Yesterday the new controlling shareholder of WNDW promoted himself to both the CEO and Chairman roles. Mr. John Rhee, the new controlling shareholder and CEO, is no stranger to the company, having been appointed to the company’s board back in July 2000 to help the company’s ongoing transition. At the time of his appointment to the board, Mr. Rhee was granted 2.5M options at $3.66 to signal his and the company’s commitment.
His first order of business upon naming himself the CEO was to hire an LG Display alum to assist their current LG Display alum he hired last June to transition the company from some sort of a non-producing technology R&D shop into an actual production company with a real product. Though originally hired to help with this transition, Mr. Rhee is no operating guy, having spent his time working with the Softbank VC group and some non-profit foundations.
Mr. John Rhee acquired controlling ownership (or rather, is set to acquire controlling ownership) back on December 8th when he agreed to purchase 33M shares and 16.7M warrants from controlling shareholder and SEC litigation defendant Mr. Harmel Rayat. Mr Rayat is vigorously defending his name and honor from those specious SEC charges that he orchestrated some sort of a pump and dump scheme in late 2017 with his other majority controlled company, RenovaCare (RCAR). It’s not like that hasn’t happened before, of course. Perhaps he needs the money from this deal to defend his good name, since his RCAR shares are essentially worthless.
At the time of the change-of-control announcement, WNDW shares were trading for roughly $4 a share, and the total consideration was to be $47.5M Canadian Dollars, which is roughly $38M US dollars. Normally controlling interests are valued at something more than regular interests since the new owner can choose to do as he will with the company, but not in this case. The warrants are for the company’s Series T warrants that have a $1.7 exercise price, so were roughly $2.30 in the money at the time of the announcement. So if you do the math, those 16.666667M warrants at $2.30 in the money were worth around $38M dollars, so he essentially got 33M shares at $4 or $132M worth of stock for free. Overall, $170M worth of stock and warrants for $38M, which is not too shabby. If you look at it from the other perspective, of course, selling the equivalent of 50M shares of stock for $38M for a price that is 80% below market value doesn’t really give one a sense he was very confident in the direction of the company.
The outgoing CEO, Mr. Jatinder S Bhogal, was hired at about the time Mr. Rhee was originally appointed to the board in 2000. According to the most recent 10K, Mr. Bhogal retired with 3.75M options at $2.60 for his less than 2 years worth of service.
Finally, Mr. Rhee has 120 days to secure financing for the purchase of Mr. Rayat’s shares, and as of yesterday’s announcement that does not appear to have happened quite yet. At the bottom of the press release is a cautionary statement:
“Cautionary Statement: Investors are cautioned that the transaction referenced in this announcement includes, among other terms and conditions: (a) Deferred payment obligations of Light Quantum Energy Holdings (the “Buyer”) to Kalen Capital Corporation and its relevant subsidiaries (the “Seller”); (b) Financial penalties payable by the Buyer to the Seller under certain conditions; (c) Operating covenants imposed on the Buyer by the Seller until such time that all payment obligations of the Buyer are satisfied; (d) Obligations of the Buyer to return all securities to the Seller in the event that the Buyer is unable to satisfy payment obligations to the Seller; and (e) Others. There is no assurance that the Buyer will satisfy deferred payment obligations to the Seller. Mr. John Rhee serves as Managing Director of Light Quantum Energy Holdings, a company owned by Mr. Rhee and his immediate family. Details of the transaction, including deferred payment provisions, operating covenants, and default remedies are provided in the Company’s 8-K filed on December 14, 2021, available at SEC.gov and at www.SolarWindow.com.”
So the securities have already been transferred and Mr. Rhee apparently has 120 days to make good on the payment or return those securities. From reading through the original agreement, there does not appear to be any restriction on Mr. Rhee not to sell any shares in order to satisfy the obligation as long as he does not exercise the warrants or take his ownership under 50%. He also has the option to raise equity or debt, which he could likely loan back out to himself to pay for the shares.
With a sweetheart deal like this one, it doesn’t appear that this change in ownership is really going to change much at all.