DGTL Holdings Inc. (TSX-V:DGTL, OTCQB:DGTHF) has announced the closing of the first tranche of its previously announced private placement offering of 1,030 subscription receipts at a price of $1,000 per subscription receipt, for aggregate gross proceeds of $1.03 million.
Toronto-based DGTL, which acquires digital media, marketing, and advertising software technologies powered by artificial intelligence, noted that the completion of the first tranche satisfied “a key condition” to closing in the arrangement agreement between it and target company Engagement Labs (TSX-V:EL) Inc.
In August, DGTL agreed to merge with data and analytics firm Engagement Labs (TSX-V:EL) in an all-stock transaction. Concurrently, DGTL said it would conduct a financing of subscription receipts and the merger was conditional on completion of the financing as well as shareholder, regulatory, and court approval.
READ: DGTL Holdings to merge with Engagement Labs in an all-stock deal
The gross proceeds of the first tranche are being held by Garfinkle Biderman LLP, in its capacity as subscription receipt agent, said the company. With the satisfaction, or waiver of certain escrow release conditions, each subscription receipt will automatically be converted into a $1,000 principal amount convertible debenture and the proceeds will be released.
“The escrow release conditions shall include the completion of DGTL's previously announced acquisition of Engagement Labs (TSX-V:EL) pursuant to a plan of arrangement and the delivery by DGTL of a notice to Garfinkle confirming such condition has been met,” said the statement.
Meanwhile, the convertible debentures will bear interest at an annual rate of 7% payable in arrears in equal installments semi-annually. They will mature two years after the satisfaction of the escrow release conditions. DGTL said the principal amount of convertible debenture will be convertible at the holder's option into DGTL shares at any time prior to the maturity date at a conversion price of $0.30 per conversion share.
DGTL said that subject to the approval of the TSX Venture Exchange, instead of paying any interest, it may elect to settle interest payments in shares.
In connection with the first tranche, DGTL will pay a finder's fee to eligible finders comprised of an aggregate of $49,000 in cash. It forms part of the subscription receipt proceeds and will be released to the finders on satisfaction of the escrow release conditions, and DGTL will issue 81,659 finder's warrants.
Each finder's warrant entitles the holder to buy a DGTL share at a price of $0.40 for a period of 36 months following the date on which the escrow release conditions are satisfied. The subscription receipts and any underlying securities issued following the first tranche are subject to a statutory hold period of four months and one day.
DGTL said that in connection with the first tranche, a "related party," subscribed for 200 subscription receipts. The company said it is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101.
“The offering is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as the company is not listed on the markets specified in MI 61-101, and neither the fair market value of the subscription receipts distributed to, nor the consideration received from interested parties exceeded $2.5 million,” said DGTL.
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