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Grom Social Enterprises, Inc. Announces Closing of $4.0 Million Private Placement

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Grom Social Enterprises, Inc. (NASDAQ: GROM; GROMW) announced the first closing of a private placement of a convertible promissory note with an initial principal amount of $4,000,000. The company will issue warrants to acquire 1,514,072 shares of Common Stock to the institutional investor. The net proceeds from the private placement will be used for general working capital and administrative purposes. EF Hutton LLC acted as the exclusive placement agent for the offering.
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The issuance of a convertible promissory note by Grom Social Enterprises, Inc. reflects a strategic financial maneuver to raise capital. The note's initial principal amount of $4 million, coupled with the issuance of warrants, indicates a significant capital infusion for the company. The transaction's nature suggests a short-term approach to working capital and administrative expenses, which could imply that Grom is seeking immediate liquidity to support its operations or growth initiatives.

Investors and analysts should note the dual exercise price of the warrants, which may lead to future dilution of shares. The $1.78 exercise price is standard, but the $0.001 exercise price is exceptionally low, potentially resulting in a substantial increase in the number of shares outstanding if exercised. This could have a dilutive effect on existing shareholders' equity. However, the capital raised may enable Grom to invest in key areas that could enhance its competitive position in the family-friendly programming and safe social media space.

It is also important to consider the role of EF Hutton LLC as the exclusive placement agent, which suggests a level of credibility and expertise in the transaction. However, the fact that these securities are not registered under the Securities Act of 1933 and are offered only to accredited investors limits the pool of potential investors and indicates a higher risk profile associated with the securities.

From a legal perspective, the transaction undertaken by Grom Social Enterprises entails specific regulatory commitments. The mention of a registration rights agreement obligates the company to file registration statements with the SEC for the resale of common stock and the shares issuable upon exercise of the warrants. This process ensures that the company adheres to securities law and provides transparency for investors.

Investors should be aware of the legal implications of the securities being offered without registration under the Securities Act of 1933, which necessitates reliance on exemptions from registration requirements. This limits the transaction to accredited investors, a group typically more sophisticated and capable of bearing economic risk. The company's compliance with SEC regulations in the future will be a critical factor in maintaining the legality and perceived integrity of the offering.

Analysts in the securities market will recognize that Grom Social Enterprises' private placement could impact the company's stock performance. The private placement nature of the offering and the involvement of a single institutional investor suggests a vote of confidence in the company's potential, which could be perceived positively by the market. However, the potential increase in shares outstanding due to the exercise of warrants, especially at the nominal price of $0.001, could raise concerns about share dilution and its effect on the stock price.

The use of proceeds for general working capital indicates that the company is not directing funds toward any specific project or growth initiative, which may lead investors to question the long-term strategic plan of Grom. The market's reaction to this news will depend on the company's subsequent financial performance and its ability to leverage the raised capital into tangible growth outcomes that can justify the dilution.

BOCA RATON, Fla., Dec. 21, 2023 (GLOBE NEWSWIRE) -- Grom Social Enterprises, Inc. (NASDAQ: GROM; GROMW) (“Grom” or the “Company”), a media, technology and entertainment company dedicated to family-friendly programming, web filtering technology and safe social media for kids, today announced the first closing of its previously announced private placement of a convertible promissory note with an initial principal amount of $4,000,000 (the “Notes”). The Notes are being issued pursuant to the securities purchase agreement, dated as of November 9, 2023 (as amended) with a single institutional investor (the “Investor”). In connection with the purchase and sale of the Notes, the Company has agreed to issue to the Investor, warrants to acquire a total of 1,514,072 shares of Common Stock consisting of (1) 757,036 shares of Common Stock with an exercise price of $1.78 per share of Common Stock and (ii) 757,036 shares of Common Stock with an exercise price of $.001 per share of Common Stock.

The Company intends to use the net proceeds from the private placement for general working capital and administrative purposes.

EF Hutton LLC acted as exclusive placement agent for the offering.

The shares of common stock and warrants described above have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission (SEC) or an applicable exemption from such registration requirements. The securities were offered only to accredited investors. Pursuant to a registration rights agreement with the investors, the Company has agreed to file one or more registration statements with the SEC covering the resale of the shares of common stock and the shares issuable upon exercise of the pre-funded warrants and warrants.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Grom Social Enterprises, Inc.
Grom Social Enterprises, Inc. (NASDAQ: GROM) is a growing social media platform and original content provider of entertainment for children under 13 years of age, which provides safe and secure digital environments for kids that can be monitored by their parents or guardians. The Company has several operating subsidiaries, including Grom Social, which delivers its content through mobile and desktop environments (web portal and apps) that entertain children, let them interact with friends, access relevant news, and play proprietary games while teaching them about being good digital citizens. The Company owns and operates Top Draw Animation, which produces award-winning animation content for some of the largest international media companies in the world. The company owns an 80% stake in Curiosity Ink Media, which is a global media company that develops, acquires, builds, grows and maximizes the short, mid, and long-term commercial potential of Kids & Family entertainment properties and associated business opportunities. Grom also includes Grom Educational Services, which has provided web filtering services for K-12 schools, government and private businesses. For more information, please visit the Company’s website at gromsocial.com or for investor relations information, please visit investors.gromsocial.com.

Safe Harbor Statement
This press release may contain forward-looking statements about Grom Social Enterprises, Inc. activities that are based on current expectations, forecasts, and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially from those anticipated or expected, including statements related to the amount and timing of expected revenues and any payment of dividends on our common stock, statements related to our financial performance, expected income, distributions, and future growth for upcoming quarterly and annual periods, and other risks set forth in the Company’s filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors. Among other matters, the Company may not be able to sustain growth or achieve profitability based upon many factors including, but not limited to general stock market conditions. We have incurred and will continue to incur significant expenses in the expansion of our existing and new service lines, noting there is no assurance that we will generate enough revenues to offset those costs in both the near and long-term. Additional service offerings may expose us to additional legal and regulatory costs and unknown exposure(s) based upon the various geopolitical locations where we will be providing services, the impact of which cannot be predicted at this time. All forward-looking statements speak only as of the date of this press release. We undertake no obligation to update any forward-looking statements or other information contained herein. Stockholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

Investor Relations Contact:
Floyd Stumpf
Worldwide Financial Marketing, Inc.
info@wwfinancial.com
(954) 360-9998

Media Contact:
Paul Ward
Grom Social Enterprises, Inc.
paul@gromsocial.com
(917) 593-6066


FAQ

What is the recent announcement from Grom Social Enterprises, Inc. (NASDAQ: GROM; GROMW)?

Grom Social Enterprises, Inc. (NASDAQ: GROM; GROMW) announced the first closing of a private placement of a convertible promissory note with an initial principal amount of $4,000,000.

How many shares of Common Stock will the company issue to the institutional investor?

The company will issue warrants to acquire a total of 1,514,072 shares of Common Stock to the institutional investor.

What is the intended use of the net proceeds from the private placement?

The net proceeds from the private placement will be used for general working capital and administrative purposes.

Who acted as the exclusive placement agent for the offering?

EF Hutton LLC acted as the exclusive placement agent for the offering.

Grom Social Enterprises Inc.

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