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Martello Announces $2M Non-Brokered Private Placement and Amendment to Credit Agreement

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES./

Initiatives supported by insiders strengthen the Company’s balance sheet to capitalize on its Vantage DX market opportunity, amid growing demand for Microsoft Teams monitoring solutions.

OTTAWA, ONNov. 11, 2021 /CNW/ – Martello Technologies Group Inc., (“Martello” or the “Company”) (TSXV: MTLO), a leading developer of enterprise digital experience monitoring (“DEM”) solutions, today announced its intention to complete a non-brokered private placement for aggregate gross proceeds of approximately CDN$2,000,000 (the “Private Placement”) in conjunction with an amendment (the “Amendment”) to the Credit Agreement (as defined below). The Private Placement will be subscribed entirely by certain directors, officers, and insiders of the Company, with a first tranche expected to close in November and a second tranche by January 31, 2022.

Martello’s market opportunity in Microsoft Teams DEM continues to strengthen in line with global hybrid workplace trends, and demand grows for its Vantage DX platform, launched in September 2021. As Martello focuses on driving sales of Vantage DX, the Company has taken steps to strengthen its balance sheet and negotiate more flexible terms with key lender Vistara Growth. These initiatives are intended to provide Martello with the time and resources to capitalize on both its Vantage DX market opportunity and its participation in the Microsoft Global Solutions Alliance program, to achieve a higher revenue growth trajectory for Microsoft DEM solutions.

Credit Agreement Amendment

Martello Technologies Corporation and Vistara Growth (“Vistara”) entered into a credit agreement on April 27, 2020 (the “Credit Agreement“) for a non–revolving term loan in the principal amount of US$8,000,000 (the “Loan“). On November 10, 2021, Martello and Vistara entered into an Amendment to this agreement.

The Amendment provides Martello with more flexible prepayment terms, adjusts certain covenants to be growth-oriented, terminates the 12,777,273 common share purchase warrants (the “Warrants”) previously issued to Vistara, and sets out the conditions of the Private Placement.

Pursuant to the terms of the Amendment, Vistara will surrender the previously issued Warrants for cancellation and, in consideration thereof, Martello shall pay to Vistara US $400,000. This reduces the number of outstanding warrants for Martello.

In addition, subject to the final approval of the TSX Venture Exchange (the “TSXV“), Martello will issue Vistara 837,110 common shares of Martello (the “Common Shares“) at a deemed price of CDN$0.119 per Common Share, consistent with the price of the Private Placement.

Martello may, pursuant to the Amendment, make partial prepayments of the outstanding Loan at the Company’s option, so long as the outstanding principal amount exceeds US$5 million. Previously, the loan was only prepayable in full.

In addition, the Amendment requires that Martello will complete the Private Placement.

Concurrent with the Amendment, Martello has also made certain immaterial amendments to its credit facility with National Bank of Canada.

Private Placement

The Private Placement will be completed in two tranches. The first tranche (the “First Tranche“) for a minimum of CDN$1,000,000 is required to be completed on or before November 30, 2021 pursuant to the Amendment. Martello intends to complete the First Tranche at a price of CDN$0.119 per Common Share, which is equal to the undiscounted volume weighted average trading price of the Common Shares on the TSXV for the five consecutive trading days prior to today’s date. Pursuant to the First Tranche, Martello will issue up to 8,403,362 Common Shares.

The second tranche (the “Second Tranche“) is for a minimum of CDN$2,000,000 less the amount of the First Tranche and is required to be completed on or before January 31, 2022, pursuant to the Amendment. The Second Tranche will be completed at a price per Common Share equal to the volume weighted average trading price of the Common Shares on the TSXV for the five consecutive trading days ending on the trading date immediately prior to the announcement of the Second Tranche. HO Industries SAS, previously the majority shareholder of GSX, has a pre-emptive right to maintain its pro rata ownership in the Company in connection with the Private Placement.

The net proceeds from the Private Placement are expected to be used by the Company to pursue sales activities and product features and enhancements, as well as for general working capital purposes. The First Tranche is expected to close on or about November 16, 2021 and is subject to certain conditions, including, but not limited to, the receipt of all necessary regulatory and other approvals, including the approval of the listing of the Common Shares on the TSXV.

The Private Placement constitutes a “related party transaction” within the meaning of TSX Venture Exchange Policies 4.1 and Section 5.9 and Multilateral Instrument 61–101 Protection of Minority Security Holders in Special Transactions (“MI 61101“) because insiders (and associated entities of certain insiders) of the Company, including Terence Matthews, through Wesley Clover International Corporation, and Colley Clarke intend to participate in the Private Placement and are expected to acquire 8,403,292 Common Shares in connection with the First Tranche. The Company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61–101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61–101 in respect of the Private Placement as the fair market value (as determined under MI 61-101) of the insider’s participation in the First Tranche is below 25% of the Company’s market capitalization (as determined in accordance with MI 61-101). A news release is being disseminated in connection with the insider participation in the First Tranche less than 21 days in advance of closing of the First Tranche as the Company did not have prior confirmation of the Private Placement or the insider participation at that time.
This press release does not constitute an offer of the securities of the Company for sale in the United States. The securities of the Company have not been registered under the United States Securities Act of 1933, (the “1933 Act”) as amended, and may not be offered or sold within the United States absent registration or an exemption from registration under the 1933 Act. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

About Martello Technologies Group

Martello Technologies Group Inc. (TSXV: MTLO) is a technology company that provides digital experience monitoring (DEM) solutions. The company’s products provide monitoring and analytics on the performance and user experience of critical cloud business applications, while giving IT teams and service providers control and visibility of their entire IT infrastructure. Martello’s software products include Microsoft 365 end user experience monitoring, unified communications performance analytics, and IT service analytics. Martello is a public company headquartered in Ottawa, Canada with employees in EuropeNorth America and the Asia Pacific region. Learn more at http://www.martellotech.com

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

Cautionary Note Regarding Forward-Looking Information

This news release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods and ” includes, but is not limited to, statements with respect to activities, events or developments that the Company expects or anticipates will or may occur in the future including the completion of the Private Placement; the expected proceeds of the First Tranche and the Second Tranche; the use of proceeds from the Private Placement; and the anticipated date for closing of the First Tranche.

Forward-looking information is neither a statement of historical fact nor assurance of future performance. Instead, forward-looking information is based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking information relates to the future, such statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking information. Therefore, you should not rely on any of the forward-looking information. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking information include, among others, the following:

  • Continued volatility in the capital or credit markets and the uncertainty of additional financing.
  • Our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so.
  • Changes in customer demand.
  • Disruptions to our technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of our operating systems, structures or equipment.
  • Delayed purchase timelines and disruptions to customer budgets, as well as Martello’s ability to maintain business continuity as a result of COVID-19.
  • and other risks disclosed in the Company’s filings with Canadian Securities Regulators, including the Company’s annual information form for the year ended March 31, 2020 dated December 24, 2020, which is available on the Company’s profile on SEDAR at www.sedar.com.

Any forward-looking information provided by the Company in this news release is based only on information currently available and speaks only as of the date on which it is made. Except as required by applicable securities laws, we undertake no obligation to publicly update any forward-looking information, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

SOURCE Martello Technologies Group Inc.

For further information: Tracy King, Vice President of Marketing, tking@martellotech.com, 613.410.7636; John Proctor, President & CEO, jproctor@martellotech.com, 613.271.5989

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