MORE INSIDER PARTICIPATION
KGIC closes $400K second tranche of debenture financing
2016-06-10 18:45 ET - News Release
Dr. Alex MacGregor reports
KGIC INC. ANNOUNCES SECOND STAGE CLOSING OF ONGOING CONVERTIBLE DEBENTURE PRIVATE PLACEMENT FINANCING
KGIC Inc. has completed the second-stage closing of its non-brokered private placement of convertible secured subordinated debentures for gross proceeds of $400,000 in principal amount. The private placement is continuing and the company expects to close one or more additional tranches for maximum total gross proceeds to the company of up to $6.5-million.
The debentures will have a maturity date of one year from the date of issue, will bear interest at a rate of 5 per cent per year and will be convertible into units at the holder's option at a preconsolidation conversion price of two cents per unit at any time prior to the maturity date, with each unit comprising one common share and one common share purchase warrant. Each common share purchase warrant will entitle the holder to purchase one common share of the company at a preconsolidation exercise price of five cents per share for a period of two years from the date of issuance of the debentures. If a holder notifies the company on or before the date that is 10 months following the date of issuance of the debentures that the holder will not be converting its debentures into units, the interest rate on the debentures will be increased to 12.5 per cent per annum, retroactive from the date of issuance of the debentures.
The offering was made pursuant to the grant of a discretionary waiver of the TSX Venture Exchange's minimum five-cent pricing requirement and is subject to acceptance by the TSX-V. With respect to the waiver, the company may conduct a share consolidation of its outstanding common shares in such ratio as would result in a postconsolidation conversion price equal to or greater than five cents per common share on or before the date that is six months following the closing date. However, the debentures may not be converted into common shares unless a consolidation is completed on or before the consolidation deadline. If a consolidation is not completed on or before the consolidation deadline, the conversion price will be deemed to be amended to five cents per common share in accordance with the TSX-V's minimum pricing requirements and the interest rate on the debentures will be increased to 12.5 per cent per year, retroactive from the date of issuance of the debentures.
The company intends to use the proceeds of the offering to finance the company's working capital requirements, with any remaining proceeds to be used to service existing obligations owed to the company's senior secured creditors.
Pursuant to applicable Canadian securities laws, the debentures (and the securities issuable upon conversion of the debentures) will be subject to a hold period until Oct. 11, 2016.
Certain directors subscribed for $150,000 total principal amount of debentures under this second stage of the offering. The participation of these parties in the offering constitutes a related party transaction within the meaning of Multilateral Instrument 61-101 (protection of minority security holders in special transactions) and the policies of the TSX-V. The company is relying upon the exemptions from the formal valuation and minority shareholder approval requirements pursuant to sections 5.5(g) and 5.7(1)(e), respectively, of MI 61-101 on the basis that the board of directors of the company, acting in good faith, and at least two-thirds of the company's independent members of the board of directors, acting in good faith, have determined that the company is in serious financial difficulty, that the offering is designed to improve the company's financial position and that the terms of the offering are reasonable in the company's circumstances.
The company was not in a position to file a material change report more than 21 days in advance of the closing of this tranche of the offering, as the details of participation of the interested parties were not known at such time.
The offering remains subject to certain conditions, including, but not limited to, the approval of the TSX-V. The offering was approved by the board of directors of the company.
We seek Safe Harbor.
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