UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 4, 2018
LONG BLOCKCHAIN CORP.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-37808 | 47-2624098 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
12-1 Dubon Court, Farmingdale, NY 11735
(Address of Principal Executive Offices) (Zip Code)
(855) 542-2832
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c)) |
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 [X]
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 13(a) of the Exchange Act. [X]
| Item 1.01 | Entry into a Material Definitive Agreement. |
Effective May 4, 2018, Long Blockchain Corp. (the “ Company ”) and Court Cavendish Ltd., the lender (“ Lender ”) under the Company’s previously announced Loan and Option Agreement (the “ Existing Facility ”), entered into an Amended and Restated Loan and Option Agreement (the “ Restated Facility ”). The Company previously borrowed $2 million under the Existing Facility, of which $1,250,000 principal amount is currently outstanding and $750,000 of principal plus interest accrued thereon was converted into shares of the Company’s common stock, $0.0001 par value per share (“ Common Stock ”), under the terms of the Existing Facility. Under the Existing Facility, the Company had the ability to increase the facility with the consent of the Lender by requesting two extensions of $1 million each, subject to certain conditions, including the continued listing of the Common Stock on the Nasdaq Capital Market. The Common Stock was delisted from the Nasdaq Capital Market on April 12, 2018.
Under the Restated Facility, the Lender agreed to make available a first extension (an “ Extension ”) of $1,500,000, from which a drawdown in the amount of $1 million was funded by the Lender on May 8, 2018. The Company may request a second Extension in the amount of up to $500,000. The amount and timing of any additional drawdowns under the first Extension and any drawdowns under the second Extension will be agreed upon between the parties. All amounts owed under the Restated Facility will be secured by all of the assets of the Company, subject to certain security interests previously granted by the Company to another third party.
On the date of the first drawdown from each Extension, the Company will be required to pay the Lender a facility fee of 7% of the Extension amount, in cash or shares of Common Stock valued at $0.40 per share, at the Company’s election. The Company has elected to pay this fee from the first drawdown in shares of Common Stock. The Company also agreed to issue to the Lender four-year warrants (the “ Warrants ”) as follows: (i) upon the first drawdown under the first Extension, a Warrant to purchase 1,200,000 shares of Common Stock, and (ii) upon each drawdown under the second Extension, a Warrant to purchase 0.8 shares of Common Stock per dollar of the drawdown. The Warrants will have an exercise price of $0.50 per share, and will have a cashless exercise feature.
Interest on the outstanding amount under the Restated Facility, including all amounts outstanding under the Existing Facility, accrues monthly at the rate of 12.5% per annum and is payable quarterly in cash or Common Stock valued at $0.40 per share, at the Company’s election. The Restated Facility matures on December 21, 2018 (the “ Maturity Date ”). On the Maturity Date, all principal and any accrued but unpaid interest will be due and payable in cash or in shares of Common Stock valued at $0.40 per share, at the Lender’s election. The Lender also has the option, exercisable at any time prior to the Maturity Date, to have any principal and interest then outstanding (but in no event less than the lesser of $500,000 or the amount of principal outstanding under the Restated Facility) converted into Common Stock at a price per share such that the average conversion price of all shares issued to the Lender upon conversion, including shares previously issued upon conversion of the initial $750,000 advanced under the Existing Facility, is $0.40 per share.
Pursuant to the Restated Facility, the Lender was granted a right of first refusal in any future sale of capital stock of the Company for cash. Additionally, the Company agreed to use its reasonable best efforts to reduce the number of directors on its board of directors from eight to six, to appoint Shamyl Malik as the Chairman of the Board, and to maintain a committee of the board of directors, consisting of three directors, including the two directors previously appointed by the Lender, that must unanimously authorize any expenses in excess of $100,000 relating to the Company’s existing operating beverage business. The Company’s Board of Directors appointed Mr. Malik as Chairman of the Board on May 5, 2018.
The Restated Facility contains customary representations and warranties and affirmative and negative covenants, including covenants that, subject to certain exceptions, restrict the Company’s ability to, among other things, sell additional shares of Common Stock at a price per share less than $0.40, create certain liens, make certain types of borrowings, and engage in certain business combinations. The Restated Facility provides for customary events of default, including, among other things, certain change of control transactions. Upon the occurrence of an event of default, at the option of the Lender, all principal and interest under the Restated Facility will become immediately due and payable. The Company agreed to pay up to $25,000 of legal fees and transaction expenses of the Lender in connection with the negotiation and execution of the Restated Facility.
| 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 in Item 1.01 is hereby incorporated by reference.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information set forth in Item 1.01 is hereby incorporated by reference. The shares of Common Stock, warrants and convertible loans were sold in a private placement to an accredited investor in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
| Item 9.01 | Financial Statements, Pro Forma Financial Information, and Exhibits. |
| (d) | Exhibits: |
| Exhibit | Description | |
| 10.1 | Amended and Restated Loan and Option Agreement. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: May 9, 2018
| LONG BLOCKCHAIN CORP. | ||
| By: | /s/ Shamyl Malik | |
| Name: | Shamyl Malik | |
| Title: | Chief Executive Officer | |
Exhibit 10.1
Amended and Restated Loan and Option Agreement
Date: May 3, 2018
PARTIES
Court Cavendish Ltd , a company incorporated in England and Wales under no. 04290684, having its registered address at The Care House, Randalls Way, Leatherhead, Surrey, KT22 7TW (the “Lender”).
Long Blockchain Corp. , a Delaware corporation, having its principal executive offices at 12-1 Dubon Court, Farmingdale, New York 11735 (formerly known as Long Island Iced Tea Corp., the “Company”).
BACKGROUND
| A. | The Lender and the Company are party to that certain Loan and Option Agreement, dated as of December 21, 2017 (the “Existing Agreement”), pursuant to which the Lender made available to the Company a facility in which the Lender provides financing to support the working capital requirements of the Company while the Company moves into specific ventures relating to blockchain technology and while the Company completes the spin out of its existing operating beverage business into an independent new company (the “Spin Out”). |
| B. | Simultaneously with the execution of the Existing Agreement, and the Company having announced to the market its move to blockchain technology, the Lender made available to the Company a loan facility in the aggregate amount of USD 4,000,000, consisting of an initial USD 2,000,000 and two extensions of USD 1,000,000 each (each, an “Extension”). The Lender advanced USD 2,000,000 to the Company in three drawdowns in the amount of USD 750,000 on December 21, 2017, USD 750,000 on January 15, 2018 and USD 500,000 on January 30, 2018 (each an “Existing Loan,” and together, the “Existing Loans”). |
| C. | On December 26, 2017, the Lender converted the first of the Existing Loans, in the amount of USD 750,000, and all accrued interest thereon, into shares of the Company’s common stock at a price of USD 3.00 per share, or an aggregate of 250,233 shares of the Company’s common stock. |
| D. | The parties have agreed to amend and restate the terms of the Existing Agreement as set forth herein (the “Restated Agreement”). |
IT IS AGREED
| 1. | On the date hereof, the Lender will make available to the Company a first Extension of USD 1,500,000 on the terms hereof. As long as (a) the warranties and representations referred to in Section 17 below are true and correct and (b) the Company continues moving toward specific ventures related to blockchain technology, the Company may request a second Extension of USD 500,000 on the terms hereof. |
| 2. | The Company may request drawdowns from time to time, with the drawdown amount and the timing of the funding of the drawdown to be agreed between parties each time a request is made. Each drawdown shall be subject to there being, in the Lender’s reasonable opinion, no material adverse change in the financial condition or operations of the Company. Notwithstanding the foregoing, the Lender agrees to provide a drawdown of USD 1,000,000 of the first Extension within two (2) business days after the execution of this Restated Agreement. All drawdowns under this Section 2, together with the Existing Loans, are referred to as the “Loans.” Subject to the conversion provisions set forth herein, the Loans and any accrued interest thereon will be due and payable on December 21, 2018 (the “Maturity Date”). |
| 3. | A facility fee of seven percent (7%) of the Extension amount shall be due on the date of the first drawdown from each Extension and, at the Company’s election, shall be payable either in cash or in shares of the Company’s common stock valued at USD 0.40. |
| 4. | The Company will use its reasonable best efforts to make the changes to the Board of Directors set forth in Schedule 4 to this Restated Agreement. |
| 5. | The Company will maintain a committee of its Board of Directors, consisting of three (3) directors and including the two (2) directors appointed by the Lender pursuant to the Existing Agreement. Such committee must unanimously authorize any expense related to the Company’s existing operating beverage business that exceeds USD 100,000. |
| 6. | The Company agrees to issue to the Lender (a) upon the drawdown under the first Extension, a four year warrant to purchase 1,200,000 shares of the Company’s common stock and (b) upon each drawdown under the second Extension, a four-year warrant to purchase a number of shares of the Company’s common stock equal to the amount of the drawdown, divided by USD 0.40, multiplied by 32%. Such warrant will be issued within five (5) business days of the funding of the applicable drawdown. The warrants shall have an exercise price of USD 0.50 per share and shall contain a cashless exercise feature. |
| 7. | Interest shall accrue monthly, at a rate of 12.5% per annum, on the unpaid principal balance of the Loans commencing on the date of the drawdown thereof and shall be due and payable, without demand or notice, at the Company’s election quarterly in cash or in shares of the Company valued at USD 0.40. |
| 8. | The Company hereby grants the Lender a security interest in all of the Company’s assets (the “Collateral”), subject to security granted to Radium for its USD 1,000,000 facility on the date hereof. Reference herein to the Collateral shall in no way impair the absolute and unconditional obligation of the Company to pay both principal and interest, if any, as provided herein. |
| 9. | The Lender may, with or without advance notice to the Company or any guarantor or other party liable therefor, extend or renew the Loans, or extend the time for making payment of any amount provided for herein, or accept any amount in advance, all without affecting the liability of the Company or any other party or guarantor liable therefor. |
| 10. | The Company may repay the Loan in whole or in part at any time without penalty or premium, but with payment of accrued interest through the date of such repayment. Amounts repaid shall not be available for drawdown again. |
| 11. | At the Maturity Date, at the Lender’s election, the Company shall repay the outstanding amount of the Loans together with accrued interest either in cash or in shares of the Company at USD 0.40. |
| 12. | In consideration of Lender making the Loans to the Company, the Company hereby grants Lender the option (the “Option”), at any time and from time to time until the Loans and all accrued interest thereon are repaid in full, to convert all or any portion of the principal amount of the outstanding Loans (but in no event less than the lesser of (a) USD 500,000 and (b) the outstanding principal amount of the Loans), and all accrued interest on such converted portion of the Loans, into shares of the Company’s common stock at a price per share such that, upon conversion of such portion of the Loans, the average conversion price of all shares issued upon conversion of the Loans (including the conversion of the Existing Loan that occurred on December 26, 2017) shall be USD 0.40. |
| 13. | During the life of this Restated Agreement, the Company shall provide reasonable updates to the Lender, within the constraints of the law and government agencies, and subject to reasonable confidentiality restrictions, at no greater than monthly intervals. Lender agrees use of such information is solely to monitor the Loans. |
| 14. | So long as the Loans are outstanding, the Company will not, without the prior written consent of Lender, do any of the following: (i) liquidate, dissolve or wind-up the affairs of the company or enter into merger, consolidation, share exchange, reorganisation, recapitalization or other similar transaction or business combination (with the exception of the Spin Out and the transactions set forth on Schedule 14); (ii) sell additional shares of the Company (excluding upon exercise of outstanding options, and other similar, and excluding the transactions set forth in Schedule 14) at a price per share less than USD 0.40; (iii) purchase or redeem or pay any dividend on any capital stock (with the exception of the Spin Out); (iv) create or authorize the creation of any debt security senior to the Loans (excluding the security held by Radium on its USD 1,000,000 facility on the date hereof); (v) enter into any agreement or other binding commitment to do any of the foregoing. If the Company receives any inquiry, proposal, offer or expression of interest by any person (other than Lender and its affiliates) with respect to any of the foregoing, it shall promptly notify Lender. |
| 15. | Upon the occurrence of a default, the whole sum of principal and accrued interest shall become due immediately at the option of the Lender. Default shall include, but not be limited to: (i) any material adverse change, in the reasonable opinion of the Lender, in the financial condition or operations of the Company after the date of this Restated Agreement; (ii) any change in control of the Company without the prior written consent of the Lender (with the exception of the transactions set forth in Schedule 14); (iii) failure to make any payment hereunder at the time prescribed for payment; (iv) filing, as to the Company or any guarantor or endorser of the Loans, of an involuntary petition which is not dismissed within sixty (60) days or of a voluntary petition under the provisions of the Federal Bankruptcy Code or any state statute for the relief of debtors; (v) default in the payment of principal or interest on any obligation in excess of USD 100,000 for borrowed money beyond the period of grace, if any, provided with respect thereto or default in the performance or observance of any other term, condition or agreement contained in any such obligation or in any agreement relating thereto, if the effect thereof is to cause, or permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause such obligation to become due prior to its stated maturity and such default remains unremedied for a period of 10 days; (vi) final judgment for the payment of money in excess of USD 100,000 shall be rendered against the Company and the same shall remain undischarged for a period of thirty (30) days during which execution of such judgment shall not be effectively stayed or is not being validly contested; or (vii) any material breach or other default by the Company under this Agreement which is not cured within five (5) days after the Company receives notice from the Lender of the occurrence thereof. |
| 16. | The times for the payment of the principal sum as herein stated are of the essence of this Restated Agreement. Upon the occurrence of a default, the amount of the principal sum hereunder, plus reasonable attorneys’ fees and expenses, shall bear interest from the date thereof to the actual date of payment (whether such payment is made voluntarily or as a result of legal process) at the maximum rate of interest permitted by law or 17.5% per annum, whichever is lower, from the date of the default to the date of actual payment. |
| 17. | The Company represents and warrants to the Lender as follows: (i) the Company is a company duly incorporated and existing under the laws of the State of Delaware; (ii) the Company has the power to enter into, perform and comply with its obligations under this Restated Agreement and all corporate and other action required to authorise the execution of this Restated Agreement and the performance by the Company of its obligations under this Restated Agreement has been taken; (iii) no event of default has occurred, or in the Lender’s reasonable opinion will occur as a result of any drawdown of facility, and the Company is not in material default under any other agreement to which it is a party; and (iv) this Restated Agreement constitutes the legal, valid and binding obligations of the Company. |
| Each of the representations and warranties hereon shall be deemed repeated on each date on which a drawdown is requested by reference to the facts and circumstances then subsisting. | |
| 18. | Each party shall bear its own expenses in connection with the transactions contemplated hereby; provided that the Company will pay up to USD 25,000 of the Lender’s legal and other expenses incurred in connection with the negotiation and execution of this Restated Agreement, which amounts may be deducted from the drawdown under the first Extension. |
| 19. | Any and all notices required or permitted to be given under any provision of this Restated Agreement shall be in writing and shall be deemed given upon personal delivery or the mailing thereof by first class certified mail, return receipt requested, upon transmission by telecopier, facsimile or electronic mail, or on the next business day upon delivery by overnight delivery service, in each case to the addresses or numbers set forth above or at such other addresses or numbers as they may have provided by prior written notice. |
| 20. | This Restated Agreement shall not be assignable by Lender without the prior written approval of the Company; provided that, without the Company’s prior written consent, the Lender may transfer solely (a) the right to receive payment of principal and interest (subject to and in accordance with the terms of this Restated Agreement) with respect to all (but not less than all) of the Loans and (b) the Option. This Restated Agreement shall not be assignable by the Company without the prior written approval of the Lender. |
| 21. | The Company shall use its commercially reasonable best efforts to have an effective registration statement registering the resale of all shares issued upon conversion of the Loans on or prior to the date that is 120 days following the execution of the Restated Agreement. If the Company is unable to obtain an effective registration statement registering the resale of all shares issuable upon the conversion of the Loans within such 120 day period, then the Company (a) will issue to Lender a number of shares of the Company’s common stock equal to ten percent (10%) of the sum of (i) the number of shares issued upon conversion of the Loans and not resold by the Lender and (ii) the number of shares issuable upon conversion of the outstanding principal amount of the Loans, except in each case to the extent such shares may then be sold pursuant to Rule 144 under the Securities Exchange Act of 1933, as amended (the “Securities Act”) (the “Restricted Shares”), within five (5) business days of the expiration of such 120-day period, and (b) upon each monthly anniversary of such 120-day period that occurs prior to the registration statement becoming effective, will issue a number of shares of the Company’s common stock equal to one percent (1%) of the then Restricted Shares, within five (5) business days of such monthly anniversary, for up to six (6) months after the expiration of such 120-day period. The Company shall cause its counsel to issue a legal opinion to its transfer agent promptly after any resale by the Lender of shares of the Company’s common stock issued upon conversion of the Loans, to effect the removal of any restrictive legend on such shares, provided that the registration statement is effective and current or the conditions of Rule 144 under the Securities Act have been satisfied in connection with such sale, and the Lender has delivered any documents required by the Company’s counsel in connection therewith (including any representations, certifications or covenants by the Lender or its broker). |
| 22. | If, at any time while the Loans are outstanding, the Company proposes to issue and sell shares (“Shares”) of its capital stock for cash (excluding upon exercise of outstanding options, and other similar, and excluding the transactions set forth in Schedule 14), the Company shall notify the Lender in writing of the material financial and other terms and conditions of such sale (the “Terms”), which notice shall constitute an offer by the Company to purchase all (but not less than all) of the Shares on the Terms. At any time prior to the expiration of three (3) business days after such notice is given (the “Acceptance Period”), the Lender may, by written notice to the Company, accept the offer for the purchase of the Shares on the Terms. If the Lender does not give notice within the Acceptance Period, the Company may, during the twenty (20) business days following the expiration of the Acceptance Period (the “Sale Period”), consummate the proposed sale of the Shares to a third party on terms and conditions no more favorable to such third party than the Terms. If the proposed Sale is not completed within the Sale Period, then the rights under this Section 22 shall be revived. |
| 23. | This Restated Agreement shall be governed by and constructed in accordance with the law of the State of New York without giving effect to principles of conflicts of law. This Restated Agreement may be signed in counterparts which, taken together, shall constitute one agreement. |
| 24. | The Lender hereby irrevocably waives any default under the Existing Agreement or Restated Agreement that may be deemed to have occurred prior to the date hereof. |
| 25. | All per share amounts set forth herein shall be equitably adjusted for any stock split, stock combination, stock dividend, reorganization, recapitalization, reclassification or other similar event affecting the Company’s common stock as a whole that occurs on or after the date hereof. |
EXECUTED AS AN AGREEMENT
| Court Cavendish Ltd: | Long Blockchain Corp. | |
| /s/ | /s/ Shamyl Malik | |
| Director | Chief Executive Officer | |
| In the presence of: | In the presence of: | |
| /s/ | /s/ | |
| Witness sign here | Witness sign here | |
| Witness name | Witness name | |
| Witness address | Witness address |