I go into rapid eye-blink mode when I read SEC filings (I did not miss my calling as a securities lawyer), so I am quoting this verbatim. Some of you will understand it. Me … kinda sorta.
Subject to the terms and conditions of the Purchase Agreement, upon the closing of the acquisition, we will acquire ownership of all of Allure’s issued and outstanding capital shares in consideration for a total purchase price of approximately $8,450,000, subject to a post-closing working capital adjustment.
Of this purchase price amount, we expect to pay approximately $6,300,000 in cash from the proceeds of this offering. Of the remaining purchase price amount, approximately $1,250,000 will be paid in the form of our assumption of certain retention bonus obligations of Allure, and approximately $900,000 (subject to increase in the event the acquisition is not consummated prior to the close of business on October 31, 2018) will be paid through our assumption of debt owed by Allure to its current shareholder, Christie Digital Systems.
That debt will be represented by our issuance to the seller of a promissory note accruing interest at 3.5% per annum. The promissory note will require us to make quarterly payments of interest only through calendar 2019, and monthly payments of interest and principal from January 2020 through December 31, 2020, on which date the promissory note will mature and all remaining amounts owing thereunder will be due. We will be able to prepay in whole or in part amounts owing under the promissory note, without penalty, at our option, at any time and from time to time.
The promissory note will be convertible into shares of Creative Realities common stock, at the seller’s option on or after the 180th day after issuance, at an initial conversion price of $8.40 per share (i.e., every $1,000 owing under the promissory note may convert into 119 shares of our common stock), subject to customary equitable adjustments. Conversion of all amounts owing under the promissory note will be mandatory if the 30-day volume-weighted average price of our common stock exceeds 200% of the common stock trading price at the closing of the acquisition. We will grant the seller customary registration rights for the shares of our common stock issuable upon conversion of the promissory note.
The stock purchase agreement contemplates additional consideration or $2,000,000 to be paid by us to seller in the event that acquiree revenue exceeds $13,000,000, wherein revenues from one specifically-named customer add only 70% of their gross value to the total, for any of (i) the 12-month period ending December 31, 2019, or (ii) any of the next following trailing 12-month periods ending on each of March 31, June 30, September 30 and December 31, 2020.
The SEC filing also notes that the company did a 1 for 30 reverse stock split last week, which I am in no position to tell you is a good thing or a bad thing.
Comments and insights appreciated. Please add below …
Dave Haynes is the founder and editor of Sixteen:Nine, an online publication that has followed the digital signage industry for more than 13 years. Dave does strategic advisory consulting work for many end-users and vendors, and also writes for many of them. He’s based near Halifax, Nova Scotia.