If charter amendment fails, first tranche may be converted to put note
By Susanna Moon
Chicago, March 14 – Liquidmetal Technologies, Inc. arranged to sell $63.4 million of common stock under a purchase agreement Thursday with Liquidmetal Technology Ltd., according to an 8-K filed Monday with the Securities and Exchange Commission. The first tranche for $8.4 million closed on March 10.
The investor is a newly formed company owned by Yeung Tak Lugee Li organized for purposes of making an investment in the company under the agreement, the filing noted.
The purchase agreement provides for the purchase of up to 405 million shares in multiple tranches.
In the first tranche, the company sold 105 million shares at $0.08 per share for proceeds of $8.4 million. The price per share was equal to the closing price of the company’s stock on March 9.
Of the remainder, the investor will purchase 200 million shares at $0.15 each and 100 million shares at $0.25 each for an aggregate purchase price of $55 million no later than 90 days after the satisfaction of offer conditions, including company stockholder approval of an amendment to the company’s amended and restated certificate of incorporation increasing the company’s authorized number of shares of common stock to 1.1 billion from 700 million.
The company also issued a warrant for 10,066,809 common shares at an exercise price of $0.07 per share. The warrant vests in increments on each closing date under the purchase agreement for a number of warrant shares that is proportionate to the amount of shares purchased under the purchase agreement on that closing date, with 2,609,913 warrant shares having initially vested on March 10.
The warrant will expire on the 10th anniversary of its issue date; provided, however, that if subsequent closings under the agreement do not occur before the 90th day after the filing of the charter amendment, the warrant will terminate and the investor will have no further right to exercise the remaining unvested 7,456,896 warrant shares under the warrant.
The warrant strike price is a 12.5% discount to the company’s closing price on March 9.
More deal terms
The purchase agreement provides that the investor will have the right to designate one individual to the company’s board of directors, with the first designee to be Li. Once the investor purchases the remaining 300 million shares, the investor will then have the right to designate an additional two individuals to serve on the company’s board.
The agreement requires the company to use commercially reasonable efforts to obtain by May 31 stockholder approval of the charter amendment, to file the charter amendment with the State of Delaware and to reserve sufficient shares of its common stock for issuance to the investor under the purchase agreement.
If the company does not obtain stockholder approval of the charter amendment in order to file it by May 31, the investor will have the right to sell the 105 million shares purchased at the first closing back to the company for $0.08 per share, under a put note, with the purchase price to be paid by means of a secured convertible promissory note issued by the company in the principal amount of $8.4 million.
The put note, if issued, would accrue interest at the rate of 3% per year and would be convertible at $0.08 per share and be due on the 18-month anniversary of issue. The company and the investor would enter into a security agreement that would grant a security interest to the investor in all of the company’s assets other than its intellectual property and its equity interests in its subsidiary, Crucible Intellectual Property, LLC.
If the investor fails to purchase the remaining 300 million shares of common stock within 90 days after the filing of the charter amendment, the investor will forfeit rights, including the right to designate additional directors to the company’s board of directors following that failure and the right to exercise the preemptive right. In that event, the company will also have the right to repurchase all of the shares held by the investor at a price of $0.08 per share within 15 months following the approval and filing of the charter amendment.
In connection with the sale, the company and DongGuan Eontec Co., Ltd., a Chinese company, entered into a parallel license agreement for a cross-license of the companies’ respective technologies. Eontec is a publicly held Chinese corporation in which Li is the chairman and majority stockholder.
Based in Rancho Santa Margarita, Calif., Liquidmetal makes industrial coatings from amorphous alloys.
| Issuer: | Liquidmetal Technologies, Inc.
|
| Issue: | Common stock
|
| Amount: | $63.4 million
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| Shares: | 405 million
|
| Price: | $0.08 per share 105 million shares; $0.15 each for 200 million shares; $0.25 each for 100 million shares
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| Warrants: | For 10,066,809 common shares
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| Warrant expiration: | 10 years
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| Warrant strike price: | $0.07 per share
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| Investor: | Liquidmetal Technology Ltd.
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| Settlement date: | March 10 for $8.4 million
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| Stock symbol: | OTCBB: LQMT
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| Stock price: | $0.08 at close March 9
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| Market capitalization: | $55.21 million
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