Attached files
| file | filename |
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| EX-10.3 - MANAGEMENT SERVICES AGREEMENT - Advance Nanotech, Inc. | ex10-3.htm |
| EX-10.2 - MASTER PROFESSIONAL SERVICES AGREEMENT - Advance Nanotech, Inc. | ex10-2.htm |
| 8-K - CURRENT REPORT - Advance Nanotech, Inc. | advnano_8k-022510.htm |
Exhibit 99.1
For
Release Friday, February 26, 2010
ADVANCE
NANOTECH PROVIDES STRATEGIC UPDATE
MONTEBELLO, NY - Advance Nanotech, Inc. (OTCBB:
AVNA) released the below letter to its shareholders today.
Dear
Shareholders,
This
letter to shareholders is a follow up to the shareholder letter dated December
3, 2009. In this letter, we will be discussing our forward plans for
Advance Nanotech that we have developed over the last three months, given the
recent transactions that have occurred at Owlstone Nanotech, Inc.
(“Owlstone”).
To begin,
it is worth reviewing the transactions that took place. On December
3, 2009 and again on January 25, 2010, Advance Nanotech announced a series of
transactions involving Owlstone and Advance Nanotech. A summary of
those transactions is set forth below:
|
|
·
|
Owlstone
sold 8,205,667 of its common shares at $0.40 per share for
$3,282,265
|
|
|
·
|
Owlstone
acquired $3,222,500 in principal amount of Advance Nanotech’s 8%
Convertible Notes
|
|
|
·
|
Owlstone
converted all of the principal and interest on its 10% Convertible
Promissory Notes outstanding into Owlstone
shares
|
|
|
·
|
Advance
Nanotech and Owlstone both retired their senior secured bridge
indebtedness outstanding
|
As a
result of these transactions, Advance Nanotech’s ownership of a better
capitalized Owlstone was reduced from 81.31% to 34.99% of the Owlstone shares
outstanding.
Management
change
Given the
recent events described above, it has been deemed to be in the best interest of
Advance Nanotech to release Messrs. Bader and Finn from their executive
responsibilities at Advance Nanotech and provide them with the ability to
concentrate their full-time energies on their respective positions at
Owlstone. With this change, new management of Advance Nanotech will
be able to pursue, with greater focus, Advance Nanotech’s current business
objectives. Consequently, on February 23, 2010, Advance Nanotech
accepted the resignations of Bret Bader as Chief Executive Officer of Advance
Nanotech and Thomas Finn as Chief Financial Officer of Advance
Nanotech. The directors of Advance Nanotech wish to thank Messrs.
Bader and Finn for their years of dedicated service and counsel to the
company. Mr. Bader and Mr. Finn will now work as Chief Executive
Officer and Chief Financial Officer, respectively, of Owlstone, focused
exclusively on enhancing the value of Owlstone, which, as previously discussed,
is Advance Nanotech’s largest asset.
On
February 23, 2010, Advance Nanotech also executed agreements with Core Equity
Group and Jon Buttles, a principal of Core Equity Group and a Director of
Advance Nanotech, whereby Mr. Buttles will serve in the role of certain
principal executive positions of Advance Nanotech. In addition, Core
Equity Group was engaged by AVNA to provide certain advisory services to the
Board of Directors and further assist the Company in the pursuit of its business
objectives. Mr. Buttles is Managing Partner of Core Equity
Group, a venture bank located in New York, New York, and has been a Director of
Advance Nanotech since September 2008.
Financial
accounting and regulatory update
In
Advance Nanotech’s December 3, 2009 shareholder letter, Advance Nanotech
discussed the need to explore the potential accounting implications relating to
its new minority shareholding position and also the possibility of Advance
Nanotech being deemed an “inadvertent investment company”, as defined under the
provisions of the Investment Company Act of 1940 as a result of the Owlstone
transactions. For the year ended December 31, 2009, it is anticipated
that Advance Nanotech will report financial statements showing consolidated
results with Owlstone. For future periods, beginning with the quarter
ending March 31, 2010, we believe Owlstone will no longer be required to be
consolidated with Advance Nanotech for financial reporting
purposes. As such, the financial statements of Advance Nanotech are
expected to reflect a value attributed to Advance Nanotech’s investment in
Owlstone. Management is working with Owlstone on a plan to provide
specific financial reporting that may be included as a supplement to Advance
Nanotech’s ongoing financial statements. Under a corporate service
agreement signed February 23, 2010, Advance Nanotech has contracted with
Owlstone to provide bookkeeping, administration, treasury, and reporting
services. This agreement will reduce costs and permit seamless
continuation of financial management and reporting. Although Advance
Nanotech has limited operating business, Advance Nanotech remains exempt from
filing under the Investment Company Act of 1940.
Advance
Nanotech’s strategy
Advance
Nanotech’s mission remains the same as was laid out in 2008 when it made the
decision to focus all of its resources on Owlstone for the benefit of Advance
Nanotech’s shareholders. The streamlining of the business and efforts
toward operational integration led by Mr. Bader have resulted in a much leaner
and more efficient Advance Nanotech organization. As a result of
these historical efforts and the most recent realignments, Advance Nanotech as
an entity has substantially eliminated all operational expenses not directly
related to the requirements of operating as a publicly traded
company. Advance Nanotech’s corporate focus for the near term is as
follows: first, to evaluate options regarding the restructuring of the Company’s
current indebtedness; second, to pursue potential corporate finance activities
using Advance Nanotech’s public status and tax loss carry forward asset; and
lastly, to support the business of our largest asset, Owlstone, to the extent
that Advance Nanotech can be helpful in its continued development.
Advance
Nanotech’s assets and liabilities
While the
recent complex transactions and the historical development of Advance Nanotech
has been and is fully disclosed in public filings, the following is a summary of
some of the Company’s significant asset and liability components.
Assets:
The
principal value of Advance Nanotech arises from its shareholdings in Owlstone, a
substantial tax loss carry forward and its status as a public reporting
entity.
Advance
Nanotech’s largest and most valuable asset is its shareholding in Owlstone of
approximately 14.0 million shares. These shares have been pledged as
collateral for the outstanding 8% Notes. As reported in Advance
Nanotech’s 8-K dated January 25, 2010, Owlstone Nanotech’s most recent private
market valuation was $0.40 per share, as determined by the price per share
received by Owlstone in both its November and January financings. The
$0.40 per share price translates to a value of $5.6 million for Advance
Nanotech’s current Owlstone holdings. Furthermore, now that Owlstone
has obtained additional funding, Owlstone is better positioned to realize
critical milestones that it has long been striving to
achieve. Ultimately, it is the success of Owlstone’s business plan
that will drive the creation of long-term value for Advance Nanotech
stakeholders.
Secondary
to the Owlstone shareholdings, Advance Nanotech possesses a tax loss carry
forward of approximately $18.0 million which has the potential to provide
significant value for a profitable growing organization looking to shelter
future income, thus possibly making Advance Nanotech a potential candidate for
investment or acquisition.
Finally,
Management believes there is value to be ascribed to the public listing enjoyed
by AVNA. Public reporting status provides stockholders with liquidity
for their shares. To become a public company is a very time
consuming, labor intensive and expensive process. Therefore, many private
companies often prefer to seek out public partners as a means to achieve said
status. Management believes its current listing has value under the
right circumstances.
Liabilities:
The most
significant liability of Advance Nanotech is its convertible debt of $7.4
million, which represents convertible secured indebtedness incurred by Advance
Nanotech in late 2007 and 2008 (the “8% Notes and Warrants”) of which $3.2
million is owned by Owlstone. The 8% Notes and Warrants carry certain
price protection rights that preclude Advance Nanotech from raising additional
equity capital below the conversion price without triggering a highly dilutive
reset. Furthermore the notes contain a requirement than any change in
the 8% Notes and Warrants requires 100% unanimous consent.
The
maturity dates of the 8% Notes are set in three tranches based on their initial
closing dates. The following table summarizes the maturity dates and
amounts of the 8% Notes:
|
Holder(s)
|
December
20, 2010
|
February
14, 2011
|
September
4, 2011
|
Total
|
|
Owlstone
|
$1,696,250
|
$1,178,750
|
$347,500
|
$3,222,500
|
|
Other
Noteholders
|
$2,053,908
|
$1,427,292
|
$717,250
|
$4,198,450
|
|
Total
|
$3,750,158
|
$2,606,042
|
$1,064,750
|
$7,420,950
|
Advance
Nanotech is presently working on multiple strategies to satisfy the 8% Notes
prior to their respective maturity dates.
New
Management
By way of
background, I, Jon Buttles, have been involved with Advance Nanotech and
Owlstone since late 2005. In September 2008, I joined the board of
directors of Advance Nanotech, a position I continue to hold today.
Acting in
my capacities as both a consultant and a member of the Board of Directors, I
have been fortunate to have had the opportunity to visit the Cambridge offices
of Owlstone on many occasions over the last 4 years. I have been able
to witness firsthand the evolution of Owlstone’s business from a start up in the
company’s original location in a business incubator in the Cambridge University
to its now 10,000 square foot technical facility in the Cambridge Science
Park. In my opinion, Owlstone has, in a brief period of time, grown
into a technical and application powerhouse capable of providing innovative
chemical sensing solutions to a wide variety of
industries. Furthermore, I believe my views on Owlstone are well
supported as Owlstone has been recognized by numerous government and commercial
organizations for its innovative and technological prowess in the field of
chemical detection.
On a
personal note, I feel it material to share that my relationship with both
Advance Nanotech and Owlstone is more involved than just my role as a consultant
to and Director of Advance Nanotech. I am a personal investor in
Advance Nanotech, having invested at various levels since 2005, and through my
company, Core Equity Group, I am a beneficial owner of 8% Notes and Warrants,
along with shares of Advance Nanotech. Finally, I am also an investor
in Owlstone, having made an investment directly in the organization in
2007.
Closing
The
recent transactions and corporate changes have positioned Owlstone to flourish,
which ultimately we believe is in the best interest of the shareholders of
Advance Nanotech. It is also relevant to mention that a significant
portion of the outstanding shares of Advance Nanotech are held by Owlstone
constituents, including, but not limited to, Owlstone as an entity, its
founders, its directors, and its current management team. As reminded
in the December 3, 2009 letter, certain members of Owlstone’s management team
along with the technology founders exchanged all of their shares in Owlstone for
shares in Advance Nanotech at a price of $0.30 per share in September 2008 (when
at that time, the price of Advance Nanotech’s shares was trading between $0.17
and $0.19 per share). A review of the largest beneficial holders of
Advance Nanotech through their filings reveals that the level of ownership that
Owlstone constituents have in Advance Nanotech is
significant. Suffice it to say, I firmly believe that these
shareholders are not only highly motivated, but also significantly incentivized
by the size of their collective holdings in Advance Nanotech, to continue to
work diligently towards creating the most value for Owlstone shares and
consequently, through Advance Nanotech’s direct holdings, Advance Nanotech’s
shares.
As part
of my ongoing role with the organization, I will endeavor to keep the investing
public abreast of developments within both organizations. Investors,
you can expect to see continued news on business developments at Owlstone
through Advance Nanotech press releases and public filings. In
addition, further information is on our website www.advancenanotech.com, or
shareholders may contact investor relations at ir@advancenanotech.com or via
telephone at (212) 583-0080.
Thank you
for your continued support.
Best
regards,
Jon
Buttles
Principal
Executive Officer
Advance
Nanotech, Inc.
About Advance Nanotech, Inc.
and Owlstone Nanotech, Inc.
Advance
Nanotech, Inc. owns a minority position in Owlstone Nanotech, Inc. ("Owlstone").
Owlstone is a pioneer in the commercialization of chemical detection products.
The Owlstone detector is a revolutionary dime-sized sensor that can be
programmed to detect a wide range of chemical agents that may be present in
extremely small quantities. Using leading-edge micro- and nano-fabrication
techniques, Owlstone has created a complete chemical detection sensor that is
significantly smaller and can be produced more cost effectively than products
using existing technology. There are numerous applications -- across industries
from security and defense to industrial process, air quality control and
healthcare -- that depend on the rapid, accurate detection and measurement of
chemical compounds. Owlstone works with market leaders within these industries
to integrate the detector into next generation chemical sensing products and
solutions. Owlstone's technology offers a unique combination of benefits,
including small size, low manufacturing costs, minimal power consumption,
reduced false-positives, and a customizable platform. For more information about
Advance Nanotech, Inc. and Owlstone, please visit
www.owlstonenanotech.com.
The
information contained in this news release, other than historical information,
consists of forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act of 1934. These
statements may involve risks and uncertainties that could cause actual results
to differ materially from those described in such statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors, including general economic
conditions, spending levels, market acceptance of product lines, the recent
economic slowdown affecting technology companies, the future success of
scientific studies, ability to successfully develop products, rapid
technological change, changes in demand for future products, legislative,
regulatory and competitive developments, the Company's ability to secure
additional working capital and/or generate sufficient cash flow to support its
operations, and other factors could cause actual results to differ materially
from the Company's expectations. Advance Nanotech's Annual Report on Form 10-K,
recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports
and other SEC filings discuss some of the important risk factors that may affect
Advance Nanotech's business, results of operations and financial condition. The
Company undertakes no obligation to revise or update publicly any
forward-looking statements for any reason.
SOURCE:
Advance Nanotech, Inc.
For
more information, contact:
Investor
Relations
(212)
583-0080
ir@advancenanotech.com