root9B Holdings, Inc. (OTCMKTS:RTNB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
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Entry into a Material Definitive Agreement.
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As previously disclosed, root9B Holdings, Inc., a Delaware
corporation (the Company) is offering secured convertible
promissory notes (the Notes) with an aggregate principal amount
of up to $10,000,000, along with warrants to purchase shares (the
Warrant Shares) of the Companys common stock, par value $0.001
per share (the Common Stock), representing fifty percent (50%)
warrant coverage (the Warrants), to certain accredited investors
(the Investors), in a private placement, to a securities purchase
agreement (the Agreement) by and between the Company and each
Investor. The following description of Notes and Warrants is
presented with adjustment for the Companys reverse split of its
Common Stock at a ratio of one-for-fifteen (the Reverse Split),
which was effective on December 5, 2016.
corporation (the Company) is offering secured convertible
promissory notes (the Notes) with an aggregate principal amount
of up to $10,000,000, along with warrants to purchase shares (the
Warrant Shares) of the Companys common stock, par value $0.001
per share (the Common Stock), representing fifty percent (50%)
warrant coverage (the Warrants), to certain accredited investors
(the Investors), in a private placement, to a securities purchase
agreement (the Agreement) by and between the Company and each
Investor. The following description of Notes and Warrants is
presented with adjustment for the Companys reverse split of its
Common Stock at a ratio of one-for-fifteen (the Reverse Split),
which was effective on December 5, 2016.
On September 9, 2016, the Company completed the initial closing
(the Initial Closing) of such private placement, at which the
Company sold Notes with an aggregate principal amount equal to
$2,636,000, along with Warrants to purchase approximately 109,833
shares of Common Stock.On September 21, 2016, the Company held a
second closing (the Second Closing) of such private placement, at
which the Company sold Notes with an aggregate principal amount
equal to $1,000,000, along with Warrants to purchase
approximately 41,666 shares of Common Stock.On September 30,
2016, the Company held a third closing (the Third Closing) of
such private placement, at which the Company sold Notes with an
aggregate principal amount equal to $60,000, along with Warrants
to purchase 2,500 shares of Common Stock.On December 22, 2016,
the Company held a fourth closing (collectively with the Initial
Closing, the Second Closing, and the Third Closing, the Closing)
of such private placement, at which the Company sold New Notes
(defined below) with an aggregate principal amount equal to
$3,075,000, along with Warrants to purchase 128,124 shares of
Common Stock.Following the Closing, the Company may sell
additional Notes with an aggregate principal amount of up to
$3,229,000, along with Warrants to purchase 134,541 shares of
Common Stock, at additional closings, which may be conducted on a
rolling basis until December 31, 2016.
(the Initial Closing) of such private placement, at which the
Company sold Notes with an aggregate principal amount equal to
$2,636,000, along with Warrants to purchase approximately 109,833
shares of Common Stock.On September 21, 2016, the Company held a
second closing (the Second Closing) of such private placement, at
which the Company sold Notes with an aggregate principal amount
equal to $1,000,000, along with Warrants to purchase
approximately 41,666 shares of Common Stock.On September 30,
2016, the Company held a third closing (the Third Closing) of
such private placement, at which the Company sold Notes with an
aggregate principal amount equal to $60,000, along with Warrants
to purchase 2,500 shares of Common Stock.On December 22, 2016,
the Company held a fourth closing (collectively with the Initial
Closing, the Second Closing, and the Third Closing, the Closing)
of such private placement, at which the Company sold New Notes
(defined below) with an aggregate principal amount equal to
$3,075,000, along with Warrants to purchase 128,124 shares of
Common Stock.Following the Closing, the Company may sell
additional Notes with an aggregate principal amount of up to
$3,229,000, along with Warrants to purchase 134,541 shares of
Common Stock, at additional closings, which may be conducted on a
rolling basis until December 31, 2016.
The term of each Note is three years after issuance (the Maturity
Date). Each Note accrues interest at a rate of 10% per annum,
payable on each March 31, June 30, September 30 and December 31,
commencing December 31, 2016 until the earlier of (i) the entire
principal amount being converted or (ii) the Maturity Date. The
interest payments shall be made in either cash or, at the holders
option, in shares of Common Stock (the Interest Payment Shares)
at a per share price equal to 85% of the average daily volume
weighted average price of the Common Stock during the five
consecutive trading day period immediately prior to the interest
payment date, but in no event less than $12.00 per share.
Following the date which is six months after the date of
issuance, at the election of the holder, all principal and
interest due and owing under each Note is convertible into shares
of Common Stock at a conversion price equal to $12.00 (the
Conversion Shares and, together with the Warrant Shares and the
Interest Payment Shares, the Shares). The conversion price is
subject to adjustment for stock splits, stock dividends,
combinations, or similar events. to a security agreement entered
into concurrently with the Investors, the Notes are secured by
substantially all of the Companys assets, subject to certain
exceptions including the assets related to and held by IPSA
International, Inc., a wholly-owned subsidiary of the Company
(IPSA).
Date). Each Note accrues interest at a rate of 10% per annum,
payable on each March 31, June 30, September 30 and December 31,
commencing December 31, 2016 until the earlier of (i) the entire
principal amount being converted or (ii) the Maturity Date. The
interest payments shall be made in either cash or, at the holders
option, in shares of Common Stock (the Interest Payment Shares)
at a per share price equal to 85% of the average daily volume
weighted average price of the Common Stock during the five
consecutive trading day period immediately prior to the interest
payment date, but in no event less than $12.00 per share.
Following the date which is six months after the date of
issuance, at the election of the holder, all principal and
interest due and owing under each Note is convertible into shares
of Common Stock at a conversion price equal to $12.00 (the
Conversion Shares and, together with the Warrant Shares and the
Interest Payment Shares, the Shares). The conversion price is
subject to adjustment for stock splits, stock dividends,
combinations, or similar events. to a security agreement entered
into concurrently with the Investors, the Notes are secured by
substantially all of the Companys assets, subject to certain
exceptions including the assets related to and held by IPSA
International, Inc., a wholly-owned subsidiary of the Company
(IPSA).
The Company may prepay any portion of the outstanding principal
amount of any Note and any accrued and unpaid interest, with the
prior written consent of the holder, by paying to the holder an
amount (the Prepayment Amount) equal to (i) if the prepayment
date is prior to the first anniversary of the date of issuance
(the Anniversary Date), (1) the unpaid principal to be repaid
plus (2) any accrued but unpaid interest plus (3) an amount equal
to the interest which has not accrued as of the prepayment date
but would accrue on the principal to be repaid during the period
beginning on the prepayment date and ending on the Anniversary
Date of the then-outstanding principal amount of that Note or
(ii) if the prepayment date is after the Anniversary Date,(1) the
unpaid principal to be repaid plus (2) any accrued but unpaid
interest plus (3) an amount equal to one-half of the interest
which has not accrued as of the prepayment date but would accrue
on the principal to be repaid during the period beginning on the
prepayment date and ending on the Maturity Date.
amount of any Note and any accrued and unpaid interest, with the
prior written consent of the holder, by paying to the holder an
amount (the Prepayment Amount) equal to (i) if the prepayment
date is prior to the first anniversary of the date of issuance
(the Anniversary Date), (1) the unpaid principal to be repaid
plus (2) any accrued but unpaid interest plus (3) an amount equal
to the interest which has not accrued as of the prepayment date
but would accrue on the principal to be repaid during the period
beginning on the prepayment date and ending on the Anniversary
Date of the then-outstanding principal amount of that Note or
(ii) if the prepayment date is after the Anniversary Date,(1) the
unpaid principal to be repaid plus (2) any accrued but unpaid
interest plus (3) an amount equal to one-half of the interest
which has not accrued as of the prepayment date but would accrue
on the principal to be repaid during the period beginning on the
prepayment date and ending on the Maturity Date.
The Warrants have a term of five years, an exercise price of
$0.80 per share and may be exercised at any time following the
date which is six months after the date of issuance. The number
of shares of Common Stock issuable upon exercise of the Warrants
is subject to adjustment for certain stock dividends or stock
splits, or any reclassification of the outstanding securities of,
or reorganization of, the Company.
$0.80 per share and may be exercised at any time following the
date which is six months after the date of issuance. The number
of shares of Common Stock issuable upon exercise of the Warrants
is subject to adjustment for certain stock dividends or stock
splits, or any reclassification of the outstanding securities of,
or reorganization of, the Company.
to the terms of both the Notes and the Warrants, a holder may not
be issued Shares if, after giving effect to the conversion or
exercise of the Shares, as applicable, the holder, together with
its affiliates, would beneficially own in excess of 9.99% of the
outstanding shares of Common Stock. In addition, in the event the
Company consummates a consolidation or merger with or into
another entity or other reorganization event in which the Common
Stock is converted or exchanged for securities, cash or other
property, or the Company sells, assigns, transfers, conveys or
otherwise disposes of all or substantially all of its assets or
the Company (other than the sale, merger or asset sale of IPSA)
or another entity acquires 50% or more of the outstanding Common
Stock, then following such event, (i) at their election within 30
days of consummation of the transaction, the holders of the Notes
will be entitled to receive the Prepayment Amount, and (ii) the
holders of the Warrants will be entitled to receive upon exercise
of such Warrants the same kind and amount of securities, cash or
property which the holders would have received had they exercised
the Warrants immediately prior to such transaction. Any successor
to the Company or surviving entity shall assume the Companys
obligations under the Notes and the Warrants.
be issued Shares if, after giving effect to the conversion or
exercise of the Shares, as applicable, the holder, together with
its affiliates, would beneficially own in excess of 9.99% of the
outstanding shares of Common Stock. In addition, in the event the
Company consummates a consolidation or merger with or into
another entity or other reorganization event in which the Common
Stock is converted or exchanged for securities, cash or other
property, or the Company sells, assigns, transfers, conveys or
otherwise disposes of all or substantially all of its assets or
the Company (other than the sale, merger or asset sale of IPSA)
or another entity acquires 50% or more of the outstanding Common
Stock, then following such event, (i) at their election within 30
days of consummation of the transaction, the holders of the Notes
will be entitled to receive the Prepayment Amount, and (ii) the
holders of the Warrants will be entitled to receive upon exercise
of such Warrants the same kind and amount of securities, cash or
property which the holders would have received had they exercised
the Warrants immediately prior to such transaction. Any successor
to the Company or surviving entity shall assume the Companys
obligations under the Notes and the Warrants.
Additionally, the Notes shall not be convertible into Common
Stock (nor any interest paid in Common Stock), and the Warrants
shall not be exercisable for Common Stock, until the Company has
a sufficient number of shares of Common Stock available for
issuance to permit full conversion or exercise of the Notes and
Warrants, respectively.
Stock (nor any interest paid in Common Stock), and the Warrants
shall not be exercisable for Common Stock, until the Company has
a sufficient number of shares of Common Stock available for
issuance to permit full conversion or exercise of the Notes and
Warrants, respectively.
The Agreement contains customary representations, warranties, and
covenants by, among, and for the benefit of the parties. The
Agreement requires the Company at any time after the Company
files its annual report on Form 10-K for the year ended December
31, 2016, at the request of the holders of a majority in interest
of the aggregate principal amount of the then-outstanding Notes,
to file a registration statement covering the resale of the
Shares within 90 days of the request for registration. In
addition, the Agreement grants the holders piggyback registration
rights until the first day the Shares may be sold under Rule 144
of the Securities Act of 1933, as amended (the Securities Act).
covenants by, among, and for the benefit of the parties. The
Agreement requires the Company at any time after the Company
files its annual report on Form 10-K for the year ended December
31, 2016, at the request of the holders of a majority in interest
of the aggregate principal amount of the then-outstanding Notes,
to file a registration statement covering the resale of the
Shares within 90 days of the request for registration. In
addition, the Agreement grants the holders piggyback registration
rights until the first day the Shares may be sold under Rule 144
of the Securities Act of 1933, as amended (the Securities Act).
The Notes and Warrants were issued and sold to exemptions from
the registration requirements of the Securities Act, including
Section 4(a)(2) thereof and Rule 506(b) of Regulation D
thereunder, as well as comparable exemptions under applicable
state securities laws, as transactions by an issuer not involving
a public offering.The offering was not conducted in connection
with a public offering, and no public solicitation or
advertisement was made or relied upon by any Investor in
connection with the offering.Moreover, each Investor represented
to the Company that (1) it is an accredited investor, as that
term is defined under Regulation D of the Securities Act, in the
United States, acquiring the Notes, Warrants, and Shares for
investment purposes only and not with a view to or for sale in
connection with any distribution thereof, (2) either alone or
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable
of evaluating the merits and risks of its investment, and (3) it
had the opportunity to review the Companys public filings and was
afforded (a) the opportunity to ask questions and receive answers
from the Company concerning the conditions of the offering, (b)
access to information about the Company sufficient to enable such
Investor to evaluate its investment in the Company, and (c) the
opportunity to obtain such additional information that the
Company possessed or could acquire without unreasonable effort or
expense necessary to make an informed investment decision.
the registration requirements of the Securities Act, including
Section 4(a)(2) thereof and Rule 506(b) of Regulation D
thereunder, as well as comparable exemptions under applicable
state securities laws, as transactions by an issuer not involving
a public offering.The offering was not conducted in connection
with a public offering, and no public solicitation or
advertisement was made or relied upon by any Investor in
connection with the offering.Moreover, each Investor represented
to the Company that (1) it is an accredited investor, as that
term is defined under Regulation D of the Securities Act, in the
United States, acquiring the Notes, Warrants, and Shares for
investment purposes only and not with a view to or for sale in
connection with any distribution thereof, (2) either alone or
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable
of evaluating the merits and risks of its investment, and (3) it
had the opportunity to review the Companys public filings and was
afforded (a) the opportunity to ask questions and receive answers
from the Company concerning the conditions of the offering, (b)
access to information about the Company sufficient to enable such
Investor to evaluate its investment in the Company, and (c) the
opportunity to obtain such additional information that the
Company possessed or could acquire without unreasonable effort or
expense necessary to make an informed investment decision.
Effective as of December 22, 2016, the Company and the holders of
a majority of the outstanding aggregate principal amount of the
Notes entered into an amendment to the Agreement (the Amendment)
to provide for the issuance by the Company of a second form of
secured promissory note (the New Note). The Company and certain
holders of Notes also entered into amendments to the Notes (the
Note Amendments). The Note Amendments amend the Notes to provide
holders with a one-time option to partially redeem up to 50% of
the Outstanding Amount (as defined therein) if cash proceeds
received by the Company in connection with the sale of IPSA
exceed certain threshold levels. The New Notes are materially
identical to the Notes, as amended by the Note Amendments.
a majority of the outstanding aggregate principal amount of the
Notes entered into an amendment to the Agreement (the Amendment)
to provide for the issuance by the Company of a second form of
secured promissory note (the New Note). The Company and certain
holders of Notes also entered into amendments to the Notes (the
Note Amendments). The Note Amendments amend the Notes to provide
holders with a one-time option to partially redeem up to 50% of
the Outstanding Amount (as defined therein) if cash proceeds
received by the Company in connection with the sale of IPSA
exceed certain threshold levels. The New Notes are materially
identical to the Notes, as amended by the Note Amendments.
The foregoing description does not purport to be complete and is
qualified in its entirety by reference to the full text of the
Agreement, form of Note, form of Warrant, security agreement, the
Amendment, the form of New Note, and Note Amendments, copies of
which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4,
respectively, to this Current Report on Form 8-K and incorporated
herein by reference. Copies of the Amendment, the form of New
Note and Note Amendments will be filed in accordance with the
rules and regulations of the Securities and Exchange Commission
(“SEC”), with portions omitted and filed separately with the SEC
to ta request for confidential treatment. This Current Report on
Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy securities.
qualified in its entirety by reference to the full text of the
Agreement, form of Note, form of Warrant, security agreement, the
Amendment, the form of New Note, and Note Amendments, copies of
which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4,
respectively, to this Current Report on Form 8-K and incorporated
herein by reference. Copies of the Amendment, the form of New
Note and Note Amendments will be filed in accordance with the
rules and regulations of the Securities and Exchange Commission
(“SEC”), with portions omitted and filed separately with the SEC
to ta request for confidential treatment. This Current Report on
Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy securities.
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Item 2.03
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Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information disclosed in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item 2.03.
Form 8-K is incorporated by reference into this Item 2.03.
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Item 3.02
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Unregistered Sales of Equity Securities.
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The information disclosed in Item 1.01 of this Current Report on
Form 8-K is incorporated by reference into this Item 3.02.
Form 8-K is incorporated by reference into this Item 3.02.
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Item 9.01
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Financial Statements and Exhibits.
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(d) Exhibits.
The information set forth in the Exhibit Index immediately
following the page to this Current Report on Form 8-K is
incorporated by reference into this Item 9.01. Certain exhibits
are incorporated by reference from documents previously filed by
the Company with the SEC as required by Item 601 of Regulation
S-K.
following the page to this Current Report on Form 8-K is
incorporated by reference into this Item 9.01. Certain exhibits
are incorporated by reference from documents previously filed by
the Company with the SEC as required by Item 601 of Regulation
S-K.
About root9B Holdings, Inc. (OTCMKTS:RTNB)
root9B Holdings, Inc., formerly root9B Technologies, Inc., is engaged in providing cybersecurity, business advisory services principally in regulatory risk mitigation, and energy and controls solutions. The Company helps clients in various industries to provide cyber operations and solutions, mitigate risk, comply with regulations, and leverage and integrate technology. It operates through three segments: Cyber Solutions, IPSA International, Inc. (IPSA)/Business Advisory Solutions, and Energy and Controls Solutions. The Cyber Solutions segment provides cyber security and technology training capabilities, operational support and consulting services. The IPSA/Business Advisory Solutions segment delivers solutions in both regulatory compliance and risk mitigation. The Energy and Controls Solutions segment works with its customers to assess, design and install processes and automation. Its services include cyber operations assessments, forensics, exploitation and defense planning. root9B Holdings, Inc. (OTCMKTS:RTNB) Recent Trading Information
root9B Holdings, Inc. (OTCMKTS:RTNB) closed its last trading session at 0.630 with 69,580 shares trading hands.
