It is impossible to know what will actually transpire with the resetting of the notes conversion price and the warrants strike price. The two investors may actually want to activate the warrant option to buy more shares, but don't want to pay out-of-the-money prices. The note and warrant language had these reset provisions in place all along, as do most all convertible notes and warrants. Nothing new here. It could just as well be that the investors wanted the warrant shares at a better price, asked SGLB for a reset, and SGLB got a repayment delay for 50% of the loan balance in return. There is no way to know at this point. It could also be that SGLB breached the clause about maintaining enough shares in the authorized to cover the convertible and warrant amounts. I think it was something like three times the actual amount of the conversion and underlying warrant shares that had to be maintained as available in the authorized, or the investors could insist upon changes. Below are some of the original clauses from the agreement.
All the best,
Silversmith
Effective October 17, 2016, Sigma Labs, Inc. (“we,” “us,” “our,” “Sigma,” or the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with two accredited investors (the “Investors”) for the private placement by the Company of Secured Convertibles Notes in the aggregate principal amount of $1,000,000 (the "Notes") and warrants (the "Warrants") to purchase up to 160,000 shares (the "Warrant Shares") of the Company's common stock ("Common Stock") (subject to adjustment in certain circumstances), for aggregate gross proceeds, before expenses, to the Company of $900,000 (the “Financing Transaction”). The closing of the Financing Transaction (the “Closing”) occurred on October 19, 2016.
The Warrants also contain certain adjustments that may be made to the Exercise Price due to future corporate events or otherwise, customary for transactions of this type. In the case of certain fundamental transactions affecting the Company, the holders of the Warrants will have the right to elect a cash payment in exchange for their then outstanding Warrants in an amount equal to the Black-Scholes value of those warrants or the positive difference between the cash per share of Common Stock paid in such fundamental transaction minus the then in effect Exercise Price. The Warrants contain a “cashless exercise” feature that allows the Investors to exercise such Warrants without a cash payment to the Company if, on any exercise date, there is not an effective Registration Statement covering the resale of the Warrant Shares by the Investors.
The payment obligations under the Notes may be accelerated upon certain Events of Default, including, among other things, any uncured breach of the Notes, bankruptcy, the existence of an event of default of the Company on any obligation for the payment of borrowed money in excess of $10,000 which is uncured, if the Common Stock is not eligible for listing or quotation for trading on the OTCQB or a national securities exchange, a "Change of Control Transaction" (as defined in the Notes), or the Company fails to have authorized and reserved the amount of shares designated in Section 4.9 of the Purchase Agreement. Upon an Event of Default, the Investors will have the right to accelerate the due date of the Notes and the Company must pay the Investors an aggregate of 110% of the outstanding balance of the Notes, accrued interest and any other sums provided for under the Notes.
END.
AI
