11-17-15 8-K “In connection with the negotiation and execution of the Distribution Agreement, the Registrant also entered into subscription agreements with GYD and three other investors in Chile for the purchase of common stock and warrants of the Registrant. The investors purchased 10,000,000 shares of common stock of the Registrant for $1,000,000 ($0.10 per share), as well as warrants to purchase up to $1,000,000 of additional shares of common stock. The warrants are exercisable through November 12, 2016. The exercise price of the warrants is 40% of the trading price of the Registrant’s common stock at the date of exercise; provided that if the warrants are exercised on or before March 30, 2016, the exercise price per share of common stock purchased under the warrant will be the lesser of 40% discount to market or $0.25 per share.”
On the one hand, if GYD thought that the EPA action, presumed to occur by mid-November, would be positive, they would be making the incremental investment at a 40% discount to market. Yet, MZEI doesn’t have the requisite shares to honor the deal at current pricing and won’t have them until mid-December, presuming shareholders increase the share authorization.
Will GYD purchase whatever it can, i.e. the estimated 10MM remaining authorization as of the prior quarter-end? Did that happen several weeks ago when MZEI’s share price was trading near $0.05 ($0.03 exercise, or ~ $300K to MZEI), or may such a purchase yet happen? Might an alternative deal be struck with GYD, after all, it’s not their fault that MZEI doesn’t have the remaining authorization, but then, the nature of their deal presupposed EPA approval prior to March 30, 2016 and a resultant higher share price. One the one hand, GYD is in something of a catbird seat, on the other, they have a great deal to lose if too hard a bargain is sought. If GYD does bring funding forth, I’d be very surprised if it comes as a blank check like last November; this one will likely have strings.
If using electronic communications, the company is required to notice the proxy 40 days in advance of the shareholder meeting – so proxy notice would seem to happen before the end of the 1st week of November. The 10Q is due out by mid-November. GYD’s warrant expires on Nov. 12, 2016. We’ve been told to expect action from the EPA by mid-November (see boardcentral.com). GYD has had two machines since early summer and another delivered later – maybe they’ll have an update to offer. So, shareholders may have plenty to digest as they consider voting their proxies.
