Touchstone closes $12.5M (U.S.) debenture issuance

Executive Summary

• Touchstone Exploration Inc. closed a private placement of a secured convertible debenture and warrants for gross proceeds of $12.5 million (U.S.) with existing shareholder JJR Wood Holdings Inc.
• The financing provides capital to immediately restart drilling operations at the Cascadura facility and reduce outstanding accounts payable.
• The proceeds satisfy a portion of the equity raise requirement under the company's loan agreement with Republic Bank Ltd., leaving a remaining obligation to raise $7.3 million (U.S.) in net equity by December 31, 2025.

Key Details

• Transaction Structure: Secured convertible debenture and warrants issued to JJR Wood Holdings Inc.
• Gross Proceeds: $12.5 million (U.S.).
• Debenture Terms:
  • Principal Amount: $12.5 million (U.S.).
  • Interest Rate: 5% per annum, payable semi-annually.
  • Maturity: Three-year term.
  • Security: Perfected security interest over all present and after-acquired personal property, including an Alberta law general security agreement and a Barbados law charge over Touchstone Exploration (Barbados) Ltd. shares.
  • Conversion Price: 21.813 U.S. cents per common share (U.S.-dollar equivalent of 30 Canadian cents per share based on the Bank of Canada exchange rate prior to issuance).
  • Conversion Limits: Total issuable shares capped at 65,248,201 (24.99% of currently outstanding common shares).
  • Ownership Restriction: Holder cannot exceed 19.9% ownership without TSX clearance and shareholder approval.
  • Change of Control: Debenture may be redeemed for principal and accrued interest; holder may convert prior to closing.
• Warrant Terms:
  • Quantity: 6.25 million warrants.
  • Exercise Price: 40 cents per common share.
  • Term: Two years from issuance.
• Placement Fee: 5% of the principal amount ($625,000 U.S.), payable in cash to the holder on closing.
• Use of Proceeds:
  • Immediate commencement of drilling the Cascadia-4ST2 development well.
  • Completion and tie-in of the Cascadia-4ST2 and Cascadia-5 wells.
  • Reduction of outstanding accounts payable.
• Loan Agreement Compliance:
  • Republic Bank Ltd. confirmed the net proceeds satisfy an equivalent amount of the equity raise requirement under the fourth amended and restated loan agreement.
  • Remaining Obligation: The company must raise an additional $7.3 million (U.S.) in net equity (net of selling commissions) by December 31, 2025, to fully meet loan agreement terms.
• Context on Previous Financing:
  • On May 8, 2025, the company announced a private placement. As of June 30, 2025, £10,324,500 of the £15,375,000 gross proceeds had not been received.
  • The company closed on £5,050,500 in gross proceeds, issuing 24,636,585 common shares.
  • No further proceeds have been received from the May 8, 2025 placement; the company views the outstanding balance as highly uncertain.

Notable Quotes

• "This financing will provide the capital necessary to immediately restart drilling operations at Cascadura and subsequently bring new production on line at the Cascadura facility. We are pleased to have secured continued support from both an existing shareholder and our Trinidad-based lender, reflecting confidence in our strategic direction and the quality of our asset base." — Paul R. Baay, President and CEO.