This morning Eguana Technologies (TSXV: EGT) announced a $33.0 million strategic investment from Japenese based trading house ITOCHU Corporation. The terms of the financing come in the form of unsecured convertible debentures, with a $0.50 conversion price, a 22% premium over Thursday’s closing price. The debentures will come with a 7% interest rate per annum on a 3-year term.
The company stated that the investment is to help “expand the two companies’ long-term relationship and significantly increase Eguana’s immediate access to working capital to achieve business growth objectives globally.” The expansion of the relationship part is interesting because ITOCHU has made investments with various large-scale battery-related companies.
Funds from the financing are said to be earmarked for inventory investment as well as for further product development. “Growth capital of this magnitude will allow us to accelerate key inventory investments across all product lines and expedite Eguana Cloud and battery module/battery management system development,” stated Eguana CEO Justin Holland. Funds are also marked to be used for the funding of working capital and general corporate expenditures.
Interest on the debentures is to be paid semi-annually, which may be settled in cash or common shares.
The debt may be converted at a price of $0.50 per share at any point beyond four months and one day from the closing of the financing, subject to Eguana posting “positive stable net income.” Eguana can also force the conversion should it trade above $1.00 for a period of twenty days, provided it has also posted a quarter of positive stable net income. Upon full conversion of the debt and all dilutive securities held by ITOCHU, the Japanese trading house would own 24.08% of Eguana on a partially diluted basis.
Eguana has been working with Omega alongside Duracell on a roll-out of both home battery systems and micro-inverters. With this announcement, they will presumably now have the firepower to ramp up sales in a meaningful way allowing them to stock up on inventory and raw materials. After the Omega EMS San Jose production facility plant commissioning was announced, Eguana stated they had the capacity to manufacture up to 400 units per month, with 800 units as the next target.
The company also elected to draw on the remaining US$5.0 million of the US$10.0 million loan from WTI Investments. Interestingly, the loan had performance and liquidity requirements for Eguana to meet, which Eguana states have been waived to make this second tranche available. This leaves investors to speculate what this means in terms of the company’s performance as eyes turn to the company’s third-quarter earnings which are due to be released any day now.
Eguana Technologies last traded at $0.41 on the TSX Venture Exchange.
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SmallCapSteve started blogging in the Winter of 2009. During that time, he was able to spot many take over candidates and pick a variety of stocks that generated returns in excess of 200%. Today he consults with microcap companies helping them with capital markets strategy and focuses on industries including cannabis, tech, and junior mining.