DGTL arranges 1:15 share rollback, $2-million placement 2024-07-19 18:46 ET - News Release
Mr. John Belfontaine reports
DGTL HOLDINGS INC. ANNOUNCES CONSOLIDATION, PRIVATE PLACEMENT AND POTENTIAL CREATION OF A NEW CONTROL PERSON
DGTL Holdings Inc. intends to complete a consolidation (as defined herein) of its outstanding common shares and the potential creation of a new control person (as defined herein), John David Belfontaine, subject to obtaining requisite approval from the annual general and special meeting of shareholders, scheduled to take place at 11 a.m. ET on July 30, 2024. In addition, after the consolidation, the company is also proceeding with a non-brokered private placement of up to 26,666,666 units, priced, on a postconsolidation basis of 7.5 cents, for gross proceeds up to $2-million.
Each unit will consist of one postconsolidation common share and one-half of one postconsolidation common share purchase warrant. The warrants are exercisable for a period of three years at a postconsolidation exercise price of 15 cents per postconsolidation common share.
The company intends to use the proceeds from the private placement for increased marketing and investor relations activities as well as technology development and general working capital, including retirement of existing accounts payable.
2024 meeting
Consolidation approval
As a matter of the upcoming meeting, the company is seeking shareholder approval for a proposed consolidation of all of the issued and outstanding common shares of the company on the basis of up to one postconsolidation common share for 15 preconsolidation common shares. There are currently 76,465,973 common shares issued and outstanding. If the consolidation is approved, and effected on a 1:15 basis, there will be an aggregate of 5,097,731 common shares issued and outstanding. The board may determine not to implement the consolidation at any time after the meeting and after receipt of necessary regulatory approvals, but prior to effecting the required amendment to the company's articles, without further action on the part of the shareholders. The proposed consolidation is subject to final TSX Venture Exchange approval.
Creation of a new control person
Mr. Belfontaine, the chief executive officer of the company, currently, directly and indirectly, holds 11,058,038 common shares, representing approximately 14.46 per cent of the issued and outstanding shares of the company. The company filed a management information circular dated May 28, 2024, in connection with the meeting. Included in the circular was a broad resolution seeking shareholder approval for the creation of a new control person. The company is limiting the scope of that approval to the private placement as described in this press release.
Mr. Belfontaine intends to subscribe for up to 3,333,333 units pursuant to the private placement. If the private placement is completed for only $250,000, Mr. Belfontaine will have control or direction over, directly or indirectly, 46.93 per cent of the issued and outstanding common shares on an undiluted basis, and approximately 58.83 per cent of the issued and outstanding common shares on a partially diluted basis. Assuming that the private placement is completed for $2-million, and Mr. Belfontaine purchases $250,000 of common shares, he will have control or direction over, directly or indirectly, 12.71 per cent of the issued and outstanding common shares on an undiluted basis and 17.83 per cent of the issued and outstanding common shares on a partially diluted basis.
Under Policy 4.1 -- Private Placements of the TSX Venture Exchange Corporate Finance Manual, shareholder approval is required where a transaction creates a shareholder that holds or controls 20 per cent or more of an issuer's shares. The Belfontaine subscription may result in Mr. Belfontaine becoming a control person of the company. Pursuant to Policy 4.1, if a transaction results in the creation of a new control person, the TSX-V requires the company to obtain shareholder approval of the transaction on a disinterested basis, excluding any shares held by the proposed new control person and its associates and affiliates.
At the upcoming meeting, approval for the creation of a new control person will be sought due to the Belfontaine subscription.
Proxy deadline
The company has opted to waive the proxy deadline for the meeting and will accept proxies up until the start date of the meeting.
If the company obtains the requisite shareholder approval for the consolidation and designation of Mr. Belfontaine as a control person, the company will affect the consolidation following the meeting, and then shortly thereafter close the private placement.
Related party transaction
The Belfontaine subscription constitutes a related party transaction within the meaning of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. The company relies on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(b) and 5.7(1)(b) in respect of the Belfontaine subscription as no securities of the company are listed or quoted on the Toronto Stock Exchange, the New York Stock Exchange, the American Stock Exchange, the Nasdaq Stock Market, or a stock exchange outside of Canada and the United States other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group PLC and the fair market value of the securities to be distributed in the private placement does not exceed $2.5-million.