On April 6, 2018, Sigma Labs, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with two purchasers (the “Purchasers”), pursuant to which the Company sold to the Purchasers, in a private placement (the “Private Placement”) pursuant to Rule 4(a)(2) and Regulation D under the Securities Act of 1933, as amended (the “Act”), an aggregate of 1,000 shares of the Company’s newly-created non-voting Series B Convertible Preferred Stock, stated value $1,000 per share (the “Series B Convertible Preferred”), and warrants (“Warrants”) to purchase an aggregate of up to 750,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), for an aggregate purchase price of $1,000,000. The Series B Convertible Preferred is initially convertible into 1,000,000 shares of Common Stock based on an initial conversion price of $1.00 per share. The Company intends to use the net proceeds of this offering (i) to make additional hires with metallurgical and software expertise for the purpose of accelerating and completing the development of tools with Signature/Solution libraries and artificial intelligence facets that are designed to enable sophisticated closed loop control of additive manufacturing machines for real time quality assurance or rescue, (ii) to acquire additional software and customer support personnel for production implementations, and (iii) for other working capital and general corporate purposes.
Series B Convertible Preferred
On April 6, 2018, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada, which designated 1,000 shares of Series B Convertible Preferred. The shares of Series B Convertible Preferred bear cumulative dividends at a rate of 10% per annum of the stated value, payable in cash upon conversion of the Series B Convertible Preferred (with respect to the shares being converted). Such dividends will cease to accrue upon the second annual anniversary of the date of issuance of the Series B Convertible Preferred. The holders of Series B Convertible Preferred also are entitled to participate in dividends (on an as-converted basis) as and when declared and paid to the holders of Common Stock.
The initial conversion price of the Series B Convertible Preferred is $1.00 per share of Common Stock, subject to standard adjustments for certain transactions affecting the Company’s securities (such as stock dividends, stock splits, and the like). Shares of Series B Convertible Preferred are convertible into Common Stock at the option of the holder from time to time, subject to a beneficial ownership limitation of 4.99% (or 9.99% at the option of the Investor).
The Series B Convertible Preferred generally has no voting rights. However, for so long as any shares of Series B Convertible Preferred are outstanding, the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Convertible Preferred is required to: (a) alter or change adversely the powers, preferences or rights given to the Series B Convertible Preferred or alter or amend the Certificate of Designation, (b) amend the Company’s articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Convertible Preferred, (c) increase the number of authorized shares of Series B Convertible Preferred, or (d) enter into any agreement with respect to any of the foregoing.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, that is not a Fundamental Transaction (as defined in the Certificate of Designation), the holders of Series B Convertible Preferred are entitled to receive out of the assets the Company the same amount they would have received on an as-converted basis, disregarding any conversion limitations. Such amounts are to be paid on a pari passu basis with all holders of Common Stock.
