Item
1.01 | Entry
into a Material Definitive Agreement |
Acquisition
Stock Purchase Agreement
On
February 6, 2023 (the “Signing Date”), SKYX Platforms Corp. (d/b/a Sky Technologies) (the “Company”) entered
into the Stock Purchase Agreement (the “Stock Purchase Agreement”) with the stockholders (the “Sellers”) of Belami,
Inc., a California corporation (“Belami”), pursuant to which the Company will acquire all of the issued and outstanding shares
of Belami from the Sellers (the transactions contemplated by the Stock Purchase Agreement, the “Acquisition”).
At
the closing of the Acquisition (the “Acquisition Closing”), Belami’s stock will transfer to the Company, and the Company
will pay to the Sellers as consideration (i) $7.0 million in cash, net of indebtedness (other than permitted indebtedness), transaction
expenses (as provided in the Stock Purchase Agreement), and bonuses to certain employees and consultants, and the release to Sellers
of a $1.0 million payment held in escrow, which the Company paid into escrow on the Signing Date, and (ii) 2,018,692 shares of the Company’s
common stock, no par value (the “common stock”), which is equal to $6.48 million divided by $3.21, which is the average closing
price per share of the common stock on The Nasdaq Stock Market LLC (“Nasdaq”) for the 20 trading days immediately preceding
the Signing Date. The Company will also pay to the Sellers, on the first anniversary of the Acquisition Closing date (the “Deferred
Payment Date”), (i) $3.22 million in cash and (ii) a number of shares of common stock equal to approximately $6.4 million divided
by the average closing price per share of the common stock on Nasdaq for the 20 trading days immediately preceding the Deferred Payment
Date, subject to a minimum price per share of $3.00 and a maximum price per share of $4.00. The deferred payment will be increased or
decreased by the amount of a working capital adjustment, as provided for in the Stock Purchase Agreement, and will be subject to offset
for indemnification claims. Any payment of the working capital adjustment by the Company will be paid one-third in cash and two-thirds
in common stock, equal to such adjustment amount divided by the average closing price per share of common stock on Nasdaq for the 20
trading days immediately preceding the date of the post-closing adjustment, up to 100,000 shares of common stock (with any additional
amount to be paid in cash).
In
addition, prior to the Acquisition Closing, an amount of cash equal to Belami’s retained earnings is required to be distributed
to the Sellers. If the amount of cash distributed is insufficient, the Company will be required to deliver a promissory note to Sellers
at the Acquisition Closing equal to the difference between retained earnings and the cash distributed, with a term of one year and an
interest rate equal to the short-term applicable federal rate then in effect. The Company also agreed to assume Belami’s loan agreement
with PNC Bank, National Association, consisting of a $2.0 million revolving line of credit and a term loan of approximately $2.5 million.
At
or following the Acquisition Closing, the Company will enter into an employment agreement with each of the President and Chief Automation
Officer of Belami. In addition, to certain employees and consultants of Belami following the Acquisition Closing, the Company agreed
to pay cash bonuses and to issue 498,445 restricted stock units, which will vest on the Deferred Payment Date, 473,523 restricted shares,
which will vest on the date of grant, and five-year options to purchase up to 300,000 shares of common stock, which will vest and become
exercisable in three equal annual installments beginning on the first anniversary of the date of grant, subject to the recommendation
of the Compensation Committee of the Company’s Board of Directors. Such equity grants will be made under the Company’s equity
incentive plans.
The
Stock Purchase Agreement contains customary representations, warranties, indemnification provisions, covenants, and closing conditions
and termination provisions. In addition, the Company is obligated to pay the Sellers a $1.0 million termination fee if the Stock Purchase
Agreement is terminated under certain circumstances, excluding termination by the Company in any of the following circumstances: (i)
the audited financials of Belami include a knowing, material misstatement resulting in a discrepancy in EBITDA of $1.0 million or more
as compared to the internally prepared financial statements previously provided to the Company; (ii) an event, development or occurrence
arising after the Signing Date constitutes or is related to an event, development or occurrence that has had a material adverse effect;
(iii) pursuant to the parties’ mutual written consent; (iv) there is a governmental order prohibiting the transaction; or (v) in
the event of certain knowing misrepresentations or covenant breaches by Sellers. The parties also agreed on certain operational priorities
jointly established for Belami in the 12-month period following the Acquisition Closing and that, until the Deferred Payment Date, Belami’s
board of directors will consist of six members, with each party designating three of the directors.
The
foregoing summary of the Stock Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by
reference to, the full text of the Stock Purchase Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K (this “Current Report”) and is incorporated herein by reference.
Private
Placement
On
February 6, 2023 (the “Closing Date”), the Company closed a private placement offering (the “Private Placement”)
pursuant to a securities purchase agreement (the “Private Placement Agreement”) with certain existing Company investors,
providing for the issuance and sale by the Company to such investors of (i) subordinated secured convertible promissory notes in the
aggregate principal amount of $8.1 million (the “Notes”) and (ii) warrants to purchase an aggregate of up to 1,016,667 shares
of the Company’s common stock (the “Warrants”) for investors (in the aggregate with their spouse) meeting a minimum
investment threshold of at least $6.0 million. The proceeds will be used for the cash component of the Acquisition consideration and
to pay certain transaction expenses in connection with the Acquisition and the Private Placement. Pursuant to the Private Placement Agreement,
the proceeds cannot be used to satisfy any portion of the Company’s debt (other than payment of trade payables in the ordinary
course of the Company’s business and prior practices), for the redemption of any common stock or certain securities that may be
converted or exercised into common stock or for the settlement of any outstanding litigation.
The
Private Placement Agreement contains customary representations and warranties and provides the investors with certain registration rights.
The Notes mature on the fourth anniversary of the Closing Date and contain customary acceleration events. The principal amount of the
Notes is convertible at any time after the Closing Date, in whole or in part, at the option of the respective holder, into shares of
common stock at an initial conversion price of $3.00 per share, subject to adjustment and a minimum conversion price of $2.70 per share.
Interest on the Notes accrues at a rate of 10% per annum, of which 7% is payable quarterly in arrears in cash and 3% is payable quarterly
in arrears in cash or in shares of the Company’s common stock at the Note conversion price on the date the principal balance of
the Note is paid in full or fully converted, at the holder’s election. The Notes are secured by substantially all of the Company’s
accounts, instruments, and tangible and intangible property, which secured interest is subordinated to interests held by other parties
in such collateral as of the Closing Date and certain future debt. The Company may prepay the entire then-outstanding principal amount
of a Note at any time, plus a prepayment premium; if the Company exercises such right, the Note holder may instead elect to convert the
Note. After the third anniversary of the Closing Date, holders may require the Company to repay the outstanding principal balance and
accrued interest on the Notes with 30 days’ prior written notice. The Warrants are exercisable for five years after the Closing
Date and are exercisable immediately after their issuance, in whole or in part. The Warrants have an initial exercise price of $3.00
per share, subject to adjustment and a minimum exercise price of $2.70 per share. Investors may demand the Company repay their Notes
in the event the Acquisition does not close by June 30, 2023, or earlier upon notice from the Company.
The
Notes and the Warrants contain conversion limitations providing that a holder thereof may not convert the Notes or exercise the Warrants
to the extent that, if after giving effect to such conversion or exercise, the holder or any of its affiliates would beneficially own
in excess of 4.99% or 9.99%, as elected by the holder, or such other percentage as the holder may select, of the number of shares of
common stock outstanding immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial
ownership limitation upon notice to the Company, provided that in no event such limitation exceeds 9.99%, and that any increase shall
not be effective until the 61st day after such notice. In no event will the aggregate number of shares of common stock that may be issued
pursuant to the Acquisition and the Private Placement, including the number of shares of common stock issued or issuable upon conversion
of the Notes and exercise of the Warrants, plus the number of shares of common stock issued or issuable in connection with the Acquisition,
exceed 19.99% of the common stock outstanding on the Closing Date prior to closing the Private Placement, unless the Company obtains
stockholder approval.
The
foregoing summaries of the Private Placement Agreement, the Notes and the Warrants do not purport to be complete and are subject to,
and qualified in their entirety by reference to, the full text of the Private Placement Agreement, the Notes and the Warrants, copies
of which are filed as Exhibit 10.1, Exhibit 4.1 and Exhibit 4.2, respectively, to this Current
Report and are incorporated herein by reference.