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EX-10.1 - FORM OF SEPTEMBER 2017 SECURED CONVERTIBLE DEMAND NOTE. - root9B Holdings, Inc. | rtnb_ex101.htm |
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 20,
2017
root9B Holdings, Inc.
(Exact name of Company as specified in Charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
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000-50502
(Commission File No.)
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20-0443575
(IRS Employee Identification No.)
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102 N. Cascade Avenue, Suite 220
Colorado Springs, CO 80919
(Address of Principal Executive Offices)
(602) 889-1137
(Issuer Telephone number)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Company under
any of the following provisions (see General Instruction A.2
below).
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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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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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13(e)-4(c))
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging growth
company
☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. ☐
Item 1.01
Entry into a Material Definitive Agreement.
On
September 21, 2017, the Company issued secured convertible demand
notes (the “Notes”) to certain of its existing secured
debt holders, with an aggregate principal amount of $400,000, 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”). The New Notes accrue
interest at the rate of 18% per annum or the highest interest rate
legally permissible, whichever is lower, payable on each March 31,
June 30, September 30 and December 31, commencing September 30,
2017 until the earlier of (i) the entire principal amount being
converted, (ii) 24 months from the date of issuance, or (iii) the
Note is repaid. Each holder of the Notes may demand repayment of
the Note at any time.
Subject
to receipt of approval from the Company’s senior secured
convertible promissory note holders, the Notes will be pari passu
with the previously issued senior secured convertible notes. The
Notes were also included as part of the Security Agreement, dated
September 9, 2016, by and among the Company and the investors
listed therein, a copy of which was filed as Exhibit 10.4 to the
Current Report on Form 8-K filed with the Commission on September
12, 2016.
The Company intends to use the proceeds to meet
its payroll obligations and for other working capital purposes. For
further information regarding the Company’s liquidity,
reference is made to “Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital
Resources” and
“Note 1:Basis of Presentation and
General Information – Going Concern and
Liquidity” to the
Company’s financial statements contained in the quarterly
report on Form 10-Q for the period ended March 31,
2017.
The Company acknowledged that it was in default of
the Notes immediately upon issuance. As of September 22, 2017, the
aggregate value of the unpaid principal amount of the
Company’s senior secured convertible debt (which includes the
Notes), together with the accrued but unpaid interest, was
$12,873,851. As noted on August 16, 2017, the Company received a
foreclosure notice from the Secured Creditors that in order to
satisfy the outstanding secured indebtedness, they intended to sell
substantially all of the assets of the Company at an auction to
conclude September 28, 2017. There can be no assurances the Company
will be successful in obtaining a waiver of default from any of its
creditors or find a solution to its liquidity concerns. In the
event the Company cannot obtain a waiver from its creditors, the
value of the Company’s securities would decline
dramatically or become worthless.
Except
as described in this Current Report, the terms of the Notes and the
Warrants are materially similar to the terms of the convertible
promissory note and warrant described in the
Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission (the “Commission”)
on August 10, 2017. The description of the Notes are qualified in
its entirety by reference to the full text of the form of Note, a
copies of which is filed as Exhibits 10.1 to this Current Report on
Form 8-K.
The
Note and Warrant were issued and sold pursuant to exemptions from
the registration requirements of the Securities Act of 1933, as
amended, 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.
Cautionary Note Regarding Forward-Looking Statements.
This
Current Report on Form 8-K contains forward-looking statements that
reflect management’s current views with respect to certain
future events and the Company’s prospects, operations,
performance and financial condition. Such forward-looking
statements speak only as of the date of this Report and the Company
will not be required to amend or update such statements at any time
in the future. Forward-looking statements include, but are not
limited to: the continued foreclosure proceedings on the
Company’s assets, the results of any sale of the
Company’s assets by the Company’s secured creditors at
an auction, the Company’s ability to obtain waivers of events
of default from its lenders; the availability of strategic
investors or buyers for the remaining assets of the Company’s
discontinued operations; and the results of any potential
restructuring activities. For all forward-looking statements, the
Company claims the protection of the Safe Harbor for
Forward-Looking Statements contained in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot
be predicted with accuracy or are otherwise beyond the
Company’s control and some of which might not even be
anticipated. Future events and actual results could differ
materially from those described in or contemplated by the
forward-looking statements. Important factors that contribute to
such risks include, but are not limited to, successful execution of
the Company’s business plan, adequacy of capital resources,
and the Company’s ability to comply with, or obtain waivers
with respect to non-compliance with, the terms of its indebtedness.
The risks included are not exhaustive; for a more detailed
description of these uncertainties and other factors, see
“Item 1A. Risk Factors” in the Company’s Annual
Report on Form 10-K filed with the Commission on April 17,
2017.
Item 2.03
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.
Item 2.04
Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet
Arrangement.
The
information disclosed in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 2.04.
Item 3.01
Notice of Delisting or Failure to Satisfy a Continued Listing Rule
or Standard; Transfer of Listing.
On
September 20, 2017, the Company received notification from the
Nasdaq that the Company has failed to maintain a minimum Market
Value of Listed Securities (“MVLS”) of $35.0 million
for the last 30 consecutive business days. As previously disclosed,
on September 6, 2017, the Company received a letter from Nasdaq
informing the Company that, pursuant to Listing Rule 5101, Nasdaq
was accelerating the due date for the Company to submit a plan to
regain compliance with the Listing Rules to September 15,
2017. On September 21, 2017, the Company received a Staff
Determination Letter from the Nasdaq noting that the Company had
not yet submitted a plan to regain compliance and accordingly, the
Nasdaq determined to deny the Company’s request for continued
listing on The Nasdaq Stock Market. Unless the Company requests an
appeal of this determination, trading of the Company’s common
stock will be suspended at the opening of business on October 2,
2017. The determination from Nasdaq was based upon:
1.
Noncompliance
with Listing Rules 5605(b)(1), 5605(c)(2) and 5605(d)(2) regarding
vacancies in our Board of Directors which resulted in an
insufficient number of independent directors on the audit committee
and the compensation committee.
2.
Failure
to maintain a minimum MVLS of $35.0 million for the last 30
consecutive business days.
3.
Failure
to file Form 10-Q for the period ended June 30, 2017 in compliance
with Listing Rules.
The
Company intends to appeal the Staff’s determination, pursuant
to the procedures set forth in the Nasdaq Listing Rules;
nevertheless, there can be no assurance the Company will be able to
submit such an appeal or regain compliance with Nasdaq’s
rules.
Item 3.02
Unregistered Sales of Equity Securities.
The
information disclosed in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 3.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
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Description
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10.1*
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Form of
September 2017 Secured Convertible Demand Note.
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* Filed herewith.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Current Report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated:
September 25, 2017
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ROOT9B
HOLDINGS, INC.
By:
/s/ William Hoke
Name:
William Hoke
Title:
Chief Financial Officer
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