Introductory Note
Rights Offering
On November 21, 2023, DIRTT Environmental Solutions Ltd. (the “Company”) announced that its board of directors has approved a rights offering to its common shareholders for aggregate gross proceeds of C$30,000,000 (the “Rights Offering”). Under the Rights Offering, each holder of the Company’s common shares (the “Common Shares”) of record at the close of business on December 12, 2023 (the “Record Date”) will receive one right (a “Right”) for each Common Share held. Each Right will entitle the holder to subscribe for 0.81790023 Common Shares at a subscription price (the “Subscription Price”) of C$0.35 per whole Common Share, exercisable for whole Common Shares only (the “Basic Subscription Privilege”). The Record Date is subject to the Company receiving applicable regulatory approvals. The Rights are expected to expire at 5:00 p.m. (Eastern Time) on January 5, 2024.
In accordance with applicable law, the Rights Offering will include an additional subscription privilege (the “Additional Subscription Privilege”) under which eligible holders of Rights who fully exercise the Rights issued to them under their Basic Subscription Privilege will be entitled to subscribe for additional Common Shares on a pro rata basis, that are not otherwise subscribed for under the Basic Subscription Privilege, subject to certain limitations.
The Company reserves the right to modify any terms of the contemplated Rights Offering, or to postpone or cancel the Rights Offering, at any time prior to the launch of the Rights Offering.
Item 1.01 |
Entry into a Material Definitive Agreement. |
In connection with the Rights Offering, on November 20, 2023, the Company entered into a Standby Purchase Agreement (the “Standby Purchase Agreement”) with 22NW Fund, LP (“22NW”) and 726 BC LLC and 726 BF LLC (collectively, “726” and together with 22NW, the “Standby Purchasers”). Subject to the terms and conditions of the Standby Purchase Agreement, each Standby Purchaser has agreed to exercise its Basic Subscription Privilege in full and, in addition thereto, to collectively purchase all Common Shares not subscribed for by holders under the Basic Subscription Privilege or Additional Subscription Privilege, so that 85,714,285 Common Shares will be sold and the Company will realize gross proceeds of C$30,000,000 under the Rights Offering (the “Standby Commitments”).
Specifically, pursuant to the Standby Purchase Agreement, 22NW and 726 have each agreed to exercise its Basic Subscription Privilege in full, and in addition thereto, to purchase from the Company at the Subscription Price, 50% and 50%, respectively of all Common Shares not issued under the Basic Subscription Privilege or Additional Subscription Privilege, or up to 42,857,142 Common Shares each. The allocation of the Common Shares purchased by 726 pursuant to the Standby Purchase Agreement will be determined by Shaun Noll in his sole discretion.
The Standby Commitments will ensure the Company realizes gross proceeds under the Rights Offering of C$30,000,000. 22NW and 726 currently hold approximately 20.4% and 16.2%, respectively, of the outstanding Common Shares and, as a result, are entitled (and required under their Standby Commitments) to purchase 17,467,412 and 13,843,008 Common Shares with an aggregate subscription price of approximately C$6,113,594 and C$4,845,053 (collectively, C$10,958,647) under their respective Basic Subscription Privileges. The Standby Purchasers may also exercise their Additional Subscription Privilege, subject to the availability and pro rata allocation of Common Shares among shareholders exercising their Additional Subscription Privilege. Under the Standby Commitments, each Standby Purchaser is required to purchase 50% of all Common Shares not subscribed for by holders under the Basic Subscription Privilege or Additional Subscription Privilege in addition to the exercise of such Standby Purchaser’s Basic Subscription Privilege in full and the exercise of its Additional Subscription Privilege, if any. In no event will either Standby Purchaser be required to subscribe for Common Shares with an aggregate Subscription Price in excess of C$15,000,000. If the aggregate Subscription Price paid by a Standby Purchaser in the Rights Offering equals C$15,000,000, and there remain Common Shares not subscribed for in the Rights Offering, the other Standby Purchaser is required to purchase such number of Common Shares as is necessary so that the aggregate gross proceeds to the Company pursuant to the Rights Offering is C$30,000,000.