|
|
ITEM 1.01
|
ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
|
On December 27, 2021, BitNile Holdings, Inc.,
a Delaware corporation (the “Company”) and its wholly owned subsidiary, Gresham Worldwide, Inc., a Delaware corporation
(“Gresham”) entered into a Share Exchange Agreement (the “Agreement”) with Giga-tronics Incorporated,
a California corporation (“GIGA”).
Pursuant to the Agreement, GIGA will acquire all
of the outstanding shares of capital stock of Gresham in exchange for (i) issuing to the Company 2,920,085 shares of GIGA’s common
stock (“GIGA Common Stock”) and 514.8 shares of a new series of preferred stock (“GIGA Preferred Stock”)
which are convertible into an aggregate of 3,960,043 shares of GIGA Common Stock, subject to adjustment, and (ii) the assumption of Gresham’s
equity awards representing, on an as-assumed basis, 249,875 shares of GIGA’s restricted shares of common stock (the “Exchange
Transaction”). Completion of the Exchange Transaction is subject to the approval of GIGA’s shareholders and other customary
closing conditions.
Immediately following the completion of the Exchange
Transaction, Gresham will be a wholly-owned subsidiary of GIGA. Outstanding shares of GIGA Common Stock will remain outstanding and unaffected
upon completion of the Exchange Transaction, as will outstanding warrants and options to purchase GIGA Common Stock. GIGA Common Stock
will continue to be registered under the Securities Exchange Act of 1934, as amended, immediately following the Exchange Transaction.
In addition, the Agreement provides that, the
Company shall loan to GIGA $4.25 million pursuant to a convertible promissory note (“Closing Date Loan”) upon the closing
of the Exchange Transaction (the “Closing”), and following the Closing, GIGA will repurchase or redeem all of its shares
of Series B, Series C, Series D and Series E preferred stock currently outstanding (the “Outstanding Preferred”).
Assuming the repurchase of the Outstanding Preferred
and based upon 2,725,010 shares of GIGA Common Stock currently outstanding, following the issuance to the Company of the shares of GIGA
Common Stock and GIGA Preferred Stock pursuant to the Exchange Transaction, the Company would hold approximately 68% of the outstanding
voting power and capital stock of GIGA, and existing holders of GIGA Common Stock would hold approximately 32%.
In addition to seeking shareholder approval for
the Exchange Transaction, GIGA has also agreed to seek shareholder approval to (1) increase the number of shares of GIGA Common Stock
authorized to be issued to 100 million shares of GIGA Common Stock, (2) to complete a reverse split of GIGA Common Stock and (3) to reincorporate
from California corporation to Delaware.
Underwritten Public Offering
The Agreement further provides that following
the Exchange Transaction, GIGA will pursue an underwritten public offering of $25 million of GIGA Common Stock. The Company has agreed
to purchase up to $10 million of GIGA Common Stock in the offering, which amount includes the $4.25 million Closing Date Loan to be issued
in accordance with the Agreement.
Governance and Management
In accordance with the terms set forth in the
Agreement, upon the completion of the Exchange Transaction, the GIGA Board shall be comprised of seven directors, four of whom shall be
designated by the Company and three of whom shall be current directors of GIGA designated by GIGA.
The parties have agreed that upon the Closing,
GIGA’s Chief Executive Officer shall be Jonathan Read, who is currently Gresham’s Chief Executive Officer; GIGA’s Chief
Operating Officer shall be Timothy Long, who is currently the Gresham’s Chief Operating Officer, and GIGA’s Chief Financial
Officer (chief accounting and financial officer) shall be Lutz P. Henckels, who is currently GIGA’s Chief Financial and Chief Operating
Officer.
The Preferred Stock
The GIGA Preferred Stock to be issued to the Company
pursuant to the Exchange Transaction shall have an aggregate liquidation preference of $12.87 million; be convertible to GIGA Common Stock
at the holder’s option at conversion price of $3.25 per share, subject to potential adjustment; entitle the holders to elect four
of GIGA’s directors; and entitle the holders to vote with GIGA Common Stock on an as-converted basis. In addition, for so long as
the Company consolidates GIGA’s operations for financial reporting purposes, the prior approval of the holders of the GIGA Preferred
Stock would be required for GIGA to incur indebtedness in excess of $1.0 million or $2.5 million the aggregate (excluding indebtedness
outstanding at the time of the preferred stock issue first issues) or to complete a merger, acquisition or purchase of assets where the
aggregate consideration is valued at more than $1.0 million.