Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): November 12, 2020
IMAGEWARE SYSTEMS, INC.
(Exact name of Registrant as specified in its Charter)
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Delaware
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001-15757
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33-0224167
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(State
or other jurisdiction
of
incorporation)
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(Commission
File No.)
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(IRS
Employer
Identification
No.)
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13500
Evening Creek Drive N., Suite 550
San Diego,
California 92128
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(Address
of principal executive offices)
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(858) 673-8600
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(Registrant’s
Telephone Number)
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Not
Applicable
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(Former
name or 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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Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of exchange on which registered
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None
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IWSY
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N/A
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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 (17
CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR 240.12b-2) ☐
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
See
Item 5.02 below.
Item 3.02 Unregistered Sale of Equity Securities.
On
November 12, 2020 (“Closing”), ImageWare Systems,
Inc., a Delaware corporation (the “Company”), consummated a private
placement (the "Series D
Financing") of 11,560 shares of its Series D Convertible
Preferred Stock, par value $0.01 per share (the "Series D Preferred"), resulting in
gross proceeds to the Company of $11.56 million, less fees and
expenses. The gross proceeds include approximately $2.2 million in
principal amount due and payable under the terms of certain term
loans issued by the Company on September 29, 2020
(“Bridge
Notes”), which Bridge Notes were converted into Series
D Preferred at Closing (the “Conversion”). The issuance and
sale of the Series D Preferred was made pursuant to that certain
Securities Purchase Agreement, dated September 28, 2020 (the
"Purchase Agreement"), by
and between the Company and certain accredited investor signatories
thereto (the "Purchasers"),
for the purchase price of $1,000.00 per share of Series D
Preferred. The Conversion and Series D Financing was undertaken
pursuant to Section 3(a)(9) and/or Rule 506 promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
For
additional information regarding the Purchase Agreement and a
description of the Series D Preferred Financing and the Bridge
Notes, see the Company’s Current Report on Form 8-K filed by
the Company with the Securities and Exchange Commission on
September 30, 2020. See also Item 5.03 of this Current Report on
Form 8-K.
Item 3.03 Material Modification to Rights of Security
Holders.
See
Item 5.03.
Item
5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers
Director Resignations
At
Closing, Messrs. Steve Hamm, David Loesch, David Carey, Neal
Goldman, and Jim Miller resigned as members of the Board of
Directors of the Company. Each of the
director’s resignations were not the result of any
disagreements with respect to the Company's operations, policies,
or practices, and were effected in connection with the consummation
of the Series D Financing.
Appointment of Messrs. Ben Smeal and James Demitrieus to the Board
of Directors
On
November 13, 2020, Messrs. Ben Smeal and James Demitrieus were
appointed by the sole remaining director, Kristin Taylor, to fill
two of the vacancies on the Company’s Board of Directors
resulting from the resignation of the directors as disclosed
above.
Ben Smeal. Mr. Smeal, 43, has been a
private investor since April 2018. From April 2017 to April 2018,
he served as the Associate Director, Public Equities at Willett
Advisors, the family office of Michael R. Bloomberg, managing
substantially all of Bloomberg's personal assets in addition to
those of Bloomberg Philanthropies. From November 2007 to April
2017, he held the role of Senior Analyst at Kenmare Management, a
hedge fund focused on U.S. equities. Mr. Smeal holds a Bachelor of
Arts in Political Economy from Williams College in Williamstown,
Massachusetts, and a Master of Business Administration, with a
focus on Value Investing, from Columbia Business School in New
York, New York.
Mr.
Smeal was selected as a member of the Board due
to his capital market experience, as well as his
experience working with undervalued companies, that management
believes will assist in the Board’s efforts
to create value for shareholders as it executes its business
plan following consummation of the Series D Financing.
James Demitrieus. Mr. Demitrieus, 73,
served as Managing Director of Jameson Associates, a specialty
investment management and financial advisory firm, from March 2018
to present. Prior to Jameson, he served in multiple
positions at Eyelock Corporation beginning in 2009, including Chief
Executive Officer from 2010 to 2018. Eyelock Corporation
provides iris based biometric solutions to various business
verticals. Prior to Eyelock Corporation, he served in various
senior executive roles, including as President of Sherwood Valve, a
division of Harsco Corporation, and as Chief Executive Officer
at Aluma Systems. Earlier in Mr. Demitrieus’ career, he
served in numerous senior accounting and finance roles, including
with the public accounting firm of Arthur Andersen & Co.
Mr. Demitrieus holds a Bachelor's in Business Administration
from Adelphi University in New York.
Mr.
Demitrieus was selected as a member of the Board due to his
experience in the field of biometrics, as well as his extensive
management, finance and accounting experience, that management
believes will provide the Board with valuable insights regarding
monetizing the Company’s product offerings and intellectual
property.
Messrs.
Smeal and Demitrieus will serve on the Board of Directors until the
next annual meeting of shareholders of the Company, or until their
successor is elected and qualified. As compensation as an
independent director, they will receive (a) a $30,000 annual cash
retainer, payable in equal monthly installments in cash or shares
of the Company’s Common Stock; (b) an initial grant of
options to purchase that number of shares of Common Stock equal to
$60,000 divided by the fair market value of the Company’s
Common Stock as determined on the date of grant as reported on the
OTC Markets (“Initial
Grant”), the exercise price of which shall be such
fair market value, which Initial Grant shall vest one-third (1/3rd)
on the first anniversary of the Effective Date, and the remaining
two-thirds (2/3rd) shall vest ratably on the second and third
anniversary of the Effective Date; (c) reimbursement for expenses
related to Board of Director meeting attendance and Committee
participation; and (d), beginning on the first anniversary of the
Effective Date, and on each annual anniversary thereafter (unless
revised by the Board of Directors), an option to purchase that
number of shares of Common Stock equal to $30,000 divided by the
fair market value of the Company’s Common Stock as determined
on the date of grant as reported on the OTC Markets
(“Annual
Grant”), the exercise price of which shall be such
fair market value. The Initial Grant and Annual Grant shall contain
such other terms and conditions as are customary for director
grants and approved by the Board of Directors, including immediate
vesting of all unvested options effective upon a change in control
of the Company
Consulting Agreement with James Miller.
On
November 13, 2020, the Company entered into a Consulting Agreement
(the “Consulting
Agreement “) with Mr. Miller, who resigned as the
Chair of the Board of Directors of the Company upon consummation of
the Series D Financing. Under the terms of the Consulting
Agreement, Mr. Miller agreed, for a term of five months (the
“Term”), to
provide certain consulting services to the Company to assist senior
management in the execution of the Company’s business plan.
In consideration, Mr. Miller will be entitled to receive: (i) a
monthly consultation fee of $19,000 during the Term; (ii) full
vesting of 525,000 Restricted Stock Units previously granted to Mr.
Miller that had not yet vested upon his resignation from the Board
of Directors, which was reduced from the original amount of 787,000
Restricted Stock Units; and (iii) a bonus based on the amounts
actually paid to the Company resulting from contracts and/or
purchase orders received by the Company prior to the end of the
Term.
The
foregoing description of the Consulting Agreement is qualified, in
its entirety, by the full text of the Consulting Agreement, a copy
of which is attached to this Current Report on Form 8-K as
Exhibit 10.1 and is incorporated by reference
herein.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change
in Fiscal Year.
Amended and Restated Certificate of Incorporation
On
November 12, 2020, the Company filed its Amended and Restated
Certificate of Incorporation (the "Amended Charter"). The Amended Charter
increases the number of authorized shares of Common Stock from 345
million shares to 1.0 billion shares, resulting in a total increase
of 655 million shares of Common Stock. The Amended Charter, among
other things, includes an exclusive jurisdiction provision, which
provides that Delaware is the exclusive jurisdiction, and the
Delaware Court of Chancery as the exclusive forum, for all disputes
relating to the internal affairs of the Company, and the federal
district courts of United States of America as the exclusive forum
for the resolution of any causes of action arising under the
Securities Act. New Section 13 is not intended to apply to
derivative actions brought by shareholders for claims arising under
the Securities Exchange Act of 1934, as amended, as the federal
district courts have exclusive jurisdiction over all matters
arising thereunder.
Amendment to Series A Convertible Preferred Stock
On
November 12, 2020, the Company filed an Amended and Restated
Certificate of Designations, Preferences, and Rights of Series A
Convertible Preferred Stock (the "Amended Series A Certificate"). The
Amended Series A Certificate, among other things: (i) amends the
terms of conversion from Series A Convertible Preferred Stock, par
value $0.01 ("Series A
Preferred"), to Common Stock by (A) amending the conversion
price from $1.15 per share of Common Stock to $0.20 per share of
Common Stock, (B) amending the voluntary conversion process by
providing a voluntary conversion window, beginning on the
consummation of the Series D Financing and ending on August 1, 2021
(the “Conversion
Period”), to voluntarily convert all shares of Series
A Preferred into Common Stock upon notice to the Company, and (C)
for holders of Series A Preferred that do not voluntarily convert
all shares of Series A Preferred into Common Stock, a mandatory,
automatic conversion of each such holder’s shares of Series A
Preferred at a rate of 10% per month beginning on the consummation
of the Series D Financing, with all shares converting by August 1,
2021; (ii) amends the dividend payment provisions to reduce the
specified rate from 10% to 4%, with dividends now only being
payable in Common Stock through the end of the Conversion Period;
(iii) a waiver of the protective provisions in Section 9 of the
Series A Certificate; and (iv) provides that the Series A Preferred
is junior to the newly authorized and issued Series D
Preferred.
Amendment to Series A-1 Convertible Preferred Stock
On
November 12, 2020, the Company filed an Amended and Restated
Certificate of Designations, Preferences, and Rights of Series A-1
Convertible Preferred Stock (the "Amended Series A Certificate"). The
Amended Series A-1 Certificate, among other things: (i) amends the
terms of conversion from Series A-1 Convertible Preferred Stock,
par value $0.01 per share ("Series
A-1 Preferred"), to Common Stock by (A) amending the
conversion price from $0.65 per share of Common Stock to $0.20 per
share of Common Stock, (B) amending the voluntary conversion
process by providing a voluntary conversion window, beginning on
the consummation of the Series D Financing and ending on August 1,
2021 (the “Conversion
Period”), to voluntarily convert all shares of Series
A-1 Preferred into Common Stock upon notice to the Company, and (C)
for holders of Series A-1 Preferred that do not voluntarily convert
all shares of Series A-1 Preferred into Common Stock, a mandatory,
automatic conversion of each such holder’s shares of Series
A-1 Preferred at a rate of 10% per month beginning on the
consummation of the Series D Financing, with all shares converting
by August 1, 2021; (ii) amends the dividend payment provisions to
reduce the specified rate from 10% to 4%, with dividends now only
being payable in Common Stock through the end of the Conversion
Period; (iii) a waiver of the protective provisions in Section 9 of
the Series A-1 Certificate; and (iv) provides that the Series A-1
Preferred is junior to the newly authorized and issued Series D
Preferred.
Amendment to Series C Convertible Preferred Stock
On
November 12, 2020, the Company filed an Amended and Restated Series
C Certificate of Designations, Preferences, and Rights of Series C
Convertible Preferred Stock (the "Amended Series C Certificate") to,
without limitation, provide for a drag-along right whereby if at
any time one or more holders of Series C Convertible Preferred
Stock, par value $0.01 per share ("Series C Preferred") then holding, in
the aggregate, more than 50% of the outstanding shares of Series C
Preferred, exchange all (but not less than all) of each such
exchanging shareholder’s shares of Series C Preferred for
shares of Series D Preferred, then such initiating shareholder(s),
in their sole discretion, shall have the right to require that all
the holders of Series C Preferred similarly exchange their shares
of Series C Preferred into shares of Series D Preferred on
identical terms and conditions to the majority shareholders that
elected to exchange their Series C Preferred into Series D
Preferred. Additionally, the Series C Certificate was amended to
provide that the Series C Preferred shall rank junior to the newly
authorized and issued Series D Preferred.
Creation of Series D Convertible Preferred Stock
On
November 12, 2020, the Company filed the Certificate of
Designations, Preferences, and Rights of Series D Convertible
Preferred Stock (the "Series D
Certificate"). Pursuant to the Series D Certificate, the
Series D Preferred ranks senior to all Common Stock and all other
present and future classes or series of capital stock, except for
Series B Preferred, and upon liquidation will be entitled to
receive the Liquidation Preference Amount (as defined in the Series
D Certificate) plus any accrued and unpaid dividends, before the
payment or distribution of the Company’s assets or the
proceeds thereof is made to the holders of any junior securities.
Additionally, dividends on shares of Series D Preferred will be
paid prior to any junior securities, and are to be paid at the rate
of 4% of the Stated Value (as defined in the Series D Certificate)
per share per annum in the form of cash or shares of Series D
Preferred. Holders of Series D Preferred shall vote together with
holders of Common Stock on an as-converted basis, and not as a
separate class, except (i) the holders of Series D Preferred,
voting as a separate class, shall be entitled to elect two
directors, (ii) the holders of Series D Preferred have the right to
vote as a separate class regarding the waiver of certain protective
provisions set forth in the Series D Certificate, and (iii) as
otherwise required by law.
The
holders of Series D Preferred may voluntarily convert their shares
of Series D Preferred into Common Stock at any time that is at
least ninety days following the issuance date, at the conversion
price calculated by dividing the Stated Value by the conversion
price of $0.0583 per share of Common Stock, subject to adjustments
as set forth in Section 5(e) of the Series D Certificate. The
shares of Common Stock issuable upon conversion of the Series D
Preferred shall be subject to the following registration rights:
(i) one demand registration starting three months after the
Closing, (ii) two demand registrations starting one year after the
Closing, and (iii) unlimited piggy-back and Form S-3 registration
rights with reasonable and customary terms.
The
foregoing descriptions of the Amended Charter, Amended Series A
Certificate, Amended Series A-1 Certificate, Amended Series C
Certificate and Series D Certificate are qualified, in their
entirety, by the full text of the foregoing, copies of which are
attached to this Current Report on Form 8-K as Exhibits 3.1, 3.2,
3.3, 3.4 and 3.5, respectively, and are incorporated by reference
herein.
Item 8.01 Other Events
Exchange Agreement
In connection with the Purchase Agreement, the
Company entered into an Exchange Agreement with certain holders of
the Series C Preferred which hold, in the aggregate, more than 50%
of the outstanding shares of Series C Preferred (the
“Exchange
Agreement”). As
contemplated by the parties thereto, after the filing of the
Amended Series C Certificate and in connection with the closing of
the Purchase Agreement and Exchange Agreement, such holders
exercised their right under the Amended Series C Certificate to
require all holders of Series C Preferred to similarly exchange
their shares of Series C Preferred into shares of Series D
Preferred on identical terms and conditions.
Debt Exchange Agreement and Satisfaction and Release
On November 12, 2020, in connection with the
Closing of the Series D Financing, Messrs. Jim Miller and Neal
Goldman entered into (i) Debt Exchange Agreements (collectively,
the "Debt
Exchange Agreements"), and (ii)
Satisfaction and Release Agreements (collectively, the
"Release
Agreements"), for the purpose
of satisfying certain obligations of the Company arising under two
separate promissory notes executed by the Company in favor of each
Mr. Jim Miller (the "Miller Note") and Mr. Neal Goldman (the "Goldman
Note") in the amount of
$100,000 and $450,000, respectively. Pursuant to the Debt Exchange
Agreements and Satisfaction and Release Agreements: (i) the
principal and accrued interest on the Miller Note, totaling
$102,808.22, was converted into 102.8 shares of Series D Preferred
in full satisfaction of the Company's obligations under the Miller
Note; and (ii) one-half of the principal and accrued interest of
the Goldman Note, totaling $231,565.19, was converted into 231.6
shares of Series D Preferred, with the remaining one-half of the
principal and accrued interest, totaling $231,565.19, was paid to
Mr. Goldman in cash out of proceeds of the Series D Financing in
full satisfaction of the Company's obligations under the Goldman
Note.
The
foregoing descriptions of the Debt Exchange Agreements and Release
Agreements are qualified, in their entirety, by the full text of
the Debt Exchange Agreement and Satisfaction and Release dated
November 12, 2020, by and between the Company and Mr. S. James
Miller, and the Debt Exchange Agreement and Satisfaction and
Release dated November 12, 2020, by and between the Company and Mr.
Neal Goldman, copies of which are attached to this Current Report
on Form 8-K as Exhibits 10.2 and 10.3, respectively, and are
incorporated by reference herein
For
more information on the Promissory Notes, see the Company's Current
Report on Form 8-K filed on July 6, 2020.
Press Release
On
November 16, 2020, the Company issued a press release announcing
the consummation of the Series D Financing. A copy of the press
release is attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
(d)
Exhibits
EXHIBIT
INDEX
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Exhibit
Number
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Description
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Amended
and Restated Certificate of Incorporation of ImageWare Systems,
Inc., dated November 12, 2020
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Amended
and Restated Certificate of Designations, Preferences, and Rights
of Series A Convertible Preferred Stock of ImageWare Systems, Inc.,
dated November 12, 2020
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Amended
and Restated Certificate of Designations, Preferences, and Rights
of Series A-1 Convertible Preferred Stock of ImageWare Systems,
Inc., dated November 12, 2020
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Amended
and Restated Certificate of Designations, Preferences, and Rights
of Series C Convertible Preferred Stock of ImageWare Systems, Inc.,
dated November 12, 2020
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Certificate
of Designations, Preferences, and Rights of Series D Convertible
Preferred Stock of ImageWare Systems, Inc., dated November 12,
2020
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Consulting
Agreement by and between ImageWare Systems, Inc. and S. James
Miller, dated November 13, 2020
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Debt Exchange Agreement and Satisfaction and Release by and between
ImageWare Systems, Inc. and S. James Miller, dated November 12,
2020
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Debt Exchange Agreement and Satisfaction and Release by and between
ImgeWare Systems, Inc. and Neal Goldman, dated November 12,
2020
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Press
Release dated November 16, 2020
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SIGNATURES
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 hereunto duly authorized.
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IMAGEWARE SYSTEMS, INC.
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Date:
November 18, 2020
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By:
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/s/ Kristin Taylor
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Kristin
Taylor
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Chief
Executive Officer
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