Item 1.01 Entry into a Material Definitive Agreement.
Sale of LD Micro, Inc.
On March 3, 2023 (the "Closing Date"), SRAX, Inc. (the "Company") entered into
and consummated the transactions contemplated by the Agreement and Plan of
Merger (the "Merger Agreement") with Freedom Holding Corp., a Nevada corporation
(the "Parent"), Freedom U.S. Markets, LLC, a Delaware limited liability company
and wholly-owned subsidiary of the Parent (the "Buyer"), LDM Merger Sub, Inc., a
Delaware corporation and wholly-owned subsidiary of the Buyer ("Merger Sub"), LD
Micro, Inc., a Delaware corporation and wholly-owned subsidiary of the Company
("LD Micro"), to sell LD Micro, a small cap platform and conference provider.
Specifically, pursuant to the terms of the Merger Agreement, at the closing of
the transactions contemplated by the Merger Agreement (the "Closing"), LD Micro
merged with and into Merger Sub (the "Merger"), with Merger Sub surviving the
Merger (the "Surviving Corporation"), in a transaction intended to qualify for
tax-free treatment under Section 368(a) of the Internal Revenue Code of 1986, as
amended.
At the Closing, as consideration for the sale of LD Micro by means of the
Merger, the Buyer paid the Company $8,300,000 in consideration, consisting of
$4,000,000 in cash (the "Cash Payment"), and 59,763 shares of the Parent's
common stock, par value $0.001 per share (the "Parent Common Stock"), which is
equal to the quotient obtained by dividing (x) $4,300,000 by (y) the volume
weighted average of the daily closing sales prices of the Parent Common Stock,
as reported on the Nasdaq Capital Market for the thirty (30) consecutive trading
days ending on the three (3) trading days prior to the Closing (the "Payment
Shares," and together with the Cash Payment, the "Merger Consideration"). The
Company also entered into a four (4) year Sponsorship Agreement that provides
the Company certain exclusive rights as it relates to LD Micro following the
Merger, as more fully described below.
LD Micro's President, Christopher Lahiji, is a member of the Company's board of
directors (the "Board"). The Merger was approved on March 2, 2023, by the Board.
In such case, it was considered that Mr. Lahiji is an interested director of the
Company with respect to the Merger. In such case, it also was determined, among
other things, that, notwithstanding that Mr. Lahiji is an interested director of
the Company, the Merger Consideration received for the sale of LD Micro, by
means of the Merger, constitute fair and adequate consideration. In connection
with the Merger, Mr. Lahiji stepped down from the Board, as more fully described
below in Item 5.02 of this Current Report on Form 8-K.
Additionally, the Merger Agreement provides for piggy-back registration rights
to register the Payment Shares. Specifically, at any time the Parent intends to
file on its behalf or on behalf of any of Parent's other securityholders a
registration statement in connection with a public offering of any of the
Parent's securities on a form and in a manner that would permit the registration
for the offer and sale of the Payment Shares held by the Company, the Company
will have the right to register its Payment Shares for resale in that offering,
subject to certain exceptions, including registration statements filed in
connection with any employee stock option or benefits, an exchange offer between
the Parent's existing stockholders, an "at the market" registered offering, or
pursuant to a Registration Statement on Form S-4.
Pursuant to the Merger Agreement, the Company and the Parent agreed to provide
mutual indemnification to each other with respect to certain alleged
representations, warranties or covenant breaches exceeding $100,000, but in no
case exceeding $400,000. The Company also has the obligation to indemnify the
Parent for any of LD Micro's Indebtedness (as defined in the Merger Agreement)
outstanding at the Closing.
The parties also agreed to representations, warranties and covenants customary
of transactions of this type as more fully contained in the Merger Agreement.
The representations and warranties were qualified by disclosure schedules and
are subject to the materiality standards set forth in the Merger Agreement.
Further, in connection with the Merger, the Company also entered into a
sponsorship agreement with the Surviving Corporation (the "Sponsorship
Agreement"), whereby the Surviving Corporation agreed to designate the Company
as an exclusive sponsor of certain flagship events that will be organized by the
Surviving Corporation after the consummation of the Merger for a period of four
(4) years and to provide certain benefits to the Company which include (i)
exclusive virtual and live streaming partner for the events; (ii) exclusive
partner to provide video recording interviews; and (iii) certain exclusivity to
be the only sponsor providing SAAS platform services and digital marketing and
services at the events. Also included in the Sponsorship Agreement is a mutual
indemnification clause that covers breach, misrepresentation or non-performance
under the Sponsorship Agreement, certain third-party claims and intellectual
property claim or claim infringement.
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The descriptions of the Merger Agreement and Sponsorship Agreement are qualified
in their entirety by reference to the full text of the Merger Agreement and
Sponsorship Agreement, a copy of which is filed as Exhibit 2.1 and 10.1,
respectively, to this Current Report on Form 8-K and is incorporated by
reference herein.
Consent, Waiver and Release Agreement
On August 8, 2022, the Company, LD Micro and ATW Opportunities Master Fund II,
LP (the "Lender"), entered into that certain Senior Secured Revolving Credit
Facility Agreement (the "Credit Agreement"), pursuant to which, the Company may
. . .
Item 2.01 Completion of Acquisition or Disposition of Assets.
To the extent required, the information set forth above in Item 1.01 of this
Current Report on Form 8-K is incorporated herein by reference in its entirety.
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 3, 2023, in connection with the consummation of the Merger, Christopher
Lahiji, President of LD Micro and member of our Board, resigned as a member of
the Board pursuant to a resignation letter, effective immediately. Mr. Lahiji
did not serve on any committees of the Board.
Mr. Lahiji's resignation from the Board was not the result of any disagreement
with the Company, known to any executive officer, on any matter relating to the
Company's operations, policies or practices.
Item 8.01 Other Events.
The Company issued a press release announcing the Merger Agreement on March 6,
2023. A copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated by reference herein.
Item 9.01 Financial Statement and Exhibits.
Exhibit
No. Description
2.1* Agreement and Plan of Merger, dated March 3, 2023, by and between
SRAX, Inc., LD Micro, Inc., Freedom Holding Corp., Freedom U.S. Markets,
LLC and LDM Merger Sub, Inc..
10.1** Sponsorship Agreement, dated March 3, 2023, by and between SRAX, Inc.
and LD Micro, Inc.
10.2 Consent, Waiver and Release Agreement, dated March 1, 2023, by and
between SRAX, Inc., LD Micro, Inc. and ATW Opportunities Master Fund II,
LP.
99.1 Press Release dated March 6, 2023.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* The schedules and exhibits have been omitted pursuant to Item 601(a)(5) of
Regulation S-K and the Company agrees to furnish supplementally to the SEC a
copy of any omitted schedules or exhibits upon request
** In accordance with Item 601(b)(10)(iv) of Regulation S-K, certain information
(indicated by "[***]") has been excluded from this exhibit.
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