Extenway Solutions Inc.
TSX VENTURE : EY

Extenway Solutions Inc.

March 02, 2015 19:35 ET

Extenway Announces Proposed Debt Settlement and Second Tranche of a $2,910,000 Private Placement; Management Change

MONTREAL, QUEBEC--(Marketwired - March 2, 2015) - Extenway Solutions Inc. ("Extenway" or the "Company") (TSX VENTURE:EY) announces that it is arranging, subject to regulatory approval, the private placement and the debt settlement operations described below in order to immediately improve the financial position of the Company with a view of setting the Company on firm financial ground to execute its business plan. The proposed private placement and debt settlement operations are as follows:

(a) a private placement of 30,125,000 common shares of the Company, at an issue price of $0.08, with a group of accredited investors, including the Caisse de dépôt et placement du Québec ("Caisse") and Desjardins-Innovatech, s.e.c. ("DI"), existing shareholders of Extenway, for minimum gross proceeds to the Company of $2.41 million (the "Private Placement"). When combined with the $500,000 already raised pursuant to the closing of the first tranche on December 23, 2014, the aggregate amount of this round of financing will reach $2,910,000; and

(b) the settlement of up to $10,425,928.61 (as of the date of this press release) in outstanding indebtedness under outstanding debentures and working capital advances by issuing up to 130,324,109 common shares of the Company (as this number is determined as of the date of this press release) at an issue price of $0.08 (collectively, the "Debt Settlement"). The amount of the Debt Settlement includes advances in excess of $900,000 provided by (a) Mr. John McAllister (directly or indirectly),the President and Chief Executive Officer of Extenway ("McAllister"), and (b) Mr. David Brown, Chief Financial Officer of Extenway ("Brown"), since May 1st, 2014. As a result, upon the closing of the Private Placement and the Debt Settlement, investments in excess of $3,825,000 will have been made in the Company since May 1st, 2014. The indebtedness subject to the Debt Settlement consists in both the principal amount and the accrued and unpaid interest of:

  1. those issued and outstanding unsecured convertible debentures issued by the Company held by John McAllister Holdings Corporation, a company controlled by McAllister ("McAllisterCo"), Caisse, DI and 12 other investors for an aggregate principal amount of $6,170,000. As of today, the total indebtedness under said debentures is $7,687,078.61 (the "Convertible Indebtedness"). The principal amount of the debentures is currently convertible into common shares of Extenway, at a price of $0.13 per share, however, with the current market price of the Company's common shares on the TSX Venture Exchange being approximately $0.04, there is no incentive to any holders of debentures to convert. The Company has entered into discussions with the holders of debentures with respect to the conversion of all or a portion of their debentures into common shares, at a price of $0.08, the same issue price as the one provided for in the Private Placement. McAllisterCo, Caisse and DI have agreed to convert their debentures into common shares as part of the proposed Debt Settlement; and
  2. those unsecured advances from McAllister, Brown and another officer of the Company in the amount of $2,013,850, $710,000 and $15,000, respectively, which were made to assist the Company with its working capital needs (the "Working Capital Advances").

The purpose of the Private Placement and Debt Settlement is to immediately improve the financial position of the Company given its actual financial situation. The Company has been diligently pursuing additional sources of debt and equity financing and has determined that the proposed Private Placement and Debt Settlement was the best alternative for the Company.

Mr. John McAllister, President and Chief Executive Officer of Extenway, stated: "As previously announced the Company has secured a significant number of new hospital contracts and believe that additional opportunities are pending. This has encouraged our major shareholders to address balance sheet issues in advance of these installations and is a major vote of confidence for us."

The Debt Settlement and the Private Placement will allow the Company to greatly improve its balance sheet while its non-banking debts for borrowed money will be reduced by at least $8,119,805.03 and its working capital will be increased by $2,410,000. " added Mr. McAllister.

Private Placement

The Company has been in discussion with a group of accredited investors, including Caisse and DI, which have indicated their interest in participating in the Private Placement, subject to: (i) the conversion of at least 70% of the Convertible Indebtedness; (ii) the settlement of the Working Capital Advances, and (iii) other customary closing conditions. It is expected that Caisse and DI will subscribe for 18,750,000 common shares ($1,500,000) and 6,250,000 common shares ($500,000), respectively.

Related Party Transactions

The Company understands that McAllister, Brown and DI own, directly or indirectly or exercise control or direction over, 31,988,535 common shares, 29,975,210 common shares and 31,156,516 common shares, respectively, representing 22.38%, 20.98% and 21.80%, respectively, of the currently issued and outstanding common shares of the Company. In addition, McAllister and Brown are officers of the Company.

As a result, each of the proposed Private Placement and the Debt Settlement is considered a related party transaction pursuant to Policy 5.9 of the TSX Venture Exchange and Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") and triggers the requirement for a valuation and minority approval unless exemptions therefrom are available. As Exentway is not listed on or quoted on any prescribed senior exchange listed in MI 61-101, the proposed Private Placement and Debt Settlement are each exempt from the formal valuation requirement contained in MI 61-101 pursuant to section 5.5(b) of MI 61-101. In addition, Extenway is relying on the financial hardship exemption from the minority approval requirement contained in MI 61-101 pursuant to section 5.7(e) of MI 61-101. In reliance thereon, the Board of Directors of the Company (other than Mr. McAllister, who abstained from voting on the proposed transaction), including all of its independent members, has unanimously concluded that the Company is in serious financial difficulty and the proposed Private Placement and Debt Settlement, the terms of which are reasonable in the circumstances, will improve the financial position of the Company. Finally, in accordance with MI 61-101, the Company will not file a material change report in respect of the proposed related party transactions before at least 21 days of the expected date of the closing considering the fact that it is in the best interests of the Company to collect the proceeds from the Private Placement as soon as possible.

Assuming the completion of the Private Placement and the Debt Settlement (and assuming the settlement of the entire amount (100%) of the Convertible Indebtedness) on March 11, 2015, it is expected that McAllister, Brown and DI will own, directly or indirectly or exercise control or direction over, 65,188,793 common shares, 38,850,210 common shares and 51,452,463 common shares, respectively, representing 21.47%, 12.79% and 16.95%, respectively, of the then issued and outstanding common shares of the Company.

The Company anticipates closing the Private Placement and the Debt Settlement on or about March 11, 2015.

Resignation of Jacky Chatelais

The Company announces the resignation of the President of its wholly-owned subsidiary, Extenway MD Inc., Jacky Chatelais. Extenway's President and Chief Executive Officer, John McAllister, will assume the position of President of Extenway MD Inc. on an interim basis until such time a permanent successor is selected. Mr. Chatelais will continue to assist in the operations of Extenway MD Inc. as a consultant.

About Extenway Solutions

Extenway Solutions is a supplier of client-focused solutions for the healthcare industry. Services offered by Extenway include interactive television, beside terminals for patients, internet, entertainment, content integration, advertising, education and medical integrated solutions. Extenway allows organizations to optimize management and coordination of human interactions as well as communications, information and coordination. For further information, please visit extenway.com or follow us on Twitter @Extenway.

Disclaimer

Certain statements that appear in this news release constitute forward-looking statements. These forward-looking statements relate to future financial conditions, results of operations or business of Extenway Solutions Inc. These statements may be current expectations and estimates about the markets in which Extenway Solutions Inc. operates and management's beliefs and assumptions regarding these markets. These statements involve significant risks and uncertainties which are difficult to predict and assumptions which may prove to be inaccurate. The results or events predicted in forward-looking statements may differ materially from actual results or events. Extenway Solutions Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In particular, forward-looking statements do not reflect the potential impact of any merger, acquisitions or other business combinations or divestitures that may be announced or completed after such statements are made.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • John McAllister
    President and CEO
    Extenway Solutions Inc.
    514-694-1916