Rainmaker Entertainment Inc. has announced that it has completed its previously announced rights offering of unsecured convertible debentures (“Debentures”) for aggregate gross proceeds of $4,726,000 (the “Rights Offering”). Concurrent with the Rights Offering, Rainmaker also issued an aggregate of $425,000 principal amount of Debentures pursuant to its previously announced private placement (the “Private Placement”).
The Debentures accrue interest at a rate of 8% per annum payable quarterly in arrears and are convertible into common shares of Rainmaker at a price of $0.20 per share. The Debentures will mature on March 31, 2016 and are governed by the terms of an indenture between Rainmaker and Computershare Trust Company of Canada.
The Debentures issued under the Private Placement are subject to applicable statutory hold periods of four months and one day.
Investment and Backstop Commitments
An aggregate of $2,416,000 principal amount of Debentures were issued to standby purchasers in respect of their base subscription commitments under the standby purchase and investment agreement (the “Standby Agreement”) dated February 13, 2013 between Rainmaker, certain funds managed by McElvaine Investment Management Ltd., Chou Associates Management Inc. and Stacey Muirhead Capital Management, and Cavan Consulting Limited (“Cavan”). An additional aggregate of $1,606,000 principal amount of Debentures were issued to the standby purchasers in respect of their backstop commitment under the Standby Agreement. Of these, $275,000 principal amount of Debentures were subscribed for under the Private Placement by Craig Graham, Rainmaker’s Chief Executive Officer and Chairman and a director, officer and shareholder of Cavan. No fee is payable to any party in respect of the backstop commitment.
In order to retain the conversion price of $0.20 per share for Debentures issued in connection with the Private Placement (which fell outside the applicable maximum discount permitted by the policies of the Toronto Stock Exchange), Rainmaker was required to obtain security holder approval from a majority of holders of Rainmaker’s common shares excluding shareholders participating in the Private Placement. Rainmaker has obtained such shareholder approval via written consent of shareholders owning more than 50% of the common shares of Rainmaker in accordance with section 604(d) of the Toronto Stock Exchange Company Manual.
Use of Proceeds
The proceeds of the Rights Offering and the Private Placement will be used to fund Rainmaker’s commitments in respect of the feature length animated film production which it has agreed to co-invest in and co-produce and for working capital purposes.
Further details regarding the Rights Offering and the Private Placement are available in the prospectus dated February 28, 2013 (as amended on April 4, 2013) filed on SEDAR and in the press releases issued by Rainmaker on February 19, 2013 and March 1, 2013, respectively.
This news release is not an offer of securities for sale in the United States. The rights and the Debentures will not be registered under the U.S. Securities Act of 1933, or the securities laws of any state, and may not be offered or sold in the United States or to, or for the account or benefit of, any U.S. person or person in the United States without registration unless an exemption from registration is available.
Certain information set forth in this press release contains “forward-looking statements”, and “forward-looking information” under applicable securities laws. These statements relate to future events or future performance. The words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect”, and similar expressions are often used to identify forward-looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific. In evaluating these statements, readers should specifically consider risks which may cause actual results to differ materially from any forward-looking statement. The forward-looking statements contained herein are based upon certain assumptions considered reasonable at the time they were prepared. Such assumptions include, but are not limited to, assumptions regarding: (i) general economic conditions, (ii) Rainmaker’s future business prospects and opportunities, and (iii) Rainmaker’s ability to complete any or all of its proposed production work. Should one or more of the risks or uncertainties identified herein materialize, or should the assumptions underlying the forward-looking statements prove to be incorrect, then actual results may vary materially from those described herein. In respect of Rainmakers business generally, readers should also refer to Forward-looking Statements in the Management Discussion & Analysis for the year ended December 31, 2012. Readers are cautioned not to place undue reliance on forward-looking statements. Except as required by applicable securities laws, Rainmaker does not assume any obligation to update the forward-looking statements contained herein.