LEGACY EDUCATION ALLIANCE, INC. : Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant (Form 8-K)

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under a

Off-balance sheet arrangement of a registrant

Between September 13, 2022 and October 3, 2022, Legacy Education Alliance, Inc.
(the “Company”) has borrowed a total of $250,000 (collectively, the “Loan”) of ABCImpact I, LLCa Delaware with limited liability (the “Lender”), evidenced by one or more 10% convertible debentures (the “Debentures”). Under the debentures, the lender has the option to lend up to
$4,200,000 to the society.

The lender is a newly incorporated entity in which a subsidiary of Barry Kostiner, Chief Executive Officer and Sole Director of the Company, holds a passive non-controlling interest. The lender has previously loaned a total of $550,000 to the Company pursuant to convertible debentures substantially similar to the Debentures.

The maturity date of each Debenture is the earliest of 12 months following the date of issue and the date of a Liquidity Event (as defined in the Debentures), and is the date on which principal and interest will be due and payable. The debentures bear interest at a fixed rate of 10% per annum. Any overdue accrued and unpaid interest will incur a late charge at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law, which will accrue daily from the date on which such interest are due until the date of effective payment in full.

The Company intends to use the net proceeds of the loan for general corporate purposes and working capital.

The principal and interest then outstanding and unpaid under each Debenture will be converted into common shares of the Company and an equal number of common share purchase warrants (the “Warrant”) at the option of the lender, at a conversion price per share of $0.05, subject to adjustment (including under certain dilutive issues) in accordance with the terms of the debenture. The Debentures are subject to a beneficial ownership limit of 4.99% (or 9.99% at the option of the lender).

The Company may not prepay the Debentures without the prior written consent of the lender.

Debentures contain customary events of default for transactions such as lending. If an Event of Default occurs, the unpaid principal amount of the Debentures, plus accrued but unpaid interest, liquidated damages and other amounts due up to the Acceleration Date, will, at the Lender’s election, become immediately due and payable. in cash on the mandatory due date. Default amount. “Mandatory Default Amount” means the sum of (a) the greater of (i) the principal amount outstanding of the Debenture, plus all accrued and unpaid interest, divided by the conversion price on the date on which the amount Mandatory Default is either (A) demanded or otherwise due or (B) paid in full, whichever is lower, multiplied by the VWAP (as defined in the Debenture) on the date on which the Default Amount obligatory is either (x) demanded or otherwise due or (y) paid in full, whichever is greater VWAP, or (ii) 130% of the principal amount outstanding of the debenture, plus 100% of accrued and unpaid interest, and ( (b) all other amounts, costs, expenses and damages due in respect of the Debenture.

The warrant has an exercise price per share of $0.05, subject to adjustment (including by virtue of certain dilutive issues) in accordance with the terms of the Warrant. The exercise period of the Warrant is five years from the date of issue.

Exercise of the Warrant is subject to a beneficial ownership limit of 4.99% (or 9.99%) of the number of common shares outstanding immediately after giving effect to such exercise.

The shares underlying the Debenture and the Warrants carry “add-on” registration rights.

The foregoing is a brief description of the Debenture and Warrant, and is qualified in its entirety by reference to the full text of the Debentures and Warrant, the forms of which are included in Exhibit 10.1 of this company’s current report on Form 8-K, each of which is incorporated herein by reference.

Item 9.01   Financial Statements and Exhibits.

Exhibit     Description
10.1          Form of Convertible Debenture, with form of Common Stock Purchase
            Warrant (incorporated by reference to the Company's Current Report on
            Form 8-K filed with the SEC on August 25, 2022)
104         Cover Page Interactive Data File (embedded within the Inline XBRL
            document)

© Edgar Online, source Previews