SharonAI (SHAZ) Registration Filing summary

Use of proceeds and capital allocation

• Proceeds from the Standby Equity Purchase Agreement (SEPA) are to be used for working capital and general corporate purposes, with explicit restrictions against repayment of related party debt or loans to executives, directors, or employees without prior written consent from the investor.

• The company is prohibited from using SEPA funds to make payments in respect of related party obligations, including payables or notes payable to related parties, unless such payments are disclosed in the Form S-4 and not repaid from SEPA funds.

• The company may not loan, invest, transfer, or downstream any cash proceeds from the SEPA to any subsidiary unless that subsidiary has signed and delivered a Guaranty Agreement to the investor.

• The company is restricted from using proceeds to fund or facilitate activities in countries or with persons subject to U.S., EU, or UK sanctions.

• The company must not use proceeds to repay advances or loans to executives, directors, or employees, or to make payments in respect of related party obligations, unless specifically permitted.

• The company is required to pay a 1% commitment fee to the investor, payable in cash or shares, and a $25,000 structuring fee.

• The company is responsible for all expenses related to the registration and disposition of shares, including legal, accounting, and listing fees, but not the investor's legal fees for reviewing the registration statement.

Offering details and pricing

• The SEPA allows the company to issue and sell up to $50,000,000 of Class A Ordinary Common Stock to the investor over a 24-month period, subject to certain conditions.

• The investor also committed to provide up to $7,500,000 in prepaid advances, funded in tranches, evidenced by convertible promissory notes.

• The first tranche of $2,500,000 is advanced within two business days of the business combination closing; the second tranche of $2,500,000 is advanced on the 60th day after the initial registration statement becomes effective.

• Each advance is subject to a 5% original issue discount, which is not funded but deemed fully earned at closing.

• The purchase price for shares in each advance is 97% of the market price, defined as the lowest daily VWAP during the three-day pricing period, with additional shares issued if the VWAP falls below a minimum acceptable price.

• The investor cannot own more than 4.99% of the outstanding shares at any time, and the total shares issued cannot exceed 19.99% of the outstanding shares unless shareholder approval is obtained.

• The company must maintain an effective registration statement for the resale of shares and comply with all SEC and exchange requirements.

Risk factors and disclosures

• The agreement includes extensive representations and warranties by both parties, including compliance with all applicable laws, absence of material adverse effects, and no undisclosed liabilities.

• The company is restricted from entering into variable rate transactions or repaying related party debt while the SEPA is outstanding, except as disclosed in the Form S-4.

• The company must not affect any reverse stock split or share consolidation without investor consent, unless required to maintain listing.

• The agreement includes indemnification provisions for both parties, covering losses arising from misstatements or omissions in the registration statement or prospectus, breaches of representations, warranties, or covenants, and violations of law.

• The agreement is governed by New York law, with exclusive jurisdiction in New York courts, and includes a mutual waiver of jury trial.