Elutions purchases securities under proposed strategic relationship
By Angela McDaniels
Tacoma, Wash., March 19 - Management Network Group, Inc. sold 609,756 shares of common stock to Elutions, Inc. for $3.28 each for a total of $2 million.
In addition, the company's subsidiary, Cartesian Ltd., issued a $3.27 million promissory note to Elutions Capital Ventures Sarl, a subsidiary of Elutions, and a warrant (the "tracking warrant") to Elutions.
The note carries a 7.825% interest rate, payable monthly, and matures March 18, 2019. It is payable in pounds sterling. The note is putable at any time and may be prepaid by Cartesian after 18 months if the trading price of the company's common stock exceeds $5.50 per share for a specified period of time and may be prepaid by Cartesian at any time after 30 months.
The notes are guaranteed by Management Network Group and are secured by some assets relating to client contracts involving Elutions under a security agreement entered into by the company and Elutions at closing.
Amounts outstanding under the note may be applied to the exercise price under the tracking warrant.
The tracking warrant allows the holder to purchase 996,544 shares for $3.28 per share until March 18, 2020.
The price per share and the warrant strike price are 13% premiums to the company's $2.90 closing share price on Feb. 24, the day before pricing.
The company may require Elutions to exercise or forfeit the tracking warrant at any time after 18 months if its stock exceeds $5.50 per share for a specified period of time and the company meets certain cash and working capital thresholds and after 30 months if the company meets certain cash and working capital thresholds.
Finally, the company issued to Elutions a warrant (the "commercial incentive") under which Elutions can earn the right to purchase up to 3.4 million shares at prices ranging from $3.85 per share to $4.85 per share based on the company's financial results related to certain customer contracts obtained jointly by the company and Elutions. The warrant expires March 18, 2020.
Each of the warrants also permits Elutions (subject to certain exceptions) to purchase shares in future equity offerings made by the company on a pro rata basis to all stockholders.
The agreements and instruments described above are part of a proposed strategic relationship between the parties under which they plan to work together to market, sell and implement certain products, solutions and services developed by Elutions. The parties have agreed to a term of five years, with automatic two-year renewals unless notice is given.
Management Network Group is a management consulting company based in Overland Park, Kan.
| Issuer: | Management Network Group, Inc.
|
| Issue: | Common stock, promissory note payable in pounds sterling, tracking warrant
|
| Amount: | $5,268,664
|
| Pricing date: | Feb. 25
|
| Settlement date: | March 18
|
| Stock symbol: | Nasdaq: TMNG
|
| Stock price: | $4.31 at close March 19
|
| Market capitalization: | $30.82 million
|
|
|
| Common stock
|
| Amount: | $2 million
|
| Shares: | 609,756
|
| Price: | $3.28
|
| Investor: | Elutions, Inc.
|
|
|
| Promissory note
|
| Amount: | $3,268,664
|
| Maturity: | March 18, 2019
|
| Coupon: | 7.825%, payable monthly
|
| Put option: | At any time
|
| Call option: | After 18 months if trading price of company's common stock exceeds $5.50 per share for specified period of time and at any time after 30 months
|
| Investor: | Elutions Capital Ventures Sarl
|
|
|
| Tracking warrant
|
| Warrant: | For 996,554 shares
|
| Warrant expiration: | $3.28
|
| Warrant strike price: | March 18, 2020
|
| Investor: | Elutions, Inc.
|
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