Company may issue total of up to $1 million of notes by second closing
By Marisa Wong
Madison, Wis., Jan. 9 - LTS Nutraceuticals, Inc. issued $658,000 of 10% convertible promissory notes to accredited investors on Jan. 3 under a subscription agreement, according to an 8-K filed Monday with the Securities and Exchange Commission.
Under the agreement, the company may issue up to $1 million of the notes. There will be a second closing date by which the company may issue the remaining up to $342,000 of notes. The second closing must occur within 30 days of the first closing date, according to the filing.
The notes, which have a maturity of two years, are guaranteed by LTS Nutraceutical's wholly owned subsidiary, Source Vitamin Co.
The notes are convertible into common stock at an exercise price of $0.50 per share, subject to adjustment.
Interest is payable semiannually in cash. If an event of default has not occurred, the company may choose to make any interest payment in shares of its common stock at a discount of 20% to the volume weighted average price for the five final trading days preceding such interest payment date.
The company must make an additional payment to noteholders if any of the following events occurs:
• The company is prohibited from issuing shares issuable upon conversion of a note;
• An event of default that continues beyond any applicable cure period;
• A change in control; or
• Liquidation, dissolution or winding up of the company or any subsidiary.
The amount of that payment is equal to the greater of (a) 120% of par and (b) par times a fraction, the numerator of which is the highest closing price of the company's stock for the 30 days preceding the applicable payment date and the denominator of which is the lowest applicable conversion price during that 30-day period, plus accrued interest and any other amounts due.
In addition to the notes, the company issued to the investors 18 five-year warrants to purchase common stock for each $1.00 principal amount of notes purchased on the closing date of the private placement.
The warrants are exercisable at a price of $0.50 beginning 12 months after the closing date.
The conversion price of the notes and the warrant strike price represent an 89.69% discount to the Dec. 27 closing share price of $4.85.
According to the filing, the notes may not be converted, and the warrants may not be exercised, to the extent such conversion or exercise would cause the holder to own a number of shares of LTS stock that would exceed 4.99% of the company's outstanding shares.
Based in Ft. Lauderdale, Fla., LTS Nutraceuticals develops and sells nutritional products.
| Issuer: | LTS Nutraceuticals Inc.
|
| Issue: | Convertible promissory notes
|
| Amount: | Up to $1 million ($685,000 in first closing)
|
| Maturity: | Two years
|
| Coupon: | 10%
|
| Conversion price: | $0.50
|
| Warrants: | To purchase common stock for each $1.00 of notes purchased; 18 issued
|
| Warrant expiration: | Five years
|
| Warrant strike price: | $0.50
|
| Initial settlement date: | Jan. 3
|
| Stock symbol: | OTCBB: LTSN
|
| Stock price: | $4.85 at close Dec. 27
|
| Market capitalization: | $204.19 million
|
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