Yesterday, Advance Display Technologies, Inc. announced that a group of Stockholders controlling approximately 90 percent of their outstanding shares filed a Transaction Statement under Section 13(e) of the Securities Exchange Act of 1934 (Schedule 13E-3) with the Securities and Exchange Commission. The Schedule 13E-3 disclosed that this group of Stockholders will cause Advance Display Technologies, Inc. to merge with a newly formed corporation, GSLD Holdings, Inc., a Colorado corporation, in a “going-private” transaction via a “short-form” merger.
In addition, upon consummation of the merger, the Company will apply for deregistration under the Securities Exchange Act of 1934, as amended. The result of this transaction is that Advance Display Technologies, Inc. will emerge as a privately held corporation (Surviving Corporation). Under Colorado law, the merger does not require the approval of the Company’s Board of Directors or Stockholders. The merger will consummate after the expiration of a 31-day period following the filing of the Schedule 13E-3.
Pursuant to the terms of a merger and contribution agreement, a group of Stockholders will contribute their shares of Advance Display Technologies Inc.’s (ADTI) stock to Holdings. In connection with the going-private merger, ADTI’s stockholders who hold in the aggregate 1,500 shares or more of ADTI stock will receive one share of common stock of the Surviving Corporation for every 1,500 shares of ADTI common stock held prior to the merger. They will also receive one share of Series D convertible preferred stock of the Surviving Corporation for every 1,500 shares of ADTI Series D convertible preferred stock held prior to the merger.
There will be no issuance of fractional shares. Instead, holders who would otherwise be entitled to receive fractional shares will instead receive an amount in cash, without interest, equal to $0.02 per share. Any Stockholder who is entitled to receive cash for their shares of Common Stock or Preferred Stock will receive at least one United States dollar.
As previously announced, on June 28, 2010, ADTI’s principal lender foreclosed on substantially all of their assets. That foreclosure reduced the Company’s debt to the Lender by $7.6 million, the appraised value of the assets, leaving an unpaid balance of approximately $7.88 million.
ADTI also entered into another agreement with the Lender on June 28, 2010. With this agreement, the lender agreed to forgive the outstanding interest of approximately $1.2 million and reduce the interest rate going forward to lowest federal rate allowable. The lender also agreed to reimburse the Company for the costs of going private, and to cause their affiliate, ADTI Media LLC (Media), which now holds the assets formerly held by ADTI, to pay the Company a 20 percent royalty on revenues generated by Media from the assets over the next three years.
By going private and reducing their legal, accounting and administrative expenses going forward, ADTI hopes to preserve some value for their shareholders from the royalty. There is no certainty, however that the royalty will generate enough income for ADTI to pay off the balance of their loan, cover their operating expenses and have funds remaining for distribution to their remaining shareholders. ADTI has no other business or operations remaining besides the royalty.