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Lansing’s XG Sciences plans $24 million IPO

BY Sunday, March 20, 2016 04:38pm

LANSING — A Mid Michigan nanotechnology company seeks to raise $24 million through an initial public offering to fund operations as it continues to commercialize composite materials for rechargeable lithium-ion batteries and other uses.

XG Sciences Inc. wants to issue up to 3 million shares of common stock at $8 per share, according to a filing with the U.S. Securities and Exchange Commission. The company initially filed in January to do a $16 million IPO, then raised the amount to $24 million in a subsequent March filing.

While the company has accumulated operating losses exceeding $43 million during its development stage, the securities filing cites a growing customer list and order volume. XG Sciences projects 2016 revenues of $5 million to $10 million through the sale of graphene and graphene nanoplatelets for electronic and industrial products that use lithium-ion batteries. Uses of the products range from vehicles and tablet computers to power tools and cell phones.

The company generated $642,592 in revenue in 2015.

“We believe the unique properties of graphene and graphene nanoplatelets will enable numerous new product applications and the market for such products will quickly grow to be a significant market opportunity,” the company stated in a prospectus filed with the SEC. 

A number of companies are currently testing XG Sciences’ materials for applications including lithium-ion batteries, supercapacitors, thermal shielding, inks and coatings, printed electronics, construction products, composites and military uses.

Past customers include automotive companies Ford Motor Co., Johnson Controls Inc., Honda and Magna International, plus firms including Samsung SDI, LG Chem, Dow Chemical and Dupont. XG Sciences has sold materials to more than 1,000 customers since 2008, according to the SEC filing.

After working on the technology for a decade, the company opted to pursue an IPO as the market begins to open up for some applications, CEO  told MiBiz. As a leading producer of graphene and nanoplates globally,“we would like to be a first-comer also for accessing public markets in North America,” Rose said. 

“We feel it’s a good balance of timing for us,” said Rose, who joined XG Sciences in January 2014.

“In terms of establishing the bar, if you will, we feel earlier is better than later,” he said. “We can continue and pursue strategic investors and other types of funding, but we just felt, on balance, that this would be the best route for our shareholders — to go down this pathway and begin to step our way into the public markets, and do it in a somewhat controlled fashion.”

Rose previously worked at SAFC Hitech, a $100 million division of St. Louis-based Sigma-Aldrich Corp. that produces materials for the LED, energy, display and semiconductor markets.

Formed in May 2006 and based in a Delphi Township facility it moved to in 2012, XG Sciences licensed a proprietary manufacturing process developed by researchers at Michigan State University. Through August 2015, the company raised $31.2 million in private capital from strategic investors, and its technology has been “vetted in a fair number of ways by folks who put their money on the table,” Rose said.

Investors include Samsung Ventures, Hanwha Chemical Corp. and POSCO Corp.

The company considers rechargeable batteries as “one of the more exciting near term market opportunities.” Materials used for the production of lithium-ion batteries were a $60 billion market in 2014, according to the prospectus.

One of the areas that XG Sciences targets had a market size of $2.5 billion in 2014 and a compounded annual growth rate of 16 percent over the previous decade. Addressing one segment of that market represents a $500 million sales opportunity for an XG Sciences material that replaces carbon and graphite used the current generation of lithium-ion batteries, according to the filing. The company stated that the material results in improved storage capacity and battery life. 

XG Sciences in December signed a joint development agreement to customize materials for Boston-Power Inc.’s lithium-ion battery cells.

While the company’s materials have not yet been incorporated into large-volume commercial products, “six customers have informed us of their intent to begin commercializing products using our products during 2016,” XG Sciences stated in the prospectus. “As a result, we expect to begin shipping significantly greater quantities of our products in 2016.”

Of the $24 million XG Sciences hopes to raise through an IPO, $11.4 million will go to fund operations for the next two years, “by which time the company might begin generating positive cash flow from operations.” Proceeds from the IPO would also go to working capital, and to increase capacity and its sales and technical service staff.

From April 2015 to January 2016, XG Sciences raised $4.3 million from 64 private investors, according to a separate SEC filing. The amount is close to what the company identified in its IPO filing as the funding it needed to sustain operations for another 12 months.

XG Sciences is self-underwriting the IPO and initially will seek to market its shares to institutional and retail investors through broker-dealers to avoid the expense of listing on a public exchange, Rose said. It does eventually want to join an exchange such as Nasdaq, the New York Stock Exchange or the OTC Markets.

The Lansing office of law firm Foster Swift Collins & Smith PC is serving as legal adviser to XG Sciences for the IPO, while Atlanta-based accounting firm Frazier & Deeter LLC is the company’s financial adviser.  

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