Resverlogix Corp. ("Resverlogix" or the "Company") (TSX:RVX)
announced a private placement of 60,416,667 equity units to
Shenzhen Hepalink Pharmaceutical Co. Ltd. (“Hepalink”) at a price
of $1.44 per unit for gross proceeds of $87 million. Each unit will
be comprised of one common share and 0.082759 of a common share
purchase warrant. Each full warrant will be exercisable at a price
of $1.64 per share for a period of four years from the closing of
the offering. The units will be subject to a four-month hold
period. The private placement is subject to execution of definitive
transaction documents, customary closing conditions and receipt of
all necessary regulatory and stock exchange approvals.
Prior to completion of the private placement,
Hepalink held 14,603,333 common shares and 2,333,333 common share
purchase warrants of Resverlogix which represented 12.74 percent of
common shares outstanding before giving effect to any outstanding
warrants and 14.48 percent of the outstanding common shares
assuming the exercise by Hepalink of its warrants. After giving
effect to the private placement, the Company will have a total of
175,040,756 common shares issued and outstanding. Hepalink will
hold 75,020,000 common shares and 7,333,333 common share purchase
warrants which represents 42.86 percent of the common shares
outstanding before giving effect to any outstanding warrants and
45.16 percent of the outstanding common shares assuming the
exercise by Hepalink of its warrants. After giving effect to the
private placement to Hepalink, the equity interest of Eastern
Capital Limited, which is not participating in the private
placement, will be reduced from 19.35 percent to 12.67 percent
of the outstanding common shares and the equity interest of the
remainder of shareholders of the Company will be reduced from 67.91
percent to 44.47 percent of the outstanding common shares.
The net proceeds of the offering will primarily
be used to repay the Company’s $68.8 million secured loan which
matures on December 26, 2017 (the “Loan”). The balance of the net
proceeds will be used to fund research and development activities,
including but not limited to, clinical trial activities related to
the Phase 3 BETonMACE trial, general and administrative expenses,
working capital needs and other general corporate purposes.
Financial Hardship Exemption
Application
The private placement requires disinterested
shareholder approval pursuant to requirements of the Toronto Stock
Exchange (“TSX”), unless an exemption is obtained, due to the
increase in Hepalink’s ownership interest affecting control of the
Company and as the private placement will involve the issuance of
more than 25 percent of the outstanding common shares of the
Company and the issuance of more than 10 percent of the outstanding
shares to an insider. The private placement is also a “related
party transaction” within the meaning of Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special
Transactions (“MI 61-101”) as Hepalink is an insider of the
Company, such that minority shareholder approval would also be
required pursuant to MI 61-101, unless an exemption is
available.
The Company has applied to TSX for an exemption
from the requirement to obtain shareholder approval for the private
placement based on the “financial hardship” exemption in Section
604(e) of the TSX Company Manual, and the Company plans to rely on
a similar exemption from the requirements of MI 61-101, based on
the board of directors of the Company having determined that the
Company is in serious financial difficulty, the private placement
is designed to improve the financial position of the Company and
the terms of the private placement are reasonable in the
circumstances of the Company. All of the directors approved the
private placement, other than Mr. Shawn Lu, who declared his
interest in the private placement as a representative of Hepalink
and, accordingly, abstained from approving the private placement.
There is no assurance that the TSX will grant the exemption.
The Company applied for an exemption from the
shareholder approval requirement on the basis of financial
hardship, given that the immediacy of the Company’s need to address
its financial difficulties through the private placement does not
afford it sufficient time to hold a meeting of shareholders. The
Company currently has accounts payable in excess of cash of
approximately US$12 million and the outstanding Loan in the
principal amount of $68.8 million which is accruing interest at a
rate of 4.6046 percent per annum and additional fees at a rate of
12 percent per annum. In addition, the Company requires cash of
approximately US$3 million per month to sustain operating
activities. Resverlogix’s management and board of directors expects
the private placement to address the Company’s financial
difficulties by providing sufficient funds to repay the Loan and to
satisfy the Company’s short term cash requirements. Given the
Company's current financial situation, in the absence of completion
of the private placement, its ability to continue operating as a
going concern and to meet its obligations as they come due cannot
be assured.
The Company anticipates filing a material change
report less than 21 days prior to the closing of the private
placement as closing must occur expeditiously in order to fund the
Company’s short-term capital requirements including the repayment
of the Loan.
Remedial Delisting Review
As a consequence of relying upon the financial
hardship exemption under Section 604(e) of the TSX Company Manual,
the Company expects that the TSX will commence a remedial delisting
review, which is normal practice when a listed issuer seeks to rely
on this exemption. Although the Company believes that it will be in
compliance with all of the TSX listing requirements following
completion of the offering, no assurance can be provided as to the
outcome of such review and, therefore, the Company’s continued
qualification for listing on the TSX.
About Resverlogix
Resverlogix is developing apabetalone (RVX-208),
a first-in-class, small molecule that is a selective BET
(bromodomain and extra-terminal) inhibitor. BET bromodomain
inhibition is an epigenetic mechanism that can regulate
disease-causing genes. Apabetalone is the first and only BET
inhibitor selective for the second bromodomain (BD2) within the BET
protein called BRD4. This selective inhibition of apabetalone on
BD2 produces a specific set of biological effects with potentially
important benefits for patients with high-risk cardiovascular
disease (CVD), diabetes mellitus (DM), chronic kidney disease,
end-stage renal disease treated with hemodialysis,
neurodegenerative disease, Fabry disease, peripheral artery disease
and other orphan diseases, while maintaining a well described
safety profile. Apabetalone is the only selective BET bromodomain
inhibitor in human clinical trials. Apabetalone is currently being
studied in a Phase 3 trial, BETonMACE, in high-risk CVD patients
with type 2 DM and low high-density lipoprotein (HDL), and is
expected to be initiated in a Phase 2a kidney dialysis trial
designed to evaluate biomarker changes and safety parameters in up
to 30 patients with end-stage renal disease treated with
hemodialysis.
Resverlogix common shares trade on the Toronto Stock Exchange
(TSX:RVX).
Follow us on Twitter: @Resverlogix_RVX or on our blog at
http://www.resverlogix.com/blog
For further information please contact:
Investor Relations Email: ir@resverlogix.com Phone: 403-254-9252
Or visit our website: www.resverlogix.com
This news release may contain certain
forward-looking information as defined under applicable Canadian
securities legislation, that are not based on historical fact,
including without limitation statements containing the words
"believes", "anticipates", "plans", "intends", "will", "should",
"expects", "continue", "estimate", "forecasts" and other similar
expressions. In particular, this news release includes forward
looking information relating to a private placement of equity units
and the use of proceeds therefrom, and the potential role of
apabetalone in the treatment of CVD, DM, chronic kidney disease,
end-stage renal disease treated with hemodialysis,
neurodegenerative disease, Fabry disease, peripheral artery disease
and other orphan diseases. Our actual results, events or
developments could be materially different from those expressed or
implied by these forward-looking statements. We can give no
assurance that any of the events or expectations will occur or be
realized. By their nature, forward-looking statements are subject
to numerous assumptions and risk factors including those discussed
in our Annual Information Form and most recent MD&A which are
incorporated herein by reference and are available through SEDAR at
www.sedar.com. The forward-looking statements contained in this
news release are expressly qualified by this cautionary statement
and are made as of the date hereof. The Company disclaims any
intention and has no obligation or responsibility, except as
required by law, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
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