Nanophase Technologies Corp. has completed a PIPE transaction that provides much-needed capital for the company, which was down to $962,000 in cash at the end of the September quarter, while it also gives an executive in a related technology field the opportunity to acquire shares at a potential 50% discount.
The PIPE was the second $2 million tranche in the deal.
The transaction provides the company with capital and furthers Nanophase’s relationship with technology executive Bradford Whitmore but threatens dilution.
Romeoville, Ill.-based Nanophase provides a wide variety of oxides with numerous applications.
Oxides are chemicals defined by a binary combination of oxygen with another element. Nanophase offers zinc, iron, cerium, bismuth and antimony tin oxides.
The chemical’s names have an industrial ring to them, but millions of people have used a zinc oxide compound in sunscreen. Other markets for the company’s oxides include solar power, integrated circuit and data storage, plastic and textile manufacturing, surface polishing and energy.
The company’s products in solar films and battery products make for a connection with the PIPE investor–Ultralife Corp. (ULBI) chairman Whitmore.
Whitmore, 61, oversees Ultralife’s operations in providing electrical services for backup and industrial purposes.
The company’s products include commercial rechargeable and non-rechargeable batteries, industrial power storage systems, satellite communication equipment and backup products specifically for medical situations where maintaining power is critical.
Whitmore also sits on the boards of Pureline Treatment Systems LLC, Divi Hotels Inc. and Bell Geospace Inc., and he is also managing director of Grace Brothers Ltd., according to BoardEx, The Deal’s board data provider.
He founded the Grace Brothers investment management firm, which has also invested in Nanophase, in 1986.
The PIPE deal, which took place in two, $2 million tranches, according to a Friday, Nov. 22, regulatory filing, consists of a secured convertible note with a 54-month term.
The interest rate is only 2%, but it comes with a price – the securities’ 20-cent conversion price has in recent weeks reflected discounts ranging from 30% to 50%.
The arrangement provides advantages to both parties. Whitmore could end up with highly discounted stock, while Nanophase is receiving an extremely low interest rate in a microcap financing environment where interest rates sometimes go as high as 25%.
The PIPE also did not include warrants, often the source of financial destruction in microcap PIPE deals.
Nanophase has raised $38.1 million in seven PIPEs, according to PrivateRaise, The Deal’s private placement data service.