/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
TORONTO, Feb. 3, 2023
/CNW/ - Pathway Health Corp. (TSXV: PHC) ("Pathway" or the
"Company") is pleased to announce a proposed $1.25 million private placement of a secured
convertible promissory note with HEAL Global Holdings Corp. (the
"Lender"), an entity controlled by the Company's largest
indirect beneficial shareholder Avonlea-Drewry Holdings Inc.
("ADH"), and which is a party to the Company's previously
announced letter of intent ("LOI") in respect of a proposed
business acquisition, recapitalization and debt restructuring
transaction involving Pathway, HEAL and The Newly Institute Inc.
(see press release dated December 22,
2022) (the "Proposed Transaction"). Pursuant to
the terms and conditions of the promissory note to be issued by
Pathway in respect of the loan (the "Note"), the Company
will have the ability to request drawdowns of up to $1.25 million in aggregate (the "Principal
Amount") to further the integrated business platform of the
enterprise that will result from the Proposed Transaction and for
working capital and general corporate purposes. The Lender has
offered to advance the loan to Pathway to bridge the period of time
between the date hereof and closing of the Proposed Transaction,
and the loan proceeds represent an advance on the aggregate capital
otherwise available to Pathway's business within the larger
combined enterprise.
The Note is secured against all of the assets of the Company,
and is subordinate to the credit facility between the Company and
ADH (see press release dated July 29,
2022). The Note will mature on the earlier of June 30, 2023 and the date on which the
definitive agreement or LOI, as applicable, in respect of the
Proposed Transaction is terminated or expires (in either case, the
"Maturity Date").
The Principal Amount outstanding under the Note from time to
time will bear interest at a rate of 15% per annum and is
convertible at a conversion price of $0.05 per common share in the capital of Pathway
("Common Shares"). Pursuant to the Note, the Lender has
agreed, in connection with completion of the Proposed Transaction,
to convert the Note and all accrued and unpaid interest thereon
immediately prior to closing of the Proposed Transaction (failing
which the Note will automatically convert without any further act
of the Lender or the Borrower).
The Lender will be issued, concurrently with the issue of the
Note, 25,000,000 common share purchase warrants (the
"Warrants"), each such Warrant which will be exercisable for
one Common Share at a price of $0.05
per share for a period of 12 months from the date of issuance of
the Note. Accrued and unpaid interest on the Note will be
convertible into Common Shares in accordance with the policies of
the TSX Venture Exchange (the "TSX-V").
In the event that the Company defaults under the Note, or if the
Maturity Date occurs in connection with an event of default,
accrued and unpaid interest thereon will be deemed to have accrued
at the highest applicable rate permitted under applicable law since
the issuance date of the Note, and the Lender shall have the option
to either extend the Maturity Date for an additional 24 months
(during which time the Note will continue to accrue interest at the
highest applicable permitted rate), or avail itself of other
remedies provided under applicable law.
The Company has applied to the TSX-V to obtain approval of the
Note and the Warrants, as well as the listing of the Common Shares
issuable upon conversion of the Note and the exercise of the
Warrants.
The Note contains certain other customary financial and other
covenants, and will be made available on the Company's SEDAR
profile at www.sedar.com. The Note and the Warrants are
to be issued subject to customary closing conditions, including
approval from the TSX-V.
The Lender is an affiliate of ADH. Mr. Michael Steele, the sole director and officer of
the Lender, and Ms. Alison Wright, a director of the Company,
are directors, officers and shareholders of ADH (the "Insider
Position"). As a result, the Lender is a "related party" of the
Company and the entering into the Note and matters relating thereto
including the issuance of the Warrants are considered to be
"related party transactions" within the meaning of Multilateral
Instrument 61-101 - Protection of Minority Security Holders in
Special Transactions ("MI 61-101"), requiring the
Company, in the absence of exemptions, to obtain a formal valuation
of, and minority shareholder approval of, the related party
transactions. Pursuant to MI 61-101, the Company is relying on an
exemption from the formal valuation requirements as no securities
of the Company are listed or quoted on certain specified exchanges,
and on an exemption from the minority shareholder approval
requirements as, in addition to no securities of the Company being
listed or quoted on certain specified exchanges, the fair market
value of the Note and the Warrants, as it pertains to the Company,
do not exceed $2.5 million, as
determined in accordance with MI 61-101. Neither the Company
nor, to the knowledge of the Company after reasonable inquiry, the
Lender, has knowledge of any material information concerning the
issuer or its securities that has not been generally disclosed. The
Company intends to file a material change report within the
required timeframe relating to this related party transaction.
None of the securities sold in connection with the private
placement will be registered under the United States Securities Act
of 1933, as amended, and no such securities may be offered or sold
in the United States absent
registration or an applicable exemption from the registration
requirements. This news release shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any
sale of the securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
Neither the Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the Exchange) accepts
responsibility for the adequacy or accuracy of this Press
Release. The TSX Venture Exchange Inc. has in no way
passed upon the merits of the proposed transaction and has
neither approved nor disapproved the contents of this press
release.
Cautionary and Forward-Looking
Statements
This news release contains forward–looking
statements and forward–looking information within the
meaning of applicable securities laws. These statements relate to
future events or future performance. All statements other than
statements of historical fact may be forward–looking
statements or information. Forward–looking statements
and information are often, but not always, identified by the use of
words such as "appear", "seek", "anticipate", "plan", "continue",
"estimate", "approximate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", "would" and similar expressions. More
particularly and without limitation, this news release contains
forward-looking statements and information concerning the Note, the
Warrants, the use of proceeds of the Note, the Proposed Transaction
and the Company's future financing or transactional or operational
activities. The forward-looking statements and information are
based on certain key expectations and assumptions made by the
Company. Although the Company believes that the expectations
and assumptions on which such forward-looking statements and
information are based are reasonable in the circumstances, undue
reliance should not be placed on the forward-looking statements and
information because the Company can give no assurance that they
will prove to be correct. By its nature, such forward-looking
information is subject to various risks and uncertainties, which
could cause the actual results and expectations to differ
materially from the anticipated results or expectations expressed.
These risks and uncertainties, include, but are not limited to the
Company being unable to use the proceeds of the Note as described,
legal or regulatory impediments regarding the Note, accrued and
unpaid interest thereon and (or) the Warrants, the Proposed
Transaction not completing as proposed or at all, the Company
defaulting on the Note leading to, among other things, enforcement
under the security, increased accrued interest and the Lender
extending the maturity date of the Note (and increased accrued
interest in respect thereof) or availing itself of other available
remedies, the proceeds being insufficient for the Company's
purposes, the Company's inability to repay the Note on the Maturity
Date or at all and the Company being unable to raise additional
funds on terms acceptable to the Company or at all. Readers are
cautioned not to place undue reliance on this forward-looking
information, which is given as of the date hereof, and to not use
such forward-looking information for anything other than its
intended purpose. The Company undertakes no obligation to update
publicly or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by law or the TSX Venture Exchange.
SOURCE Pathway Health Corp.