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CALGARY, Aug. 17 /CNW/ - RS Technologies Inc. ("RS") (RS - TSX), a technology innovator and manufacturer of advanced composite products for infrastructure markets, today announced the closing of its previously announced bridge financing. At closing, RS issued a $2 million principal amount of unsecured promissory note (the "Note") and 1,000,000 common shares of RS to Marjad Inc., a company wholly owned by RS's Chairman, Mr. Wilmot Matthews, for total gross proceeds of $2 million. The Note is due and payable on November 1, 2010 (the "Maturity Date") and accrues interest at a rate of twelve (12%) percent per annum payable on the Maturity Date. Pursuant to the terms of the Note, RS must repay the Note, together with any accrued interest, out of the net proceeds of the first debt or equity financing completed by RS on or before the Maturity Date. The common shares of RS issued pursuant to the private placement are subject to a hold period until December 18, 2010.
RS intends to use the proceeds from the bridge financing to fund general working capital deficiencies until RS secures permanent funds for its near term working capital needs and its anticipated manufacturing expansion. As announced on June 22, 2010, RS has engaged Macquarie Capital Markets Canada Ltd. as its financial advisor to assist RS in securing funds for both its near term working capital needs and its anticipated manufacturing expansion. RS, together with its financial advisor, is actively engaged in seeking debt and/or equity financing in order to raise funds necessary to fund RS's working capital deficit, to pay RS's accounts payable and accrued liabilities, and to make capital improvements to enhance manufacturing. RS does not currently have any arrangements in place for the completion of any debt and/or equity financing and there is no assurance that RS will be successful in completing any debt and/or equity financing. RS's ability to continue operations is entirely dependent on RS's ability to obtain bridge financing until such time as long-term financing is secured. As disclosed in the future operations note of RS's unaudited consolidated financials for the three and six months ended June 30, 2010, RS will require additional bridge funds in order to continue as a going concern in the event that a long-term financing has not been completed prior to August 31, 2010.
As announced on August 11, 2010, RS has elected to satisfy its obligation to repay all of the $25 million principal amount of 8.5 percent unsecured convertible debentures (the "Debentures") of RS due on October 7, 2010 by issuing and delivering to the holders of the Debentures that number of common shares of RS equal to the number obtained by dividing such principal amount of the Debentures by 95% of the weighted average trading price per common share of RS for the 20 consecutive trading days ending on September 30, 2010 (the "VWAP"). As at the date hereof, the directors and senior officers of RS directly or indirectly, own or control, an aggregate of $825,000 principal amount of the Debentures. The issuance of common shares to repay the principal amount of the Debentures may result in a material affect in control of RS. For the purposes of illustration, the following table sets forth the number of common shares of RS that would be issued to repay the principal amount of the Debentures and the approximate percentage share dilution (based on the number of issued and outstanding common shares as at the date hereof) that would result from such share issuances assuming 95 percent of the VWAP is equal to the amounts set forth below.
Issuable to Percentage of
95% of the VWAP Repay Debentures Share Dilution
----------------------- ----------------------- -----------------------
$0.05 500,000,000 225%
$0.10 250,000,000 113%
$0.15 166,666,667 75%
The TSX, in its discretion, may require RS to obtain approval of a majority of its shareholders as a condition to the issuance of common shares to the debentureholders. If shareholder approval is required by the TSX, RS intends to seek shareholder approval to the share issuance to debentureholders by seeking written consent of the holders of more than 50 percent of the voting securities of RS, or by shareholder meeting, as permitted by TSX rules.
The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the U.S. Securities Act.
RS is an ISO 9001:2008 certified technology innovator that develops advanced composite material products for infrastructure markets. The composite products manufactured using the company's proprietary resins and processes are typically lighter, more durable and longer-lasting than competing products made from the traditional building blocks of wood, steel or concrete. RS's flagship product is its award-winning RStandard(R) composite pole. The pole is used as transmission and distribution poles to carry electric grids and as communication structures for various uses including wireless networks and microwave communications systems.
For the latest on RS's developments, go to the company's website at www.grouprsi.com.
"RStandard" is a registered trademark of RS.
Certain information set forth in this news release, including management's assessment of RS's future plans, operations and use of proceeds of the bridge financing, contains forward-looking statements which are based on RS's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "expects", "anticipates", "believes", "projects", "plans" and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause RS's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, RS not securing permanent funds for both its near term working capital needs and anticipated manufacturing expansion, RS not securing additional bridge financing to fund its operations in the event long-term financing is not completed by August 31, 2010, RS's lack of revenues and unpredictability of future revenues; the uncertainty of the profitability of existing and contemplated products of RS; RS's ability to raise capital on acceptable terms when needed; RS's ability to attract and retain key employees; competition from established competitors with greater resources; the uncertainty of the developing markets in which RS operates; the risks associated with rapidly changing technology; RS's reliance on third parties to supply raw materials and the cost of such raw materials; intellectual property risks, foreign exchange rate fluctuations and changes in general economic, market and business conditions. Many of these risks and uncertainties are described in RS's annual information form for the year ended December 31, 2009 and other documents RS files with the Canadian securities authorities. The forward-looking statements are made as of the date hereof and RS assumes no obligation to update or revise such statements to reflect new events or circumstances except as required by applicable securities laws.
SOURCE RS Technologies Inc.
For further information: For further information: RS Technologies Inc., Laurien Abel, Investor Relations and Communications, Tel: (403) 219-8000, Fax: (403) 219-8001, Email: firstname.lastname@example.org