18. SUBSEQUENT EVENTS
The following events occurred subsequent to the year ended December 31, 2018:
The Company issued 701,250 shares for gross proceeds of $182,250 pursuant to the exercise of 701,250 stock options.
The Company issued 7,037,555 shares for gross proceeds of $3,415,311 pursuant to the exercise of 7,037,555 share purchase warrants.
The Company granted 250,000 RSUs which vest over three years.
April 26, 2018
June 15, 2018
October 1, 2018
Three business days prior to aircraft delivery
CANADA JETLINES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018
(Expressed in Canadian Dollars)
18. SUBSEQUENT EVENTS (continued)
The Company cancelled 750,000 unvested RSUs.
The Company executed a letter of intent with a South Korean special purpose fund (the “SPV”) led and established by InHarv Partners Ltd. for a financing of up to $14,000,000 which will consist of convertible debentures (each, a “Debenture”) and 1,785.71 variable voting share purchase warrants (each, a “Warrant”) for every $1,000 of principal of the Debentures. The initial tranche provides for gross proceeds in the amount of $7,000,000. Each Warrant is exercisable into one additional variable voting share (each, a “Warrant Share”) at an exercise price of $0.56 per Warrant Share for a period of 36 months from the date of closing.
The Debentures will have a maturity date of 36 months from the date of issuance (the “Maturity Date”) and the principal amount of the Debentures, together with any accrued and unpaid interest, will be payable on the Maturity Date, unless earlier converted. The Debentures bear interest at a rate of 10% per annum, payable in cash annually, unless earlier converted. The principal amount of the Debentures is convertible into variable voting common shares of the Company at the option of the holders at a conversion price of $0.56 per variable voting common share. The Debentures are subject to an origination fee of 5% payable in variable voting common shares based on the market price at the time of issuance of such shares. The funds will be available to the Company once certain conditions have been satisfied. The Debentures will be secured by a charge over the assets of the Company.
The closing of the Debentures is conditional on the execution of a definitive subscription agreement and the satisfaction of conditions to closing that will be contained in the subscription agreement.
The Company executed a letter of intent with SmartLynx with respect to the lease for two Airbus A320 aircraft each for a period of five months to commence on November 1, 2019 (the “SmartLynx LOI”) and paid security deposits in the amount of US$380,000. The SmartLynx LOI is subject to executing a definitive lease agreement and other conditions customary to a transaction of this nature.
The Company terminated the Airbus Lease Agreements (Note 17). Security deposits paid by the Company in the amount of US$2,190,000 were retained by the lessor and may be applied in the lessor’s determination as financial accommodation to potential future aircraft lease transactions between the Company and the lessor entered into prior to April 3, 2020 subject to certain conditions (Note 6).
The Company resigned as a member of The Bootheel Project LLC and no longer has any interest in the Bootheel property (Note 8).
The Company surrendered its interest in the CMB Silver Spruce property (Note 8).
The Company and SmartLynx amended the escrow release conditions of the Offering completed during the year ended December 31, 2018 (Note 10). The proceeds in the amount of $7,500,000 shall be released to the Company as follows: (a) $5,250,000 upon (i) the Company completing the Funding Milestone from a subsequent financing by June 30, 2019 (such completion date subject to waiver by SmartLynx), and (ii) the receipt by Jetlines Operations from the Canada Transportation Agency an order providing an exemption from Section 59 of the Canada Transportation Act, to allow it to sell tickets for air travel; and (b) $2,250,000 upon the receipt by Jetlines Operations of its air operator certificate from Transport Canada. In addition, the Termination Fee is required to be held in escrow. The Company is obligated to pay the Termination Fee if the Company has not achieved the Funding Milestone by June 30, 2019 or commits certain other material breaches and SmartLynx terminates the underlying agreements.
The Company granted 710,000 RSUs of which 660,000 RSUs vest over three years and 50,000 RSUs vest over one year.
The Company granted 300,000 stock options which vest over two years.