7 August 2020
Kaizen Discovery Inc. is pleased to announce that the Company has arranged an additional US$1.25 million short-term loan (the "Loan") from its majority shareholder HPX TechCo Inc. ("HPX"); a wholly-owned subsidiary of High Power Exploration Inc.
HPX will advance funds under the Loan in its discretion from time to time upon request by Kaizen prior to the maturity date. The Loan is in addition to the existing short-term loan of US$2.15 million from HPX, and Kaizen has issued to HPX an amended and restated unsecured promissory note that replaces the unsecured promissory note covering the existing short-term loan that was due on June 30, 2020 (refer to Kaizen's news release dated December 23, 2019). The amended promissory note evidences the total of up to US$3.4 million plus interest that will be owed to HPX and reflects a maturity date for all amounts owing of December 31, 2020. The Loan has an interest rate of 10% per annum, compounding only at maturity. The interest rate will increase to 12% per annum in the event that Kaizen does not repay the amount owing upon the maturity date.
The Loan constitutes a "related party transaction" under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions ("MI 61-101") as HPX is a related party of Kaizen given its greater than 10% beneficial shareholding. Pursuant to Section 5.7(1)(f) of MI 61-101, the Company is exempt from obtaining minority approval of the Company's shareholders in respect of the Loan because it was determined that the Loan is on reasonable commercial terms that are not less advantageous to the Company than if the Loan was obtained from a person dealing at arm's length with the Company and because the Loan is not convertible into, or repayable in, equity or voting securities of the Company or a subsidiary of the Company or otherwise participating in nature. The Company will file a material change report in respect of the Loan. However, the material change report will be filed less than 21 days prior to the closing of the Loan, which is consistent with market practice and which the Company deems is reasonable in the circumstances.
The Company intends to use the additional proceeds for general working capital purposes.