Item 1.01.
Entry into a Material Definitive Agreement.
On September 29, 2017, Smith Micro Software, Inc. (the “
Company
”) entered into a Securities Purchase Agreement with several investors for the issuance and sale (the “
Offering
”) of 5,500 shares of the Company’s newly designated Series B 10% Convertible Preferred Stock (the “
Series B Preferred Stock
”) at $1,000 per share, for a total purchase price of $5,500,000. The Series B Preferred Stock is convertible into the Company’s Common Stock at a conversion price of $1.14 per share, which was the closing bid price of the Common Stock on September 28, 2017, or approximately 4,824,000 shares of Common Stock in the aggregate.
In the Offering, the Company raised gross cash proceeds of $2,700,000, and exchanged outstanding indebtedness with a principal amount of $2,750,000 owed to William W. Smith, Jr. (“Smith”) and Dieva L. Smith and $50,000 owed to Andrew Arno (“Arno”). The Offering raised net cash proceeds of approximately $2,400,000 (after deducting the placement agent fee and expenses of the Offering), and resulted in an increase in the Company’s stockholders’ equity of approximately $5,200,000. The Company intends to use the net cash proceeds from the Offering for working capital purposes. Smith is the Company’s Chairman and Chief Executive Officer and Arno is a director.
The Company engaged Sutter Securities Incorporated as placement agent for the Offering. Chardan acted as the Company’s financial advisor in connection with the Offering.
In connection with the Offering, the Company entered into a Securities Purchase Agreement (the “
Purchase Agreement
”) with investors containing customary representations and warranties. The Company also entered into a Registration Rights Agreement with investors under which
the Company agreed to prepare and file a registration statement (the “
Resale Registration Statement
”) with the Securities and Exchange Commission (“
SEC
”) within 30 days after closing for the purpose of registering the resale of shares of Common Stock issuable upon conversion of the
Series B Convertible Preferred Stock
. The Company agreed to use its reasonable best efforts to cause the Resale Registration Statement to be declared effective by the SEC within 90 days after the closing (120 days in the event the registration statement is reviewed by the SEC). If the Company fails to meet the specified filing deadlines or keep the Resale Registration Statement effective, subject to certain permitted exceptions, the Company will be required to pay liquidated damages to the purchasers. The Company also agreed, among other things, to indemnify the selling holders under the Resale Registration Statement from certain liabilities and to pay all fees and expenses incident to the Company’s performance of or compliance with the Registration Rights Agreement.
The representations, warranties and covenants contained in the Purchase Agreement were made solely for the benefit of the parties to the Purchase Agreement and may be subject to limitations agreed upon by the contracting parties. In addition, such representations, warranties and covenants (i) are intended as a way of allocating the risk between the parties to the Purchase Agreement and not as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. Accordingly, the Purchase Agreement is filed with this report only to provide investors with information regarding the terms of transaction, and not to provide investors with any other factual information regarding the Company. Stockholders should not rely on the
1
representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter of the representations and warranties
may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures.
The Offering was exempt from the registration requirements of the Securities Act of 1933, as amended (the “
Securities Act
”) pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. Each of the Purchasers represented that it is an accredited investor within the meaning of Rule 501(a) of Regulation D, and was acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by the Company or its representatives.
The foregoing description of the Purchase Agreement and Registration Rights Agreement is qualified in its entirety by reference to the forms of such agreements which are filed hereto as Exhibits 10.1 and 10.2, respectively.