are not sufficient
to pay in full the liquidation preference, then the holders of Series A Stock will share ratably in any distribution.
The liquidation preference
shall be proportionately adjusted in the event of a stock split, stock combination or similar event so that the aggregate liquidation
preference allocable to all outstanding shares of Series A Stock immediately prior to such event is the same immediately after giving
effect to such event.
In the event of a sale of
less than all or substantially all of the assets (by merger, asset sale, change of control, capital lease or long term license/lease spin
off or otherwise of the Company or any subsidiary) with gross proceeds to the Company in excess of $1,500,000 whereby the assets sold
exceeds the cost of assets acquired for GAAP purposes, then the holder of the Series A Stock will receive a “special dividend”
from the Company equal to 25% of the value of such holder’s Series A Stock, payable in same form of consideration, as received by
the Company.
Conversion. Each share
of Series A Stock is convertible, at any time, into five shares of common stock.
If at any time, shares of
common stock is changed into the same or a different number of shares of any class or classes of stock, by recapitalization, reclassification,
reorganization, merger, exchange, consolidation, sale of assets or otherwise (each a “Corporate Change”), (i) each holder
of Series A Stock shall may convert such stock into the kind and amount of stock and other securities and property receivable upon such
Corporate Change by a holder of the number of shares of common stock into which such shares of Series A Stock could have been converted
immediately prior to such Corporate Change, or with respect to such other securities or property by the terms thereof and (ii) the PIK
Dividend will be paid in shares of such kind and amount of stock and other securities and property receivable upon such Corporate Change
as would have been received as such PIK Dividend immediately prior to such Corporate Change, or with respect to such other securities
or property by the terms thereof.
In the event that any of the
following occurs (a) a declaration or payment of any dividend or other distribution on the common stock, without consideration, in additional
shares of common stock or other securities or rights convertible into, or entitling the holder thereof to receive, directly or indirectly,
additional shares of common stock; (b) a subdivision (by stock split, reclassification or otherwise) of the outstanding shares of common
stock into a greater number of shares of common stock; or (c) a combination or consolidation (by reverse stock split) of the outstanding
shares of common stock into a smaller number of shares of common stock (each, a “Common Stock Event”), the (i) aggregate number
of shares of common stock into which the Series A Stock may be converted (the “Conversion Shares”) in effect immediately prior
to such Common Stock Event, and (ii) the common stock PIK Dividend Rate shall, simultaneously with the occurrence of such Common Stock
Event, be proportionately decreased or increased, as appropriate. The Conversion Shares shall be readjusted in the same manner upon the
occurrence of each subsequent Common Stock Event.
Share Reservation.
We are obligated to at all times reserve and keep available out of its authorized but unissued shares of common stock, a sufficient number
of its shares of common stock as shall from time to time be available to effect the conversion of all outstanding shares of the Series
A Stock.
Redemption. The Series A
Stock is not redeemable.
Transfer. The sale,
offer to sell, contract to sell, assignment, pledge, hypothecation, encumbrance or other transfer of the Series A Stock or common stock
issuable upon the conversion of the Series A Stock is restricted as provided in a subscription agreement for the shares between the Company
and the purchaser or its successors and assigns.
Protective Provisions.
So long as any shares of Series A Stock are outstanding, we may not take any actions (whether by merger, consolidation or otherwise) without
the approval of the holders of a majority of the issued and outstanding Series A Stock, voting separately as a single class, that would
amend the rights, preferences or privileges of the Series A Stock.
While we do not currently
have any plans for the issuance of additional preferred stock, the issuance of such preferred stock could adversely affect the rights
of the holders of common stock and, therefore, reduce the value of the common stock. It is not possible to state the actual effect of
the issuance of any shares of preferred stock on the rights of holders of the common stock until the board of directors determines the
specific rights of the holders of the preferred stock; however, these effects may include:
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Restricting dividends on the common stock |
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Diluting the voting power of the common stock; or |
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Impairing the liquidation rights of the common stock. |
As of the date of this prospectus,
we have no shares of our Series A Stock issued and outstanding.
Series B Stock
Ranking. The Series
B Stock ranks senior and prior to all other classes or series of our preferred stock and common stock.
Conversion. The holder
may at any time after the 12-month anniversary of the issuance of the shares of Series B Stock convert such shares into common stock at
a conversion price equal to the 30-day volume weighted average price (“VWAP”) of a share of common stock for each share of
Series B Stock to be converted. In addition, we at any time may require conversion of all or any of the Series B Stock then outstanding
at a 50% discount to the 30-day VWAP.
Voting. The holders
of our Series B Stock vote together as a single class with the holders of shares of our common stock, with each share entitling the holder
to 1.5625 votes per share. The consent of the holders of at least two-thirds of the shares of Series B Stock is required for the amendment
to any of the terms of the Series B Stock, to create any additional class of stock unless the stock ranks junior to the Series B Stock,
to make any distribution or dividend on any securities ranking junior to the Series B Stock, to merge or sell all or substantially all
of our assets or acquire another business or effectuate any liquidation of the Company.
Dividends. Cumulative
dividends accrue on each share of Series B Stock at the rate of 8% per annum of the stated value of $1.00 per share and are payable in
common stock in arrears quarterly commencing 90 days from issuance.
Liquidation. Upon a
liquidation, dissolution or winding up of the Company, the holders of the Series B Stock are entitled to $1.00 per share plus all accrued
and unpaid dividends. No distribution may be made to holders of shares of capital stock ranking junior to the Series B Stock upon a liquidation
until Series B stockholders receive their liquidation preference. The holders of 66 2/3% of the then outstanding shares of Series B Stock,
may elect to effect a merger, reorganization or consolidation of the Company into or with another corporation, not affiliated with said
majority, or other similar transaction or series of related transactions in which more than 50% of the voting power of the Company is
disposed of in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity,
or the sale of all or substantially all of the assets of the Company.
As of the date of this prospectus,
we have no shares of Series B Stock issued and outstanding.
Series C Stock
Designation and Amount.
The number of shares constituting the Series C Preferred Stock shall be 10,000,000, with a stated value of $1.00 per share.
Ranking. The Series
C Preferred Stock ranks senior and prior to all other classes or series of our preferred stock and common stock.
Dividends. Cumulative
dividends accrue on each share of Series C Preferred Stock at the rate of 8% per annum of the stated value of $1.00 per share and are
payable in common stock in arrears quarterly commencing three months from the date of issuance.
Liquidation. Upon a
liquidation, dissolution or winding up of the Company, the holders of the Series C Preferred Stock are entitled to $1.00 per share, plus
all accrued and unpaid dividends. No distribution may be made to holders of shares of capital stock ranking junior to the Series C Preferred
Stock upon a liquidation until the holders of Series C Preferred Stock receive their liquidation preference. The holders of 66 2/3% of
the then outstanding shares of Series C Preferred Stock, may elect to effect a merger, reorganization or consolidation of the Company,
or other similar transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of
in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity, or the sale
of all or substantially all of our assets, as a liquidation.
Voting. The holders
of our Series C Preferred Stock vote together as a single class with the holders of our common stock, with each share entitling the holder
to 1.5625 votes per share. The consent of the holders of at least 66 2/3% of the shares of Series C Preferred Stock is required for the
amendment to any of the terms of the Series C Preferred Stock, to create any additional class of stock unless the stock ranks junior to
the Series C Preferred Stock, to make any distribution or dividend on any securities ranking junior to the Series C Preferred Stock, or
to merge or sell all or substantially all of our assets or acquire another business or effectuate any liquidation of the Company.
Conversion. The holder
may, at any time after the 6-month anniversary of the issuance of the shares of Series C Preferred Stock, convert such shares into common
stock at a conversion rate of $1,152.00 per share. In addition, we may, at any time after the issuance of the shares, convert any or all
of the outstanding shares of Series C Preferred Stock at a conversion rate of $1,152.00 per share.
As of December 19, 2023, we
had 9,281,809 shares of Series C Stock issued and outstanding.
Stock Options
As of December 19, 2023, an
aggregate of 347 shares of common stock were issuable upon the exercise of outstanding stock options, at a weighted-average exercise price
of $1,788.00 per share.
Warrants
As of December 19, 2023, warrants
to purchase an aggregate of 1,347,983 shares of common stock at a weighted average exercise price of $16.81 are issued and outstanding
and terms between 1.2 years and 4.7 years.
The Note and the Warrants Offered in this Offering
On December 21, 2023, we consummated
the Offering pursuant to the SPA with the Selling Stockholder for the purchase of (1) the Note, having an initial principal amount of
$4,000,000, and (2) an aggregate of (i) 757,036 Warrant As to purchase up to an aggregate of 757,036 shares of common stock at an exercise
price of $1.78 per share of common stock; and (ii) 757,036 Warrant Bs to purchase up to an aggregate of 757,036 shares of common stock
at an exercise price of $0.001 per share of common stock. The purchase price of the Note was $3,640,000. The aggregate gross proceeds
of the Offering was approximately $3.6 million, before deducting fees to the placement agent and other expenses payable by us. EF Hutton
LLC, acted as the exclusive placement agent in connection with the Offering.
The Note
The Note in the aggregate principal amount of $4,000,000
has five (5) year maturity with an interest at nine (9) percent per calendar year and carries a nine (9) percent of original issue discount.
The Company has agreed to make amortization payments each month in the amount of $83,033.42 in cash or in kind.
The Note is convertible at
the discretion of the purchaser of the Note into Common Stock at a price of $1.50. The purchaser may choose the alternate Conversion Price
(as described in the Note) equal to 85% of the average of the three lowest trading prices during the previous ten (10) trading day period
ending on the latest complete trading day prior to notice of conversion.
The Conversion Price is subject
to full ratchet anti-dilution protections in the event that the Company issues any Common Stock at a per share price (each a “Dilutive
Price”) lower than the conversion price then in effect, provided, however, that the purchaser shall have the sole discretion in
deciding whether to utilize such Dilutive Price instead of the Conversion Price otherwise in effect at the time of the respective conversion.
In the event of an Event of
Default (as described in the Note), the Conversion Price shall be equal to seventy (70) percent multiplied by the lower of (i) the lowest
intraday trading price in the forty (40) trading days prior to the applicable Conversion Date (as described in the Note) or (ii) the lowest
closing bid price in the forty (40) trading days prior to the applicable Conversion Date.
The Warrants
The Warrant As are immediately
exercisable for $1.78 per share of Common Stock, subject to certain adjustments, including with respect to stock dividends, splits, subsequent
rights offerings, pro rata distributions and a Fundamental Transaction (as defined in the Warrant A) until the fifth anniversary of the
original issuance date.
The Warrant Bs are immediately
exercisable for $0.001 per share of Common Stock, subject to certain adjustments, including with respect to stock dividends, splits, subsequent
rights offerings, pro rata distributions and a Fundamental Transaction (as defined in the Warrant B) until the fifth anniversary of the
original issuance date .
Exercise Limitation.
A holder will not have the right to exercise any portion of the Warrants if the holder (together with its affiliates) would beneficially
own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage
ownership is determined in accordance with the terms of the Warrants. However, the holder may decrease such percentage at any time or
increase such percentage, upon at least 61 days’ prior notice from the holder to us.
Transfer Agent
The transfer agent for our
common stock and warrants is Equiniti Trust Company.
Registration Rights
None of the holders of shares
of our common stock or their transferees, are entitled to certain rights with respect to the registration of the offer and sale of those
shares under the Securities Act (other than the Selling Stockholder). If the offer and sale of these shares is registered, the shares
will be freely tradable without restriction under the Securities Act, and a large number of shares may be sold into the public market.
Anti-Takeover Provisions
As described above, our articles
of incorporation provide that our Board may issue preferred stock with such designation, rights and preferences as may be determined from
time to time by our Board. Our preferred stock could be issued quickly and utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company or make removal of management more difficult.
Certain provisions of Florida
law and our bylaws summarized below, may have the effect of delaying, deferring or discouraging another person from acquiring control
of us.
It is possible that these
provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their
best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.
These provisions expected
to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking
to acquire control of us to first negotiate with our Board. We believe that the benefits of increased protection of our potential ability
to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging
these proposals because negotiation of these proposals could result in an improvement of their terms.
Florida Law
The Florida Business Corporation
Act (the “FBCA”) contains a control-share acquisition statute that provides that a person who acquires shares in an “issuing
public corporation,” as defined in the statute, in excess of certain specified thresholds generally will not have any voting rights
with respect to such shares unless such voting rights are approved by the holders of a majority of the votes of each class of securities
entitled to vote separately, excluding shares held or controlled by the acquiring person.
The FBCA also provides that
an “affiliated transaction” between a Florida corporation with an “interested shareholder,” as those terms are
defined in the statute, generally must be approved by the affirmative vote of the holders of two-thirds of the outstanding voting shares,
other than the shares beneficially owned by the interested shareholder. The FBCA defines an “interested shareholder” as any
person who is the beneficial owner of 10% or more of the outstanding voting shares of the corporation.
These laws could delay or
prevent an acquisition.
In addition, we are subject
to Section 607.0902 of the FBCA, which prohibits the voting of shares in a publicly held Florida corporation that are acquired
in a control share acquisition unless (i) our Board approved such acquisition prior to its consummation or (ii) after such acquisition,
in lieu of prior approval by our Board, the holders of a majority of the corporation’s voting shares, exclusive of shares owned
by officers of the corporation, employee directors or the acquiring party, approve the granting of voting rights as to the shares acquired
in the control share acquisition. A control share acquisition is defined as an acquisition that immediately thereafter entitles the acquiring
party to 20% or more of the total voting power in an election of directors.
Special Stockholder Meetings
Our bylaws provide that a
special meeting of stockholders may be called by of our Board, our President and by a demand delivered to the Company of at least 10%
of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting.
Requirements for Advance Notification of
Stockholder Nominations and Proposals
Our bylaws establish advance
notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors.
LEGAL MATTERS
The validity of the securities
being offered by this prospectus has been passed upon for us by Lucosky Brookman LLP, Woodbridge, New Jersey.
EXPERTS
The consolidated financial
statements included in this prospectus and in the registration statement for the fiscal years ended December 31, 2022 and December 31,
2021 have been audited by Rosenberg Rich Baker Berman, P.A., an independent registered public accounting firm, and are included in reliance
upon such report given upon the authority of said firm as experts in auditing and accounting.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
As disclosed our on Current
Report on Form 8-K filed on March 2, 2022, on February 17, 2022, the Board dismissed BF Borgers CPA PC as our independent registered public
accounting firm, effective as of such date.
The audit reports of BF Borgers
CPA PC on our consolidated financial statements for each of the two fiscal years ended December 31, 2020 and December 31, 2019 did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting
principles. The audit reports for the years ended December 31, 2020 and December 31, 2019 contained an explanatory paragraph disclosing
the uncertainty regarding our ability to continue as a going concern.
During our two fiscal years
ended December 31, 2020 and December 31, 2019 and during the subsequent interim period from January 1, 2021 through February 17, 2022,
(i) there were no disagreements with BF Borgers CPA PC on any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedures that, if not resolved to BF Borgers CPA PC’s satisfaction, would have caused BF Borgers CPA PC to
make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events”
as defined in Item 304(a)(1)(v) of Regulation S-K.
We provided BF Borgers CPA
PC with a copy of the foregoing disclosures and a copy of BF Borgers CPA PC’s letter dated March 1, 2022 to the SEC, stating whether
it agrees with the foregoing disclosure, is filed as Exhibit 16.1 to our Form 8-K filed March 2, 2022.
On February 17, 2022, the
Board engaged Rosenberg Rich Baker Berman, P.A. as our independent registered public accounting firm for the year ending December 31,
2021.
During the two fiscal years
ended December 31, 2020 and December 31, 2019 and during the subsequent interim period from January 1, 2021 through February 17, 2022,
neither we nor anyone on our behalf consulted Rosenberg Rich Baker Berman, P.A. regarding either (i) the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements,
and neither a written report nor oral advice was provided to us that Rosenberg Rich Baker Berman, P.A. concluded was an important factor
considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was either
the subject of a “disagreement” or a “reportable event”, each as defined in Regulation S-K Item 304(a)(1)(iv)
and 304(a)(1)(v), respectively.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC
this registration statement on Form S-1 under the Securities Act with respect to the securities being offered by this prospectus. This
prospectus, which constitutes a part of this registration statement, does not contain all of the information in this registration statement
and its exhibits. For further information with respect to us and the units, common stock and warrants offered by this prospectus, you
should refer to this registration statement and the exhibits filed as part of that document. Statements contained in this prospectus as
to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to
the copy of the contract or other document filed as an exhibit to this registration statement. Each of these statements is qualified in
all respects by this reference.
We are subject to the informational
requirements of the Exchange Act and file annual, quarterly and current reports, proxy statements and other information with the SEC.
You can read our SEC filings, including this registration statement, over the Internet at the SEC’s website at http://www.sec.gov.
You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C.
20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100
F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference
facilities. You may also request a copy of these filings, at no cost, by writing or telephoning us at: Grom Social Enterprises, Inc.,
2060 NW Boca Raton, Suite #6, Boca Raton, Florida 33431 or (561) 287-5776.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate
by reference” information into this prospectus, which means that we can disclose important information to you by referring you to
those documents and that the information in this prospectus is not complete and you should read the information incorporated by reference
for more detail. We incorporate by reference in two ways. First, we list certain documents that we have already filed with the SEC. The
information in these documents is considered part of this prospectus. Second, the information in documents that we file with the SEC in
the future will update and supersede the current information in, and incorporated by reference in, this prospectus until we file a post-effective
amendment that indicates the termination of the offering of the common stock made by this prospectus.
We incorporate by reference
the documents listed below and any future filings we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
(other than information furnished in Current Reports on Form 8-K filed under Item 2.02 or 7.01 of such form unless such form expressly
provides to the contrary), including those made after the date of the initial filing of the registration statement of which this prospectus
is a part and prior to effectiveness of such registration statement:
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our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 17, 2023; |
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our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023, June 30, 2023, and September 30, 2023, filed with the SEC on May 17, 2023, August 18, 2023, and November 20, 2023; |
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our Current Reports on
Form 8-K filed with the SEC on January
31, 2023, March 29, 2023, April
14, 2023, August 10, 2023, September
11, 2023, September 12,
2023, November 15, 2023, November
21, 2023, and December 27, 2023; |
|
· |
our preliminary and definitive information statements on PRE 14C and DEF 14C, respectively, filed with the SEC on November 21, 2023, and December 1, 2023, respectively; |
|
|
|
|
· |
our preliminary and definitive proxy statements on PRE 14A and DEF 14A filed with the SEC on February 14, 2023, February 24, 2023, June 28, 2023, and July 10, 2023. |
The documents incorporated
by reference into this prospectus are also available on our corporate website at www.gromsocial.com. We will provide
to each person, including any beneficial owner, to whom a prospectus is delivered, a copy of any or all of the information that has been
incorporated by reference in this prospectus but not delivered with this prospectus. You may request a copy of this information at no
cost, by writing or telephoning us at the following address or telephone number:
Grom Social Enterprises, Inc.
2060 NW Boca Raton Blvd., Suite #6
Boca Raton, Florida 33431
(561) 287-5776
Attention: Corporate Secretary
Except for the
specific incorporated documents listed above, no information available on or through our website shall be deemed to be incorporated in
this prospectus or the registration statement of which it forms a part.
The SEC maintains an internet
website that contains reports, proxy and information statements and other information regarding the issuers that file electronically with
the SEC, including us, and can be accessed free of charge on the SEC’s website, http://www.sec.gov.
Up to 6,861,666 Shares of Common Stock
![](https://www.sec.gov/Archives/edgar/data/1662574/000168316823009097/image_001.jpg)
GROM SOCIAL ENTERPRISES, INC.
PROSPECTUS
_______________, 2023
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution.
The following table sets forth
the expenses expected to be incurred by us in connection with the issuance and distribution of the securities registered hereby, all of
which expenses, except for the Securities and Exchange Commission (“SEC”) registration fee, are estimates:
Item |
|
Amount
to be paid |
|
SEC registration fee |
|
$ |
789.41 |
|
Legal fees and expenses |
|
|
175,000 |
|
Accounting fees and expenses |
|
|
10,000 |
|
Miscellaneous expenses |
|
|
7,500 |
|
Total |
|
$ |
193,289.41 |
|
Item 14. Indemnification of
Directors and Officers.
The Florida Business Corporation
Act (the “FBCA”) provides that a corporation may indemnify a director or officer against liability if the director or officer
acted in good faith, the director or officer acted in a manner he or she reasonably believed to be in, or not opposed to, the best interests
of the corporation, and in the case of any criminal proceeding, the director or officer had no reasonable cause to believe his or her
conduct was unlawful. A corporation may not indemnify a director or an officer except for expenses and amounts paid in settlement not
exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably
incurred in connection with the defense or settlement of such proceeding, including any appeal thereof, where such person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation.
The FBCA provides that a corporation
must indemnify a director or officer who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which
the individual was a party because he or she is or was a director or officer of the corporation against expenses incurred by the individual
in connection with the proceeding.
A corporation may, before
final disposition of a proceeding, advance funds to pay for or reimburse expenses incurred in connection with the proceeding by a director
or an officer if the director or officer delivers to the corporation a signed written undertaking of the director or officer to repay
any funds advanced if such director or officer is not entitled to indemnification.
Our Articles of Incorporation
and Bylaws provide that we shall indemnify our directors, officers, employees and agents to the full extent permitted by FBCA, including
in circumstances in which indemnification is otherwise discretionary under such law.
These indemnification provisions
may be sufficiently broad to permit indemnification of our officers, directors and other corporate agents for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act of 1933, as amended (the “Securities Act”).
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company pursuant
to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
We have the power to purchase
and maintain insurance on behalf of any person who is or was one of our directors or officers, or is or was serving at our request as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other business against any liability
asserted against the person or incurred by the person in any of these capacities, or arising out of the person’s fulfilling one
of these capacities, and related expenses, whether or not we would have the power to indemnify the person against the claim under the
provisions of the FBCA. We do not currently maintain director and officer liability insurance on behalf of our director and officers;
however, we intend to so purchase and maintain such insurance when economically feasible.
Item 15. Recent Sales of Unregistered Securities.
The following list sets forth
information as to all securities we have sold since December 27, 2020, which were not registered under the Securities Act.
On February 9, 2021, we issued
Auctus Fund, LLC, an accredited investor, a twelve-month convertible promissory note in the principal amount of $500,000. In connection
with the note issuance, Auctus Fund was also issued a five-year warrant to purchase up to an aggregate of 6,510 shares of our common stock
at an exercise price of $57.60 per share.
On February 17, 2021, we issued
an aggregate of 2,564,175 shares of Series B Stock to three holders of convertible notes in the aggregate amount of $1,700,905 as payment
in full for such notes.
On February 17, 2021, we sold
an aggregate of 300,000 shares of Series B Stock for aggregate gross proceeds of $300,000 to two accredited investors in a private offering.
On March 11, 2021, we issued
FirstFire Global Opportunities Fund, LLC, an accredited investor, a twelve-month convertible promissory note in the principal amount of
$300,000. In connection with the note issuance, FirstFire Global was also issued a five-year warrant to purchase up to an aggregate of
3,906 shares of our common stock at an exercise price of $57.60 per share.
On March 31, 2021, we sold
an aggregate of 650,000 shares of Series B Stock for aggregate gross proceeds of $650,000 to three accredited investors in a private offering.
On April 16, 2021, we issued
Labrys Fund, LP, an accredited investor, a twelve-month convertible promissory note in the principal amount of $300,000. In connection
with the note issuance, Labrys Fund was also issued a five-year warrant to purchase up to an aggregate of 3,906 shares of our common stock
at an exercise price of $57.60 per share.
On May 20, 2021, we entered
into exchange agreements with all of the holders of our Series B Stock, pursuant to which the holders agreed to exchange all of the issued
and outstanding shares of our Series B Stock for shares of Series C Stock, on a one for one basis. The exchange will be effective upon
the filing of the Certificate of Designation with the Secretary of State of the State of Florida, which may be as of May 20, 2021, or
a later date. Upon effectiveness of the exchange, all 9,215,059 issued and outstanding shares of our Series B Stock will be exchanged
for an aggregate of 9,215,059 shares of our Series C Stock, and all of the exchanged shares of Series B Stock will be cancelled.
On June 4, 2021, we issued
53 shares of common stock to a contractor for technology design services provided to us.
On June 11, 2021, we issued
521 shares of common stock to a consultant for investor relations services provided to us.
On June 28, 2021, we issued
79 shares of common stock to a contractor for public relations services provided to us.
On July 6, 2021, we issued
90 shares of common stock to a contractor for technology design services provided to us.
On July 13, 2021, we issued
79 shares of common stock to a contractor for public relations services provided to us.
On July 16, 2021, we issued
37 shares of common stock to a contractor for public relations services provided to us.
On July 19, 2021, we issued
37 shares of common stock to a contractor for public relations services provided to us.
On August 2, 2021, we issued
5,265 shares of common stock to an officer as bonus compensation.
On August 6, 2021, we issued
119 shares of common stock to a contractor for technology design services provided to us.
On August 6, 2021, we issued
60 shares of common stock to a contractor for public relations services provided to us.
On August 10, 2021, we issued
60 shares of common stock to a contractor for public relations services provided to us.
On August 19, 2021, pursuant
to the terms of a Membership Interest Purchase Agreement entered into on July 29, 2021, we acquired 80% of Curiosity Ink Media’s
outstanding membership interests (the “Purchased Interests”) from the holders of all of Curiosity’s outstanding membership
interests (the “Sellers”) in consideration for the issuance to the Sellers of an aggregate of 59,063 shares of our common
stock, pro rata to their membership interests immediately prior to the closing of the acquisition. The shares were valued at $84.60 per
share which represents to the 20-day volume-weighted average price of our common stock on August 19, 2021. Pursuant to the Membership
Interest Purchase Agreement, we also paid $400,000 and issued an 8% eighteen-month convertible promissory note in the principal amount
$278,000 (the “Note”) to pay-down and refinance certain outstanding loans and advances previously made to CIM by two of the
Sellers, Russell Hicks and Brett Watts. The Note is convertible into shares of our common stock at a conversion price of $98.40 per share,
but may not be converted if, after giving effect to such conversion, the noteholder and its affiliates would beneficially own in excess
of 9.99% of our outstanding common stock.
On September 2, 2021, we issued
112 shares of common stock to a contractor for technology design services provided to us.
On September 14, 2021, we
entered into a Securities Purchase Agreement with L1 Capital Global Opportunities Master Fund (“L1 Capital”), pursuant to
which it sold L1 Capital (i) a 10% Original Issue Discount Senior Secured Convertible Note in the principal amount of $4,400,000, due
March 13, 2023 (the “Original Note”), and (ii) a five-year warrant to purchase 27,109 shares of our common stock at an exercise
price of $126.00 per share (the “Original Warrant”), for consideration of $3,960,000.
On September 17, 2021, we
issued 815 shares of common stock to a contractor for advisory services provided to us.
On September 17, 2021, we
issued 45 shares of common stock to a contractor for public relations services provided to us.
On October 13, 2021, we issued
4,333 shares of common stock to a consultant for investor relations services provided to us.
On October 18, 2021, we issued
138 shares of common stock to a contractor for technology design services provided to us.
On October 18, 2021, we issued
45 shares of common stock to a contractor for public relations services provided to us.
On November 17, 2021, we issued
90 shares of common stock to a contractor for technology design services provided to us.
On November 24, 2021, we issued
36 shares of common stock to a contractor for public relations services provided to us.
On January 24, 2022, we issued
686 shares of common stock to a preferred stockholder upon the conversion of 39,500 shares of Series C Stock.
On March 3, 2022, we issued
1,736 shares of common stock to a related party for marketing and promotional services provided to us.
On March 3, 2022, we
issued 750 shares of common stock to an investor and public relations firm for services provided to us.
On March 18, 2022, we issued
66,667 shares of common stock to a noteholder upon the conversion of $1,300,000 in convertible note principal.
On March 21, 2022, we issued
46,154 shares of common stock to a noteholder upon the conversion of $900,000 in convertible note principal.
On March 23, 2022, we issued
10,256 shares of common stock to a noteholder upon the conversion of $200,000 in convertible note principal.
On June 17, 2022, we issued
5,895 shares of common stock to the holders of its Series C Stock for PIK dividends.
On June 17, 2022, we issued
1,464 shares of common stock to a consultant for investor relations services provided to us.
On July 1, 2022, we issued
333 shares of common stock to a consultant for investor relations services provided to us.
On September 8, 2022, we issued
333 shares of common stock to a consultant for investor relations services provided to us.
On September 29, 2022, we
issued 15,296 shares of common stock to the holders of its Series C Stock for PIK dividends.
On September 30, 2022, we
issued 1,333 shares of common stock to a contractor for advisory services provided to us.
On January 25, 2023, we consummated
the PIPE Offering pursuant to the terms of the 2023 SPA and issued (i) 100,000 shares of common stock; (ii) 100,000 Purchase Warrants
to purchase an aggregate of 175,000 shares of Common Stock; and (iii) 1,227,434 Pref-Funded Warrants to purchase an aggregate of 2,148,010
shares of Common Stock. The purchase price of each Share and associated Purchase Warrant was $2.26. The purchase of each Share and associated
Prefunded Warrant was $2.25. The aggregate gross proceeds of the PIPE Offering was approximately $3 million, before deducting fees to
the placement agent and other expenses payable by us. EF Hutton, division of Benchmark Investments, LLC, acted as the exclusive placement
agent in connection with the PIPE Offering.
In connection with the PIPE
Offering, we entered into a Waiver with L1 Capital Global Opportunities Master Fund (“L1”) waiving certain provisions of 2021
SPA, by and between us and L1. Pursuant to the terms of the Waiver, L1 waived certain provisions of the 2021 SPA and in consideration
thereof, we (i) issued 150,000 purchase warrants substantially similar to the Purchase Warrants issued in connection with the 2023 SPA;
and (ii) paid a cash fee of $50,000 to L1.
On February 15, 2023, the
Company issued 1,167 shares of Common Stock to an investor and public relations firm for services provided to the Company.
The above issuances did not
involve any underwriters, underwriting discounts or commissions, or any public offering and we believe is exempt from the registration
requirements of the Securities Act of 1933 by virtue of Section 3(a)(9) or Section 4(a)(2) thereof and/or Regulation D promulgated thereunder.
Item 16. Exhibits and Financial Statement Schedules
Exhibit Number |
Description |
|
Form |
Exhibit |
Filing Date |
|
|
|
|
|
|
3.1 |
Articles of Incorporation |
|
S-1 |
3.1 |
01/13/2016 |
3.2 |
Bylaws |
|
S-1 |
3.2 |
01/13/2016 |
3.3 |
Amendment to Articles of Incorporation |
|
8-K |
3.3 |
08/22/2017 |
3.4 |
Certificate of Designation of Series A Convertible Preferred Stock, dated February 22, 2019 |
|
10-K |
10.16 |
04/16/2019 |
3.5 |
Articles of Amendment to Articles of Incorporation, dated May 31, 2019 |
|
8-K |
3.1 |
06/18/2019 |
3.6 |
Certificate of Designation of Series B 8% Convertible Preferred Stock |
|
10-Q |
4.5 |
08/06/2020 |
3.7 |
Certificate of Amendment to the Articles of Incorporation of the Company, filed May 7, 2021, effective as of May 13, 2021 |
|
8-K |
3.1 |
05/17/2021 |
3.8 |
Certificate of Designation of Preferences, Rights and Limitations of Series C 8% Convertible Preferred Stock |
|
8-K |
3.1 |
05/24/2021 |
3.9 |
Certificate of Amendment to the Articles of Incorporation of the Company, filed on December 6, 2022 |
|
8-K |
3.1 |
12/08/2022 |
4.1 |
Form of Warrant |
|
10-Q |
4.1 |
11/19/2019 |
4.2 |
12% Convertible Note, dated February 9, 2021, issued to Auctus Fund, LLC |
|
8-K |
4.1 |
02/19/2021 |
4.3 |
Common Stock Purchase Warrant, dated February 9, 2021, issued to Auctus Fund, LLC |
|
8-K |
4.2 |
02/12/2021 |
4.4 |
8% Convertible Promissory Note, dated August 19, 2021, issued by Grom Social Enterprises, Inc. to Curiosity Ink Media LLC |
|
8-K |
4.1 |
08/24/2021 |
4.5 |
Form of $4,400,000 Principal Amount, 10% Original Issue discount Senior Secured Convertible Note issued to L1 Capital, due March 14, 2023 |
|
8-K |
10.2 |
09/20/2021 |
4.6 |
Form of Common Stock Purchase Warrant issued to L1 Capital, exercisable at $4.20 for 813,278 shares of the Company’s Common Stock |
|
8-K |
10.3 |
09/20/2021 |
4.7 |
Amended and Restated $4,400,000 Principal Amount, 10% Original Issue Discount Senior Secured Convertible Note issued to L1 Capital on October 20, 2021 |
|
8-K |
10.2 |
10/20/2021 |
4.8 |
Form of Common Stock Purchase Warrant |
|
S-1 |
4.15 |
12/06/2022 |
4.9 |
Form of Pre-Funded Common Stock Purchase Warrant |
|
S-1 |
4.16 |
12/06/2022 |
4.10 |
Form of Series A Warrant |
|
S-1/A |
4.10 |
08/25/2023 |
4.11 |
From of Series B Warrant |
|
S-1/A |
4.11 |
08/25/2023 |
4.12 |
Form of Pre-Funded Common Stock Purchase Warrant |
|
S-1/A |
4.12 |
08/25/2023 |
4.13 |
Form of $4,000,000 Principal Amount, 9% Original Issue Discount Note issued to Generating Alpha Ltd. |
|
8-K |
10.2 |
11/15/2023 |
4.14 |
Form of Common Stock Purchase Warrant issued to Generating Alpha Ltd. |
|
8-K |
10.3 |
11/15/2023 |
5.1* |
Opinion of Lucosky Brookman LLP |
|
|
|
|
9.1 |
Voting Agreement |
|
8-K |
9.1 |
09/20/2021 |
9.2 |
Form of Voting Agreement by and between Grom Social Enterprises, Inc., certain shareholders of Grom Social Enterprises, Inc., and Generating Alpha Ltd. |
|
8-K |
9.1 |
11/15/2023 |
10.1 |
Copy of Letter of Intent with Grom Holdings, Inc. |
|
8-K |
10.4 |
01/17/2017 |
10.2 |
Share Exchange Agreement with Grom Holdings, Inc. |
|
8-K |
10.5 |
05/17/2017 |
10.3 |
Employment Agreement, dated June 1, 2016, between the Company and Darren Marks |
|
8-K |
10.5 |
08/22/2017 |
10.4 |
Employment Agreement with Melvin Leiner |
|
8-K |
10.5 |
08/22/2017 |
10.5 |
Acquisition Agreement of TD Holdings |
|
8-K |
10.6 |
08/22/2017 |
10.6 |
Amending Agreement to the Share Sale Agreement for the Entire Issued Share Capital of TD Holdings Limited and the Secured Promissory Note |
|
8-K |
10.7 |
01/5/2018 |
10.7 |
Subscription Agreement for Series A Stock |
|
10-K |
10.2 |
04/16/2019 |
10.8 |
Purchase and Sale Agreement with TeleMate.Net |
|
10-K |
10.21 |
04/16/2019 |
10.9 |
Grom Educational Services Peachtree Pointe Lease |
|
10-K |
10.22 |
04/16/2019 |
10.10 |
Form of Subscription Agreement |
|
10-Q |
10.1 |
11/19/2019 |
10.11 |
Form of Debt Exchange Agreement |
|
8-K |
10.1 |
11/15/2019 |
10.12 |
Form of 12% Senior Secured Convertible Promissory Note |
|
8-K |
4.1 |
03/20/2020 |
10.13 |
Form of 12% Senior Secured Convertible Promissory Note |
|
8-K |
4.2 |
03/20/2020 |
10.14 |
Form of Subscription Agreement for 12% Senior Secured Convertible Promissory Note |
|
8-K |
10.2 |
03/20/2020 |
10.15 |
Security Agent Agreement, dated March 16, 2020 |
|
8-K |
10.3 |
03/20/2020 |
10.16 |
Third Amendment to the TDH Share Sell Agreement, dated March 16, 2020 |
|
8-K |
10.4 |
03/20/2020 |
10.17 |
Security Agreement, dated March 16, 2020 |
|
8-K |
10.5 |
03/20/2020 |
10.18 |
Form of Subscription Agreement |
|
8-K |
10.6 |
03/20/2020 |
10.19 |
Form of Debt Exchange Agreement |
|
10-Q |
10.33 |
08/06/2020 |
10.20 |
Form of Exchange Agreement for Series A 10% Convertible Preferred Stock |
|
10-Q |
10.34 |
08/06/2020 |
10.21 |
Form of Subscription Agreement for Series B Convertible Stock |
|
10-Q |
10.35 |
08/06/2020 |
10.22 |
2020 Equity Incentive Plan, dated September 16, 2020 |
|
8-K |
10.36 |
09/21/2020 |
10.23 |
Form of Incentive Stock Option Agreement |
|
8-K |
10.37 |
09/21/2020 |
10.24 |
Form of Non-Qualified Stock Option Agreement |
|
8-K |
10.38 |
09/21/2020 |
10.25 |
Form of Restricted Stock Agreement |
|
8-K |
10.39 |
09/21/2020 |
10.26 |
Form of Grant of Stock Appreciation Rights |
|
8-K |
10.4 |
09/21/2020 |
10.27 |
Note Purchase Agreement, dated December 17, 2021, between the Company and Quick Capital, LLC |
|
8-K |
10.45 |
02/12/2021 |
10.28 |
8% Convertible Promissory Note, dated December 17, 2021, issued to Quick Capital LLC |
|
8-K |
10.46 |
02/12/2021 |
10.29 |
Common Stock Purchase Warrant, dated December 17, 2021, issued to Quick Capital, LLC |
|
8-K |
10.47 |
02/12/2021 |
10.30 |
Securities Purchase Agreement, dated February 9, 2021, between the Company and Auctus Fund, LLC |
|
8-K |
10.3 |
02/12/2021 |
10.31 |
Note Cancellation and General Release, dated March 17, 2021 from Newbridge Securities Corporation |
|
8-K |
10.47 |
04/13/2021 |
10.32 |
12% Convertible Promissory Note, dated March 11, 2021, issued to FirstFire Fund, LLC |
|
8-K |
4.1 |
04/05/2021 |
10.33 |
Common Stock Purchase Warrant, dated March 11, 2021, issued to FirstFire Fund, LLC |
|
8-K |
4.2 |
04/05/2021 |
10.34 |
Securities Purchase Agreement, dated March 11, 2021, between the Company and FirstFire Fund, LLC |
|
8-K |
10.2 |
04/05/2021 |
10.35 |
Registration Rights Agreement, dated March 11, 2021, between the Company and FirstFire Fund, LLC |
|
8-K |
10.3 |
04/05/2021 |
10.36 |
Form of Exchange Agreement for exchange of Series B Stock for Series C Stock |
|
8-K |
4.2 |
05/24/2021 |
10.37 |
Membership Interest Purchase Agreement, dated July 29, 2021, by and among the Company, Curiosity and the Sellers |
|
8-K |
10.1 |
08/04/2021 |
10.38 |
Amended and Restated Limited Liability Company Agreement dated as of August 19, 2021 by and among CIM, Grom and Sellers |
|
8-K |
10.2 |
08/24/2021 |
10.39 |
Employment Agreement dated as of August 19, 2021 between the Company and Russell Hicks |
|
8-K |
10.3 |
08/24/2021 |
10.40 |
Non-Qualified Stock Option Agreement dated August 19, 2021 between the Company and Russell Hicks |
|
8-K |
10.4 |
08/24/2021 |
10.41 |
Employment Agreement dated as of August 19, 2021 between the Company and Brent Watts |
|
8-K |
10.5 |
08/24/2021 |
10.42 |
Non-Qualified Stock Option Agreement dated August 19, 2021 between the Company and Brent Watts |
|
8-K |
10.6 |
08/24/2021 |
10.43 |
Executive Separation Agreement, dated April 22, 2022, by and among Grom Social Enterprises, Inc., and Melvin Leiner |
|
8-K |
10.1 |
04/28/2022 |
10.44 |
Form of Warrant Agent Agreement |
|
S-1 |
10.7 |
12/06/2022 |
10.45 |
Form of Lockup Agreement |
|
S-1 |
10.71 |
12/06/2022 |
10.46 |
Securities Purchase Agreement |
|
8-K |
10.1 |
01/31/2023 |
10.47 |
Amendment No. 1 to Securities Purchase Agreement, dated January 30, 2023, between the Company and Hudson Bay Master Fund Ltd. |
|
8-K |
10.2 |
01/31/2023 |
10.48 |
Amendment No. 2 to Securities Purchase Agreement, dated January 30, 2023, between the Company and Hudson Bay Master Fund Ltd. |
|
8-K |
10.3 |
01/31/2023 |
10.49 |
Waiver Agreement, dated January 30, 2023, between the Company and L1 Capital Global Opportunities Master Fund |
|
8-K |
10.4 |
01/31/2023 |
10.50 |
Registration Rights Agreement by and between Grom Social Enterprises, Inc. and the Hudson Bay Master Fund Ltd. dated January 25, 2023 |
|
8-K |
10.5 |
01/31/2023 |
10.51 |
Securities Purchase Agreement, dated November 9, 2023, by and between Grom Social Enterprises, Inc. and Generating Alpha Ltd. |
|
8-K |
10.1 |
11/15/2023 |
10.52 |
Form of Registration Rights Agreement by and between Grom Social Enterprises, Inc. and Generating Alpha Ltd. |
|
8-K |
10.4 |
11/15/2023 |
10.53 |
First Amendment to Securities Purchase Agreement, dated November 20, 2023, by and between Grom Social Enterprises, Inc. and Generating Alpha Ltd. |
|
8-K |
10.1 |
11/21/2023 |
16.1 |
Letter from BF Borgers CPA PC dated March 1, 2022 to the Securities and Exchange Commission |
|
8-K |
16.1 |
03/02/2022 |
21.1 |
Subsidiaries of the Registrant |
|
10-K |
21.1 |
04/17/2018 |
23.1* |
Consent of Rosenberg Rich Baker Berman, P.A. |
|
|
|
|
23.2* |
Consent of Lucosky Brookman LLP (included in Exhibit 5.1) |
|
|
|
|
24.1* |
Power of Attorney |
|
|
|
|
107* |
Filing Fee Table |
|
|
|
|
_________________
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) |
The undersigned registrant hereby undertakes: |
|
(1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
|
(i) |
to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
|
(ii) |
to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) that, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
|
(iii) |
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
provided, however, that paragraphs
(a)(1)(i), (a)(1)(ii), and (a)(1)(iii) above do not apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in
a form of prospectus filed pursuant to Rule 424(b) that is a part of the registration statement.
|
(2) |
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
|
(3) |
To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering. |
|
(4) |
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
|
(i) |
each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| (ii) | each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule
430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier
of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities
in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such effective date. |
| (5) | That,
for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant
to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant
to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. |
|
(i) |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
SIGNATURES
Pursuant to the requirements
of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boca Raton, State of Florida, on this 27th day of December, 2023.
|
GROM SOCIAL ENTERPRISES, INC. |
|
|
|
|
By: |
/s/ Darren Marks |
|
|
Darren Marks
Chief Executive Officer and President
(Principal Executive Officer) |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS,
that each person whose signature appears below constitutes and appoints Darren Marks, his true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, for him and his name, place and stead, in any and all capacities, to sign any or
all amendments (including pre-effective and post-effective amendments) to this registration statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, including any Registration Statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, with the SEC, granting unto said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of his substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates
indicated.
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/ Darren Marks |
|
Chief Executive Officer, President and Director |
|
December 27, 2023 |
Darren Marks |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Jason Willliams |
|
Chief Financial Officer, Secretary and Treasurer |
|
December 27, 2023 |
Jason Williams |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Dr. Thomas Rutherford |
|
Director |
|
December 27, 2023 |
Dr. Thomas Rutherford |
|
|
|
|
|
|
|
|
|
/s/ Robert Stevens |
|
Director |
|
December 27, 2023 |
Robert Stevens |
|
|
|
|
|
|
|
|
|
/s/ Norman Rosenthal |
|
Director |
|
December 27, 2023 |
Norman Rosenthal |
|
|
|
|
EXHIBIT 5.1
![](https://www.sec.gov/Archives/edgar/data/1662574/000168316823009097/image_002.jpg)
December 27, 2023
Grom Social Enterprises, Inc.
2060 NW Boca Raton Blvd., Suite #6
Boca Raton, Florida 33431
Re: |
Grom Social Enterprises, Inc. |
|
Registration Statement on Form S-1 |
Ladies and Gentlemen:
We have acted
as counsel to Grom Social Enterprises, Inc., a Florida corporation (the “Company”), in connection with the Company’s
Registration Statement on Form S-1 filed hereto with the Securities and Exchange Commission (the “Commission”)
pursuant to the Securities Act of 1933, as amended (the “Securities Act”) on December 27, 2023, (the “Registration
Statement”) with respect to the registration of the proposed offering of up to an aggregate of 6,861,666 shares of common
stock of the Company, par value $0.001 per share (the “Common Stock”), which consists of:
(1) 5,347,594 shares of Common Stock
(the “Conversion Shares”) issuable upon the conversion of a convertible promissory note of the Company (the
“Note”), having an initial principal amount of $4,000,000, sold in a private placement offering (the “Offering”)
pursuant to a securities purchase agreement, dated November 9, 2023 and as amended November 20, 2023 (the “SPA”), entered
into by and between the Company and the purchaser named therein (the “Selling Stockholder”); and
(2) (a) 757,036 shares of Common Stock
(the “Warrant Shares”) issuable upon the exercise of 757,036 warrants at an exercise price of $1.78 per share
of Common Stock (the “Warrant As”) issued in the Offering to the Selling Stockholder; and (b) 757,036 shares
of Common Stock issuable upon the exercise of 757,036 warrants at an exercise price of $0.001 per share of common stock (the “Warrant
Bs”, together with the Warrant As, the “Warrants”) issued in the Offering to the Selling Stockholder.
We have reviewed
the Registration Statement, including the prospectus (the “Prospectus”) that is part of the Registration Statement.
The Registration Statement registers the Conversion Shares and the Warrant Shares held by the selling securityholder named in the Registration
Statement.
In connection with
this opinion, we have examined the originals or copies certified or otherwise identified to our satisfaction of the following: (a) Articles
of Incorporation of the Company, (b) Bylaws of the Company, (c) the Registration Statement and all exhibits thereto, (d) the forms of
the Note and Warrants, (e) the resolutions adopted by the Company’s Board of Directors, and (f) such certificates, documents and
records as we have deemed appropriate in order to enable us to render the opinions set forth herein. In addition to the foregoing, we
also have relied, exclusively as to matters of fact, upon the representations made by the Company and its representatives and we have
assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original
documents of all documents submitted to us certified or photostatic copies.
Based upon the
foregoing, and in reliance thereon, we are of the opinion that:
|
1. |
The Conversion Shares have been duly authorized and when issued and paid for upon conversion in accordance with the terms and conditions of the Note, will be validly issued, fully paid and nonassessable. |
|
|
|
|
2. |
The Warrant Shares have been duly authorized and when issued and paid for upon exercise in accordance with the terms and conditions of the Warrants, will be validly issued, fully paid and nonassessable. |
We are attorneys licensed
to practice in the States of New York and New Jersey and, with your permission, for the purpose of issuing the opinions rendered herein,
we have assumed that the laws of the State of Florida are identical to the laws of the State of New York. This opinion letter is limited
to the laws in effect as of the date the Registration Statement is declared effective by the Commission and is provided exclusively in
connection with the public offering contemplated by the Registration Statement.
This opinion letter speaks
only as of the date hereof and we assume no obligation to update or supplement this opinion letter if any applicable laws change after
the date of this opinion letter or if we become aware after the date of this opinion letter of any facts, whether existing before or arising
after the date hereof, that might change the opinions expressed above.
This opinion letter is furnished
in connection with the filing of the Registration Statement and may not be relied upon for any other purpose without our prior written
consent in each instance. Further, no portion of this letter may be quoted, circulated or referred to in any other document for any other
purpose without our prior written consent.
We hereby consent to the
filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption “Legal Matters”
in the Prospectus forming a part of the Registration Statement. In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder.
|
Very truly yours, |
|
|
|
|
|
/s/ Lucosky Brookman LLP |
|
|
Lucosky Brookman LLP |
|
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-1 of our report dated April 17, 2023, with respect to our audits of the consolidated financial
statements of Grom Social Enterprises, Inc. for the years ended December 31, 2022, and 2021.
We also consent to the referent to our Firm under the heading
“Experts” in such Prospectus.
/s/ Rosenberg Rich Baker Berman, P.A.
Somerset, New Jersey
December 26, 2023
EXHIBIT 107
CALCULATION OF
FILING FEES TABLE
FORM S-1
(Form Type)
Grom Social
Enterprises, Inc.
(Exact Name of Registrant
as Specified in Charter)
Title
of Each Class of Securities to Be Registered |
|
Fee
Calculation Rate |
|
|
Amount
of Shares to Be Registered
(1) |
|
|
Proposed
Maximum Offering Price per Unit or per Share |
|
|
Proposed
Maximum Aggregate Offering Price |
|
|
Fee
Rate (per $1 Million) |
|
|
Amount
of Registration Fee |
|
Common Stock, par value $0.001 per share, each underlying
the Convertible Note(2) |
|
|
457 |
(i) |
|
|
5,347,594 |
|
|
$ |
0.748 |
(3) |
|
|
|
|
$ |
4,000,000.31 |
|
|
|
0.00014760 |
|
|
$ |
590.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, par value $0.001 per share, each underlying
the Warrant A (4) |
|
|
457 |
(g) |
|
|
757,036 |
|
|
$ |
1.78 |
(5) |
|
|
|
|
$ |
1,347,524.08 |
|
|
|
0.00014760 |
|
|
$ |
198.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, par value $0.001 per share, each underlying
the Warrant B (4) |
|
|
|
457(g) |
|
|
757,036 |
|
|
$ |
0.001 |
(5) |
|
|
|
|
|
|
$757.036 |
|
|
|
0.00014760 |
|
|
$ |
0.11 |
|
Fees Previously Paid |
|
|
|
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carry Forward Securities |
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Offering Amounts |
|
|
|
6,861,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
789.41 |
|
Total Fees Previously Paid |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Total Fees Offset |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Net Fee Due |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
789.41 |
|
(1) |
Pursuant to Rule 416 under the Securities Act of 1933,
as amended (the “Securities Act”), there are also being registered such indeterminable additional shares of Common Stock
as may be issued to prevent dilution as a result of stock splits, stock dividends or similar transactions, and the resale of such
shares of Common Stock. |
(2) |
Represents the issuance by the registrant of 5,347,594
shares of Common Stock that may be issued upon conversion of the convertible note (the “Note”) held by selling securityholders
named in the prospectus that forms a part of this registration statement on Form S-1 (the “Selling Securityholder”). |
(3) |
Based on the conversion price of $0.748 per share of common stock in accordance
with rule 457(i) under the Securities Act. |
(4) |
Represents the issuance by the registrant of 757,036
shares of Common Stock that may be issued upon the exercise of Warrant A and 757,036 shares of Common Stock that may be issued upon
the exercise of Warrant B held by the Selling Securityholder which were issued in connection with the issuance of the Note. |
(5) |
Based on the exercise price of the Warrant A of $1.78 per share of Common
Stock and the exercise price of the Warrant B of $0.001 per share of Common Stock in accordance with Rule 457(g) under the Securities
Act. |
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