Item 1.01 Entry into a Material Definitive Agreement.
Securities Purchase Agreement (Institutional). On January 27, 2020, Sigma Labs,
Inc. (the "Company") entered into a Securities Purchase Agreement (the
"Institutional SPA") attached hereto as Exhibit 10.1, with certain institutional
investors (the "Institutional Investors"). Pursuant to the Institutional SPA,
the Company has agreed to issue and sell to each Institutional Investor and each
Institutional Investor severally has agreed to purchase from the Company shares
of the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock"), warrants to purchase the Company's Common Stock (the "Institutional
Common Warrants") and warrants to purchase the Series D Preferred Stock (the
"Preferred Warrants") for a total gross purchase price of $1,600,000. At the
closing, the Company will issue to the Institutional Investors an aggregate of
1,640 shares of the Series D Preferred Stock (the "Series D Preferred Shares"),
Institutional Common Warrants to purchase up to an aggregate of 7,796,000 shares
of Common Stock and warrants to purchase an aggregate of 6,156 of additional
Series D Preferred Stock, which, if exercised in full, would result in
additional gross proceeds to the Company of approximately $6 million (including
$500,000 subject to a forced exercise right by the Company described more fully
below).
Under the Certificate of Designations for the Series D Preferred Stock, the
Series D Preferred Stock has an initial stated value of $1,000 per share (the
"Stated Value"). Dividends accrue at a dividend rate of 9% per annum (subject to
increase upon the occurrence (and during the continuance) of certain triggering
events described therein) will accrue and, on a monthly basis, shall be payable
in kind by the increase of the Stated Value of the Series D Preferred Shares by
said amount. The holders of the Series D Preferred Shares will have the right at
any time to convert all or a portion of the Series D Preferred Shares
(including, without limitation, accrued and unpaid dividends and make-whole
dividends through the third anniversary of the closing date) into shares of the
Company's Common Stock at the conversion price then in effect, which initially
is $1.00 (subject to adjustment for stock splits, dividends, recapitalizations
and similar events and full ratchet price protection). In addition, a holder may
at any time, alternatively, convert all, or any part, of its Series D Preferred
Shares at an alternative conversion price, which equals the lower of the
applicable conversion price then in effect, and the greater of (x) $0.1856 and
(y) 85% of the average volume weighted average price ("VWAP") of the Common
Stock for a five (5) trading day period prior to such conversion. Upon the
occurrence of certain triggering events, described in the Certificate of
Designations, including, but not limited to payment defaults, breaches of
transaction documents, failure to maintain listing on the Nasdaq Capital Market,
and other defaults set forth therein, the Series D Preferred Shares would become
subject to redemption, at the option of a holder, at a 125% premium to the
underlying value of the Series D Preferred Shares being redeemed.
The Institutional Common Warrants have a term of 5½ years, but is not initially
exercisable until six month and one day after the closing. The initial exercise
price is $1.00 and is subject to adjustment for stock splits, dividends,
recapitalizations and similar events and, unless shareholder approval is
obtained by the Company, subject to a floor of $0.95, full ratchet antidilution
price protection.
The Preferred Warrants have a term of one year from the date that the securities
referenced in the Institutional SPA become fully tradeable (whether by
registration with the SEC of such securities or the expiration of the requisite
holding period under Rule 144 of the Securities Act of 1933, as amended). The
Company has the right to force the exercise of up to 512 Preferred Warrants
subject to certain equity conditions, which would result in gross proceeds to
the Company of approximately $500,000. The initial exercise price for the
Preferred Warrants is $975 per share, which is subject to adjustment for stock
splits, dividends, recapitalizations and similar events.
The Certificate of Designations contains a prohibition on the issuance of any
shares of Common Stock upon conversion of the Series D Preferred Shares in
excess of the amount set forth in NASDAQ Listing Rule 5635(d) (20% or more of
the outstanding shares of common stock) until the Company obtains shareholder
approval for issuance of shares of Common Stock in excess of such amount. In the
Institutional SPA, the Company has agreed to promptly obtain such shareholder
approval and amend its article of incorporation and/or effect a reverse split in
order to have sufficient shares of Common Stock available to allow the holders
of the Series D Preferred Shares to convert in full the Series D Preferred
Shares and exercise in full the Institutional Common Warrants.
Pursuant to a Registration Rights Agreement to be executed on or before the
closing, the Company has agreed to prepare and, as soon as practicable, file
with the Securities and Exchange Commission a registration statement covering
the resale of all the Series D Preferred Shares (including the Series D
Preferred Shares issuable upon exercise of the Preferred Warrants), the shares
issuable upon conversion of the Series D Preferred Shares, and the shares
issuable upon exercise of the Institutional Common Warrants.
The foregoing summaries of the Securities Purchase Agreement, Certificate of
Designations, Registration Rights Agreement, Institutional Common Warrants and
Preferred Warrants do not purport to be complete and are qualified in their
entirety by the terms and conditions set forth in the forms thereof attached
hereto exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, which are
incorporated by reference herein in their entirety.
Securities Purchase Agreement (Other Investors).
On January 27, 2020, the Company also entered into a Securities Purchase
Agreement ("Other Investors SPA") attached hereto as Exhibit 10.6, with the
Company's largest shareholder and certain of its directors (the "Other
Investors"). Pursuant to the Other Investors SPA, the Company has agreed to
issue and sell to each Other Investor and each Other Investor severally has
agreed to purchase from the Company shares of the Company's Series E Convertible
Preferred Stock (the "Series E Preferred Stock"), and Class A warrants to
purchase the Company's Common Stock (the "Class A Warrants") for a total gross
purchase price of $500,000.
At the closing, the Company will issue to the Other Investors an aggregate of
333.33 shares of the Series E Preferred Stock (the "Series E Preferred Shares"),
and Class A Warrants to purchase shares of Common Stock equal to 100% of the
conversion shares issuable at the closing.
Under the Certificate of Designations for the Series E Preferred Stock, the
Series E Preferred Shares have an initial stated value of $1,500 per share (the
"Stated Value"). Dividends at the initial rate of 9% per annum will accrue and,
on a monthly basis, shall be payable in kind by the increase of the Stated Value
of the Series E Preferred Stock by said amount. The holders of the Series E
Preferred Shares have the right at any time to convert all or a portion of the
Preferred Shares (including, without limitation, accrued and unpaid dividends
and make-whole dividends through the third anniversary of the closing date) into
shares of the Company's Common Stock at an initial conversion rate determined by
dividing the Conversion Amount by the Conversion Price ($0.13 above the
consolidated closing bid price for the trading day prior to the execution of the
Other Investors SPA). The Conversion Amount is the sum of the Stated Value of
the Series E Preferred Shares then being converted plus any other unpaid amounts
payable with respect to the Series E Preferred Shares being converted plus the
"Make Whole Amount" (the amount of any dividends that, but for the conversion,
would have accrued at the dividend rate for the period through the third
anniversary of the initial issuance date). The Conversion Rate is also subject
to adjustment for stock splits, dividends recapitalizations and similar events.
The Class A Warrants have a term of 5 ½ years, but is not initially exercisable
until six month and one day after the closing. The initial exercise price is
equal to 110% of the conversion price of the Series E Preferred Stock and is
subject to adjustment for stock splits, dividends, recapitalizations and similar
events.
The foregoing summaries of the Other Investors SPA, Certificate of Designations
for the Series E Preferred Stock and Class A Warrants do not purport to be
complete and are qualified in their entirety by the terms and conditions set
forth in the forms thereof attached hereto exhibits 10.6, 10.7 and 10.8,
respectively, which are incorporated by reference herein in their entirety.
General
The closing of the issuance of the securities covered by the Securities Purchase
Agreements is subject to the closing conditions set forth therein.
Item 8.01 Other Events.
On January 27, 2020, the Company issued a press release announcing the private
placements described herein. A copy of this press release is filed as Exhibit
99.1 hereto, and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
Number Description
10.1 Securities Purchase Agreement (Institutional Investors)
10.2 Form of Certificate of Designations (Series D Convertible Preferred
Stock)
10.3 Registration Rights Agreement
10.4 Form of Institutional Common Warrant
10.5 Form of Preferred Warrant
10.6 Securities Purchase Agreement (Other Investors)
10.7 Form of Certificate of Designations (Series E Convertible Preferred
Stock)
10.8 Form of Other Investors Common Warrant
99.1 Press Release issued January 27, 2020
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