PhotoMedex, Inc. (NASDAQ:PHMD) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement.
On March 31, 2017, PhotoMedex, Inc. (the Company) and its
newly-formed subsidiary FC Global Realty Operating Partnership,
LLC, a Delaware limited liability company (Acquiror)
entered into an Interest Contribution Agreement (the Agreement)
with First Capital Real Estate Operating Partnership, L.P., a
Delaware limited partnership (Contributor), and First
Capital Real Estate Trust Incorporated, a Maryland corporation,
the Contributor Parent and, together with Contributor, the
Contributor Parties), under which the Contributor may
contribute certain real estate assets to the Companys subsidiary
in a series of three installments no later than December 31,
2017. In exchange, the Contributor will receive shares of the
Companys Common Stock and newly designated Series A Convertible
Preferred Stock as described below.
First Contribution
In the first contribution installment, which has an initial
closing on or before May 17, 2017, the Contributor will transfer
$10 million of assets to the Company, comprising four vacant land
sites set for development into gas stations located in northern
California, and a single family residential development located
in Los Lunas, New Mexico. Contributor Parent currently has a 6%
interest in the entity which owns the residential development,
and expects to acquire an additional 11.9% interest prior to the
initial closing date. The proposed gas station sites are located
in Atwater and Merced, California and have an appraised value of
$2.6 million. The residential development in New Mexico consists
of 251, non-contiguous, single family residential lots and a
10,000 square foot club house. 37 lots have been finished, and
the remaining 214 are platted and engineered lots. The appraised
value of this property is approximately $7.4 million.
In return, the Company will issue to Contributor a number of duly
authorized, fully paid and non-assessable shares of the Companys
Common Stock and Series A Convertible Preferred Stock, determined
by dividing the $10 million value of that contribution by a
specified per share value, which will represent a 7.5% premium
above the volume-weighted average price (VWAP) of all
on-exchange transactions in the Companys shares executed on
NASDAQ during the forty-three (43) NASDAQ trading days prior to
the NASDAQ trading day immediately prior to the public
announcement of the transaction by the Company and Contributor
Parent, as reported by Bloomberg L.P. (the Per Share
Value). Contributor shall receive a number of shares equal to
up to 19.9% of the issued and outstanding Common Stock of the
Company immediately prior to the initial closing. The balance of
the shares shall be paid in the Companys newly designated Series
A Convertible Preferred Stock.
Also at this initial closing, the Acquiror shall assume the
liabilities associated with these initial contributed properties.
On or before this initial closing, certain named officers and/or
directors of the Company Dr. Dolev Rafaeli, Dennis McGrath, and
Dr. Yoav Ben-Dror will resign from their positions as officers
and/or directors of the Company. In addition, certain members of
the Companys board of directors will resign, or the board will be
expanded, so that the board will ultimately consist of seven (7)
persons as set forth under Special Meeting of Stockholders below.
Second Contribution
Contributor Parent is also required to contribute two additional
property interests valued at $20 million if certain conditions as
set forth in the Agreement are satisfied by December 31, 2017.
This second installment is mandatory.
Contributor Parent must contribute to the Acquiror its 100%
ownership interest in a private hotel that is currently
undergoing renovations to convert to a Wyndham Garden Hotel. This
265 room full service hotel is located in Amarillo, Texas and has
an appraised value of approximately $16 million. Before
contributing the property to the Acquiror, Contributor Parent
must resolve a lawsuit concerning ownership of the property. Only
when Contributor Parent has confirmed that it is the full and
undisputed owner of the property may it contribute that interest
to the Acquiror.
In addition, Contributor Parent must contribute to the Acquiror
its interest in Dutchmans Bay and Serenity Bay (referred to as
the Antigua Resort Developments), two planned full service
resort hotel developments located in Antigua and Barbuda in which
Contributor Parent owns a 75% interest in coordination with the
Antigua government. Serenity Bay is a planned five star resort
comprised of five contiguous parcels (28.33 acres) zoned for
hotel and residential use that are planned for 246 units and 80
one, two and three bedroom condo units. Dutchmans Bay, is a
planned four star condo hotel with 180 guestrooms, 102 two
bedroom condos, and 14 three bedroom villas. For the property in
Antigua, Contributor Parent must obtain an amendment to its
agreement with the government to extend the time for development
of these properties and confirm that all development conditions
in the original agreement with the government have been either
satisfied or waived.
In exchange for each of these properties, the Company will issue
to Contributor a number of duly authorized, fully paid and
non-assessable shares of the Companys Common Stock or Series A
Convertible Preferred Stock, determined by dividing the $20
million value of that contribution by the Per Share Value. The
shares shall be comprised entirely of shares of Common Stock if
the issuance has been approved by the Companys stockholders prior
to the issuance thereof and shall be comprised entirely of shares
of Series A Convertible Preferred Stock if such approval has not
yet been obtained.
Optional Contribution
Contributor Parent has the option to contribute either or both of
two additional property interests valued at $66.5 million if
certain conditions as set forth in the Agreement are satisfied by
December 31, 2017. This third installment is optional in
Contributor Parents sole discretion.
The Contributor Parent may contribute to the Acquiror its
interest in a resort development project on an island just south
of Hilton Head, South Carolina (Melrose). Contributor
Parent currently has the property under a Letter of Intent and
expects to close on the property by December 31, 2017. Melrose is
valued by Contributor Parent at $22.5 million, based upon a
senior lending position that Contributor Parent holds under the
Letter of Intent on this property.
Contributor Parent also may contribute to the Acquiror a golf and
surf club development project on the Baja Peninsula in Mexico
(Punta Brava). Contributor Parent also has this property
under a Letter of Intent and expects to close by December 31,
2017. Punta Brava is valued by Contributor Parent at $44 million
based on Contributor Parents commitment of $5 million upon
closing on this property, plus a commitment for an additional $5
million and a second commitment of $34 million for construction
of the project.
In exchange for each of these properties, the Company will issue
to Contributor a number of duly authorized, fully paid and
non-assessable shares of the Companys Common Stock or Series A
Convertible Preferred Stock, determined by dividing $86,450,000
(130% of the value of that contribution) by the Per Share Value.
The shares shall be comprised entirely of shares of Common Stock
if the issuance has been approved by the Companys stockholders
prior to the issuance thereof and shall be comprised entirely of
shares of Series A Convertible Preferred Stock if such approval
has not yet been obtained. In addition, the Company will issued
to Contributor a five (5) year warrant (the Warrant) to
purchase up to 25,000,000 shares of the Companys Common Stock at
an exercise price of $3.00 per share that shall vest with respect
to the number of underlying shares upon the achievement of the
milestone specified Agreement. The number of warrant shares and
the exercise price will be equitably adjusted in the event of a
stock split, stock combination, recapitalization or similar
transaction.
General Conditions
In each case, the Companys board of directors will determine
whether or not the pre-contribution conditions have been
satisfied before accepting the property interests and issuing
shares of the Companys stock to Contributor Parent.
The Agreement is subject to the usual pre- and post-closing
representations, warranties and covenants, and restricts the
Companys conduct to the conduct to that in the ordinary course of
business between the signing and December 31, 2017.
Under the Agreement, amounts due to Dr. Dolev Rafaeli and Dennis
McGrath under their employment agreements, as well as amounts due
to Dr. Yoav Ben-Dror for his services as a board member and
officer of the Companys foreign subsidiaries, will be converted
to convertible secured notes (the Payout Notes) after
approval from the Companys stockholders. The Payout Notes will be
due one year after the stockholder approval and carry a ten
percent (10%) interest rate. The principal will convert to shares
of the Companys Common Stock at the lower of (i) the Per Share
Value or (ii) the VWAP with respect to on-exchange transactions
in the Companys Common Stock executed on the NASDAQ during the
thirty (30) trading days prior to the maturity date as reported
by Bloomberg L.P.; provided, however, that the value of the
Companys Common Stock shall in no event be less than $1.75 per
share. The Payout Notes will be secured by a security interest in
all assets of the Company; provided, however, that such security
interest will be subordinated to any (i) claims or liens to the
holders of any debt (including mortgage debt) being assumed by
the Company as a result of the transaction contemplated by the
Agreement, and (ii) all post-closing indebtedness incurred by the
Company or its subsidiaries. The holders of the Payout Notes will
have demand registration rights which requiring the filing of a
re-sale registration statement on appropriate form that registers
for re-sale the shares of Common Stock underlying the Payout
Notes within thirty (30) days of issuance with best efforts to
cause the same to become effective within one-hundred twenty
(120) days of issuance.
Special Meeting of Stockholders
As promptly as possible following the initial closing, the
Company is required file a proxy statement and hold a special
meeting of its stockholders to authorize and approve the
following matters:
an increase the number of authorized shares of common stock, $.01
par value per share, of the Company from fifty million
(50,000,00) shares to five hundred million (500,000,000) shares
and increase the number of authorized shares of preferred stock,
$.01 par value per share, of the Company from five million
(5,000,000) shares to fifty million (50,000,000) shares;
the issuance to the Contributor or its designee or designees the
Companys shares in exchange for the contributed assets, and the
issuance of the Warrant and, upon exercise of the Warrant, the
underlying shares of the Companys Common Stock in exchange for
the contribution of the optional property interests, if any are
made;
the amendment and restatement of the Articles of Incorporation of
the Company;
the amendment and restatement the Bylaws of the Company;
the approval of the issuance of the Payout Notes and the issuance
of the Companys Common Stock upon conversion thereof; and
the election a new Board of Directors to consist of seven (7)
persons of whom (i) three (3) shall be designated by the Company,
(ii) three (3) shall be designated by Contributor Parent; and
(iii) one (1) (the Nonaffiliated Director) shall be
selected by the other six (6) directors; provided, however, that
at least four (4) of the members of the Board of Directors as so
designated shall be independent directors as provided by the
rules of NASDAQ (each an Independent Director). Of the
board designees of the parties, one (1) of the Companys designees
shall be an Independent Director, two (2) of the Contributor
Parents designees shall be Independent Directors and the
Nonaffiliated Director shall be an Independent Director. The
compensation committee, nominations and corporate governance
committee and audit committee of the Company shall each consist
of the Companys designee who is an Independent Director, one of
Contributor Parents designees who is an Independent Director and
the Nonaffiliated Director.
Board members, officers and certain insiders of the Company are
subject to a voting agreement under which they are obligated to
vote in favor of the proposals at the stockholder meeting.
Registration Rights
Promptly following the execution of the Agreement, the Company is
required prepare and file with the Securities and Exchange
Commission two registration statements on Form S-3 (or such other
form available for this purpose) (the Registration
Statements) to register (a) the primary offering by the
Company (i) to the holders of the Payout Notes the Common Stock
underlying the Payout Notes, and (ii) to the unaffiliated
shareholders of Contributor Parent the Common Stock distributed
to such unaffiliated shareholders as a dividend by Contributor
Parent and (b) the secondary offering (i) by the Contributor
Parties of all the shares of the Companys Common Stock
(including, without limitation, the shares of Common Stock
underlying the Warrant) retained by the Contributor Parties, (ii)
by Maxim Group LLC of the shares received by it as compensation
for services rendered to Contributor Parent, and (ii) by certain
affiliates of the Contributor Parent who receive shares from
Contributor Parent.
Termination Fee
Finally, the transaction is subject to a termination provision
under which, in the event of a material breach of the terms of
the transaction, the breaching company must pay all out-of-pocket
expenses of the non-breaching company incurred up to the date of
termination of the transaction.
The foregoing summary of the terms and conditions of the
Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the agreement attached
hereto as Exhibit 10.1, which is incorporated herein by
reference.
Forward-Looking Statements
This Current Report on Form 8-K may contain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainty.
Such statements are based on management’s current expectations
and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from those described in
the forward-looking statements. Investors are cautioned that
there can be no assurance actual results or business conditions
will not differ materially from those projected or suggested in
such forward-looking statements as a result of various factors.
Forward looking statements include, but are not limited to,
statements with respect to the plans, strategies and objectives
of management for future operations; product development,
extensions and marketing; and expectations, beliefs or
assumptions underlying any of the foregoing. The important
factors that could cause actual results to differ significantly
from those expressed or implied by such forward-looking
statements include, but are not limited to, changes in consumers
spending habits and the marketability of certain products.Please
refer to the risks detailed from time to time in the reports we
file with the SEC, including our Annual Report on Form 10-K for
the year ended December 31, 2015, as well as other filings on
Form 10-Q and periodic filings on Form 8-K, for additional
factors that could cause actual results to differ materially from
those stated or implied by such forward-looking statements. We
disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events, or otherwise, unless required by law.
Item 3.02. Unregistered Sales of Equity
Securities.
The information set forth under Item 1.01 regarding the issuance
of shares of Common Stock, shares of Series A Convertible
Preferred Stock, the Warrant and the Payout Notes under the
Agreement is incorporated by reference into this Item 3.02. The
issuance of these securities is being made in reliance upon an
exemption from registration provided under Section4(a)(2) of the
Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
| Exhibits | ||
| 10.1 |
Interest Contribution Agreement, dated March 31, 2017, by and among PhotoMedex, Inc., FC Global Realty Operating Partnership, LLC, First Capital Real Estate Operating Partnership, L.P., and First Capital Real Estate Trust Incorporated |
About PhotoMedex, Inc. (NASDAQ:PHMD)
PhotoMedex, Inc. is a global health products and services company providing integrated disease management and solutions to dermatologists, professional aestheticians and consumers. The Company provides products and services that address skin diseases and conditions, including acne and photo damage. It operates through three business segments: Consumer segment, Physician Recurring segment and Professional segment. It provides skin health solutions to spa markets, as well as traditional retail, online and infomercial outlets for home-use products. Through its subsidiary, Radiancy, Inc., it offers home-use devices under no!no! brand for indications, including hair removal, acne treatment, skin rejuvenation and lower back pain. Its professional product line includes offerings for acne clearance, skin tightening, psoriasis care and hair removal. It is also engaged in the development, manufacture and sale of surgical products, including free-beam and contact laser systems for surgery. PhotoMedex, Inc. (NASDAQ:PHMD) Recent Trading Information
PhotoMedex, Inc. (NASDAQ:PHMD) closed its last trading session down -0.04 at 1.77 with 28,233 shares trading hands.