MONSTER DIGITAL, INC. (NASDAQ:MSDI) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01

Entry Into a Material Definitive Agreement

Offers to Amend and Exercise Certain Warrants to Purchase Common Stock

The Company commenced an Offer to Amend and Exercise Warrants dated September 25, 2017 and as amended on October 12, 2017, October 17, 2017 and November 16, 2017, to purchase an aggregate of 2,396,676 shares of common stock issued to (i) holders of promissory notes, Series A Convertible Preferred stock and other indebtedness upon conversion of such indebtedness and preferred stock in connection with the Company’s initial public offering which closing occurred in July 2016, (ii) investors participating in and brokers assisting with certain of the Company’s private placement financings which closings occurred from January 2017 to September 2017, (iii) the placement agent and its assignees of the Company’s private placement financings with respect to which closings occurred from October 2012 to January 2015 and (iv) the Company’s public relations firm. These warrants are known together as the “Original Warrants” and this Offer to Amend and Exercise Warrants is known as the “September 2017 Offer to Amend and Exercise”.

The Company also commenced an Offer to Amend and Exercise Warrants dated October 17, 2017 and as amended on November 16, 2017, held by holders of record as of September 19, 2017 to purchase 2,025,000 shares of the Company’s common stock at an exercise price of $5.625 per share issued to investors in the Company’s initial public offering which closing occurred in July 2016. These warrants are known together as the “IPO Warrants” and this Offer to Amend and Exercise Warrants is known as the (“IPO Warrant Offer to Amend and Exercise”). The September 2017 Offer to Amend and Exercise and the IPO Warrant Offer to Amend and Exercise are together known as the “Offers to Amend and Exercise”.

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The Offers to Amend and Exercise expired at 5:00 p.m. Pacific time (9:00 p.m. Eastern time) on November 24, 2017 (the “Expiration Date”).

to the September 2017 Offer to Amend and Exercise, an aggregate of 1,820,895 Original Warrants were tendered by their holders and were amended and exercised in connection therewith for gross proceeds to the Company of approximately $819,403. Such tendered Original Warrants represent approximately 76% of the Company’s outstanding Original Warrants as of November 24, 2017.

to the IPO Warrant Offer to Amend and Exercise, an aggregate of 1,063,978 IPO Warrants were tendered by their holders and were amended and exercised in connection therewith for gross proceeds to the Company of approximately $478,790. Such tendered IPO Warrants represent approximately 53% of the Company’s outstanding IPO Warrants as of November 24, 2017.

The Company issued the Original Warrants in private placement transactions in reliance on the exemption from registration provided by Rule 506 of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). In connection with such transactions, the holders of the Original Warrants represented that they were “accredited investors.” Similarly, the issuance of the shares of the Company’s common stock upon the amendment and exercise of the 1,820,895 Original Warrants was exempt from registration under the Securities Act to Rule 506 of Regulation D. In connection with the September 2017 Offer to Amend and Exercise, all holders of tendered Original Warrants represented that they were “accredited investors.”

The Company registered the IPO Warrants in connection with its initial public offering in July 2016. However,the issuance of the shares of the Company’s common stock upon the amendment and exercise of the 1,063,978 IPO Warrants was exempt from registration under the Securities Act to Rule 506 of Regulation D. In connection with the IPO Warrants Offer to Amend and Exercise, less than 35 holders of tendered IPO Warrants represented that they were not “accredited investors”

Stock Purchase Agreement

As previously disclosed, the Company currently has an outstanding debt owed to Walgreens of $1.2 million. The debt was incurred in 2015 in connection with certain price protection afforded Walgreens by the Company. Walgreens agreed to settle the debt in full for the sum of $600,000 if payment was made by November 30, 2017.

To obtain sufficient funds to repay the debt to Walgreens, the Company’s Board of Directors approved the issuance of shares of its common stock to an unaffiliated investor. Further to the terms of a Stock Purchase Agreement dated September 12, 2017 (the ‘‘Stock Purchase Agreement’’), the investor placed $600,000 in escrow. As approved by the Company’s stockholders at its special meeting held on November 9, 2017 (the “Special Meeting”), the Company issued the investor 1,850,418 shares of common stock which was equal to 1,195,000 divided by the lesser of (i) $0.80 or (ii) the average closing bid price of the Company’s common stock for the ten trading days immediately preceding the date of the Special Meeting (ten-day average was $0.6458).

Following the amendment and exercise of the 1,820,895 Original Warrants and 1,063,978 IPO Warrants to the terms of the Offers to Amend and Exercise, as well as the issuance of 1,850,418 shares of common stock further to the aforementioned Stock Purchase Agreement, the Company had 14,360,972 shares of common stock issued and outstanding, excluding outstanding options and warrants to purchase 16,834 and 1,536,803 shares of the Company’s common stock, respectively.

The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

On November 29, 2017, the Company issued a press release with respect to (i) announcing an anticipated closing date on or before December 19, 2017 of the Merger with Innovate Biopharmaceuticals, Inc., (ii) the results of the Offers to Amend and Exercise and (iii) the issuance of shares further to the Stock Purchase Agreement. The press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 7.01 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section18 of the Securities and Exchange Act of 1934, as amended, or incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Monster Digital, Inc. Exhibit
EX-99.1 2 tv480489_ex99-1.htm EXHIBIT 99.1 Exhibit 99.1   Monster Digital,…
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About MONSTER DIGITAL, INC. (NASDAQ:MSDI)

Monster Digital, Inc. designs and engineers data storage and memory products. The Company is engaged in the design, development and marketing of its products under the Monster Digital brand for use in high-performance computing and consumer and mobile product applications. The Company’s primary product offerings include an action sports camera used in adventure sport, adventure photography and extreme-action videography; a line of ultra-small mobile external memory drive products for Apple iPhone operating system (iOS) devices; On-The-Go Cloud devices, which create a wireless fidelity (Wi-Fi) hot spot for multiple users while simultaneously allowing data to be viewed, played or transferred among the connected storage; a selection of memory storage products consisting of Solid State Drives (SSDs), removable flash memory CompactFlash cards (CF cards), secured digital cards (SD cards) and universal serial bus (USB) flash drives.