Item 1.01 Entry into a Material Definitive Agreement.
Letter Agreement
On February 8, 2021, Mohawk Group Holdings, Inc. (the “Company”) entered into a Letter Agreement (the “Letter Agreement”) with High Trail Investments SA LLC (the “Investor”), pursuant to which, among other things, (i) the Company and the Investor agreed to amend the terms of that certain warrant to purchase up to an aggregate of 2,864,133 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), that the Company issued to the Investor on December 1, 2020, as amended (the “December Warrant”), to provide that the December Warrant is immediately exercisable on a cash basis, (ii) the Investor agreed to exercise 980,000 shares of Common Stock subject to the December Warrant (the “December Warrant Shares”) for an aggregate payment to the Company of $8,829,800, (iii) the Investor and the Company agreed to cancel the unexercised portion of the December Warrant in exchange for an aggregate payment by the Investor to the Company of $16,957,197 and the issuance by the Company to the Investor of a warrant to purchase 1,884,133 shares of Common Stock (the “Penny Warrant”), (iv) the Company agreed to seek stockholder approval (collectively, the “Stockholder Approvals”) at a stockholder meeting to be held no later than May 31, 2021 (the “Stockholder Meeting”) to issue shares of Common Stock in excess of the limitations imposed by Nasdaq Listing Standard Rule 5635(a) and/or 5635(d) (collectively, the “Nasdaq Rules”) pursuant to the Additional Warrant (as defined below), the December Note (as defined below), the February Note (as defined below), the February Warrant (as defined below) and that certain Asset Purchase Agreement, dated February 2, 2021, by and among the Company and Truweo, LLC, as Purchaser, Healing Solutions, LLC, Jason R. Hope, and for the purposes of Section 5.11 and Article VII, Super Transcontinental Holdings LLC, (v) the Company agreed to issue to the Investor a warrant to purchase 750,000 shares of the Common Stock (the “Additional Warrant”), (vi) the Company agreed to prepare and file by March 26, 2021 a registration statement (the “Registration Statement”) with the Securities and Exchange Commission for the purpose of registering for resale the December Warrant Shares and the shares issuable upon exercise of the Penny Warrant (the “Penny Warrant Shares”), and (vii) the Investor agreed, for the first 30 days following the effectiveness of the Registration Statement, not to sell, or otherwise transfer or dispose of the December Warrant Shares or Penny Warrant Shares on any day in an amount that is greater than 10% of the trading volume of the Common Stock for such day.
Pursuant to the Letter Agreement, the Investor exercised the December Warrant and the Company issued the Penny Warrant and the Additional Warrant to the Investor on February 9, 2021.
The Penny Warrant has an exercise price of $0.01 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, is immediately exercisable, has a term of five years from the date of issuance and is exercisable on a cashless basis.
The Additional Warrant has an exercise price of $33.56 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, is immediately exercisable, has a term of the later of five years from the date of issuance and the date that is one year from the date that the Stockholder Approvals are obtained and will be exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable upon exercise of the Additional Warrant (the “Additional Warrant Shares”), in which case the Additional Warrant shall also be exercisable on a cashless exercise basis at the Investor’s election. The Additional Warrant includes a provision that gives the Company the right to require the Investor to exercise the Additional Warrant if the price of the Common Stock exceeds 200% of the exercise price of the Additional Warrant for 20 consecutive trading days and certain other conditions are satisfied. The Additional Warrant may not be exercised unless the Company obtains stockholder approval contemplated by the Nasdaq Rules to issue any shares of Common Stock upon exercise of the Additional Warrant.
The Penny Warrant and the Additional Warrant provide that in no event will the number of shares of Common Stock issued upon exercise of the Penny Warrant or the Additional Warrant result in the Investor’s beneficial ownership exceeding 9.99% of the Common Stock outstanding at the time of conversion or exercise, as applicable (which percentage may be decreased or increased by the Investor, but to no greater than 9.99%, and provided that any increase will not be effective until the sixty-first (61st) day after notice of such request by the Investor to increase its beneficial ownership limit has been delivered to the Company).
There is no material relationship between the Company or its affiliates and the Investor other than in respect of that certain securities purchase agreement, dated as of December 1, 2020, by and between the Company and the Investor, as amended, that certain Senior Secured Note due 2022 issued to the Investor on December 1, 2020, as amended (the “December Note”), the
