ePals Completes Private Placement of Senior Secured Convertible Debentures and Shares for Debt Transaction and Grants Restricted Share Units

Not for Distribution to United States Newswire Services or for Dissemination in the United States

Marketwired

TORONTO--(Marketwired - Aug 27, 2013) - ePals Corporation (TSX VENTURE: SLN) ("ePals" or the "Company") is pleased to announce that it has completed the final tranche of its previously announced non-brokered private placement of senior secured convertible debentures (the "Debentures"), issuing Debentures in an aggregate principal amount of $350,000 to ZG Ventures, LLC ("ZG"), an entity controlled by ePals Chairman, Miles Gilburne, and co-founder and board member of ePals, Nina Zolt.

The Debentures were issued pursuant to the terms and conditions of a trust indenture (the "Indenture") dated March 20, 2013 between the Company and Olympia Transfer Services Inc. which provides for the issuance of debentures in an aggregate principal amount of up to $10,000,000, all of which have now been issued. 

The Debentures rank senior to other indebtedness of the Company and rank equally with all other secured convertible debentures issued pursuant to the Indenture. The terms of the Debentures are identical to all other secured convertible debentures issued pursuant to the Indenture which are described in a news release of the Company dated March 13, 2013. 

The Company intends to use the net proceeds of the offering for general corporate purposes and working capital. 

The Company also announces that it has completed a share for debt transaction pursuant to a debt assignment agreement with ZG. Pursuant to the agreement, ZG assigned to the Company the outstanding debt owed to it by ePals, Inc., a wholly-owned subsidiary of the Company, in the aggregate amount of US$3,000,000 (the "Debt") in consideration for the issuance by the Company to ZG of an aggregate of 24,801,600 restricted voting common shares of the Company (the "Consideration Shares"). The Company and ZG determined the Canadian dollar amount of the Debt to be CDN$3,100,200 and the Consideration Shares were issued at a deemed price of CDN$0.125 per share. Upon the completion of the assignment of the Debt and the issuance of the Consideration Shares, the Debt became payable by ePals, Inc. to the Company.

The Debentures issued in connection with the offering and the Consideration Shares issued in connection with the shares for debt transaction, as well as the underlying voting common shares, are subject to resale restrictions under applicable Canadian securities laws for a period of four months from the closing date. The transactions described in this news release have been conditionally accepted by the TSX Venture Exchange.

Pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the issuance of the Debentures and the Consideration Shares to ZG is each a "related party transaction" for the Company. For these transactions, the Company has relied on the exemption from the formal valuation requirements of MI 61-101 contained in section 5.5(b) of MI 61-101 and has relied on the exemption from the minority shareholder approval requirements of MI 61-101 contained in section 5.7(a) of MI 61-101. 

A material change report in respect of the shares for debt transaction has not been filed at least 21 days in advance of the anticipated date for closing of the transaction as the terms of the transaction were not settled until shortly before the closing of the transaction.

The Company also announces that the board of directors has approved the grant of an aggregate of 503,772 restricted share units to certain members of management of the Company. All restricted share units are redeemable, once vested, for an equal number of restricted voting common shares of the Company. The shares issuable upon redemption of the restricted share units are subject to a hold period of four months commencing on the date of grant.

The securities described herein have not been registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), and may not be offered or sold in the United States unless registered under the U.S. Securities Act or unless an exemption from registration is available.

About ePals Corporation

ePals Corporation (TSX VENTURE: SLN) is an education media company and the leading Global Learning Network. Focused on the K-12 market, ePals offers elementary and secondary school administrators, teachers, students and parents worldwide a safe and secure platform for building educational communities, providing quality digital content and facilitating collaboration for effective 21st century learning. ePals' award-winning products include: the ePals Global Community®; Learn365; In2Books®, a common core eMentoring program that builds reading, writing and critical thinking skills; and popular children's media brands including Cricket® and Cobblestone®. ePals customers and partners include the International Baccalaureate, Microsoft Corporation, Dell Inc., National Geographic and leading school districts across the United States and globally. ePals serves approximately 1 million classrooms and reaches millions of teachers, students and parents in approximately 200 countries and territories. Corporate information is available at www.corp.epals.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Statements

This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the expected use of proceeds of the private placement. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by the Company and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits the Company will derive therefrom. The forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Contact:
FOR FURTHER INFORMATION PLEASE CONTACT:

Aric Holsinger
Chief Financial Officer
ePals Corporation
Phone: (703) 885-3400
aholsinger@corp.epals.com

Cory Pala
Investor Relations
E.vestor
Phone: (416) 657-2400
cpala@corp.epals.com
View Comments (0)