Item 1.01. Entry into a Material Definitive Agreement.
The information set forth below in Item 3.02 of this Form 8-K is incorporated
herein by reference in its entirety.
Item 3.02. Unregistered Sales of Equity Securities.
On February 21, 2014, we completed a private placement, pursuant to a Purchase
Agreement dated as of February 12, 2014, for the issuance and sale of 34,285,728
shares of our common stock, at a purchase price of $0.35 per share, to a number
of institutional and other accredited investors, for gross proceeds of
$12,000,000. The lead investor in the private placement was Special Situations
Funds. As part of the private placement, the investors received warrants to
purchase up to 17,142,864 shares of our common stock at an exercise price of
$0.35 per share and warrants to purchase up to another 17,142,864 shares of our
common stock at an exercise price of $0.50 per share. The warrants will expire
on February 21, 2019, five years after the date on which they are issued.
For each of the five-year warrants, the holder will be able to exercise the
warrant immediately or on a so-called "cashless" basis at any time following six
months after the closing of the private placement if at that time of exercise a
registration statement covering the shares of our common stock underlying such
warrants is not effective; provided, that if any of the shares underlying the
warrants are the subject of a registration "cut-back" imposed by the SEC
pursuant to Rule 415, a cashless exercise for such cut-back shares will accrue
as to 25% of the shares for every six months following the initial six-month
period for which the shares are not registered. The warrants also contain
weighted-average anti-dilution protection for holders in connection with
issuances of capital stock below the respective exercise prices during the term
of the warrant, but excludes certain events such as issuances of capital stock
in connection with stock option plans and mergers and acquisitions.
The net proceeds from the private placement, following the payment of
offering-related expenses, will be used by us to focus on revenue growth through
the acceleration of our sales and client relations activities and marketing
initiatives, establishment of strategic partnerships and continuation of
technology and engineering enhancements to our platforms, as well as to fund our
working capital and capital expenditure requirements. At the closing of the
private placement, we paid Craig-Hallum Capital Partners LLC, the exclusive
placement agent for the private placement, cash compensation of $814,850 and two
five-year warrants, one warrant to purchase up to 750,511 shares of our common
stock at an exercise price of $0.35 per share and another warrant to purchase up
to 750,511 shares of our common stock at an exercise price of $0.50 per share.
We have agreed, pursuant to the terms of a registration rights agreement with
the investors, to (i) file a shelf registration statement with respect to the
resale of the shares of our common stock sold to the investors and shares of our
common stock issuable upon exercise of the warrants with the SEC within the
sooner of 60 days after the closing date or 10 business days after we file our
annual report on Form 10-K for the year ended December 31, 2013; (ii) use our
commercially reasonable best efforts to have the shelf registration statement
declared effective by the SEC as soon as possible after the initial filing, and
in any event no later than 90 days after the closing date (or 120 days in the
event of a full review of the shelf registration statement by the SEC); and
(iii) keep the shelf registration statement effective until all registrable
securities may be sold pursuant to Rule 144 under the Securities Act of 1933,
without the need for current public information or other restriction. If we are
unable to comply with any of the above covenants, we will be required to pay
liquidated damages to the investors in the amount of 1% of the investors'
purchase price per month until such non-compliance is cured, with such
liquidated damages payable in cash. If and to the extent the SEC imposes a
registration cut-back on some or all of the shares to be included in
the registration statement pursuant to Rule 415, no liquidated damages will
apply to the cut-back shares until they can be registered.
In connection with completing the private placement, pursuant to the Purchase
Agreement, we agreed to put in place an independent Board of Directors as
defined under the Nasdaq Marketplace Rules within 180 days after the closing
date, and to use our best efforts to "up-list" our stock to trade on the Nasdaq
Capital Market within 24 months after the closing date. Until our shares are
listed on Nasdaq, we agreed to comply with Nasdaq rules requiring the holding of
annual stockholder meetings and the timely filing of proxy statements.
The common stock, warrants and common stock issuable upon exercise of the
warrants have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and were issued and sold in reliance upon the exemption
from registration contained in Section 4(a)(2) of the Securities Act and
Regulation D promulgated thereunder. These securities may not be offered or sold
in the United States in the absence of an effective registration statement or
exemption from the registration requirements under the Securities Act.
Copies of the warrant and registration rights agreement are filed herewith as
Exhibits 4.1 and 10.2, and are incorporated herein by reference. The form of the
Purchase Agreement was previously filed as Exhibit 10.1 to our current report on
Form 8-K dated February 12, 2014. The foregoing summary descriptions of the
definitive agreements are qualified in their entirety by reference to the full
texts of each of such exhibits.
On February 24, 2014, we issued a press release announcing the completion of our
private placement. A copy of the press release is attached hereto as Exhibit
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
4.1 Composite Form of Warrant to Purchase Common Stock of IZEA,
Inc. issued to each Investor.
10.1 Form of Securities Purchase Agreement, dated as of February
12, 2014, by and among IZEA, Inc. and the Investors.
(Incorporated herein by reference to current report on Form
8-K dated February 12, 2014 and filed with the SEC on
February 19, 2014).
10.2 Form of Registration Rights Agreement, dated as of February
21, 2014, among IZEA, Inc. and each of the Investors.
99.1 Press Release issued by IZEA, Inc. on February 24 2014.