Board Changes and $3M Promissory Note Raising

Board Changes and $3M Promissory Note Raising

Highlights

  • Highly regarded Executives Jason Marinko and Tim Wise appointed to the board
  • Binding commitments from sophisticated and professional investors to raise $3 million
  • Funds raised will be used to complete construction of ECT’s small-scale Coldry demonstration & char plant in Bacchus Marsh as well as provide funds to enable the Company to assess complementary ESG acquisition and business development opportunities and working capital

Environmental Clean Technologies Limited (ASX: ECT) (ECT or Company) is pleased to announce that it has received firm commitments for a promissory note raising of A$3,000,000 via the issue of promissory notes each with a face value of $1.00 (Promissory Note Raising) and the appointment of highly regarded Executives Jason Marinko and Tim Wise, to the Board as Non-Executive Directors.

Board Restructure

Mr Marinko is an experienced public company CEO, Director and Chairman, with expertise in the technology and investment banking industries and a proven track record in leading technologies to commercialisation. His experience includes being the Executive Chairman of geospatial imagery company Spookfish Limited, where he oversaw the company from its ASX listing through to its eventual sale to North American industry leader, EagleView Technologies Inc and its U.S. private equity partners.

In addition, Mr Marinko was previously CEO of Little World Beverages Limited and an Executive Director at ASX-listed logistics technology company, Yojee Limited, and is currently a Non-Executive Director of legal tech innovator, Immediation Limited. He has extensive corporate finance experience and holds an MBA from INSEAD Business School in France and is a graduate of the Australian Institute of Company Directors.

Mr Wise is an experienced entrepreneur and Company Director with particular expertise in the energy, industrial innovation and technology sectors has more than 20 years’ experience in public companies and capital markets. He was the founder and former CEO of Kalina Power Ltd (ASX:KPO) and The Tap Doctor, and is currently an Executive Director at Phos Energy Limited and a Non-Executive Director of Tamaska Oil and Gas Limited (ASX:TMK), Graft Polymer plc and Melchor Pty Ltd. He has a Bachelor of Science from the University of Western Australia.  

In conjunction with the appointment of Messrs Marinko and Wise to the board, existing Directors the Hon. Neil O’Keefe and Mr Ashley Moore will step down from the board to make way for the new directors. Mr Moore will continue as ECT’s group Chief Engineer, and the Company will engage Mr O’Keefe on a consulting basis to continue to assist the Company with its government relations strategy. In connection with the board restructure, current Executive Chairman Glenn Fozard will move into the position of Managing Director. These board changes take effect immediately. To show their support for the Company, Messrs Marinko and Wise have also participated in the Promissory Note Raising (Mr Marinko as to $50,000 and Mr Wise as to $25,000).

Glenn Fozard and Ashley Moore are also participating in the Promissory Note Raising, with Mr Fozard subscribing for $40,000 of Promissory Notes and Mr Moore subscribing for $20,000 of Promissory Notes. Messrs Fozard and Moore’s participation in the Promissory Note Raising will be set off against outstanding directors fees owing from the Company to Messrs Fozard and Moore. Details in respect of the Promissory Note Raising are provided below.

Promissory Note Raising

The Company is also pleased to announce that it has received firm commitments for a Promissory Note Raising from a syndicate of sophisticated and professional investors (together, the Lenders).

Proceeds from the Promissory Note Raising will be utilised:

  1. to complete the construction of the Company’s small-scale Coldry demonstration & char plant in Bacchus Marsh, Victoria;
  2. to enable the Company to assess complementary acquisition and business development opportunities; and
  3. for working capital purposes.

Settlement of the Promissory Note Raising and the issue of the Promissory Notes is set to occur in early September 2021. Refer to Schedule 1 for the material terms (including the conversion provisions which are subject to shareholder approval) of the promissory notes (Promissory Notes). If the Company obtains shareholder approval and all of the Promissory Notes are converted, assuming a conversion price of $0.01 per Share, up to 300,000,000 Shares will be issued to the Lenders (which will result in a dilution to existing shareholders, based on the total issued share capital of the Company as at the date of this announcement, of approximately 19%).

Subject to the Company obtaining shareholder approval, 100 free attaching listed options in the ECTOE class of securities (Option) will also be granted for every Promissory Note subscribed for under the Promissory Note Raising. These Options have an exercise price of 3 cents and expire on 20 February 2023. An Appendix 3B accompanies this announcement.

Kaai Capital acted as Lead Manager to the Promissory Note Raising and will be paid a fee of 6% of the amount raised together with 150 million listed Options in the ECTOE class of options (LM Options).  To enable the Company to preserve cash, Kaai has agreed to receive its 6% fee in fully paid ordinary shares (Fee Shares) and Options (Fee Options) on the same effective terms as the conversion terms of the Promissory Notes, that is at a deemed issue price of 1 cent per Fee Share together with 1 attaching Fee Option for each cent raised. 

The value of the LM Options and the Fee Options based on a Black-Scholes valuation is $0.00014 per Option. The Company has valued these options based on the following assumptions:

  • Share price: $0.01 (being the closing price of Shares on 26 August 2021, the day the Company entered into trading halt)
  • Exercise price: $0.03
  • Expiry date: 23 February 2023
  • Risk free rate: 0.2%
  • Volatility: 50%

The value of the securities to be issued to Kaai or nominees in consideration for lead managing the Promissory Note Raising based on the last traded price of Shares on 26 August 2021 (being the day the Company entered into a trading halt) and the Black Scholes valuation of the LM Options and the Fee Options is as follows:

 NumberValue per securityTotal Value
Fee Shares18,000,000$0.01$180,000
Fee Options18,000,000$0.00014$2,520
LM Options150,000,000$0.00014$21,000

The Fee Shares, LM Options and 15 million Fee Options will be issued under the Company’s existing 15% placement capacity under ASX Listing Rule 7.1. The balance of 3 million Options will be subject to shareholder approval to be sought at the Company’s 2021 Annual General Meeting. None of the fee securities to be issued to Kaai or its nominees will be subject to escrow.

The Company notes that as detailed in its 7 April 2021 ASX announcement, Kaai also acted as Lead Manager to a placement by the Company in April which raised $1.5 million (April Placement), and was also engaged to lead manage any shortfall arising under the Company’s share purchase plan to raise $2 million (SPP).  The fees paid to Kaai (or its nominees) in consideration for lead managing the April Placement were approved by shareholders at a general meeting held on 25 June 2021 (Meeting) and are detailed again below:

  • a 6% fee of the amount raised under the April Placement of $1.5 million, which was settled through the issue of Shares and Options on the same terms as the placement, resulting in the issue of 9 million Shares and 3 million Options; and
  • 75 million Options, on the basis of 1 Option for every 2 Shares issued under the April Placement.

In addition, the Company also established an equity lending facility with nominees of Kaai under which 35 million Shares were issued. These Shares are subject to a holding lock and will not be released unless and until the subscription price of $0.02 is paid.

As announced by the Company on 9 June 2021, approximately $395k was raised under the SPP, and the shortfall of approximately $1.6 million has not been placed to date as the Company’s share price has generally traded below the SPP offer price of 1.6c since close of the SPP. As approved by shareholders at the Meeting, the Company has until 25 September 2021 (being 3 months after the Meeting) to place the SPP shortfall.             

This announcement has been authorised for release to ASX by the Company’s Board of Directors.

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For further information, please contact:

INVESTORS
Glenn Fozard
Managing Director

[email protected] / +61398496203

MEDIA
Adam Giles
Company Secretary

[email protected] / +61398496203

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