8-K: Ault Disruptive Technologies to Merge with Gresham Worldwide in $60 Million Deal

Ault Disruptive Technologies Corporation will merge with Gresham Worldwide, Inc., making Gresham a wholly-owned subsidiary of Ault, in a deal valued at approximately $60 million.

Summary

• Gresham Worldwide, Inc. has entered into a merger agreement with Ault Disruptive Technologies Corporation, where Ault will acquire Gresham.
• The merger consideration is valued at $60 million, subject to adjustments for intercompany advances, warrant exercise prices, and any PIPE financing.
• Gresham's preferred stock will be converted into common stock before the merger, and outstanding common stock will be exchanged for Ault common stock.
• Options and warrants to purchase Gresham stock will be converted into rights to purchase Ault stock, with adjustments to the number of shares and exercise price.
• Restricted stock units of Gresham will be converted into restricted stock units of Ault, maintaining the same terms and conditions.
• Promissory notes of Gresham will be either converted into Ault preferred stock or assumed by Ault as new promissory notes.
• Upon completion of the merger, Ault will change its name to Gresham Worldwide, Inc. and trade under the ticker symbol GWWI, pending NYSE American approval.
• The merger is subject to approvals from both Gresham and Ault stockholders, as well as other closing conditions, including a minimum $3.5 million PIPE financing by Ault.
• Ault's executive officers will become the executive officers of Gresham after the merger, and Ault's majority shareholder will control a majority of the board of directors.
• A joint registration statement and proxy statement will be filed with the SEC to seek stockholder approval for the merger.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a strategic merger that could benefit both companies. However, there are risks and uncertainties associated with the deal, which temper the overall sentiment.

Positives

• The merger provides Gresham with access to Ault's resources and capital.
• The combined entity will be publicly traded on the NYSE American, potentially increasing visibility and access to capital markets.
• The merger is expected to create synergies and efficiencies between the two companies.
• Existing Gresham management will continue to lead the combined entity, ensuring continuity.
• The conversion of Gresham's preferred stock simplifies the capital structure.

Negatives

• The merger is subject to several conditions, including stockholder approvals and a minimum PIPE financing, which could delay or prevent the deal from closing.
• The merger consideration is subject to adjustments, which could reduce the final value received by Gresham stockholders.
• Ault's majority shareholder will control a substantial majority of the voting power of the combined entity, potentially limiting the influence of other shareholders.
• The merger requires the cancellation of existing Gresham promissory notes, which may impact noteholders.
• The merger is subject to the risk of disruption to Gresham's current plans and operations.

Risks

• The merger may not be completed if the required stockholder approvals are not obtained.
• Ault may not be able to secure the necessary financing to complete the merger.
• The combined entity may not meet NYSE American listing standards.
• The war in Israel could negatively impact the operations of Gresham's Israeli subsidiary.
• The merger could disrupt Gresham's current plans and operations.

Future Outlook

The document outlines the steps for the merger, including obtaining stockholder approvals, filing a registration statement, and completing the PIPE financing. The combined entity will operate under the name Gresham Worldwide, Inc. and trade on the NYSE American, pending approval.

Management Comments

• The executive officers of Ault will become the executive officers of Gresham after the merger.
• Ault, as the majority holder of the Acquiror Preferred Stock, will be entitled to elect a majority of the board of directors of the Acquiror.

Industry Context

This merger is part of a trend of special purpose acquisition companies (SPACs) merging with private companies to bring them to the public markets. The deal is structured to allow Ault to acquire an operating business, while providing Gresham with access to public markets and capital.

Comparison to Industry Standards

• The merger structure, involving a reverse merger with a SPAC, is a common approach for private companies seeking to go public.
• The valuation of $60 million is within the range of similar transactions in the technology and industrial sectors.
• The requirement for a PIPE financing is a standard condition in SPAC mergers to ensure sufficient capital for the combined entity.
• The conversion of preferred stock and the treatment of options and warrants are typical in these types of transactions.
• The governance structure, with Ault's majority shareholder controlling the board, is also common in SPAC mergers where the SPAC sponsor retains significant influence.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders of Gresham will receive shares of Ault common stock, subject to the terms of the merger agreement.
• Employees of Gresham will become employees of the combined entity, with their existing terms and conditions generally maintained.
• Customers and suppliers of Gresham will continue to do business with the combined entity.
• Creditors of Gresham will have their obligations either assumed by Ault or converted into Ault securities.

Next Steps

• Gresham and Ault will jointly file a Form S-4 with the SEC.
• Gresham and Ault will hold special meetings for their respective stockholders to vote on the merger.
• Ault will seek to complete the PIPE financing.
• The merger will be consummated upon satisfaction of all closing conditions.

Key Dates

Keywords

merger, acquisition, Gresham Worldwide, Ault Disruptive Technologies, stock options, warrants, preferred stock, common stock, PIPE financing, NYSE American, shareholder approval, promissory notes