Mr. David Deacon reports
SEMCANINC. ANNOUNCES CLOSING OF THE FIRST TRANCHE OF FINANCING FOR GROSSPROCEEDS OF $2,014,520 AND CONVERTS $3,743,363 OF DEBT TO EQUITY
Semcan Inc. has successfully closed the first tranche of the previously announced financing.
On April 14, 2011, the company closed the first tranche of the financingfor gross proceeds of $2,014,520 through a private placement toaccredited investors of a secured convertible loan.
David Deacon, chief executive officer, commented, "The closing of thisfirst tranche of the financing plus the conversion of over $3.7-millionof debt to equity represents a major step forward in rebuilding thecompany's financial strength. The working capital it has provided willallow the company to continue to execute the growing order backlog, andalso invest in the resources needed to take the company to its nextstage of development."
The loan interest rate is 10 per cent per annum, paid quarterly incash. The term is three years, with the company having the right torepay the loan in cash after the first 12 months of the term uponproviding the lenders with 45 days written notice. Any such earlyrepayment must apply to the full outstanding balance of the loan. Theearly repayment privilege will be available to the company only if thecompany's common shares have traded at or above 25 cents per share forthe 20 business days prior to the date of the company providing noticeto the lenders of its intent to repay the loan. The loan is convertiblein full or in part at any time until maturity into units, at the optionof the lenders at a conversion price of 14 cents per unit. Each unitcomprises one common share and one-half of a common-share purchasewarrant. Each full warrant received on conversion will be exercisable toreceive one common share at a price of 14 cents per share, with thewarrants expiring at the original maturity date of the loan. The loan issubject to TSX Venture Exchange approval.
Further to the company's news release in Stockwatch dated March 23,2011, Semcan has converted $3,743,363 of debt into 7,506,976 commonshares at a deemed price of 40 cents per share, 294,118 common shares ata deemed price of 34 cents per share, 1,859,943 common shares at adeemed price of 30 cents per share, 262,950 common shares at a deemedprice of 20 cents per share and 214,286 common shares at a deemed priceof 14 cents per share. The conversion of debt to common shares has beendone in order to conserve cash and finance continuing working capitalneeds.
In addition, lenders have agreed that the company can defer therepayment of approximately $1.5-million of other term debt until thecompany's senior debt has been repaid.
The net proceeds from the first tranche of the Loan, net of filing fees,were approximately $2-million, of which $100,000 were used to repayexisting debt. The balance will be used for working capital purposes.The effect of the loan, conversion of existing debt to equity and thedeferral of existing debt will improve the company's working capitalposition by approximately $7.2-million. The securities issued pursuantto the loan and debt conversion transactions are subject to a four-monthhold period from the date of issuance.
We seek Safe Harbor.