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Archive for November 10th, 2020

SALE OF The NanoSteel Company, Inc.

Gerbsman Partners – http://gerbsmanpartners.com  has been retained by Horizon Technology Finance Corporation (https://horizontechfinance.com), as collateral agent (in such capacity, “Horizon”) for the senior secured lenders to The NanoSteel Company, Inc. (“NanoSteel”), (http://nanosteelco.com), to sell all or substantially all of NanoSteel’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “NanoSteel Assets”).  Please see attached detail Sales Notice, NanoSteel presentation, NDA, Fixed Asset list and Master Patent list.

Please be advised that the NanoSteel Assets are being offered for sale pursuant to Section 9-610 of the Uniform Commercial Code (“the Code”) in a private proceeding.  Purchasers of the NanoSteel Assets will receive all of NanoSteel’s right, title, and interest in and to the purchased portion of Horizon’s collateral, which consists of substantially all of NanoSteel’s assets, as provided under the Code, with an express waiver of all warranties to the fullest extent permitted under Section 9-610(e)(2) of the Code. 

Founded in 2002 to develop steel products based on research completed at the U.S. Department of Energy, NanoSteel launched its initial products in 2003 as steel-based coatings while continuing to expand the technology into sheet steel. NanoSteel has created an extensive portfolio of over 100 patents worldwide (filed & granted) supporting its sheet steel technology. Venture investors including EnerTech Capital, Fairhaven Capital, and Chrysalix Venture Capital, as well as strategic investors General Motors, Lear Corp., and Trinity Rail Corp, funded NanoSteel with approximately $85M of capital from 2005 – 2020.

The sale is being conducted with the cooperation of Horizon and NanoSteel.  Certain former NanoSteel employees and management have advised Horizon that they will be available to assist purchasers with due diligence and assist with a prompt transfer of the NanoSteel Assets.

IMPORTANT LEGAL NOTICE:  

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the NanoSteel Assets has been supplied by third parties and obtained from a variety of sources. It has not been independently investigated or verified by Horizon or Gerbsman Partners or their respective agents.  

Potential purchasers should not rely on any information contained in this memorandum or provided by Horizon or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Horizon and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reason of Horizon’s or Gerbsman Partners’ negligence or otherwise. 

Any sale of the NanoSteel Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Horizon or Gerbsman Partners. Without limiting the generality of the foregoing, Horizon and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the NanoSteel Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose. 

This memorandum contains confidential information and is not to be supplied to any person without Horizon’s or Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

SUMMARY OF HISTORICAL INFORMATION[1]

NanoSteel (or “the Company”) is an advanced materials company specializing in the design and commercialization of patented steels with exceptional mechanical properties derived from their nano-scale microstructure.  Targeting a $40B addressable market, the Company’s primary focus is the design of proprietary alloys for use as sheet steel in automotive and railcar light-weighting applications to improve efficiency and increase revenue generating payload capacity while maintaining strict safety standards. NanoSteel has successfully completed alloy design, full scale production trials, weld qualifications, stamping / forming studies, customer testing, and end customer prototype deliveries.

The Company has also granted end-customer licenses for the sheet steel product to General Motors, Lear Corporation and Trinity Rail Corporation.  In addition, it has licensed its non-sheet steel technology to Lincoln Electric for use as a steel coating and separately, its powder technology to Formetrix for use as a 3D printable steel powder.   

Founded in 2002 to develop steel products based on research completed at the U.S. Department of Energy, the Company launched its initial products in 2003 as steel-based coatings while continuing to expand the technology into sheet steel.  In 2010 NanoSteel developed the first nanostructured steel that could be produced in sheet form. The Company achieved additional technological breakthroughs in 2014 which allowed for the first full scale production of NanoSteel sheet steel by a steel producing partner.  In 2018, NanoSteel achieved a critical inflection point by validating repeatable, full-scale commercial grade production and is currently delivering material to railcar and automotive companies for commercial qualification.

The Company has created an extensive portfolio of over 300 patents worldwide, separable into 3 major categories: Coatings, Additive Manufacturing and Sheet Steel.  Each category was constructed to provide the freedom to operate without requiring the use or overlap of the other two.  Venture investors including EnerTech Capital, Fairhaven Capital, and Chrysalix Venture Capital combined with strategic investors General Motors, Lear Corp., and Trinity Rail Corp have supported the Company with approximately $85M of capital from 2005 – 2020.

Target Market: 

NanoSteel’s unique, patented combination of exceptionally high levels of strength and formability combine to provide a new solution to automakers.  Designing structures with NanoSteel allows Auto OEMs to use thinner gauges of steel to reduce part weight, form advanced geometry parts to meet stiffness requirements for ride quality and safety, and leverage their existing manufacturing capital equipment and skilled workforce. Utilizing the technology designed for automotive applications, NanoSteel has expanded its market outside the traditional Automotive market to include applications within the railcar, container and automotive aftermarket segments.

Customers and Partners: 

NanoSteel has strong customer relationships with blue-chip customers across the automotive sector. Key customer relationships include leading producers of light duty passenger vehicles, tanker railcars, all-terrain vehicles (“ATVs”), automotive car seats, auto suspension components and military shipping containers.

NanoSteel is a steel alloy design leader with more than 500 alloys designed and a proven prototype scale system for the rapid design, production and testing of new steel alloys.  A key factor in NanoSteel’s success has been the Company’s relationships with steel producers worldwide which have developed the production capability to produce NanoSteel alloys in full scale production.

Intellectual Property

NanoSteel has generated a substantial body of intellectual property in the form of patents, trademarks, and know-how.  The Company currently has 13 issued US patents and 28 issued international patents, 11 pending patent applications in the US and 55 pending international applications for its sheet steel product line.  The patent portfolio includes innovations on alloy chemistry, microstructure and strengthening mechanisms. Details of the issued patents and trademarks are shown in Appendix A.

ALL INFORMATION PROVIDED HEREIN RELATING TO THE OPERATIONS OF NANOSTEEL’S BUSINESS AND THE MARKET POSITIONS AS IT RELATES TO PERIODS ON OR PRIOR TO OCTOBER 31, 2020, WHEN THE COMPANY CEASED OPERATIONS.

  • Attractive Industry – Steel continues to be the highest volume material used for automotive body structures throughout the world.  New steel alloy designs have been called for by automotive designers to enhance the lightweighting designs in order to meet ever increasing emissions regulations for internal combustion engine vehicles and increase range distances for electric vehicles.
  • Best in Class Technology – NanoSteel’s alloys provide some of the highest level of strength and formability available in sheet steel, necessary for automotive design applications while providing a less expensive option than alternative materials such as aluminum or carbon fiber.
  • Diversified Base of Customers – NanoSteel’s sheet steel alloys are under qualification testing in applications covering most aspects of automotive body structures, tanker railcars, shipping containers, and aftermarket automotive components.
  • Extensive Relationships – NanoSteel maintains strong relationships with both end-users such as automotive and railcar OEMs along with international steel producers.

The reasons why NanoSteel’s assets are attractive are:

•  NanoSteel is considered a leader in the field of advanced high strength steel alloy development.  Its patent portfolio creates a strong barrier to entry for steel companies wishing to design competing alloys with similar combinations of mechanical performance.  However, recent working capital constraints and an overly leveraged balance sheet have created the opportunity for all or a portion of the NanoSteel Assets to be sold.  The acquisition of all or a portion of these assets can enable the purchaser to realize significant short and long term value.

•  Extensive Global Patent Portfolio: NanoSteel’s patent portfolio was developed to assure global coverage.  Patents within all geographies important to automotive production and sales (North America, Europe, Japan, China) provide for excellent security against competitive threats.  Structured to go beyond simple chemistry claims, the patent portfolio includes exclusive rights to microstructure and strength mechanism making it significantly challenging for competition.

•  Market Accepted Royalty Model:  NanoSteel has secured end-user royalty bearing licenses from General Motors, Lear Corporation and Trinity Rail, validating the royalty bearing business model.  In addition to the current licensees, NanoSteel has engaged with the majority of the world’s major automotive OEMs who have begun the process of qualifying NanoSteel through forming and/or welding trials.  In all cases, the business approach of royalty bearing licenses has been acknowledged as a necessary condition of commercial use.

•  Freedom to Operate / Secondary Revenue Stream:  NanoSteel strategically avoided the granting of any production licenses.  The acquirer will have complete authority over sublicenses granted to production suppliers creating the desired level of competition and global availability at terms compelling to the owner.  The potential for royalty revenue therefore exists from the granting of licenses to both steel producers and additional end-users.

•  Ease of Production: NanoSteel alloys have been specifically designed to be producible utilizing existing steel production assets.  The alloys require no special constituents.  Producible within Electric Arc Furnaces (“EAFs”), the Company’s alloys can utilize scrap as raw material.  Unlike most competing AHSS products, NanoSteel alloys do not require special heat treatment processes, such as quench and tempering, to achieve their exceptional mechanical performance.

•  Ease of Use:  The Company’s alloys were designed to provide the high formability necessary to allow conventional component production utilizing forming techniques common to current automotive production.   NanoSteel sheet steel avoids the need for expensive, capacity constrained hot stamping which is required by most other AHSS alloys due to their limited formability.  Weldability has been optimized to simplify the joining process and benefit from the use of standard automotive welding systems.  Because of the processing similarity to conventional steels, the Company’s products further benefit the end-customer by requiring no retraining of production employees and no unique capital equipment which is necessary for other AHSS products.

•  Rapid Alloy Development Process:  NanoSteel has developed the process and facility to allow for rapid iron-based alloy development including alloy design, melt, cast, processing and testing within a small footprint utilizing 4kg prototype melt sizes.  Key testing capability allows for the rapid iterative process to optimize alloys for specific performance characteristics and customer product demonstrations.

 

Former Management Team at NanoSteel (for information purposes only):

David Paratore, CEO:  Having joined NanoSteel in 2005, Dave brought NanoSteel experience in general management, operations and business development from products ranging from superconductor wire to aircraft engines. Prior to NanoSteel, he was president and COO of American Superconductor (AMSC) and held positions of increasing responsibility with United Technologies – Pratt & Whitney Aircraft Engines. Dave’s successes there include achieving profitability for two businesses – high technology electric motors and power electronics – and the creation of a jet engine overhaul business. He received his BS in Mechanical Engineering from UMass Amherst and his MBA from Rensselaer Polytechnical Institute. Dave is an avid cyclist and soccer player.

Dr. Daniel Branagan, CTO & Founder:  Dr. Branagan has been a pioneering leader in developing new materials for over 25 years with a focus on the commercialization of paradigm changing and disruptive nanotechnology.  Dr. Branagan has won numerous awards for his achievements, most recently SAE’s Sydney H. Melbourne Award for “excellence in the advancement of automotive sheet steel”.  He has also been recognized by both Forbes and MIT as an ‘important innovator of our time’.  Dr. Branagan earned his Ph.D. in metallurgy from Iowa State University.

Rhonda Landers, CFO: Rhonda led NanoSteel’s financial vision and strategic implementation. She came to NanoSteel from Transas, a global marine communications technology company. Through similar high-tech CFO positions at companies such as Globe Wireless, Seawave LCC and Instrumentation Laboratory she demonstrated leadership in fund raising, due diligence, acquisitions and shareholder exits. Ms. Landers began her career at PriceWaterhouseCoopers and holds a BA from Babson College and an MBA from Instituto de Estudios Superiores de la Empresa in Spain.

Craig Parsons, President – Automotive:  Craig led NanoSteel’s entry into the automotive market, as an expert in automotive parts production, supply chain solutions, and new product development. Craig has been recognized for bringing leading lightweighting technologies such as laser welded blanks and tubes, roll-forming and hot-stamping to the automotive OEMs. Prior to joining NanoSteel, Craig was vice president of sales and business development for Gestamp North America. He received his BS from Eastern Michigan University, his Master’s in supply chain management from Michigan State University and his MBA from the University of Detroit. Outside the office, Craig can often be found cheering his kids on at their extracurricular activities.

THE BIOGRAPHICAL INFORMATION CONCERNING THE FORMER MANAGEMENT OF NANOSTEEL IS INCLUDED FOR INFORMATION PURPOSES ONLY.  ALTHOUGH THIS SALE IS BEING CONDUCTED WITH NANOSTEEL’S COOPERATION, THIS SALE IS STRICTLY AN ASSET SALE OFFERED BY HORIZON PURSUANT TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE.  HORIZON HAS NO ARRANGEMENT PURSUANT TO WHICH THE BUYER OF THE NANOSTEEL ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY FORMER NANOSTEEL OFFICERS OR EMPLOYEES.

INTERESTED PARTIES SHOULD SATISFY THEMSELVES THROUGH INDEPENDENT INVESTIGATIONS AS THEY OR THEIR LEGAL AND FINANCIAL ADVISORS SEE FIT.

Any sale of the NanoSteel Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Horizon or Gerbsman Partners. Without limiting the generality of the foregoing, each of Horizon, Gerbsman Partners and each of their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the NanoSteel Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

 

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (in the form attached hereto as Exhibit A) to have access to key members of NanoSteel’s former management, intellectual capital and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, upon obtaining Due Diligence Access, shall be deemed to acknowledge and represent that (i) it is bound by the bidding procedures described herein; (ii) it has an opportunity to inspect and examine the NanoSteel Assets and to review all pertinent documents and information with respect thereto; (iii) it is not relying upon any written or oral statements, representations, or warranties of Horizon or Gerbsman Partners, or any of their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of such interested party, and neither Horizon nor Gerbsman Partners (nor any of their respective, staff, agents, or attorneys) make any representations as to the accuracy or completeness of the same.  

Following an initial round of due diligence, interested parties will be invited to participate with a bid for the acquisition of the NanoSteel Assets. Each sealed bid must be submitted via email to steve@gerbsmanpartners.com(with a copy to Horizon Technology Finance Corporation, Diane Earle, Chief Credit Officer, diane@horizontechfinance.com), so as to be actually received by Gerbsman Partners and Horizon no later than Tuesday, December 15, 2020 at 3:00 pm. Eastern Standard Time (the “Bid Deadline”).

Bids should identify with specificity the assets being tendered for so that such assets are reasonably identifiable. Please be advised that the NanoSteel fixed asset list set forth on Exhibit B attached hereto may not be complete. 

Horizon reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from the sale. 

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Horizon Technology Finance Corporation). Unsuccessful bidders will have their deposit returned to them within 72 hours of Horizon’s acceptance of the successful bid.

Horizon will require the successful bidder to close within 7 days of Horizon’s acceptance of the successful bid.  Any and all of the NanoSteel Assets will be sold on an “as is, where is” basis, with no representations or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the NanoSteel Assets shall be the sole responsibility of the successful bidder, which shall pay the aggregate amout of all such taxes to Horizon concurrently with closing of each sale of the NanoSteel Assets.

For additional information, please see below and/or contact:

 

Steven R. Gerbsman                                                          

Gerbsman Partners

steve@gerbsmanpartners.com                         

 

Kenneth Hardesty

Gerbsman Partners

ken@gerbsmanpartners.com

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