KeyOn Communications Holdings, Inc. (fka KEYO)

[janice shell]

Earlier, I spent a LONG time compiling a post which--just before I was finished--slid off my screen, never to return. This is an attempt at a more concise explication.

Soon-Shiong's California Capital Equity (CalCap: made an initial investment in KEYO in 2010.

On February 5, 2010, pursuant to the Note Purchase Agreement, the Company issued to CalCap a secured convertible promissory note for the principal sum of $15,000,000 (the “Note”). On December 3, 2010, the Company entered into the Conversion Agreement with CalCap, subject to stockholder approval, pursuant to which CalCap agreed to convert all of the outstanding principal and accrued but unpaid interest under the Note into Preferred Stock at a conversion price of $1.00 per share. In addition, upon the conversion of the Note and in accordance with the Conversion, the Company agreed to issue CalCap a five year warrant to purchase 4,300,000 shares of Preferred Stock at an exercise price of $0.25 per share, a five year warrant to purchase 4,000,000 shares of Preferred Stock at an exercise price of $0.40 per share and a five year warrant to purchase 2,000,000 shares of Preferred Stock at an exercise price of $0.60 per share (collectively, the “Warrants”). Upon approval by vote of the stockholders, on March 11, 2011, the Company issued 16,315,068 shares of Preferred Stock in addition to 10,300,000 exercisable warrants to obtain Preferred Stock, thereby satisfying the Note.

The conversion of the Cal Cap Note into Series A Preferred Stock has been accounted for as an induced conversion. The Company induced conversion of the Note through: (1) the issuance of warrants to purchase additional shares of Series A Preferred Stock at exercise prices not provided for in the original Note, (2) additional voting rights granted to Preferred Stock holders relative to those possessed by common stockholders and (3) control of the Board of Directors through the ability to appoint a majority of its members.

http://www.sec.gov/Archives/edgar/data/1335294/000143774911008575/keyo_10q-093011.htm

At the time, KEYO was still trying to make a go of its failing VOIP business. And then in June 2011, CalCap coughed up another $2.6 million:

http://www.sec.gov/Archives/edgar/data/1335294/000133529411000002/xslFormDX01/primary_doc.xml

http://www.sec.gov/Archives/edgar/data/1335294/000114420411036857/v226300_sc13da.htm

The first note was converted into Series A preferred. What happened with the second is unclear. In the last 10-Q, the company says first:

On June 16, 2011, we raised an additional $2,600,000 in a secured convertible note from California Capital Equity, LLC, an entity controlled by our largest shareholder, Dr. Patrick Soon-Shiong. The note is convertible into additional shares of the Company’s preferred stock at a conversion price of $0.75.

That implies it had not yet been converted by 30 September 2011, but elsewhere in the same filing it's said (see unhighlighted line):



I believe the note was converted to Series A preferred. Since the conversion ratio of the Series A to common was 1:1, there'd be no point in effecting that second conversion.

Soon-Shiong's man Wittenschlaeger took over as CEO on 19 December 2011.

http://www.sec.gov/Archives/edgar/data/1335294/000143774911009691/keyon_8k-121611.htm

And a few days later, he terminated registration. Why? And what's happened since then? That was three years ago, after all.

Throwing away nearly $20 million on a soon-to-be-worthless shell is not how most billionaires become billionaires.