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Covalon Announces Non-Brokered Private Placement With Insiders Participating

Stocks in this article: COV

MISSISSAUGA, ON, Aug. 16, 2013 /CNW/ - Covalon Technologies Ltd. (the "Company" or "Covalon") (TSXV: COV), an advanced medical technologies company, today announced that it intends to complete, subject to the approval of the TSX Venture Exchange, a non-brokered private placement comprised of 750 units (the "Units") at a price of $1,000 per Unit for gross proceeds of $750,000. Each Unit will consist of $1,000 principal amount of 12% senior secured convertible debenture (the "Debentures" and each a "Debenture") and 6,452 warrants (each, a "Warrant"). Proceeds of the private placement will be used by Covalon to fund the market launch of the Company's new products IV Clearâ„¢ and SurgiClearâ„¢ and for general working capital.

Each Debenture will be convertible at the holder's option into 6,452 common shares of the Company (the "Common Shares") at a conversion price of $0.155 at any time on or prior to the Maturity Date, which will be three years from the closing date. These conversion rights will be subject to standard anti-dilution provisions. The Debentures will bear interest at the rate of 12% per annum and will be direct secured obligations of the Company ranking senior to all indebtedness of the Company.  Interest will accrue and be added to the principal amount outstanding under the Debentures.  Each Warrant will entitle the holder thereof to acquire one Common Share at an exercise price of $0.155 at any time for a period of three years from the date of the Private Placement.  The Debentures and the Common Shares issuable upon conversion of the Debentures and exercise of the Warrants will be subject to a hold period of four months and one day following the closing date.

It is anticipated that insiders of the Company, including directors and officers will subscribe for up to 580 Units for gross proceeds of up to $580,000.  At the Company's Annual and Special Meeting of shareholders on June 13, 2013, approximately 99% of the represented Common Shares of disinterested shareholders approved a resolution allowing Abe Schwartz, the Chairman of the Board of Directors of the Company, to continue to financially support the Company by increasing his holdings in the Company, and thereby becoming a 'control person' as defined in the TSX Venture Exchange Corporate Finance Manual.  It is anticipated that Mr. Schwartz will subscribe for 356 Units for gross proceeds of $356,000.

No commission or finder's fee will be paid in connection with the private placement.  As Insiders will participate in the private placement, any such subscriptions will be considered to be related party transactions within the meaning of TSXV Policy 5.9 and Multilateral Instrument 61-101 ("MI 61-101"). The Company intends to rely on the exemptions from the valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(b) and 5.7(a) of MI 61-101 in respect of such Insider participation.

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