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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, DC 20549
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FORM 8-K
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CURRENT REPORT PURSUANT
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TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
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Date of
report (Date of earliest event reported): December 22,
2016
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root9B Holdings, Inc.
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(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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000-50502
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20-0443575
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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102 N. Cascade Avenue, Suite 220
Colorado Springs, CO
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80919
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
Telephone Number, Including Area Code: (602)
889 1137
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N/A
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(Former
Name or Former Address, if Changed Since Last Report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
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☐
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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☐
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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☐
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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☐
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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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
Company’s 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, pursuant 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 Company’s 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
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 holder’s 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. Pursuant to a
security agreement entered into concurrently with the Investors,
the Notes are secured by substantially all of the Company’s
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.
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.
Pursuant 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 Company’s
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.
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”).
The
Notes and Warrants were issued and sold pursuant 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 Company’s 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.
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 pursuant 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.
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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 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.
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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 signature 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.
SIGNATURE
Pursuant 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, thereunto duly
authorized.
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ROOT9B HOLDINGS, INC.
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Dated:
December 29, 2016
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By:
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/s/ Dan
Wachtler
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Name:
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Dan
Wachtler
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Title:
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President
& Chief Operating Officer
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Exhibit Index
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Exhibit
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Description
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10.1
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Securities
Purchase Agreement, dated September 9, 2016 (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of the
Company filed with the Commission on September 12,
2016).
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10.2
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Form of
Secured Convertible Promissory Note (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K of the Company filed
with the Commission on September 12, 2016).
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10.3
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Form of
Common Stock Purchase Warrant (incorporated by reference to Exhibit
10.3 to the Current Report on Form 8-K of the Company filed with
the Commission on September 12, 2016).
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10.4
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Form of
Security Agreement (incorporated by reference to Exhibit 10.4 to
the Current Report on Form 8-K of the Company filed with the
Commission on September 12, 2016).
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