By Devika Patel
Knoxville, Tenn., Nov. 28 – Ener-Core, Inc. said on Friday that it plans to raise up to $4 million in a private placement of about $4.5 million of original issue discount convertible senior secured notes.
The zero-coupon notes will be issued at a 10% original issue discount and mature on Dec. 31, 2018.
The notes will be initially convertible into common shares at $2.50, a 16.67% discount to the $3.00 closing share price on Wednesday. They will automatically convert into common stock on the fifth trading day immediately following the issuance date on which the common stock’s weighted average price for each trading day during a 20-trading-day period is $5.00 or more.
Investors will also receive warrants for 400 shares for every $1,000 of notes purchased. The five-year warrants are exercisable at $3.00, which is identical to Wednesday’s closing share price.
Proceeds will be used for working capital and general corporate purposes.
The company expected to issue about $3.6 million of the convertibles on Tuesday and up to $900,000 more of the notes by Dec. 12.
In connection with the offering, the company also restructured its senior debt on the same terms as the convertibles issued in the private placement.
The company has agreed to secure the listing of its common stock on a national securities exchange by no later than Dec. 31, 2017.
“The closing of the new financing and amendment of our existing debt considerably improves Ener-Core's financial position, as the amount of cash flow required to address our interest expenses has been substantially reduced,” chief executive officer Alain Castro said in a press release.
“This tranche of capital from both new and existing investors, combined with our shift toward a leaner, license fee-based business model, provides us with a greater opportunity to achieve positive cash flow operations in the next 15 months.”
The Irvine, Calif., company designs and manufactures systems for producing continuous energy from a range of sources, including previously unusable ultra-low quality gas.
| Issuer: | Ener-Core, Inc.
|
| Issue: | Convertible senior secured notes
|
| Principal amount: | $4.5 million (approximate)
|
| Maturity: | Dec. 31, 2018
|
| Coupon: | 0%
|
| Price: | 10% original issue discount (up to $4 million)
|
| Conversion price: | $2.50
|
| Warrants: | Warrants for 400 shares for every $1,000 of notes
|
| Warrant expiration: | Five years
|
| Warrant strike price: | $3.00
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| Pricing date: | Nov. 25
|
| Settlement date: | Nov. 29 (for about $3.6 million), Dec. 12 (for up to $900,000)
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| Stock symbol: | OTCBB: ENCR
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| Stock price: | $3.00 at close Nov. 23
|
| Market capitalization: | $10.22 million
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