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Section 1: 8-K (CURRENT REPORT)

 

 

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): August 30, 2019 (September 6, 2019)

 

Gadsden Properties, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   000-11635   59-2058100
(State or other jurisdiction
of incorporation)  
  (Commission File Number)   (IRS Employer
Identification No.)

 

15150 North Hayden Road, Suite 235, Scottsdale, AZ   85260
(Address of principal executive offices)   (Zip Code)

 

480-530-3495

(Registrant’s telephone number, including area code)

 

FC Global Realty Incorporated

(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:

 

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 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging Growth Company ☐

 

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. ☐

 

Securities registered pursuant to Section 12(b) of the Act: None

 

 

 

 

 

 

ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

 

Purchase Agreement

 

As previously reported, on August 2, 2019, Gadsden Properties, Inc., formerly FC Global Realty Incorporated (the “Company”) and the Company’s parent, Gadsden Growth Properties, L.P. (“Gadsden”), entered into a Purchase Agreement (the “Purchase Agreement”) with the several lenders named therein (collectively, the “Initial Lenders”), pursuant to which the Initial Lenders agreed to purchase for an aggregate purchase price of $400,000: (i) Senior Subordinated Promissory Notes of Gadsden (the “Notes”) in an aggregate principal amount of $400,000; and (ii) Warrants (the “Warrants” and together with the Notes, the “Securities”) to purchase shares of the Company’s common stock, $0.01 par value (the “Common Stock”), at an exercise price of $0.50 per share. The sale by the Company to the Initial Lenders of the Securities was completed on August 2, 2019 (the “Initial Closing”).

 

On August 30, 2019, the Company and the Gadsden entered into a Purchase Agreement with the lender named therein (the “Lender” and together with the Initial Lenders, the “Lenders”), pursuant to which the Lender agreed to purchase for an aggregate purchase price of $100,000: (i) a Note, in the principal amount of $100,000; and (ii) a Warrant. The sale by the Company to the Lender of the Securities was completed on August 30, 2019 (the “Second Closing”).

 

Pursuant to the terms of the Purchase Agreement, the Company may hold one or more additional closings for the sale of up to an additional $14,500,000 of Securities (collectively with the Initial Closing and the Second Closing, the “Private Placement”) through December 31, 2019, which date may be extended for up to 180 additional days at the joint election of the Company and National Securities Corporation, the placement agent for the Private Placement.

 

The Purchase Agreement contains customary representations and warranties of the Company, Gadsden and the Lender, and contains customary closing conditions, including, without limitation, the receipt of all authorizations, consents and approvals and delivery of customary officer certificates.

 

The foregoing summary of the terms and conditions of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, the form of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

 

Loan and Security Agreement

 

In connection with the Purchase Agreement, on August 30, 2019, the Company, as Guarantor, entered into a Loan and Security Agreement (the “Loan Agreement”) with Gadsden, as Borrower, and the Lender. Pursuant to the Loan Agreement, the loan made and evidenced by the Note purchased by the Lender (the “Loan” and together with loans evidenced by the Notes purchased in the Initial Closing, the “Loans”) will bear interest at a non-compounded per annum rate of interest equal to ten percent (10%), or, if lower, the maximum amount permitted by applicable law, with interest on the Loan accruing from the date the Loan is made. Accrued and unpaid interest on the unpaid principal balance of all Loans outstanding under the Private Placement from time to time shall be due and payable quarterly on the first day of each January, April, July and October while the Loans remain outstanding with the final payment of accrued, but unpaid, interest being due and payable on the maturity date, which is the earlier of (i) June 30, 2021 or (ii) two (2) business days following a Liquidity Event (as described below), unless extended pursuant to any modification, extension or renewal note executed by Gadsden and accepted by the Lenders in their sole and absolute discretion. A Liquidity Event is defined in the Loan Agreement as (i) any sale, lease or other disposition of any asset of Gadsden or any subsidiary thereof (other than a sale, lease or other disposition to a wholly-owned subsidiary or affiliate of Gadsden), whether alone or in the aggregate with other sales, leases or other dispositions, resulting in net cash proceeds payable to Gadsden or the Company of at least $25 million in the aggregate or (ii) one or more debt or equity financings by Gadsden or the Company, resulting in net cash proceeds of at least $25 million in the aggregate.

 

Any amount of interest on the principal amount of any Loan made under the Private Placement which is not paid when due shall be added to the principal balance of such Loan and shall bear interest payable on demand at a default per annum interest rate equal to fifteen percent (15%).

 

Except as otherwise provided in the Loan Agreement, all interest and fees shall be paid, at Gadsden’s election, in either cash or in shares of the Common Stock of the Company. Gadsden may prepay the Loan in cash, in whole or in part, without penalty, provided that any prepayment of principal shall include all accrued and unpaid interest thereon to the date of such prepayment.

 

Pursuant to the terms of the Loan Agreement, the Company has absolutely and unconditionally guaranteed prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of any and all of the Loans or other obligations of Gadsden to the Lenders arising under the Loan Agreement or under any other document entered into in connection with the Private Placement (the “Guaranty”). In connection with the Guaranty, the Lenders having Loans representing a majority in principal amount of the aggregate amount of Loans outstanding at the time of determination, may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness of the Loan Agreement: (i) amend, extend, renew, compromise, discharge, accelerate or otherwise change the time for payment or the terms of the Loans or any part thereof; (ii) take, hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any security for the payment owing under the Guaranty; (iii) apply such security and direct the order or manner of sale thereof as such Lenders may determine; and (iv) release or substitute one or more of any endorsers or other guarantor of any of such obligations. All intercompany debt of Gadsden owing to the Company is subordinated until such time as the obligations under the Loan Agreement are paid in full in cash.

 

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As security for the payment and performance of the obligations under the Loan Agreement, Gadsden pledged to the Lender a continuing and unconditional security interest in and to any and all assets and property of Gadsden, subject to the terms of the Loan Agreement.

 

The Loan Agreement contains customary representations and warranties and covenants of Gadsden, and contains customary closing conditions, including, without limitation, the receipt of all authorizations, consents and approvals and delivery of customary officer certificates.

 

The foregoing summaries of the terms and conditions of the Loan Agreement and the Note do not purport to be complete and are qualified in their entirety by reference to the full text of the Loan Agreement and the Note, the forms of which are attached hereto as Exhibits 10.2 and 4.1, respectively, and are incorporated herein by reference.

 

ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION OF AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT

 

The information set forth under Item 1.01 regarding the payment of the Note issued in the Second Closing is incorporated by reference into this Item 2.03. The issuance of the Note was made in reliance upon an exemption from the registration requirements of Section 5 of the Securities Act.

 

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.

 

On August 30, 2019, the Company completed the Second Closing and issued a Warrant to the Lender pursuant to the Purchase Agreement. The Warrant is exercisable in whole or in part for three (3) years from the date of issuance, subject to the terms and conditions therein, and includes a provision by which the Lender may exercise the Warrant by means of a cashless exercise. The number of shares of Common Stock for which the Warrant may be exercised is equal to the Loan amount of the Lender divided by the “Closing VWAP,” which is defined in the Warrant as the volume weighted average closing price of the Company’s Common Stock for the 20 trading days after the date of issuance of the Warrant.

 

The exercise price and number of shares of Common Stock issuable upon exercise of the Warrant is subject to adjustment from time to time for stock splits, combinations, stock dividends, consolidation or merger, the sale or other disposition of all or substantially all of the Company’s assets, or reclassification, change or conversion of the outstanding securities of the Company or any reorganization of the Company or any similar corporate reorganization.

 

Pursuant to the terms of the Warrant, the Company will reserve and keep available from its authorized but unissued Common Stock the number of shares of Common Stock that are then issuable and deliverable upon the exercise of the entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Lender.

 

The issuance of these securities is being made in reliance upon an exemption from the registration requirements of Section 5 of the Securities Act.

 

The foregoing summary of the terms and conditions of the Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of the Warrant, the form of which is attached hereto as Exhibit 4.2 and is incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(c)Exhibits

 

Exhibit No.   Description of Exhibit
     
4.1   Form of Senior Subordinated Promissory Notes issued by Gadsden Growth Properties, L.P. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on August 8, 2019)
4.2   Form of Warrant between Gadsden Properties, Inc. (formerly FC Global Realty Incorporated) and the holder named therein (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on August 8, 2019)
10.1   Form of Purchase Agreement, by and among Gadsden Properties, Inc. (formerly FC Global Realty Incorporated),  Gadsden Growth Properties, L.P. and the lender party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 8, 2019)
10.2   Form of Loan and Security Agreement, by and among Gadsden Properties, Inc. (formerly FC Global Realty Incorporated),  Gadsden Growth Properties, L.P. and the lender party thereto (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on August 8, 2019)

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this current report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  GADSDEN PROPERTIES, INC.
     
Date: September 6, 2019 By: /s/ John Hartman
    John Hartman
    Chief Executive Officer

 

 

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