By Devika Patel
Knoxville, Tenn., May 23 - Vertical Communications, Inc. sold another $1.57 million of short-term subordinated convertible promissory notes in a private placement on May 19, according to an 8-K filed Friday with the Securities and Exchange Commission. The company has raised a total of $6.82 million from this deal.
The company sold $5.25 million of the notes in a March 17 deal and $1.05 million of the notes in a separate transaction on April 16. The May 19 notes were sold as part of the March 17 private placement, through two joinder agreements which allowed LG-Nortel Co. Ltd. and other investors to take part in the deal.
The notes are due on demand, bear interest at 15% and are automatically convertible into series F preferred stock upon a qualifying investment of $1 million by LG-Nortel. Friday's filing said that LG-Nortel's investment of $1.4 million qualifies as such an investment, so the notes automatically converted at closing at the rate of one preferred per $1,000 invested.
Upon conversion, the notes have similar terms to the company's previously issued series E preferred stock. The new preferreds have a conversion price of $0.05.
Investors also received warrants for a number of shares equal to the original principal amount of the note divided by the conversion price of the preferreds, $0.05, and rounded up to the nearest whole share. The warrants are exercisable at $0.01 for 10 years.
Proceeds will be used for general working capital purposes.
Located in Cambridge, Mass., Vertical develops hardware and software used in the communications sector.
| Issuer: | Vertical Communications, Inc.
|
| Issue: | Short-term subordinated convertible promissory notes
|
| Amount: | $6.82 million
|
| Maturity: | On demand
|
| Coupon: | 15%
|
| Price: | Par
|
| Yield: | 15%
|
| Warrants: | For 136.4 million shares
|
| Warrant expiration: | 10 years
|
| Warrant strike price: | $0.01
|
| Investor: | LG-Nortel Co. Ltd. (for $1.4 million)
|
| Pricing date: | March 17
|
| Settlement date: | May 19
|
| Stock symbol: | OTCBB: VRCC
|
| Stock price: | $0.42 at close March 17
|
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