Pacific Safety Products Inc.
TSX VENTURE : PSP

Pacific Safety Products Inc.

August 18, 2010 07:29 ET

Pacific Safety Products Inc. Announces the Closing of a $1,000,000 Private Placement Unit Offering and Sale of Headborne System Assets

KANATA, ONTARIO--(Marketwire - Aug. 18, 2010) - Pacific Safety Products Inc. (TSX VENTURE:PSP) ("PSP" or the "Company") announced today that the Company has completed a non-brokered private placement offering of $1,000,000 in funds (the "Offering"). The Company also sold certain of PSP's headborne system assets, in particular, the helmet liner capability, to Revision Eyewear Inc. ("Revision") for $275,000 and a 4% royalty on gross sales over a 5 year period (the "Headborne Sale"). In connection with the Headborne Sale, PSP granted Revision an exclusive option for a period of one month to purchase the remainder of the headborne systems assets for an additional $100,000 and a 2.5% royalty on gross sales over a 5 year period.

Details of the Offering

The Offering consisted of 40 units (the "Units") at a purchase price of $25,000 per Unit. Each Unit consists of $25,000 in principal amount of unsecured convertible debentures (the "Debentures") and 62,500 detachable common share purchase warrants (the "Warrants"). The Debentures are convertible into common shares of PSP from the date of issue, at the option of the holder, at a price of $0.10 per common shares. The Debentures will mature and be payable three years from the date of issuance and, subject to the conversion right, may be repaid by the Company after one year from the date of issuance. Interest will accrue on the Debentures at a rate of 10% per annum, compounded and paid annually, payable in (i) cash, or, at the election of the Company, (ii) common shares of the Company calculated based on 95% of the market weighted average closing price for the period of 20 trading days ending on the day that is 5 days immediately preceding date of payment. Any conversion which will result in a subscriber holding 20% or more of the Company's issued and outstanding common shares is subject to shareholder approval. Each Warrant will allow the subscriber to purchase one common share at a price of $0.10 per common share for the first 6-month term and $0.12 per common share for the second 6-month term.

The Offering is primarily undertaken by non-insiders, however, Stonehouse Management Capital Ltd. ("Stonehouse"), who currently holds 9.9% of the issued common shares of PSP, participated in approximately $350,000 of the Offering. Assuming full exercise of its Debentures and Warrants, Stonehouse will hold approximately 18.1% of the issued and outstanding common shares of PSP. Daniel Marks, a member of the Board of Directors of PSP, is the President of Stonehouse.

Stonehouse acquired these securities for investment purposes. It may, from time to time, acquire additional securities of PSP, dispose of some or all of the existing or additional securities it holds or will hold, or may continue to hold its position.

The Units issued upon the closing of the Offering are subject to a four-month hold period plus one day from the date of completion of the Offering in accordance with applicable securities legislation.

This press release does not constitute an offer to sell, or a solicitation of an offer to sell, any of the foregoing securities in the United States. The foregoing securities will not be registered with the U.S. Securities and Exchange Commission and may not be offered or sold within the United States without registration or an applicable exemption from the registration requirements of the United States Securities Act of 1933 and any applicable state securities laws.

Bank Forbearance

Although the Company remains offside the debt to tangible net worth covenant in its bank credit facility, the Bank has agreed, pursuant to a letter agreement dated today's date (the "Forbearance Agreement"), not to take steps to realize under the facility prior to February 28, 2011 (the "Forbearance Period") unless a terminating event as defined in the Forbearance Agreement occurs. During this Forbearance Period, the Company will be subject to amended financial covenants. Proceeds from the Offering and from the Headborne Sale will be used by the Company to fund projected losses as at June 30, 2010 and September 30, 2010 and during the Forbearance Period.

About PSP

The mission statement of Pacific Safety Products Inc. is ...we bring everyday heroes home safely™. PSP is an established industry leader in the production, distribution and sale of high-performance and high-quality safety products for the defence and security market. These products include body armour to protect against ballistic, stab and fragmentation threats, ballistic blankets to reduce blast effects, and protective products against chemical and biological hazards. PSP is the largest armour manufacturer in Canada, directly supplying the Canadian Department of Defence, Federal Government Agencies and major Canadian law enforcement organizations. The Company also provides specialized law enforcement and safety products through APS Distributors, a division of PSP that services law enforcement and public safety agencies across the country. The Company, through its U.S. subsidiary Sentry Armor Systems Inc., provides body armour products to U.S. based law enforcement and private security firms. The Company also produces tactical clothing. Pacific Safety Products is a reporting issuer in British Columbia, Alberta and Ontario, Canada and publicly trades under the symbol PSP on the TSX Venture Exchange.

About Revision

Revision Eyewear Inc. is a private company specializing in the development and delivery of purpose-built eye protection solutions for military and tactical clients worldwide. Revision's clients include the U.S. Department of Defence, the Canadian Department of National Defence, the Netherlands Defence Materiel Organization, the Swiss Federal Department of Defence and the UK Ministry of Defence, among others. Privately owned and ISO 9001:2008 certified, Revision's operational headquarters is located in Essex Junction, Vermont, USA, with additional offices in the UK, Germany and Canada. For more information, visit www.revisioneyewear.com, write info@revisioneyewear.com, or call +1 514-849-1874.

Forward-Looking Statements: This news release contains forward-looking statements based on management's expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the proposed Offering, its likelihood of completion on either the terms currently proposed or on revised terms, together with any statements about the Company's growth strategy, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. In particular, there are no assurances that the Company will be able to remain onside the revised financial covenants in its bank credit facility or that the Company will be able to raise additional funds to fund ongoing operations in the event that losses during the Forebearance Period are greater than projected. Many factors, including those discussed more fully elsewhere in this release and in documents which may be filed with the British Columbia Securities Commission, the Alberta Securities Commission, the Ontario Securities Commission, the TSX Venture Exchange, as well as others, could cause results to differ materially from those stated.

On behalf of the Board of Directors

Janet Mason, President

Neither TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Pacific Safety Products Inc.
    Janet Mason
    President
    (613) 254-9488 ext. 322
    www.pacsafety.com