ESP gets $100,000 upfront, $4.9 million later in Lincoln Park deal

Committed financing has stock price fixed on day of sale

By Stephanie N. Rotondo and Devika Patel

Portland, Ore., Sept. 22 - ESP Resources, Inc. sold $100,000 in restricted stock and received a commitment for another $4.9 million investment from Lincoln Park Capital Fund LLC.

The financing agreement - which was inked Sept. 16, according to an 8-K filed with the Securities and Exchange Commission - is not a traditional equity line agreement, nor is it like an at-the-market deal, according to Josh Scheinfeld, the managing member of Lincoln Park. He dubbed the transaction "a committed financing where the price is fixed on the day they sell to us."

The initial purchase reflects a 7% premium over the market price.

Lincoln Park's initial $100,000 stock purchase was made up of 666,667 shares at $0.15 per share, along with 100% warrant coverage, exercisable at $0.20 per share.

Future tranches will come in increments up to $500,000, bought at a level based on prevailing market prices. According to the 8-K filing, subsequent stock purchases will be at either the lowest trading price on the day of purchase or based on the lowest closing levels for a period preceding the day of purchase, whichever of the two is the smallest.

Also, Scheinfeld noted, the initial investment is not registered and the remaining portion is not being done via an existing shelf.

For OTC companies, "it's really hard to do a shelf," Scheinfeld said. However, ESP will register the $4.9 million commitment. Once the registration statement is effective, the company is free to sell the shares to Lincoln Park as it chooses over the following 30 months.

"Unlike most other people, we're buying some stock all at once and that is not registered," he said, adding that the restricted nature of the securities results in "real investment risk."

Scheinfeld also noted that the 1.81 million shares received as a commitment fee are "restricted for the duration of the deal."

"We are pleased to have signed a purchase agreement with Lincoln Park Capital," ESP president David Dugas said in a press release published on Monday. "After significant due diligence, we look forward to working with the team at Lincoln Park Capital. They have an outstanding reputation in the financial marketplace and we welcome them as an investor."

ESP Resources is an oil and gas exploration company is based in Scott, Texas.

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