SEC Filings Show CRI Raising Money To Fund Allure Acquisition, Pay Down Debt

SEC filings by Creative Realities show the solutions provider is buying Allure from Christie Digital out of  money it hopes through an offering of common stocks and warrants.

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

Dave Haynes

Editor/Founder at Sixteen:Nine
Dave Haynes is the founder and editor of Sixteen:Nine, an online publication that has followed the digital signage industry for more than 12 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.
Dave Haynes

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Dave Haynes

4 thoughts on “SEC Filings Show CRI Raising Money To Fund Allure Acquisition, Pay Down Debt

  1. In a nutshell:

    Christie sells Allure to CRO for $6.3M in cash to Christie and $2.1M in assumption of retention bonus obligations and debt held by Christie. $900K of that (the debt) is being covered by a convertible note, which Christie can convert to CRI stock (at a conversion price about 10% greater than the current price) after 6 months, or just hold the note and accept interest through 2019, principal and interest payments through 2020, with the balance due at the end of 2020. (A bet with zero downside on CRI’s stock price). Christie also gets an additional $2M if CRI grows the Allure business beyond $13M by the end of 2020 without the benefit of its biggest customer driving that growth. An unusual deal term, most likely a long shot.

    The reverse split means little other then changing the share price from $0.26 to $7.80, enabling them to be listed and traded differently than as a penny stock. Their market cap remains less than $22M.

    The interesting tidbit here is that Christie committed to huge retention bonuses at the time that they bought Allure. What are the reasons for the recipients to stay after they are paid?No way of knowing how much, if any, has already been paid out, but the balance is $1.2M, so Christie clearly wanted out before those bonuses were due. It appears that Christie is simply cutting their losses after dramatically overpaying for Allure in the first place, probably betting on cinema synergies that weren’t there and/or went away.

  2. Allure’s continued growth could be adversely affected by the loss of several key customers. For the year ended March 31, 2018, revenues from customers representing greater than 10% of total Allure revenues included two customers with revenues aggregating approximately $5,187,000, or 55% of net revenues.

    Hope those 2 big customers don’t churn. Otherwise, CRO’s shareholders might also be forced to cut their losses too.

  3. A “reverse split” of 1-to-30 means that before the “split” the stock was worth about 28-cents per share… ($8.40 divided by 30). Typically, a reverse split is a mechanism to avoid being “delisted” on a stock exchange.

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