THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN
CANADA ONLY AND IS NOT
INTENDED FOR DISTRIBUTION TO UNITED
STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES.
TORONTO, May 10, 2024
/CNW/ -- (TSXV: SEV) (OTCQB: SPVNF) Spectra7 Microsystems Inc.
("Spectra7" or the "Company"), a leader in
high-performance analog semiconductors for broadband connectivity
markets, such as AI networks, hyperscale data centers, and AR/VR,
is pleased to announce it has closed the first tranche of its
previously announced non-brokered private placement (the
"Private Placement") to certain institutional investors,
other investors and insiders of the Company (the
"Subscribers") of units ("Units"), with each Unit
consisting of either: (i) one common share (each a "Common
Share") and one common share purchase warrant (each a
"Warrant"); or (ii) if the Share Ownership Threshold
(defined below) would be exceeded by a Subscriber as a result of
their subscription for Units or a Subscriber otherwise elects, one
pre-funded common share purchase warrant (each, a "Pre-Funded
Warrant") and one Warrant, at a purchase price of $0.10 per Unit (the "Offering Price"). The
Company issued 107,683,090 Units for aggregate gross proceeds
of approximately $10.7 million
in a first tranche of the Private Placement.
Each Warrant is exercisable immediately and entitles the holder
thereof to purchase either: (i) one Common Share; or (ii) if the
Share Ownership Threshold would be exceeded by a Subscriber as a
result of the exercise of their Warrants, one Pre-Funded Warrant,
at an exercise price of $0.11 per
Common Share or Pre-Funded Warrant until May
10, 2029. The expiry date of the Warrant can be accelerated
by the Company at any time prior to the expiry date of the Warrants
if the closing price of the Common Shares on the TSX Venture
Exchange (the "TSXV") is greater than $0.33 for any period of 10 consecutive trading
days and certain volume trading thresholds are met during those 10
consecutive trading days. Each Pre-Funded Warrant entitles the
holder to purchase one Common Share for a nominal amount subject to
compliance with the Share Ownership Thresholds. The Pre-Funded
Warrants do not expire.
The "Share Ownership Threshold" is (i) 9.99% of the number of
Common Shares outstanding immediately after giving effect to the
purchase of the Units, exercise of the Warrants, or conversion of
the 9% Debentures or 14% Debentures, as applicable; or (ii) if the
relevant Subscriber or holder has filed and the TSXV has cleared
for acceptance a personal information form in the form prescribed
by the TSXV, 19.99% of the number of Common Shares outstanding
immediately after giving effect to the purchase of the Units,
exercise of the Warrants, or conversion of the 9% Debentures or 14%
Debentures, as applicable; provided, however, that the 19.99%
threshold shall apply if the requisite disinterested shareholder
approval has been obtained in accordance with applicable TSXV
policies. The Company may complete subsequent tranches of the
Private Placement to bring the total aggregate gross proceeds up to
$24 million. The net proceeds of the
Private Placement are expected to be used for working capital and
general corporate purposes.
In connection with the Private Placement, the Company and a lead
investor in the Private Placement (the "Lead Investor") have
entered into an investor rights agreement (the "IRA")
whereby the Company has granted certain rights to the Lead
Investor, including: (a) a nomination right with respect to one
director on the board of the Company; (b) a pre-emptive right and
top-up right in connection with certain future equity financings by
the Company, each right being provided to the Lead Investor to
allow it to maintain its ownership level in the Company and being
subject to the prior approval of the TSXV; and (c) registration
rights in the event the Company lists the Common Shares on a U.S.
national securities exchange and becomes subject to the reporting
requirements of U.S. securities laws. The IRA shall be terminated
in the event the Lead Investor's ownership level in the Company,
calculated on a partially-diluted basis, becomes less than
10.0%.
Craig-Hallum Capital Group (the "Agent") acted as the
sole placement agent for the first tranche of the Private
Placement, and is acting as sole placement agent for any subsequent
tranches of the Private Placement, for purchasers in the United States, other than existing
insiders. The Agent received a cash commission of US$391,727 and compensation warrants on
substantially the same terms as the Warrants, entitling the Agent
to purchase up to 3,482,048 Common Shares at an exercise price
of $0.11 per Common Share until
May 10, 2029. The compensation
warrants are not exercisable for Pre-Funded Warrants and are
non-transferable.
Amendments to Existing Debentures
Spectra7 is also pleased to announce that it has entered into
supplemental indentures to amend (the "Debenture
Amendments") each of its existing $8.873
million 14% unsecured convertible debentures (the "14%
Debentures") and its existing $2.828 million 9% unsecured convertible
debentures (the "9% Debentures") to provide that
holders may, at any time prior to maturity, convert such
debentures, and that the Company has the right to convert such
debentures, at any time prior to maturity, into: (a) in the case of
the 14% Debentures, 7,538 units for each $1,000 principal amount of 14% Debentures (each,
a "14% Unit"), with each 14% Unit consisting of one Common
Share and one common share purchase warrant (each, a "14%
Warrant") or, if the Share Ownership Threshold would be
exceeded by the warrantholder as a result of the conversion, one
Pre-Funded Warrant and one 14% Warrant and (b) in the case of
the 9% Debentures, 7,538 units for each $1,000 principal amount of 9% Debentures (each, a
"9% Unit"), with each unit consisting of one Common Share
and 0.80 of a common share purchase warrant (each whole warrant, a
"9% Warrant") or, if the Share Ownership Threshold
would be exceeded by the warrantholder as a result of the
conversion, one Pre-Funded Warrant and 0.80 of a 9% Warrant. Each
14% Warrant shall be exercisable into one Common Share or, if the
Share Ownership Threshold would be exceeded by a holder as a result
of the exercise of their warrants, one Pre-Funded Warrant, at an
exercise price of $0.13 until
July 26, 2027. Each 9% Warrant shall
be exercisable into one Common Share or, if the Share Ownership
Threshold would be exceeded by a holder as a result of the exercise
of their warrants, one Pre-Funded Warrant, at an exercise price of
$0.13 until September 14, 2028.
Spectra7 has delivered notice of the exercise of its right to
force the conversion of the 14% Debentures and 9% Debentures (the
"Debenture Conversion") to be effective on May 15, 2024.
Following closing of the first tranche of the Private Placement
and completion of the Debenture Conversion, the Company will have
outstanding a total of 137,822,393 Common Shares, 98,564,320
Pre-Funded Warrants, 107,683,090 Warrants, 66,884,674 14% Warrants,
and 17,052,840 9% Warrants.
All dollar amounts in this news release are denominated in
Canadian dollars unless otherwise specified.
The Private Placement and the Debenture Amendments have received
conditional approval from the TSXV and are subject to receipt of
final approval by the TSXV. In the United
States, the Units were issued on a private placement basis
pursuant to exemptions from the registration requirements of the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act"). No securities regulatory authority has either
approved or disapproved of the contents of this news release.
Securities offered in the Private Placement and sold in
Canada are subject to a statutory
four month resale restriction under National Instrument 45-102 –
Resale of Securities, and, if applicable, a four month hold
period under the policies of the TSXV, which expires on
September 11, 2024. This news release
is not an offer to sell or the solicitation of an offer to buy the
securities in the United States or
in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to qualification or registration under the
securities laws of such jurisdiction, nor shall there be any sale
of the securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
The securities being offered have not been, nor will they be,
registered under the U.S. Securities Act, and such securities may
not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons
absent registration or an applicable exemption from U.S.
registration requirements and applicable U.S. state securities
laws.
Pursuant to Multilateral Instrument 61-101 Protection of
Minority Security Holders in Special Transactions ("MI
61-101"), the Private Placement and Debenture Conversion
(together, the "Restructuring") constitute a "related party
transaction" as insiders of the Company purchased 16,500,000 Units
in the first tranche of the Private Placement and are expected to
receive 2,012,646 9% Units as a result of the conversion of
$267,000 of principal amount of 9%
Debentures and 15,083,538 14% Units as a result of the conversion
of $2,001,000 of principal amount of
14% Debentures. The Company is relying on exemptions from the
formal valuation requirement of MI 61-101, pursuant to the
exemption provided under Section 5.5(b) of MI 61-101, as the
Company is not listed on a market specified in that section, and
from the minority approval requirement of MI 61-101, pursuant to
the "financial hardship" exemption provided under Section 5.7(1)(e)
of MI 61-101, as the Company is (i) in a situation of serious
financial difficulty, (ii) the Restructuring is designed to improve
the financial position of the Company, (iii) the circumstances
described in Section 5.5(f) of MI 61-101 are not applicable, and
(iv) the Company's board of directors and independent directors (as
such term is defined in MI 61-101) have, acting in good faith,
determined that (i) and (ii) apply and the terms of the
Restructuring are reasonable in the circumstances of the Company.
The securities issued to insiders of the Company in the Private
Placement will be subject to resale restrictions for a period of
four months and one day after the date of issuance. The Company did
not file a material change report more than 21 days before the
closing of the Private Placement as details of the related parties'
participation in the Private Placement had not been settled.
Neither TSXV nor its Regulation Services Provider (as that
term is defined in policies of the TSXV) accepts responsibility for
the adequacy or accuracy of this release.
About Spectra7 Microsystems
Spectra7 Microsystems Inc. is a high-performance analog
semiconductor company delivering unprecedented bandwidth, speed and
resolution to enable disruptive industrial design for leading
electronics manufacturers in virtual reality, augmented reality,
mixed reality, data centers and other connectivity markets.
Spectra7 is based in San Jose,
California with a design center in Cork, Ireland and a technical support location
in Dongguan, China.
For more information, please visit www.spectra7.com.
CAUTIONARY NOTES
Certain statements contained in this press release constitute
"forward-looking statements" or "forward-looking information"
(collectively, "forward-looking statements") under applicable
securities laws in the United
States and Canada. All
statements other than statements of historical fact contained in
this press release, including, without limitation, any statements
preceded by, followed by or that include the words "believe",
"expect", "aim", "intend", "plan", "continue", "will", "may",
"would", "anticipate", "estimate", "forecast", "predict",
"project", "seek", "should" or similar expressions or the negative
thereof, are forward-looking statements. Forward looking statements
in this press release include, but are not limited to, statements
with respect to the size, terms, participants and timing of any
subsequent tranche of the Private Placement, the ability of the
Company to raise up to $24 million
(including funds raised in the closing of the first tranche of the
Private Placement and in any subsequent tranche of the Private
Placement), the ability of the Company to obtain the final approval
of the TSXV for the first tranche of the Private Placement and the
Debenture Amendments, and to obtain the necessary regulatory and
stock exchange approvals for any subsequent tranche of the Private
Placement, the use of proceeds for the Private Placement, the
ability of the Company to complete the Debenture Conversion on the
terms described herein or at all, and the Company's ability to
support hyperscaler customer needs. These statements are not
historical facts but instead represent only the Company's
expectations, estimates and projections regarding future events.
These statements are not guarantees of future performance and
involve assumptions, risks and uncertainties that are difficult to
predict, including, but not limited to, the risk that the Company
is unable to complete any subsequent tranche of the Private
Placement on the terms or timing described herein or at all, the
Company not being able to obtain the necessary regulatory or stock
exchange approvals for any subsequent tranche of the Private
Placement, the proceeds of the Private Placement being insufficient
for the Company's needs, or being used in a manner other than as
disclosed herein. Therefore, actual results may differ materially
from what is expressed, implied or forecasted in such
forward-looking statements. Additional factors that could cause
actual results, performance or achievements to differ materially
include, but are not limited to, the risk factors discussed in the
Company's management's discussion and analysis for the year ended
December 31, 2023. Management
provides forward-looking statements because it believes they
provide useful information to investors when considering their
investment objectives and cautions investors not to place undue
reliance on forward-looking information. Consequently, all of the
forward-looking statements made in this press release are qualified
by these cautionary statements and other cautionary statements or
factors contained herein, and there can be no assurance that the
actual results or developments will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, the Company. These forward-looking
statements are made as of the date of this press release and the
Company assumes no obligation to update or revise them to reflect
subsequent information, events or circumstances or otherwise,
except as required by law.
For more information, please contact:
Matt Kreps
Darrow Associates
214-597-8200
ir@spectra7.com
Spectra7 Microsystems Inc.
Ron Pasek
Chair of the Board of Directors
408-710-6462
ronpasek@yahoo.com
Spectra7 Microsystems Inc.
Dave Mier
Interim Chief Financial Officer
925-858-7011
ir@spectra7.com
Spectra7 Microsystems Inc.
John Mitchell
Public Relations
650-269-3043
pr@spectra7.com
SOURCE Spectra7 Microsystems Inc.
