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): January 21, 2025
SCWorx Corp.
(Exact name of registrant as specified in its charter)
| Delaware | | 001-37899 | | 47-5412331 |
(State or Other Jurisdiction
of Incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
260 Madison Avenue, 8th Floor
New York, New York 10016
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (844) 472-9679
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations 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)) |
Securities registered pursuant to Section 12(b) of the Act: None.
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| N/A | | N/A | | N/A |
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 ☐
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. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On January 21, 2025, SC Worx Corp. (the “Company”, ““Registrant”, we”, “us”, “our”) entered into a Securities Purchase Agreement (“SPA”) with certain accredited investors (the “Investors”), and, pursuant to the SPA, sold to the Investors a new series of senior secured convertible notes (the “Convertible Notes”) with an aggregate original principal amount of $1,500,000 and an initial conversion price of $1.25 per share, subject to adjustment as described in the Convertible Notes, and Series A warrants (the “Series A Warrants”, Series B warrants (the “Series B Warrants”) and Series C warrants (the “Series C Warrants”) to acquire up to an aggregate amount of 7,200,000 additional shares of the Company’s common stock (collectively, the “Warrants” and together with the Notes, the “Notes Offering”). The Warrants are exercisable immediately, one-third of which (the Series A Warrants) are exercisable at a price of $1.25 per share and two-thirds of which (the Series B Warrants and the Series C Warrants) are exercisable at a price of $1.375 per share, all expiring five years from the date of issuance. There is no established public trading market for the Warrants and we do not intend to list the Warrants on any national securities exchange or nationally recognized trading system. The Notes Offering was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and in reliance on similar exemptions under applicable state laws. Each of the Investors represented that it is an accredited investor within the meaning of Rule 501(a) of Regulation D, and that it was acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by the Company or its representatives.
The Company expects to use proceeds from the Offering to fund operating expenses and for general working capital, fees and expenses.
SPA
The SPA contains certain representations and warranties, covenants and indemnities customary for similar transactions. The representations, warranties and covenants contained in the SPA were made solely for the benefit of the parties to the SPA and may be subject to limitations agreed upon by the contracting parties.
Convertible Notes
Payment
The Convertible Notes will mature on January 21, 2027 (“Maturity Date”). Principal under the Convertible Notes is payable in equal monthly installments beginning on the earlier of (A) 30 days after the effective date of the Registration Statement (as defined below) or (B) the date that the shares of Common Stock issuable upon conversion of the Convertible Notes are eligible for sale under Rule 144. Amortization payments are payable, at the Company’s election, in cash or, subject to certain limitations, in shares of common stock valued at the lower of, (i) the Conversion Price then in effect, and (ii) the greater of (x) the $0.3496 floor price (subject to adjustment) and (y) 80% of the quotient of (A) the sum of the closing prices of the shares of Common Stock for each of the three (3) Trading Days with the lowest closing prices of the shares of Common Stock during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately prior to the applicable Installment Date, divided by (B) three (3). Except as specifically permitted by the Convertible Notes, we will not be permitted to prepay any portion of the outstanding principal or accrued and unpaid interest.
Interest
The Convertible Notes will accrue compounding interest at the rate of 10.0% per annum, which will be payable in cash or shares of our common stock at the Company’s option, in arrears quarterly in accordance with the terms of the Convertible Notes. Upon the occurrence and during the continuance of an Event of Default (as defined in the Convertible Notes), the Convertible Notes will accrue interest at the rate of 18.0% per annum. See “-Events of Default” below. Upon conversion, holders of the Convertible Notes are also entitled to receive an interest make-whole payment.
Conversion
Each Convertible Note will be convertible, at the option of the applicable noteholder, into shares of our common stock at an initial fixed conversion price of $1.25 per share. The conversion price will be subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transactions The conversion price is also subject to a “full ratchet” anti-dilution adjustment which, in the event that we issue or are deemed to have issued, certain securities at a price lower than the then applicable conversion price, immediately reduces the conversion price to equal the price at which we issued or was deemed to have issued our common stock. In addition, if we sell or issue any options or convertible securities that are convertible into or exchangeable or exercisable for shares of our common stock at a price which varies or may vary with the market price of the shares of common stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions, the holder of a Convertible Note will have the right to substitute the variable price for the fixed conversion price upon conversion of all or part of the Convertible Note.
Limitations
Notwithstanding the foregoing, our ability to settle conversions and make amortization and interest make-whole payments using shares of our common stock is subject to certain limitations set forth in the Convertible Notes. For example, the Notes contain a beneficial ownership limitation as to each holder of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon conversion of, or as part of any amortization payment or interest make-whole payment under, the Convertible Notes or Warrants.
Events of Default
The Convertible Notes include certain customary Events of Default, including, among other things, the failure to file and maintain an effective shelf registration statement covering the sale of the noteholder’s securities registrable pursuant to the Registration Rights Agreement and Company’s failure to pay any amounts due to holders of the Convertible Notes when due. In connection with an Event of Default, each noteholder will be able to require us to redeem in cash any or all of the noteholder’s Convertible Note at a premium as set forth in the Convertible Note.
Covenants
We are subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer of assets, among other matters.
Security Interest
The Convertible Notes are secured by a first priority security interest in substantially all of our assets, as evidenced by a Guaranty and Security agreement in favor of Iroquois Capital Management, LLC in its capacity as collateral agent (the “Security Agreement”).
Warrants
The exercise price of the Series A Warrants is $1.25 per share, subject to adjustment as described below. The exercise price of the Series B Warrants and Series C Warrants is $1.375, subject to adjustment as described below. The Series A Warrants and Series B Warrants are each immediately exercisable, and the Series C Warrants become exercisable at any time that any portion of the Series B Warrants are exercised, subject in each case to stockholder approval as described below. The term of the Series A Warrants, Series B Warrants and Series C Warrants is five years from the issue date. The Warrants are also exercisable on a cashless basis at any time the registration statement covering the shares issuable upon the exercise of the Warrants is not effective. The Warrants are not exercisable if, after giving effect to the exercise, the holder or any of its affiliates would be the beneficial owner as determined in accordance with the rules of the SEC of in excess of 4.99% of our outstanding shares of common stock.
Rule 5635 of the Rules of the Nasdaq Stock Market requires that a listed company seek stockholder approval in certain circumstances, including prior to the issuance, in a transaction other than a public offering, of 20% or more of the company’s outstanding Common Stock or voting power outstanding before the issuance, at a price that is less than the lower of (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement in connection with such transaction; or (ii) the average Nasdaq Official Closing Price of the Common Stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of such binding agreement (the “Minimum Price”). We obtained shareholder approval at our December 2024 annual meeting of stockholders to issue 4.5 million shares of our common stock issuable upon exercise of warrants at prices below the Minimum Price. Since the Series A, B and C Warrants issued in connection with this offering exceed 4.5 million shares, we are required under our agreements with the investors to seek shareholder approval of the issuance of all the shares of Common Stock issuable upon exercise of all of the Warrants in accordance with Nasdaq Rule 5635.
The exercise price is subject to adjustment for stock splits, combinations or similar events, and, in such event, the number of shares issuable upon the exercise of the Warrant will also be adjusted such that the aggregate Warrant exercise price shall be the same immediately before and immediately after such adjustment. In addition, the Warrant exercise price is also subject to a “full ratchet” anti-dilution adjustment which, in the event that we issue or are deemed to have issued, certain securities at a price lower than the then applicable Warrant exercise price, immediately reduces Warrant exercise price to equal the price at which we issued or was deemed to have issued, our common stock.
If we sell or issue any options or convertible securities that are convertible into or exchangeable or exercisable for shares of our common stock at a price which varies or may vary with the market price of the shares of common stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions, the holder of a Warrant will have the right to substitute the variable price for the Warrant exercise price upon exercise of all or part the Warrant.
The Series B Warrants are subject to a call option whereby provided that there is an effective Registration Statement that covers the resale of all of the Warrant Shares, the Company has the option to “call” the exercise of any or all of the Series B Warrants from time to time by providing written notice (the “Call Notice”) to the Holder after any period of twenty (20) consecutive Trading Days (the “Measurement Period”) during which, on each day of the Measurement Period, (i) the daily VWAP of the Common Stock is not less than 300% of the Exercise Price in effect, (ii) the total daily trading dollar volume of the Common Stock is at least $1,000,000 and (iii) the Equity Conditions (as defined therein) are satisfied. During the thirty (30) Trading Days following the delivery of the Call Notice (the “Call Period”), the Holder may exercise the Warrant and purchase the called Common Stock underlying the Warrant. The Company shall simultaneously call all outstanding Series B Warrants issued pursuant to the Purchase Agreement on the same terms.
Registration Rights
The Convertible Notes, the shares of common stock issuable upon conversion of the Convertible Notes (the “Conversion Shares”), the shares of common stock issuable upon exercise of the Warrants (the “Warrant Shares”), have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). In anticipation of the SPA, the Company and the Investors among others entered into an Amendment and Consent, dated November 18, 2024 (the “Amendment and Consent”), which amended certain provisions of the Registration Rights Agreement entered into with the Investors among others in July 2024 (as so amended, the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company is required to file a resale registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) to register for resale, in addition to the shares required to be registered under the original Registration Rights Agreement, the Conversion Shares, the Warrant Shares and the Shares and Warrant Shares related to the November 2024 offering. The Company was required to file the Registration Statement with the SEC registering the Conversion Shares and the Warrant Shares issued in the July 2024 offering, as well as the shares issued to the vendor in payment of the arbitration award, promptly following the Closing of the July 2024 offering, but in no event later than September 29, 2024, and the Company was required to have such Registration Statement declared effective by the Effectiveness Date (as defined in the Registration Rights Agreement). The Company did not file the Registration Statement by the September 29, 2024 filing deadline. The Company has paid damages and is obligated to pay certain additional liquidated damages to the investors because the Company failed to file the Registration Statement when required and failed to cause the Registration Statement to be declared effective by the SEC when required. If the Company fails to maintain the effectiveness of the Registration Statement pursuant to the terms of the Registration Rights Agreement, it will also be subject to certain penalties. The Company intends to file the Registration Statement as soon as practicable following the Closing of the offering reported herein. The Registration Statement will cover all the shares as required by the Registration Rights Agreement (as amended).
The foregoing is only a summary of the material terms of the SPA, the Convertible Notes, the Warrants, the Security Agreement, the Registration Rights Agreement, the Amendment and Consent and the other transaction documents, and does not purport to be a complete description of the rights and obligations of the parties thereunder. The summary of the forms of SPA, Convertible Notes, Warrants, Security Agreement, Registration Rights Agreement and Amendment and Consent is qualified in its entirety by reference to the forms of such agreements, which are filed as exhibits to this Current Report and are incorporated by reference herein.
The foregoing summary and the exhibits hereto also are not intended to modify or supplement any disclosures about us in our reports filed with the SEC. In particular, the agreements and the related summary are not intended to be, and should not be relied upon, as disclosures regarding any facts and circumstances relating to the Company or any of its subsidiaries or affiliates. The agreements contain representations and warranties by us, which were made only for purposes of those agreements and as of specified dates. The representations, warranties and covenants in the agreements were made solely for the benefit of the parties to the agreements; may be subject to limitations agreed upon by the contracting parties, including being subject to confidential disclosures that may modify, qualify or create exceptions to such representations and warranties; may be made for the purposes of allocating contractual risk between the parties to the agreements instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the SPA is filed with this report only to provide investors with information regarding the terms of transaction, and not to provide investors with any other factual information regarding the Company. Stockholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the agreements, which subsequent information may or may not be fully reflected in our public disclosures.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information included in Item 1.01 of this Current Report is incorporated by reference into this Item 2.03 of this Current Report to the extent required.
Item 3.02 Unregistered Sales of Equity Securities
The matters described in Section 1.01 of this Current Report on Form 8-K related to the Notes Offering and the stock issuances in payment of the arbitration award are incorporated herein by reference. In connection with the issuance of the securities described in Item 1.01, the Company relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| * | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of any of the omitted schedules upon request by the SEC. |
SIGNATURES
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.
| | SCWorx Corp. |
| | |
| | By: | /s/ Timothy Hannibal |
| | | Timothy Hannibal |
| | | CEO |
| | | |
| Dated: January 22, 2025 | | |
6
