SIGMA LABS, INC. (OTCMKTS:SGLB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
Entry into a Material Definitive Agreement.
Underwriting Agreement
On February 15, 2017, Sigma Labs, Inc. (the Company) entered into
an underwriting agreement (the Underwriting Agreement) with
Dawson James Securities, Inc., as underwriter (the Underwriter)
in connection with a public offering (the Offering) of the
Companys securities. to the Underwriting Agreement, the Company
has agreed to sell 1,410,000 units (the Class A Units), with each
Class A Unit consisting of one share of the Companys common
stock, par value $0.001 per share (the Common Stock), and one
warrant to purchase one share of the Companys Common Stock at an
exercise price of $4.00 per share (the Warrants). The
Underwriting Agreement also provides that, to the extent that the
purchase of Class A Units would otherwise result in a purchaser,
together with its affiliates and certain related parties,
beneficially owning more than 4.99% of the Companys outstanding
Common Stock immediately following the consummation of the
Offering, such purchaser will have the opportunity, in lieu of
purchasing Class A Units, to purchase units (the Class B Units)
consisting of one share of the Companys Series A Convertible
Preferred Stock (the Series A Preferred) convertible upon
issuance into one share of the Companys Common Stock, together
with the equivalent number of Warrants as would have been issued
to such purchaser if such purchaser had purchased Class A Units.
The shares of Common Stock (or, as applicable, Series A
Preferred) and the Warrants are immediately separable and will be
issued separately. The public offering price for the Units is
$4.13 per Unit and the purchase price for the Underwriter is
$3.7996 per Unit, resulting in an underwriting discount and
commission of $0.3304 (or 8.00%) per Unit and total net proceeds
to the Company before expenses of $5.4 million. The Company has
agreed with the Underwriter to an underwriting discount of 3% on
any sales of securities made to the Companys officers and
directors, as well as certain other investors sourced by the
Company. The total net proceeds to the Company from the Offering,
after expenses, is estimated to be approximately $4.7 million.
The closing of the Offering is expected to occur on February 21,
2017.
to the Underwriting Agreement, the Company agreed to issue to the
Underwriter a unit purchase option (the Unit Purchase Option)
more fully described below. The Company has also agreed to pay
the Underwriter a non-accountable expense allowance equal to 1%
of the gross proceeds of the Offering (excluding any proceeds
from the over-allotment option described below, if any) and to
reimburse the Underwriter for its expenses up to $100,500.
The Company has granted the Underwriter a 45-day option to
purchase (i) up to 211,500 additional shares at the public
offering price per Unit less the price per Warrant included in
the Units and less the underwriting discount and/or (ii)
additional Warrants to purchase up to 211,500 additional shares
at a purchase price of $0.01 per Warrant, to cover
over-allotments, if any.
to the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and
liabilities arising from breaches of representations and
warranties contained in the Underwriting Agreement, or to
contribute to payments that the Underwriter may be required to
make in respect of those liabilities. The Underwriting Agreement
also contains customary representations, warranties, and
conditions precedent to closing.
The Underwriting Agreement is filed as Exhibit 1.1 hereto and is
incorporated into this Item 1.01 by reference. The foregoing
description of the Underwriting Agreement is qualified in its
entirety by reference to the full text of the Underwriting
Agreement. The representations, warranties and covenants
contained in the Underwriting Agreement were made only for
purposes of such agreement and as of specific dates, were solely
for the benefit of the parties to such agreement, and may be
subject to limitations agreed upon by the contracting parties,
including being qualified by confidential disclosures exchanged
between the parties in connection with the execution of the
Underwriting Agreement. The representations and warranties may
have been made for the purposes of allocating contractual risk
between the parties to the agreement instead of establishing
these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ
from those applicable to investors. Investors are not third-party
beneficiaries under the Underwriting Agreement and should not
rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of
facts or condition of the Company. Moreover, information
concerning the subject matter of the representations and
warranties may change after the date of the Underwriting
Agreement.
Warrant Agency Agreement/Warrants
The Warrants will be issued to a Warrant Agency Agreement between
the Company and Interwest Transfer Co., Inc. (the Warrant
Agreement). The Warrants will separate from the shares of Common
Stock or Series A Preferred included within the Units immediately
and be exercisable at any time on or after the date of issuance.
The Warrants will terminate on the fifth anniversary of the date
of issuance and have an initial cash exercise price of $4.00 per
share. The Warrants may also be exercised on a cashless basis in
the event that no effective registration statement or prospectus
is available at the time of exercise. In this case, the number of
shares issuable upon exercise of each Warrant will be calculated
to a formula based on the volume weighted average price of the
Common Stock, as described in the Warrants. The exercise price
and number of shares of Common Stock issuable upon exercise of
the Warrants is subject to appropriate adjustment in the event of
stock dividends, stock splits, reorganizations or similar events
affecting the Common Stock and the exercise price.
The Warrants will not be exercisable or exchangeable by any
holder to the extent (and only to the extent) that such holder or
any of its affiliates would beneficially own in excess of 4.99%
of our outstanding Common Stock immediately after exercise,
except that upon at least 61 days prior notice from a holder to
the Company, such holder may increase the amount of ownership of
outstanding shares after exercising such holders Warrants up to
9.99% of the number of shares of our Common Stock outstanding
immediately after giving effect to the exercise, as such
percentage ownership is determined in accordance with the terms
of the Warrants. No fractional shares of Common Stock will be
issued in connection with the exercise of the Warrants. In lieu
of fractional shares, the Company will either pay the holder an
amount in cash equal to the fractional amount multiplied by the
exercise price or round up to the next whole share.
If, at any time a Warrant is outstanding, the Company consummates
any fundamental transaction, as described in the Warrants and
generally including any consolidation or merger into another
corporation, or the sale of all or substantially all of the
Companys assets, or other transaction in which our Common Stock
is converted into or exchanged for other securities or other
consideration, each holder of a Warrant will have the right to
receive, for each share of Common Stock that would have been
issuable upon such exercise immediately prior to the occurrence
of such fundamental transaction, at the option of such holder,
the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration receivable as a
result of such fundamental transaction by a holder of the number
of shares of Common Stock for which the Warrant is exercisable
immediately prior to such fundamental transaction.
The Warrant Agreement and Warrant certificate are filed as
Exhibits 4.1 and 4.2, respectively and are incorporated into this
Item 1.01 by reference. The foregoing description of the Warrant
Agreement and the Warrants is qualified in its entirety by
reference to the full text of the Warrant Agreement and the form
of Warrant.
Unit Purchase Option
to the Underwriting Agreement, the Company has agreed to grant
the Underwriter the right to purchase from the Company up to a
number of Units equal to 5% of the Units sold in the Offering (or
up to 70,500 Units) at an exercise price equal to 125% of the
public offering price of the Units in the Offering, or $5.1625
per Unit.
The form of Unit Purchase Option is filed as Exhibit 4.3 hereto
and is incorporated into this Item 1.01 by reference. The
foregoing description of the Unit Purchase Option is qualified in
its entirety by reference to the full text of the Unit Purchase
Option.
Item 2.04
Triggering Events That Accelerate or Increase a Direct
Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement.
As previously disclosed by the Company, on October 19, 2016, the
Company sold secured convertible notes (the Notes) in the
aggregate principal amount of $1,000,000 and warrants to purchase
up to 80,000 shares of Common Stock in a private placement. Each
holder of these Notes has the option to cause the Company to
repay such holder’s Noteon the date that is 30 days after the
Company raises at least $5,000,000 in gross proceeds from a
public offering of its securities. This 30-day period will
commence upon the closing of the Offering described above.
Item 3.03
Material Modification to Rights of Security
Holders.
See Item 5.03 below, which is incorporated by reference into this
Item 3.03.
Item 5.02
Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
John Rice was appointed to our board of directors effective as of
February 15, 2017. Mr. Rice will also serve as a member of the
Companys audit committee, compensation committee and nominating
and corporate governance committee. In conjunction with Mr.
Rice’s appointment as a director, the Company issued Mr. Rice
5,231 shares of Common Stock, which shares will vest in four
equal, successive quarterly installments beginning on the first
quarterly anniversary of the grant date, provided that an
installment will not vest if Mr. Rice is not a director of the
Company as of the applicable quarterly anniversary date,
Mr. Rice has extensive experience in business operations. In
1990, Mr. Rice founded ASiQ, LLC, a firm specializing in
operations management services ranging from launching successful
startups and executing business turnarounds to financings, crisis
management and the repositioning of enterprises for sale at
optimum market prices. Mr. Rice presently serves as ASiQs CEO and
President. He also served as CEO of Coca-Cola Bottling Company of
Santa Fe, a client of ASiQs, from 2009 to 2015. From 2010 to
2012, Mr. Rice served as Director and Contracts Officer of
Detector Networks International. Mr. Rice frequently lectures on
breakout growth strategies, crisis management, corporate
turnarounds, venture capital, and financial structuring and
strategies. He has also served on a number of boards. Since 2005,
Mr. Rice has served as Director of New Mexico Angels, Inc., a New
Mexico based group of accredited individual angel investors.
Since 2016, Mr. Rice has served as Director of Akal Security,
Inc. He was also a Director of Detector Networks International
from 2010-2012, where he successfully negotiated the business
turnaround for the company. Mr. Rice is an honors graduate of
Harvard College.
On February 16, 2017, the Company and Mark J. Cola entered into
an employment agreement (the Employment Agreement) for a
three-year term, to which Mr. Cola will continue to serve as the
Companys President, Chief Executive Officer and Chief Operating
Officer. The Employment Agreement will become effective as of the
closing of the Offering described above. Upon the effectiveness
of the Employment Agreement, Mr. Cola will be entitled to receive
an annual base salary of $220,000, which will be subject to
increase in the discretion of the board of directors or
Compensation Committee based on its annual assessment of Mr.
Colas performance and other factors. to the Employment Agreement,
the Company has agreed to grant Mr. Cola a stock option to
purchase up to 123,750 shares of our Common Stock under the
Company’s 2013 Equity Incentive Plan, as amended, vesting in
equal quarterly installments over an 18-month period. The Company
has agreed in the Employment Agreement that, on each of the first
and second anniversaries of the effectiveness of the Employment
Agreement, Mr. Cola will receive a stock option to purchase
61,875 shares of our Common Stock. Each stock option will have an
exercise price equal to the closing price of our Common Stock on
the date of grant and will vest and become exercisable in equal
quarterly installments over an 18-month period, provided, in each
case, that Mr. Cola remains an employee of the Company through
such vesting date. Under the Employment Agreement, Mr. Cola will
be entitled to participate in employee benefit and welfare plans
and programs of the Company, and, in the event the Companys
terminates Mr. Colas employment without cause, he will be
entitled to receive compensation and benefits received as of the
date of termination for the lesser of the remaining term of
employment or a period of 24 months.
The Employment Agreement is filed as Exhibit 10.1 hereto and is
incorporated into this Item 5.02 by reference. The foregoing
description of the Employment Agreement is qualified in its
entirety by reference to the full text of the Employment
Agreement.
Item 5.03
Amendments to Articles of Incorporation or Bylaws; Change
of Fiscal Year.
Certificate of Designation for the Series A Convertible
Preferred Stock
The Company’s board of directors designated 1,621,500 authorized
shares of preferred stock as Series A Convertible Preferred
Stock. On February 15, 2017, the Company filed a Certificate of
Designation of Rights, Preferences and Privileges of SeriesA
Convertible Preferred Stock (the Certificate of Designation) with
the Nevada Secretary of State. The Certificate of Designation
creates the Series A Preferred and fixes the rights, preferences,
powers, restrictions and limitations of the Series A Preferred.
The Series A Preferred is a component of the Class B Units being
offered to the Offering described above.
Conversion. Each share of SeriesA Preferred is
convertible into one share of our Common Stock (subject to
adjustment as provided in the Certificate of Designation) at any
time at the option of the holder, provided that the holder will
be prohibited from converting SeriesA Preferred into shares of
our Common Stock if, as a result of such conversion, the holder,
together with its affiliates, would own more than 4.99% of the
total number of shares of our Common Stock then issued and
outstanding. However, any holder may increase or decrease such
percentage to any other percentage not in excess of 9.99%,
provided that any increase in such percentage would not be
effective until 61 days after such notice to us.
Liquidation Preference. In the event of a liquidation of
our Company, the holders of Series A Preferred would be entitled
to participate on an as-converted-to-Common Stock basis with
holders of Common Stock in any distribution of assets of the
Company to the holders of our Common Stock.
Voting Rights. Shares of Series A Preferred generally
have no voting rights, except as required by law and except that
the consent of the holders of the outstanding Series A Preferred
will be required to amend any provision of the Companys articles
of incorporation that would have a materially adverse effect on
the rights of the holders of the Series A Preferred.
Dividends. Shares of Series A Preferred are not entitled
to receive any dividends, unless and until specifically declared
by the Companys board of directors. The holders of the Series A
Preferred will participate, on an as-if-converted-to-Common Stock
basis, in any dividends to the holders of Common Stock.
Redemption. The Company is not obligated to redeem or
repurchase any shares of Series A Preferred. Shares of Series A
Preferred are not otherwise entitled to any redemption rights or
mandatory sinking fund or analogous fund provisions.
The text of the Certificate of Designation is filed as Exhibit
3.1 hereto and is incorporated by reference into this Item 5.03.
The foregoing description of the Certificate of Designation is
qualified in its entirety by reference to its full text.
Reverse Stock Split
The Company effected an amendment to its amended and restated
articles of incorporation, as amended, by filing a Certificate of
Change with the Nevada Secretary of State on February 14, 2017.
This filing effected a 1-for-2 reverse stock split (the Reverse
Split) of the Companys Common Stock and a corresponding decrease
in the number of shares of the Companys Common Stock that the
Company is authorized to issue, effective as of February 15,
2017. The Reverse Split combined each two shares of the Companys
issued and outstanding Common Stock into one share of Common
Stock. No fractional shares were issued in connection with the
Reverse Split, and any fractional shares resulting from the
Reverse Split were rounded up to the nearest whole share.
The Certificate of Change is filed as Exhibit 3.2 hereto and is
incorporated by reference into this Item5.03.
All Unit and Share amounts described in this report reflect the
Reverse Split.
Bylaws
On February 15, 2017, the Company adopted Amended and Restated
Bylaws to become effective upon the completion of the Offering
described above. The new bylaws contain provisions that could
delay or prevent changes in control or changes in the
Company’s’ management without the consent of the board of
directors. These provisions include the following:
a classified board of directors with three-year staggered terms,
which may delay the ability of stockholders to change the
membership of a majority of the board of directors;
no cumulative voting in the election of directors, which limits
the ability of minority stockholders to elect director
candidates;
the exclusive right of the board of directors to elect a director
to fill a vacancy created by the expansion of the board of
directors or the resignation, death or removal of a director,
which prevents stockholders from being able to fill vacancies on
the board of directors;
the ability of the board of directors to alter the Company’s
bylaws without obtaining stockholder approval;
the required approval of the holders of at least two-thirds of
the shares entitled to vote at an election of directors to adopt,
amend or repeal the Company’s bylaws or repeal the provisions of
the Company’s articles of incorporation and bylaws regarding the
election and removal of directors;
a prohibition on stockholder action by written consent, which
forces stockholder action to be taken at an annual or special
meeting of stockholders;
the requirement that a special meeting of stockholders may be
called only by the chairman of the board of directors, the chief
executive officer, the president or the board of directors, which
may delay the ability of the Company’s stockholders to force
consideration of a proposal or to take action, including the
removal of directors; and
advance notice procedures that stockholders must comply with in
order to nominate candidates to the board of directors or to
propose matters to be acted upon at a stockholders meeting, which
may discourage or deter a potential acquirer from conducting a
solicitation of proxies to elect the acquirers own slate of
directors or otherwise attempting to obtain control of the
Company.
In accordance with the Companys amended and restated bylaws that
became effective immediately prior to the Listing described
above, the Companys board of directors is divided into three
classes with staggered, three-year terms. At each annual meeting
of stockholders, the successors to directors whose terms then
expire will be elected to serve from the time of election and
qualification until the third annual meeting following election.
The Amended and Restated Bylaws are filed as Exhibit 3.3 hereto
and are incorporated by reference into this Item 5.03.The
foregoing description of the Amended and Restated Bylaws is
qualified in its entirety by reference to the full text of the
Amended and Restated Bylaws.
Item 8.01
Other Events.
On February15, 2017, the Company issued a press release with
respect to the Offering, the Listing and the Reverse Split. A
copy of the press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits
There are filed as part of this report the exhibits listed on the
accompanying Index to Exhibits, which information is incorporated
herein by reference.
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
|
Date: February 17, 2017 |
SIGMA LABS, INC. By: /s/ Mark J. Cola Name: Mark J. Cola Title: President and Chief Executive Officer |
INDEX TO EXHIBITS
|
Exhibit Number |
Description |
|
|
1.1 |
Underwriting Agreement, dated as of February 15, 2017, |
|
|
3.1 |
Certificate of Designation of Rights, Preference and |
|
|
3.2 |
Certificate of Change |
About SIGMA LABS, INC. (OTCMKTS:SGLB)
Sigma Labs, Inc. is a technology company that specializes in the development and commercialization of manufacturing and materials technologies. The Company’s principal business activities include the development of its In-Process Quality Assurance (IPQA) suite of technologies and the commercialization of both its IPQA and materials-related suite of technologies, with its focus on three-dimensional printing (3DP) industry. It is engaged in a range of activities in which it seeks to commercialize technologies and products in various industry sectors, such as aerospace and defense manufacturing; bio-medical manufacturing; automotive manufacturing, and other markets. It offers PrintRite3D SENSORPAK, which is an auxiliary sensor and hardware kit; PrintRite3D INSPECT, which is a software that verifies quality layer by layer, and PrintRite3D CONTOUR, which is a software that assures the as-built geometry. Its other software modules include PrintRite3D THERMAL and PrintRite3D ANALYTICS. SIGMA LABS, INC. (OTCMKTS:SGLB) Recent Trading Information
SIGMA LABS, INC. (OTCMKTS:SGLB) closed its last trading session down -0.08 at 3.61 with 176,407 shares trading hands.
