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Braidy Industries ‘fact sheet’ says aluminum mill project is advancing

November 28, 2018

ASHLAND - Braidy Industries says its $1.68 billion aluminum mill project in Eastern Kentucky is moving forward, according to what it called a fact sheet released by the company Tuesday in response to questions posed to it by news media.

Braidy is seeking to raise a total of $500 million in capital through the sale of its common stock. As of Nov. 26, Braidy had about 560 investors, including those who have subscribed via the Netcapital portal. Subscriptions via the Netcapital portal currently total 673,250 shares at $18 per share, for a commitment total of $12,118,500, according to the fact sheet. That amounts to about 2.5 percent of what the company hopes to raise.

In addition to unaccredited investors investing through the Netcapital portal, materially more than 100 institutional funds and accredited investors have purchased Braidy shares directly from Braidy in private placement transactions under the SEC’s Regulation D.

“In fact, the bulk of our current equity offering we expect will be made through direct investments in Braidy, which are not and would not be reflected in the share and dollar amounts of investments made through the portal,” the fact sheet stated. “Due to confidentiality, strict NDA provisions and sensitivity of disclosure at the accredited investor level, we cannot provide specific details of the offering. However, we can say that we currently have nearly $1 billion in substantial indications of interest from various accredited parties, and along with our stakeholders, are satisfied and confident in the progression of the offering and the amount of equity raised to date. Where we are at in our current equity raise is nothing atypical from standard procedure for equity raises of similar-sized companies to Braidy.”

The fact sheet also explained why Braidy made a $15 million loan to Braidy Industries’ CEO Craig Bouchard.

“Braidy made a full-recourse market-interest 200 percent collateralized loan to Mr. Bouchard that was duly approved by the Braidy board of directors in accordance with standard corporate governance provisions for privately owned companies,” it said. “As a privately owned company, this was an entirely permissible transaction entered into in due course and without controversy. To date, Mr. Bouchard has repaid $12 million of principal and interest on the loan, and has advised Braidy that he intends to repay the loan in full in the next several months. The loan must be repaid in full before Braidy lists as a public company on NASDAQ due to the different regulations that govern public, or publicly traded versus private, or privately owned, companies.”

According to the fact sheet, the loan to Bouchard was an internal transaction step that was necessary to complete Braidy’s acquisition of Veloxint Corp. within a mandated time frame.

“Veloxint is an MIT-incubated light weighting solution for some of the strongest and stiffest metal ever manufactured,” the fact sheet said. “Braidy considered the acquisition terms and timing to be very favorable, and acquiring Veloxint was also a critical part of Braidy’s strategic plan.”

When the Veloxint deadline approached and Braidy had received commitments for approximately $58 million of the $75 million needed to set the share price benchmark, it appeared Braidy would likely be unable to complete the acquisition.

“At this point, Mr. Bouchard stepped forward as a backstop and agreed to personally purchase $18.5 million of stock so the Veloxint transaction could close,” the fact sheet explained. “Internally, this was seen as a heroic act of selflessness and sacrifice. It was a way to save the transaction, and given the timing, the only way. The board of directors considered the circumstances, and the disinterested directors, without Mr. Bouchard’s participation in the vote, authorized the extension of $15 million in credit to Mr. Bouchard for the purpose of enabling Mr. Bouchard to purchase the entire amount of Braidy shares. This would enable Braidy to set the benchmark and close on the Veloxint acquisition. If Mr. Bouchard had not stepped forward personally to purchase the remaining $18.5 million in Braidy shares, of which the loan only covered $15 million, the Veloxint deal would not have been completed and Braidy would not have achieved a critical goal in its strategic plan.”

Given the timing of the Veloxint acquisition and the hard deadline to complete the merger, the loan transaction allowed Bouchard in part to bridge additional investors who were not able to complete their investment due diligence before the acquisition deadline and to provide the same terms and stock price provided to all others in the $75 million financing round, the fact sheet said.

The fact sheet went on to say that even after the Veloxint acquisition, complete development of the mill’s engineering and architectural plans, and the initiation of mill construction, Braidy has approximately $60 million in cash on-hand and no debt.

“This is enough cash to scale and operate Veloxint and represents years and years of operating runway,” it said. “The current equity raise is simply for the equity portion of the overall construction budget for the mill to meet an expected debt covenant to achieve the best-in-market cost of capital. Again, raising equity and debt is in the normal course of a developing business, especially one constructing a $1.684 billion mill. We will be around for a long, long time.”

Braidy broke ground on the mill in June and began construction. Over the past 60 days alone, Braidy has spent approximately $5 million on the ongoing construction of the mill. Additionally, Braidy has completed engineering and architectural plans for the mill and has substantially completed negotiations on its engineering, procurement and construction contract, the fact sheet stated.

“As is standard in large construction projects, finalization of the EPC agreement is dependent on certain debt and other financing covenants, and thus will close concurrently with the close of the current financing round,” the fact sheet said.

Meanwhile, Braidy Atlas (Braidy’s subsidiary building the mill) has converted the reservations of approximately one-third of its capacity into long-term binding contracts.

“These binding contracts range from 7 to 14 years, and at today’s prices, are expected to generate approximately $4 billion of revenue over the course of the contracted period,” the fact sheet stated.

In May, Braidy acquired an approximately 12.5-acre parcel in the EastPark Industrial Center adjacent to the site of the Braidy Atlas mill. This new parcel, which includes an existing approximately 70,000-square-foot structure, was the site of the 70th annual Ashland Alliance Dinner and will be the home of Veloxint’s scaled manufacturing facility.

Braidy expects Veloxint to employ 150 employees or more at full operation. Veloxint has customer agreements at various stages in the consumer products/electronics, tooling, racing, automotive, space exploration and defense industries.

“Most Veloxint customer names must be kept confidential due to strict NDA provisions,” the fact sheet said. “However, one public partnership that we have made widely known is that with Stanley Black and Decker, which is also a shareholder of Braidy.”

In September, Braidy completed the acquisition of aluminum strengthening technology provider NanoAl, which will form a core part of Braidy’s research and development efforts with the goal of creating an industry-leading research and development profit center. Additionally, Veloxint entered into a $6.94 million agreement with NanoAl to advance its own research and development efforts, the fact sheet said.

Follow reporter Fred Pace at Facebook.com/FredPaceHD and via Twitter @FredPaceHD.

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