Known for 3D printing aerospace-grade titanium components for industry giants like Boeing and Spirit AeroSystems, Norsk Titanium (Euronext: NTI, OTCQX: NORSF) announced a new bridge loan agreement. This temporary financial boost will help the company continue its work while looking for more long-term funding. This announcement comes on the heels of another significant development – the appointment of Interim CEO Carl Johnson, who steps in as the company’s chief executive following the departure of Mike Canario, who left to become the new CEO at Qarbon Aerospace, a manufacturer of composite components and assemblies.
Headquartered in Oslo, Norway, Norsk has been a unique player in additive manufacturing (AM). By leveraging 3D printing, it has successfully created complex and lightweight parts, addressing the specific needs of aerospace and various other industries.
The recent development involves a bridge loan of NOK 21.9 million ($2 million) provided by White Crystals, an independent entity despite being a shareholder in Norsk Titanium Cayman Ltd., which holds the largest stake in Norsk at 34.9%. The loan’s primary purpose is to extend Norsk’s cash runway, allowing the company to continue exploring opportunities to secure long-term funding. With the funds from White Crystals, Norsk says it can sustain its ongoing operations until mid-December 2023.
One important factor of this loan is that it is non-interest bearing, meaning Norsk will not incur interest expenses. However, in exchange, the company will pay a one-time facilitation fee consisting of 250,000 common shares. This fee is like a thank-you gift to the lender. To pay the Facilitation Fee, the company’s Board of Directors has agreed to create the new shares, with a price of NOK 0.08 (0.74 cents). However, if the company fails to secure additional funding before January 1, 2024, White Crystals will receive a “Make Whole Fee” consisting of 125,000 common shares for each additional month until the loan is fully repaid.
Both Norsk and White Crystals agree that if Norsk issues new shares or uses other financial methods to raise money, White Crystals can decide to turn the loan into shares. The price at which they can do this will be the same as what others pay to get those new shares from Norsk.
It’s crucial to understand that giving out shares to cover the Facilitation Fee and if needed, the Make Whole Fee is different from what shareholders usually have the right to do. According to the company, the Board of Directors looked at the terms of the loan and the importance of raising money in a smart and flexible way. After thinking it through, they decided that doing it this way was best for the company and its shareholders.
Norsk’s history is based on directed energy deposition (DED) of titanium since its founding in 2007. While its first production machine was not released until 2015, it produced several prototypes and established many crucial partners and investors during those years. This included backing from Arconic (previously Alcoa), a cooperation agreement with Airbus, and becoming an approved Boeing supplier. It was even during this time that it received $125 million from the state of New York to create a 3D printing facility in Plattsburgh.
The company has since established itself firmly in the aerospace segment. First, it produced the world’s first 3D printed, Federal Aviation Administration (FAA)-approved structural aircraft part for the Boeing 787 Dreamliner. This was followed by the first 3D printed integrally bladed rotor, which has undergone a second round of testing and will likely be topped by a landing gear structure for Safran. Now that it is in production for the 787 component with its customer Spirit AeroSystems, the company is an essential player in the additive space by demonstrating the possibility of DED metal 3D printing for structural end parts.
In June 2022, Norsk began trading on the Over-The-Counter Markets (OTCQX) under the ticker symbol “NORSF.” This move followed the company’s initial public offering (IPO) on the Euronext Growth Stock Market in 2021, where it trades under the symbol “NTI.” While these dual listings provided greater access to investors in different regions, Norsk’s financial situation underlines the need for additional capital.
Securing the future
In its half-year financial earnings report, the company acknowledged that its current free cash flow supports less than a year of operations. Also, the Board recognized the need to secure additional funding to sustain operations until reaching cash break-even, a milestone expected in 2026 based on current activity levels. However, the outcome and timing of these funding efforts remain uncertain.
In response, the company is in discussions with potential investors while exploring other strategic alternatives. To maintain ongoing operations during these negotiations, Norsk has received the loan and plans to bolster its workforce in the fourth quarter of 2023 to meet anticipated customer demand through 2024. However, there are no guarantees regarding the outcome or timing of the ongoing discussions and funding review process. If the process of securing long-term funding extends beyond the available cash runway, Norsk may need to implement cost-reduction measures and assess the viability of its continued operations.
While Norsk’s pursuit of additional funding reflects its commitment to advancing additive manufacturing technology, the company still faces the challenge of securing the necessary economic support to continue its work, which has the potential to recast various industries through 3D printing.
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