Item 5. Other Events.
Additional Short-term Financing Completed. Video Network Communications, Inc. (the “Company”) announced today that it has completed a fourth short-term debt financing. On March 28, 2002, the Company issued to investors in a private placement $349,000 in the aggregate principal amount of 9% Unsecured Promissory Notes (the “Unsecured Notes”) and warrants (the “Warrants”) to purchase 698,000 shares of the Company’s common stock at an initial exercise price of $1.30 per share (the “Bridge Financing”)...
The Unsecured Notes are unsecured debt obligations of the Company and are due and payable on the earlier of June 26, 2002 or the date on which the Company completes its next debt or equity financing in which it raises in the aggregate, on a cumulative basis, in excess of $2,500,000 in gross proceeds. The holders of the Unsecured Notes have the right to convert all or any portion of the principal amount of the Unsecured Notes into the securities that the Company issues in its next financing. The Unsecured Notes bear interest at a rate of 9% per annum. Interest accrues from March 28, 2002 through the date on which the Unsecured Notes become due and payable. If the Unsecured Notes are not paid when due, interest will accrue at the rate of 18% per annum thereafter.
The Warrants issued in connection with the loan will first be exercisable beginning on August 26, 2002 and will be exercisable until August 26, 2007. The initial exercise price for the Warrants of $1.30 per share is subject to adjustment in certain limited events, including recapitalizations, reclassifications or split-ups of the Company’s common stock and for issuances of securities at a price less than the then current exercise price. The Warrants have a cashless exercise provision.
So...
Someone loans the company $350K, to be repaid in three motnhs, and for that they get warrants that, at today's price are worth $1.4 million. Only problem is, they aren't exercisable until August. Obviously the investors think (and the company must agree) that the stock won't be worth much in August. |
