Edge Total arranges debenture unit financing

Executive Summary

• Edge Total Intelligence Inc. announced a non-brokered proposed private placement of up to C$10,000,000 via convertible debenture units, though the specific financial terms indicate a maximum of $7.25 million USD in gross proceeds.
• The company engaged a broker-dealer as an exclusive placement agent for a reasonable best efforts offering of up to 7,250 debenture units priced at $1,000 USD per unit.
• The financing structure involves convertible debentures with tiered interest rates and warrants, with conversion and warrant exercise contingent upon a specific "trigger event" involving a merger or amalgamation with a U.S.-domiciled entity resulting in a U.S. exchange listing.

Key Details

• Offering Size and Price: Up to 7,250 debenture units at $1,000 (U.S.) per unit, for aggregate gross proceeds of up to $7.25-million (U.S.).
• Instrument Structure: Each debenture unit comprises:
  • One unsecured convertible debenture with a principal amount of $1,000 (U.S.).
  • 675 subordinate voting share (SVS) purchase warrants.
• Debenture Terms:
  • Maturity: Three years following issuance.
  • Interest Rates: 6.00% per annum (Year 1), 8.00% per annum (Year 2), and 10.00% per annum (Year 3).
  • Payment: Payable on the earlier of maturity or conversion.
  • Make-Whole Provision: If a merger/amalgamation results in listing on a U.S. exchange (and the company is no longer listed on TSX-V), a 24% non-compounded simple interest make-whole payment applies.
  • Conversion Trigger: Following the completion of the trigger event (merger/amalgamation with a U.S. entity resulting in U.S. exchange listing), accrued principal and interest automatically convert into resulting issuer shares 20 trading days after listing.
  • Conversion Price: 10% discount to the 5-trading-day volume weighted average price (VWAP) of the resulting issuer shares on the U.S. exchange, ending one trading day prior to conversion.
• Warrant Terms:
  • Entitlement: Each warrant entitles the holder to acquire one SVS (or equivalent resulting issuer shares).
  • Exercise Price: $2 (Canadian) per warrant share.
  • Exercise Period: Commences after the trigger event and continues until the 18-month anniversary of issuance.
  • Acceleration Clause: The resulting issuer may accelerate warrant expiration to 30 days following the 30-trading-day VWAP of resulting issuer shares on the U.S. exchange meeting or exceeding $4 (U.S.), provided the average daily dollar trading volume during the triggering period is at least $1-million (U.S.) per trading day.
• Fundamental Transactions: Debentures and warrants become securities of the resulting issuer with the same economic terms upon a fundamental transaction. No conversion or exercise occurs prior to the trigger event.
• Use of Proceeds: Working capital requirements and other general corporate purposes.
• Placement Agent Compensation:
  • Cash commissions: Up to 8% on agent-sourced subscriptions and 4% on company-sourced subscriptions.
  • Management fee: 1% on total gross proceeds.
  • Compensation Warrants: Up to 5% of the resulting issuer shares underlying the debentures, exercisable at a 25% premium to the implied conversion price, valid for 60 months.
• Closing and Regulatory: Expected to close by the end of 2025, subject to regulatory approvals, including conditional approval of the TSX-V.
• Hold Periods:
  • Canadian securities laws: 4 months and 1 day from closing.
  • U.S. securities laws (if applicable): 1 year from closing.