Mr. Michael Gaffney reports
LEONOVUS ANNOUNCES BRIDGE LOAN
LeoNovus Inc. has entered into a loan agreement with two directors of LeoNovus for a secured loan in the principal amount of $100,000. The loan will have a term of 18 months from the advance date and will bear interest at the rate of 18 per cent per annum and can be paid down at any time with the penalty of the full annual interest. The loan will be secured by a general security agreement.
Subject to approval of the TSX Venture Exchange, the lenders will receive a bonus of 2.5 million common share warrants of the company; each warrant has an exercise price of four cents per share and a term of 18 months. No commissions or finders' fees were paid in connection with the loan. All bonus securities are subject to a hold period of four months and one day from the date of issuance. The number of common shares issued and outstanding at this time is 20,900,996.
The company intends to use the proceeds of the loan for bridge working capital and plans to search for a strategic partner, investment or acquisition. None of the proceeds will be used for investor relations or paid to related parties other than in the normal course of business operations. Advancement of proceeds under the loan and the issuance of the warrants are subject to approval of the TSX-V and customary closing conditions.
Insider participation in loans
As two members of the board of directors of LeoNovus, one being the chief executive officer, are participating in the loan, for the amounts of $50,000 and $50,000, respectively, and, because they are expected to receive 1.25 million warrants and 1.25 million warrants, respectively, the loan constitutes a related party transaction under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions. LeoNovus has relied on the exemption under Section 5.5(b) of MI 61-101 for the requirement to obtain a formal valuation for the warrants issuable to the insiders and the exemption under Section 5.7(1)(a) of MI 61-101 for the requirement to obtain minority approval as the total value of the loan and the value of the warrants are not equal to or greater than 25 per cent of the market capitalization of the company, whether considered separately or together. The company will file a material change report with respect to the loan. However, the material change report will likely be filed less than 21 days prior to the advancement of proceeds under the loan.
We seek Safe Harbor.
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