United Reef Limited
TSX VENTURE : URP

United Reef Limited

September 15, 2011 08:15 ET

United Reef Offering $800,000 of Convertible Promissory Notes and to Seek Shareholder Approval to Consolidate Shares

TORONTO, ONTARIO--(Marketwire - Sept. 15, 2011) - United Reef Limited (TSX VENTURE:URP) ("United Reef" or the "Company") said that it is making an offering of convertible promissory notes (the "Offering") by way of private placement to qualified investors on a non-brokered basis. The Offering will consist of up to $800,000 in total principal of one year, interest bearing and convertible promissory notes (the "P/Notes") which are convertible into securities of the Company. The P/Notes are being offered in principal denominations of $5,000, and require a minimum subscription for one P/Note or $5,000 to participate in the Offering. In conjunction with the Offering, the Company will be seeking its shareholders' approval to consolidate the 88,909,980 presently issued and outstanding common shares of the Company on the basis of five existing shares for one new post consolidation share. Subject to shareholder approval being obtained, this would result in the Company's outstanding shares being reduced to approximately 17,782,000 shares post consolidation as further explained below.

The key terms of the P/Notes are as follows:

  • Minimum subscription for one P/Note or $5,000 to participate in the Offering.
  • The Company will prepay one years' interest, at the rate of six (6%) percent per annum, on the principal amount of the P/Notes at closing of the Offering.
  • The P/Notes will mature on the first anniversary of the closing of the Offering.
  • At closing of the Offering 50% of the principal amount of the P/Notes will be released to the Company for its use and the balance of the principal (50%) will be held in trust by the Company pending receipt of its shareholders' approval for the consolidation of the Company's common shares. In the event that shareholder approval has not been obtained by 90 days following closing of the Offering, at the election of the P/Note holders, the remaining 50% of the principal held in trust by the Company will be repaid to the P/Note holders.
  • Immediately following closing of the Offering, the Company will call a Special Meeting of its shareholders to obtain their approval to consolidate the Company's presently issued common shares (88,909,980) on a 5 for 1 basis (reducing the issued shares to approximately 17,782,000), said approval to be obtained within a period 90 days following closing of the Offering.
  • The P/Notes contain conversion privileges which allow the holder to acquire securities of the Company as follows:
AT TIME OF MATURITY- at maturity of the P/Notes any remaining principal balance of the P/Notes will automatically convert into units of the Company (a "Maturity Unit") on the basis of a price per Maturity Unit that is the greater of $0.10 or the volume weighted average (closing) price ("VWAP") of the Company's shares for the 30 days preceding the maturity date of the P/Notes. Each Maturity Unit will consist of one common share and one-half of a common share purchase warrant (a "Maturity Warrant"). Each whole Maturity Warrant entitling the holder to acquire a common share of the Company at a price that is the greater of $0.125 or the Maturity Unit price plus 25% and being exercisable for a period of 24 months.
OPTIONAL CONVERSION- following the closing of the Offering a P/Note holder may at any time prior to maturity of its P/Note, give notice (the "Notice Date") to the Company that it wishes to convert the principal balance of their P/Note (net of any unearned prepaid interest at that date) into units of the Company (an "Optional Unit") on the basis of a price per Optional Unit that is the greater of $0.10 or the VWAP for the 10 days preceding the Notice Date. Each Optional Unit will consist of one common share and one whole common share purchase warrant (an "Optional Warrant"). Each Optional Warrant entitling the holder to acquire a common share of the Company at a price that is the greater of $0.125 or the Optional Unit price plus 30% and being exercisable for a period of 24 months.

In the event that the Company does not obtain its shareholders' approval to consolidate the Company's shares at the Special Meeting to be called for that purpose, then, within 5 business days following the Special Meeting, the Company will, at the election of the P/Note holders, repay 50% of the principal balance of the P/Notes to the P/Note holders from the funds held in trust by the Company and forfeit any entitlement or right the Company has to recover the prepaid interest paid thereon to the P/Note holders.

The proceeds of the Offering will be used to fund the costs of an initial exploration program on the Company's Santa Maria gold project; for asset acquisition investigations; to pay the costs of a Special Meeting of Shareholders of the Company; and for general corporate purposes. The securities issued pursuant to the Offering will be subject to a four-month statutory hold period and closing of the Offering is subject to regulatory approval.

In the event that the Offering is fully subscribed and the P/Note holders exercise their conversion rights at the minimum price of $0.10 per unit, pursuant to the P/Note terms, they would potentially acquire up to 8 million common shares and warrants of the Company post consolidation. These shares, post consolidation, would represent approximately a 31% interest in the Company. On a fully diluted basis, the P/Note holders could potentially acquire up to a 45% interest in the Company by exercising their warrants.

The Company will pay a finder's fee to qualified agents (each, a "Finder") for subscriptions to the private placement completed by qualified investors who have been introduced by the Finder. The Company will pay the Finder an 8% cash fee based on the gross principal amount of any P/Notes acquired by investors introduced by the Finder; and will issue to the Finder, warrants ("Finder's Warrants") equal to 8% of the principal amount of P/Notes sold by the Finder, entitling the Finder to purchase one common share of the Company at $0.10 for a period of 12 months from the closing of the Offering (Example: $5,000 in principal = 4,000 Finder's Warrants).

Special Meeting of Shareholders

Upon the successful completion of the Offering, as stated above, the Company has undertaken to seek its shareholders' approval to consolidate the Company's presently issued 88,909,980 common shares on a five (5) for one (1) basis. If approved this would result in the Company's issued shares being reduced to approximately 17,782,000 common shares post consolidation.

Management of the Company believes that further equity financing is required in order for the Company to fund its operating and working capital requirements. It is management's opinion that the proposed consolidation is required in order to facilitate attracting new equity investment in the Company. In addition, management believes that the consolidation of the Company's shares will make investing in the Company more attractive to a broader range of institutional and professional investors and other members of the investing public. At the appropriate time the Company will send a notice, information circular and proxy form to shareholders of the Company for their consideration, which will fully explain the effects of the proposed consolidation.

About UNITED REEF

United Reef is a Canadian precious metals exploration company focused on the identification of projects that host large structural features in geological settings favourable for gold mineralization with known gold occurrences, like our Santa Maria property near Dryden. The Company is continuing to evaluate additional gold projects. The Company's past-producing (Ni-Cu) Nickel Offsets (Ross) Mine property is under option and being actively explored to follow up recent discoveries of high grade Ni and PGM values in drill intercepts. The Company has seasoned management and a highly experienced technical team of directors and consultants guiding United Reef's exploration and project evaluation. The Company's shares trade on the TSX Venture Exchange under the symbol URP.

For further information about United Reef please visit our website at www.unitedreef.com.

Shares issued: 88,909,980
Fully diluted: 95,049,980

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.

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