Financing with Lincoln Park may include up to 2.73 million more shares
By Devika Patel and Stephanie N. Rotondo
Knoxville, Tenn., Sept. 23 - Onstream Media Corp. raised $900,000 in the first installment of a financing with Lincoln Park Capital Fund, LLC on Sept. 17, according to an 8-K filed Thursday with the Securities and Exchange Commission.
The company sold 300,000 common shares at $1.25 per share and 420,000 series A-14 preferred shares at the same price. Lincoln Park also received warrants for 540,000 shares, each of which is exercisable at $2.00, and may purchase an additional 830,000 common shares.
The preferreds convert to common stock at $1.25 per share, a 34.41% premium to the Sept. 16 closing share price of $0.93. They pay a one-time 5% dividend in cash one year from issuance. The company may force conversion after two years and may redeem the preferreds for $1.56 apiece plus dividends.
The warrant strike price is a 115.05% premium to the Sept. 16 price.
The company paid the investor 50,000 common shares as a commitment fee and $26,250 as a structuring fee..
The purchase agreement has a term of 25 months but may be terminated at any time after the first year.
Lincoln Park has committed to purchase an additional up to 830,000 shares of common stock in installments. Onstream will determine the dates and amounts. The price of any sales will be fixed on the purchase date at the lesser of the lowest sale price of Onstream's common stock on the purchase date and the average of the three lowest closing sale prices of its stock during the twelve consecutive business days prior to the purchase date.
Sales will not be conducted below at a price below $0.75.
Onstream also agreed to use its best efforts to obtain shareholder approval within 190 days for the sale of up to 1.9 million more shares to Lincoln Park on the same terms.
Josh Scheinfeld, managing member of Lincoln Park, called the financing an "interesting deal" and said he believed that the company is "undervalued."
Scheinfeld added that the deal was structured the way it was - that is, with both common and preferred shares being sold - so that Lincoln Park would not have over a 5% stake in Onstream.
"We're separating it so you are not looking like you beneficially own it," he said.
He also said the deal was being done off of a shelf registration.
The Onstream deal is much like Lincoln Park's recent transaction with ESP Resources, in which the investor makes an upfront purchase along with a "back-end commitment" to purchase more. Scheinfeld shies away from calling the PIPE an equity line or an at-the-money transaction, however, as the price of the stock is fixed by the company at the time of the draw request and not subject to pricing periods.
And, Lincoln Park wanted to make the initial investment right away while also giving the company room to ask for more.
"They might need a little more money," he said. "But I didn't want them to do anything crazy" like a convertible financing. The terms of the deal include a provision that disallows Onstream from doing any "variable priced financing."
Proceeds will be used for working capital and debt repayment, as well as software development, equipment and marketing costs and other product offerings.
Based in Pompano Beach, Fla., Onstream is an online application service provider of audio and video communications.
| Issuer: | Onstream Media Corp.
|
| Issue: | Common stock, series A-14 preferred stock
|
| Amount: | $900,000
|
| Tenor: | 25 months
|
| Price: | $1.25
|
| Warrants: | For 540,000 common shares
|
| Warrant strike price: | $2.00
|
| Fees: | 50,000 common shares
|
| Investor: | Lincoln Park Capital Fund, LLC
|
| Settlement date: | Sept. 17
|
| Stock symbol: | Nasdaq: ONSM
|
| Stock price: | $1.01 at close Sept. 17
|
| Market capitalization: | $7.95 million
|
|
|
| Common stock
|
| Amount: | $375,000
|
| Shares: | 300,000
|
|
|
| Preferreds
|
| Amount: | $525,000
|
| Preferreds: | 420,000
|
| Dividends: | 5%
|
| Conversion price: | $1.25
|
| Conversion ratio: | Into 525,000 shares
|
| Call: | After two years
|
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