Inventergy Global Inc. (INVT), the patent licensing company that is negotiating an agreement to give 70% of its future revenue from patent monetization to Fortress Investment Group (FIG) for failure to repay debt, filed with the Securities and Exchange Commission to raise as much as $7.45 million in equity based on its closing price today.
Campbell, California-based Inventergy is proposing to issue 5 million shares of stock, which currently trade at $1.49. The shares fell 14.9% earlier this week, after Inventergy said Fortress had agreed to defer a Sept. 30 amortization payment owed by Inventergy and waive a minimum liquidity requirement until Oct. 30.
The equity raise is planned as a private placement arranged by Chardan Capital Markets and Dawson James Securities.
The companies said the amended agreement gives them time to conclude discussions in a signed letter of intent that would give Fortress the right to fund an enhanced enforcement program to further monetize Inventergy's 760 telecommunication patent assets.
Shares of Inventergy closed at $1.88 on Sept. 28 before the announcement of the amended agreement with Fortress. They have traded between 71 cents and $3.90 over the past year.
Under the letter of intent, Fortress will get 70% of any future revenue generated by monetizing Inventergy’s patents. The companies said the split goes into effect following payments being made to the previous patent holders, payment of any other monetization costs and Fortress collecting approximately $30 million.
"In short, Fortress has switched from being simply a finance partner of Inventergy to a comprehensive business partner. Fortress has agreed to eliminate approximately $21 million in liabilities on Inventergy's balance sheet that stem from an existing agreement between the two firms and deliver $2.2 million for Inventergy to pay-off other debt related to monetizing the patents.
“The partnership is a game changer for this company and shareholders on multiple levels," Inventergy said. "Getting Fortress in Inventergy's corner gives the company the power to aggressively defend its intellectual property, effectively leveling the playing field with larger telecommunications and mobility companies that are widely known for stepping on smaller players that lack the financial muscles to fight to protect patents.
“While the headline benefits of the partnership are obvious, the subliminal message further supports the value of Inventergy IP. It's assumable that Fortress thoroughly vetted the intellectual property and decided that it ought to be of high enough quality to warrant an investment.”
Officials from Fortress couldn't be reached for a comment on how soon it could take over the patents and how much it would invest in an enforcement campaign. Typically, each enforcement action costs up to $3 million when costs of defending against inter partes reviews is taken into account.
Inventergy, run by CEO Joseph Beyers, has struggled to monetize its patents and in the last year or so has focused more on patent asset sales and its new Inventergy Innovations initiative, in which is has completed four partnership agreements and one additional letter of intent, with others expected soon from a pipe-line of more than 10 additional prospects.
The company said significant progress is also being made by the current partnerships with the first results of this effort announced recently.
The amended agreement with Fortress and the equity raise will significantly dilute existing shareholders including Alpha Capital Anstalt, Anson Investment Master Fund LP, Brio Capital Master Fund, DiamondRockG3 LLC and Intracoastal Capital LLC, who each have 4.99% stakes. In addition, the dilution will affect CEO Joseph Beyers, who has a 15.98% stake and Alfred Charles Murabito, who has a 12.9% stake.
At June 30, 2016, Inventergy had an accumulated deficit since inception of $57.73 million and had negative working capital of $10.27 million. As of Sept.7, 2016, it had remaining cash of approximately $133,436.
"We currently do not have sufficient capital to monetize our current patent portfolios, purchase any new patent portfolios and execute our longer term business plan. Even if this offering is fully subscribed, we may need additional debt or equity financing in the future to execute our business plan and to be able to continue as a going concern. If in the future, we fail to satisfy the continued listing standards of Nasdaq Capital Market, we may not be able to sell shares of our common stock. Accordingly, market conditions may limit our ability to raise capital on favorable terms, or at all, and the terms of any public or private offerings of debt or equity securities likely would be significantly dilutive to existing shareholders.
—To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or email@example.com