UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
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Item 1.01. Entry Into a Material Definitive Agreement.
On April 29, 2024, Safe and Green Development Corporation (the “Company”) entered into a Securities Purchase Agreement, dated April 29, 2024 (the “Purchase Agreement”) with Peak One Opportunity Fund, L.P. (“Peak One”), pursuant to which the Company agreed to issue, in a private placement offering (the “Offering”) upon the satisfaction of certain conditions specified in the Purchase Agreement, three Debentures to Peak One in the aggregate principal amount of $1,200,000.
The closing of the first tranche was consummated on April 29, 2024 and the Company issued an 8% convertible debenture in principal amount of Three Hundred Fifty Thousand Dollars ($350,000.00) (the “Debenture”) to Peak One and a warrant (the “Warrant”) to purchase up to Two Hundred and Sixty Two Thousand Five Hundred (262,500) shares of the Company’s common stock, to Peak One’s designee as described in the Purchase Agreement. The Debenture was sold to Peak One for a purchase price of $315,000, representing an original issue discount of ten percent (10%). In connection with the closing of the first tranche, the Company paid $10,000 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs and issued to Peak One and its designee an aggregate total of 80,000 shares of its restricted common stock (the “Initial Commitment Shares”) as described in the Purchase Agreement.
The Debenture matures twelve months from its date of issuance and bears interest at a rate of 8% per annum payable on the maturity date. The Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest at a conversion price equal to $0.70 (the “Conversion Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events, as well as anti-dilution price protection provisions that are subject to a floor price of $0.165.
The Debenture is redeemable by the Company at a redemption price equal to 110% of the sum of the principal amount to be redeemed plus accrued interest, if any. While the Debenture is outstanding, if the Company receives cash proceeds of more than $1,500,000.00 (“Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, the Company shall, within two (2) business days of Company’s receipt of such proceeds, inform the holder of such receipt, following which the holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company (from any source except with respect to proceeds from the issuance of equity or debt to officers and directors of the Company) after the Minimum Threshold is reached to repay the outstanding amounts owed under the Debenture.
The Debenture contains customary events of default. If an event of default occurs, until it is cured, Peak One may increase the interest rate applicable to the Debenture to the lesser of eighteen percent (18%) per annum and the maximum interest rate allowable under applicable law and accelerate the full indebtedness under the Debenture, in an amount equal to 110% of the outstanding principal amount and accrued and unpaid interest. Subject to limited exceptions set forth in the Debenture, the Debenture prohibits the Company from entering into a Variable Rate Transaction (as defined in the Debenture) or incurring any new indebtedness that is senior to the Debenture or secured by the assets of the Company until the Debenture is paid in full.
The Warrant expires five years from its date of issuance. The Warrant is exercisable, at the option of the holder, at any time, for up to 262,500 of shares of common stock of the Company at an exercise price equal to $0.76 (the “Exercise Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations, and similar events, as well as anti-dilution price protection provisions that are subject to a floor price as set forth in the Warrant. The Warrant provides for cashless exercise under certain circumstances.
Under the Purchase Agreement, a closing of the second tranche may occur subject to the mutual written agreement of Peak One and the Company and satisfaction of the closing conditions set forth in the Purchase Agreement at any time after June 28, 2024, upon which the Company would issue and sell to Peak One on the same terms and conditions a second 8% convertible debenture in the principal amount of Three Hundred Fifty Thousand Dollars ($350,000.00) (the “Second Debenture”) and issue to Peak One’s designee on the same terms and conditions a second warrant (the “Second Warrant”) to purchase up to Two Hundred and Sixty Two Thousand Five Hundred (262,500) shares of the Company’s common stock. The Second Debenture would be sold to Peak One for a purchase price of $315,000, representing an original issue discount of ten percent (10%). In connection with the closing of the second tranche, the Company will pay $10,000 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs and will issue to Peak One and its designee an aggregate total of 80,000 shares of its restricted common stock as commitment shares (the “Second Commitment Shares”) as described in the Purchase Agreement.
Under the Purchase Agreement, a closing of the third tranche may occur subject to the mutual written agreement of Peak One and the Company and satisfaction of the closing conditions set forth in the Purchase Agreement at any time after 60 days after the closing of the second tranche, upon which the Company would issue and sell to Peak One on the same terms and conditions a third 8% convertible debenture in the principal amount of Five Hundred Thousand Dollars ($500,000.00) (the “Third Debenture” and together with the Debenture and the Second Debenture, the “Debentures”) and issue to Peak One’s designee on the same terms and conditions a third warrant (the “Third Warrant” and together with the Warrant and the Second Warrant, the “Warrants”) to purchase up to Three Hundred and Seventy Five Thousand Five Hundred (375,000) shares of the Company’s common stock. The Third Debenture would be sold to Peak One for a purchase price of $450,000, representing an original issue discount of ten percent (10%). In connection with the closing of the third tranche, the Company will pay $10,000 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs and will issue to Peak One and its designee an aggregate total of 100,000 shares of its restricted common stock as commitment shares (the “Third Commitment Shares” and together with the Initial Commitment Shares and the Second Commitment Shares, the “Commitment Shares) as described in the Purchase Agreement.
Without giving effect to the Exchange Cap discussed below, assuming we issued all of the Debentures and converted accrued interest in full on each of the Debentures into Common Stock at the floor price (assuming each of such Debentures accrued interest for a period one year), approximately 7,854,546 shares of our Common Stock would be issuable upon conversion.
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The Company entered into a Registration Rights Agreement, dated April 29, 2024 (the “RRA”), with Peak One where it agreed to file with the Securities and Exchange Commission (the “SEC”) an initial registration statement within 30 days to register the maximum number of Registrable Securities (as defined in the RRA) as shall be permitted to be included thereon in accordance with applicable SEC rules and to use its reasonable best efforts to have the registration statement declared effective by the SEC within ninety (90) calendar days from April 29, 2024.
Maxim Group LLC (“Maxim”) acted as placement agent in the Offering. In connection with the closing of the first tranche of the Offering, the Company paid a placement fee of $18,900 to Maxim. Assuming the second tranche is closed, a placement fee in an amount equal to $18,900 will be payable by the Company to Maxim upon closing of the second tranche of the Offering. Assuming the third tranche is closed, a placement fee in an amount equal to $27,000 will be payable by the Company to Maxim upon closing of the third tranche of the Offering.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties. Among other things, Peak One represented to the Company, that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)), and the Company sold the securities in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.
The number of shares of the Company’s common stock that may be issued pursuant to the Purchase Agreement (including the Commitment Shares), upon conversion of the Debentures, exercise of the Warrants, the issuance of Common Stock underlying the common stock purchase warrants issued by the Company on February 15, 2024 and March 21, 2024 (the “Prior Warrants”), and the issuance of an aggregate of 35,000 shares of Common Stock to Peak One and its designee in connection with the issuance of the Prior Warrants, is subject to an exchange cap (the “Exchange Cap”) of 19.99% of the outstanding number of shares of the Corporation’s common stock on the closing date, of which at least 1,982,819 shares of Common Stock shall be allocated to the transactions contemplated by the Purchase Agreement, unless shareholder approval to exceed the Exchange Cap is approved.
The foregoing descriptions of the Purchase Agreement, the Debenture, the Warrant and the Registration Rights Agreement are qualified in their entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibit 10.1, 4.1, 4.2 and 10.2, respectively, and each of which is incorporated herein in its entirety by reference. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above of this Current Report on Form 8-K is incorporated by reference in this Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 above of this Current Report on Form 8-K is incorporated by reference in this Item 3.02. The shares of the Company’s common stock issued, and the shares to be issued, under the Purchase Agreement, the Debentures and the Warrants were, and will be, sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder. The shares of common stock have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number |
Exhibit Description | |
| 4.1 | Debenture, dated April 29, 2024, in the principal amount of $350,000 | |
| 4.2 | Warrant, dated April 29, 2024 | |
| 10.1* | Securities Purchase Agreement, dated April 29, 2024 | |
| 10.2 | Registration Rights Agreement, dated April 29, 2024 | |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document) |
| * | Exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted exhibit to the SEC upon request |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Safe and Green Development Corporation | ||
| Dated: May 3, 2024 | ||
| By: | /s/ Nicolai Brune | |
| Name: | Nicolai Brune | |
| Title: | Chief Financial Officer | |
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