Verilink (NASDAQ:VRLK)
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Verilink Corporation Announces $10 Million Financing
Proceeds to be used for Repayment of Line of Credit, Working Capital and
General Corporate Purposes
CENTENNIAL, Colo., March 21 /PRNewswire-FirstCall/ -- Verilink Corporation
(NASDAQ:VRLK), a leading provider of broadband access solutions, announced
today that it has entered into a securities purchase agreement which provides
for a private placement of $10 million of senior secured convertible debentures
and warrants with certain institutional investors. The purchase agreement also
provides for up to an additional $5 million of convertible debentures to be
issued to the investors at the investors' option or, under certain
circumstances, at the Company's option. The closing of the financing is
expected to occur today. The Company will use the net proceeds from the
financing to repay its $3,500,000 revolving line of credit with RBC Centura
Bank and for working capital and general corporate purposes. The closing of the
financing and repayment of the RBC line of credit will resolve the existing
default conditions with respect to outstanding debt of the Company described in
the Company's most recent Form 10-Q.
"This investment provides us additional capital resources to execute our
strategy which is focused on growth and strengthening our position in the
global broadband access market," said Leigh S. Belden, President and CEO of
Verilink. "With the integration of last year's acquisitions now largely
completed, we believe Verilink is well positioned to address carrier
requirements for today's networks while providing an elegant migration path to
tomorrow's networks delivering VoIP and native Ethernet services."
The debentures are convertible into common stock at a conversion price of $3.01
per share, which represents a 15% premium to the closing price of the Company's
common stock on the Nasdaq National Market on Friday, March 18, 2005. The
conversion price is subject to adjustment in certain circumstances. The
debentures bear interest at a rate of six percent per annum and are repayable
in quarterly payments in either cash or, after effectiveness of the
registration statement referred to below, common stock over a period of up to
three years. Verilink will have the right, beginning one year after
effectiveness of the registration statement, to require conversion of the
debentures to common stock if the closing price of a share of the Company's
common stock exceeds 200 percent of the conversion price for 20 consecutive
trading days. The debentures are secured by substantially all of the assets of
the Company. The warrants are initially exercisable for 830,567 shares of the
Company's common stock at a price of $3.41 per share, have a term of five years
and will be exercisable beginning six months after the closing date. The
Company is required to file a registration statement with the Securities and
Exchange Commission to register the shares of common stock issuable in
connection with the financing. The Company will seek stockholder approval for
the potential issuance of shares of common stock upon conversion of the
debentures and for principal and interest payments on the debentures in order
to satisfy applicable Nasdaq requirements. The exercise price of the warrants
is subject to adjustment in circumstances similar to the conversion price of
the debentures.
The debentures and the warrants sold in the private placement and the shares of
common stock issuable in connection with the financing have not been registered
under the Securities Act of 1933, as amended, or state securities laws and may
not be offered or sold in the United States absent registration with the
Securities and Exchange Commission ("SEC") or an applicable exemption from the
registration requirements. The debentures and warrants were offered and sold
only to qualified institutional buyers and institutional accredited investors.
This announcement is not an offer to sell or the solicitation of an offer to
buy the debentures, the warrants or shares of common stock of the Company.
This announcement is only a description of the terms of the debentures and
warrants and is not a solicitation of a proxy to approve the terms of the
financing. Information concerning the financing will be included in a Current
Report on Form 8-K and any proxy statement to be furnished in connection with a
meeting of the Company's stockholders.
Kaufman Bros, L.P., an investment banking firm specializing in the
communication, media and technology sectors, acted as sole placement agent to
the Company for the transaction.
About Verilink Corporation
Verilink Corporation is a leading provider of next-generation broadband access
solutions for today's and tomorrow's networks. The company develops,
manufactures and markets a broad suite of products that enable carriers (ILECs,
CLECs, IXCs, and IOCs) and enterprises to build converged access networks to
cost-effectively deliver next-generation communications services to their end
customers. The company's products include a complete line of VoIP, VoATM, VoDSL
and TDM-based integrated access devices (IADs), optical access products,
wire-speed routers, and bandwidth aggregation solutions including CSU/DSUs,
multiplexers and DACS. The company also provides turnkey professional services
to help carriers plan, manage and accelerate the deployment of new services.
Verilink is headquartered in Centennial, CO (metro Denver area) with operations
in Madison, AL and Newark, CA and sales offices in the U.S., Europe and Asia.
To learn more about Verilink, visit the company's website at
http://www.verilink.com/.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
Except for the historical information contained herein, the matters set forth
in this press release are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include the prospects for completing
integration of the Company's acquisitions, executing its business strategy,
growth and the strengthening of its position in the global broadband access
market and it's ability to address carrier requirements for future networks and
the resolution of defaults. Such statements involve known and unknown risks,
uncertainties and other factors that may cause the Company's actual results,
performance or achievements to be materially different from the results,
performance or achievements expressed or implied by such forward- looking
statements. Such risks, uncertainties and other factors include, the potential
impact on the Company's liquidity and operations if it is unable to repay the
debentures or meet its working capital needs; the potential dilution to the
company's existing stockholders upon issuance of shares of common stock
pursuant to the terms of the financing, the impact of future developments and
unknown occurrences on compliance with the terms and conditions of financing,
the ability to successfully integrate acquisitions and achieve expected
synergies; the ability to develop and market successfully and in a timely
manner new products and to predict market demand for particular products; the
impact of competitive products and pricing and of alternative technological
advances; the ability to increase sales of acquired product lines; the impact
of cost-saving activities, including the consolidation plans; the sufficiency
of cash flow to fund operations; risks associated with the Company's lack of
liquidity and "going concern" qualification in the report of independent
registered public accounting firm for the audited fiscal 2004 financial
statements; possible negative effects on the Company's customer base, employees
and its ability to obtain additional financing; fluctuations in operating
results and general industry and economic conditions; costs associated with
internal controls; the impact of price and product competition; the impact of
customer concentration and the financial strength of customers; and changes in
demand for the Company's products. A discussion of risks and uncertainties that
could cause actual results and events to differ materially from such
forward-looking statements are included in the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. These
forward-looking statements speak only as of the date hereof. The Company
disclaims any intention or obligation to update or revise any forward-looking
statements.
Verilink and the Verilink logo are registered trademarks of Verilink
Corporation. All other trademarks or registered trademarks are the property of
the respective owners.
DATASOURCE: Verilink Corporation
CONTACT: Gary W. Gray of Verilink Corporation, +1-510-771-3354,
Web site: http://www.verilink.com/