Yes, it definitely wants to get rid of it. This debt is a bit complicated. Here’s more information from the Q3 report, apologies for the long quotes, but I think they are quite important:
6 Promissory note
In February 2020 the Company paid Pressure Technologies plc (“Pressure Technologies”) $3.4 million principal and $0.2 million interest on the promissory note, with partial use of proceeds from the February 2020 equity raise (note 7). The repayment of principal down to £4.1 million was in accordance with the terms of the promissory note, under which if the Company completed an equity financing before the maturity date of the promissory note, it would be required to pay to Pressure Technologies an amount equal to the lesser of 50% of
the net proceeds of the equity financing and such other amount as results in a reduction of the principal amount outstanding under the promissory note to £4.1 million.
On July 2, 2020, the Company executed a framework agreement with Pressure Technologies (the “Framework Agreement”), under which the principal value of the promissory note was reduced by $1.8 million to $5.2 million following the disposition of Pressure Technologies entire equity interest in the Company, which was sold in a series of block trades. Pressure Technologies disposed of 7,663,920 common shares and 5,094,765 warrants of the Company, issued to Pressure Technologies in connection with the Company’s acquisition of PT Biogas
Holdings Limited in June 2019. In order to facilitate the transaction, Brad Douville (President and Chief Executive Officer of the Company) and Creation Partners LLP (a partnership owned and controlled by certain Directors of the Company, collectively “the Parties”), as parties to the Framework Agreement, agreed to release Pressure Technologies from its obligations under certain agreements entered into with the Parties that required Pressure Technologies to place certain common shares and warrants in escrow pending repayment in full of the promissory note. In exchange Pressure Technologies agreed to complete the immediate transfer of common shares and warrants in escrow to the Parties from their free-trading and escrow positions. Under the Framework Agreement the maturity date of the remaining balance of the promissory note advanced from June 3, 2023 to June 30, 2021.
In accordance with IFRS 9 – Financial Instruments, the Company accounted for the transaction as an extinguishment of the original promissory note and a new promissory note was recorded to reflect the terms per the Framework Agreement, with a revised principal amount of $5.2 million. The Company recorded a gain of $1.8 million (net of transaction costs) in the statement of operations in the period.
Regarding shares:
7 Share capital
Common shares
At September 30, 2020, the Company had unlimited authorized common shares without par value and 98,193,646 common shares issued and outstanding (December 31, 2019 – 68,435,795).
On February 19, 2020, the Company completed a public offering through the issuance of 23,000,000 units, at a price of $0.50 per unit for gross proceeds of $11.5 million. Each unit was comprised of one common share and one-half of one common share warrant. Each full warrant entitles the holder to purchase one additional common share of the Company for $0.70 per share, for a one-year period ending on February 19, 2021. The fair value of
the warrants issued (valued using the Black-Scholes pricing model) of $0.8 million has been included in contributed surplus.
The Company received net proceeds of $10.3 million from the financing after deducting cash expenses of $1.2 million.
The Company paid commissions and other fees and expenses to brokers of $0.8 million and issued 1,380,000 agent options. Each agent option gives the holder the right to purchase one common share for $0.50, for a oneyear period ending on February 19, 2021.
During the period, 1,591,586 options were exercised, and the fair value of $0.1 million was transferred from contributed surplus to share capital.
At September 30, 2020, the Company had 6.3 million shares held in escrow, which are expected to be released on December 6, 2020. During the quarter, following completion of the Framework Agreement (note 6) 4.1 million shares were released from a further contractual restriction of transfer and an additional 4.3 million shares that were held by Pressure Technologies were released upon the cancellation of the right to direct sales agreement.
What worries me is “6.3 million shares held in escrow”. Does this mean that when these shares are released from escrow, the company will have 6.3 million of its own shares available for use?
