Azure Dynamics Corporation
TSX : AZD
PINKSHEETS : AZDDF

Azure Dynamics Corporation

February 22, 2012 15:29 ET

Azure Dynamics Files a Preliminary Short Form Prospectus in Canada for Minimum $12 Million Public Offering of Units

DETROIT, MICHIGAN--(Marketwire - Feb. 22, 2012) -

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Azure Dynamics Corporation (TSX:AZD)(PINKSHEETS:AZDDF) ("Azure" or the "Company"), a world leader in the development and production of hybrid electric and electric components and powertrain systems for light and medium duty commercial vehicles, announced today that it has filed a preliminary short form prospectus for a proposed minimum $12 million offering (the "Offering") of units (the "Units").

The Units will be offered in all provinces of Canada, except Quebec, pursuant to National Instrument 44-101 Short Form Prospectus Distributions, and in the United States on a private placement basis to "accredited investors" under U.S. securities laws.

Each Unit is to be comprised of one common share of the Company, one common share purchase warrant (a "Warrant") and one subscription option (a "Subscription Option"). Each Warrant shall be exercisable to acquire one common share of the Company for a period of five years from the closing of the Offering, subject to adjustment in certain events. Each Subscription Option shall consist of a right to purchase one additional, different unit (consisting solely of one common share of the Company and one Warrant), which will be exercisable at any time from and after the closing of the Offering until the date that is 35 trading days following the closing date of the Offering (the "Option Expiry Date"). The exercise price of each Subscription Option will initially be the offering price. Notwithstanding the foregoing, during the period commencing on the 27th trading day following the closing date of the Offering and ending on the Option Expiry Date, the exercise price of each Subscription Option will be the lower of: (a) the price per Unit under the Offering (the "Offering Price"); and (b) 80% of the closing bid price of the Common Shares on the TSX on the 30th trading day following the closing date of the Offering. The number of Units, the price per Unit and the exercise price per Warrant will be determined in the context of the market prior to the filing of the (final) short form prospectus in respect of the Offering. In particular, the Offering Price will be set at 80% of the closing price of the common shares on the trading day prior to pricing of the Offering.

The Offering will be conducted through a syndicate of agents (collectively, the "Agents") to be established by Cormark Securities Inc. in its capacity as lead agent for the Offering. Roth Capital Partners LLC will act as placement agent in respect of the offer, sale and distribution of certain of the Units outside of Canada on a private placement basis.

The Company has granted the Agents an option (the "Over-Allotment Option"), exercisable in whole or in part and at any time up to the 30th day following the date of the closing of the Offering, to arrange for the purchase from the Company of up to an additional 10% of the Units, and/or the common shares, Warrants and/or Subscription Options that comprise the Units to cover the Agents' over-allotment position, if any, and for market stabilization purposes. The Agents may elect to exercise the Over-Allotment Option for Units, common shares only, Warrants only, Subscription Options only, or any combination thereof.

The Offering is expected to close in early to mid-March, 2012, subject to customary conditions, including, but not limited to, the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange (the "TSX").

The Company plans to use the net proceeds of the Offering to fund its ongoing engineering and product development activities as well as general corporate and working capital requirements.

If the Offering is completed, the Company will have issued common shares and other securities exercisable for common shares that, in the aggregate, are expected to be well in excess of 25% of the currently issued and outstanding shares of the Company on a non-diluted basis. As a result of the significant share dilution that is anticipated upon completion of the Offering, as well as certain other terms of the Offering (including the proposed pricing formula for the Units, which will result in a significant discount to the market price of the common shares, and the discount on the exercise price of the Subscription Option), the TSX has informed the Company that it will require the Company to obtain shareholder approval for the Offering. The Company intends to apply, pursuant to the provisions of Section 604(e) of the TSX Company Manual, for an exemption from the requirement to obtain shareholder approval, on the basis of financial hardship as the Company does not have sufficient time to seek shareholder approval.

The application to the TSX will be made upon the recommendation of a special committee of independent members of the Board of Directors of the Company (the "Special Committee"), which has been established for purposes of reviewing and making recommendations to the Board of Directors of the Company in respect of the Company's strategic alternatives. The Board of Directors of the Company, having heard the advice of the Company's financial advisors, and relying in part on the recommendation of the Special Committee, each of the members of which is free from interest in the Offering and unrelated to the parties that negotiated the Offering, has concluded that the Offering is reasonable for the Company in the circumstances. The Offering is intended to improve the Company's financial position and provide the Company sufficient liquidity in the near term.

There can be no assurance the TSX will accept the application for the use of the financial hardship exemption from the requirement to obtain shareholder approval for the Offering. The Company's reliance on Section 604(e) of the TSX Company Manual will automatically result in the initiation of a de-listing review by the TSX to confirm that the Company continues to meet current listing requirements, as is customary in such circumstances. The Company believes that, following completion of the Offering, it will be in compliance with all TSX listing requirements.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities of Azure in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or unless an exemption from such registration is available.

About Azure Dynamics

Azure Dynamics Corporation (TSX:AZD)(PINKSHEETS:AZDDF) is a world leader in the development and production of hybrid electric and electric components and powertrain systems for light and medium duty commercial vehicles. Azure is strategically targeting the commercial delivery vehicle and shuttle bus markets and is currently working internationally with a variety of partners and customers. The Company is committed to providing customers and partners with innovative, cost-efficient, and environmentally-friendly energy management solutions. For more information please visit www.azuredynamics.com.

Forward-looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning a proposed Offering of Azure's securities, the anticipated closing date of such Offering, the use of proceeds from such Offering, if completed, the ability of the Offering, if completed, to improve Azure's financial position and provide it with sufficient liquidity in the near term and Azure's belief that it will be in compliance with TSX listing requirements following completion of the Offering. The forward-looking statements are based on certain key expectations and assumptions made by Azure, including expectations and assumptions concerning the absence of further deterioration in Azure's consolidated revenues and relationships with suppliers and customers, Azure's ability to manage costs, the receipt by Azure of all regulatory approvals required to complete the Offering (including acceptance by the TSX of Azure's application for an exemption from the requirement to obtain shareholder approval of the Offering on the basis of financial hardship), Azure's ability to demonstrate compliance with TSX listing requirements following completion of the Offering, the achievement of current timetables for development programs, target market acceptance of Azure's products, current and new product performance, availability and cost of labor and expertise, and evolving markets for power for transportation vehicles. Although Azure believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Azure can give no assurance that they will prove to be correct.
Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with uncertainty as to the impact of the Offering on Azure's relationship with suppliers and customers, Azure's early stage of development, lack of product revenues and history of losses, requirements for additional financing, uncertainty as to commercial viability, uncertainty as to product development and commercialization milestones being met, uncertainty as to the market for Azure's products and unproven acceptance of Azure's technology, competition for capital, product market and personnel, uncertainty as to target markets, dependence upon third parties, changes in environmental laws or policies, uncertainty as to patent and proprietary rights, availability of management and key personnel, and acquisition integration risk. These risks are set out in more detail in Azure's annual information form and the preliminary short form prospectus dated February 22, 2012, each of which can be accessed at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and Azure undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The TSX Exchange does not accept responsibility for the adequacy or accuracy of this release.

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