Monster Digital, Innovate Biopharmaceuticals enter into LOI about reverse merger
Monster Digital announced that it has entered into a non-binding letter of intent, or LOI, which contemplates a proposed reverse merger with Innovate Biopharmaceuticals. The LOI contemplates execution of a merger agreement whereby the security holders of Innovate would receive Monster Digital securities in the Merger, in exchange for securities held in Innovate. Following the closing of the anticipated Merger, Innovate would become a wholly owned subsidiary of Monster Digital, and Monster Digital, as the surviving company, would be renamed "Innovate Biopharmaceuticals, Inc." The common stock of the combined company would continue to trade on the Nasdaq Capital Market under a new symbol to reflect the name change. For purposes of determining the exchange rate used to calculate the number of Monster Digital common shares that would be issued to Innovate's stockholders, the LOI provides that Innovate would have a deemed valuation of $60M fully diluted by all of its outstanding shares of common stock and outstanding options and warrants, and Monster Digital would have a deemed valuation of $6 million fully diluted by all outstanding shares of its common stock, but excluding currently outstanding (i) warrants issued in connection with its initial public offering and (ii) warrants and options having a per share exercise price of $5.00 and above, such valuation to be reduced by any liabilities of Monster Digital assumed by Innovate at the Closing. Monster Digital's deemed valuation would be adjusted based on a net cash calculation prior to closing, which could be a negative number to the extent its liabilities exceed its cash and cash equivalents on hand at such time.