DGTL Holdings Inc. Revises Terms of Private Placement and Announces Debt Settlement and Proposed Conversion of Preferred Shares

Rhea-AI Summary

DGTL Holdings has revised its private placement terms, now offering common shares and preferred shares at $0.05 per unit for total proceeds of up to $52,500. The company plans to settle $437,500 in debt through issuing 8,750,000 common shares. CEO John Belfontaine will become a new Control Person, increasing his ownership to 42.95% through the debt settlement. The company will convert all outstanding preferred shares to common shares at a 15:1 ratio, potentially issuing between 233,284 and 1,283,284 new common shares. These transactions require shareholder approval at the upcoming July 2025 meeting and TSXV approval.

Positive

• Debt reduction of $437,500 through equity conversion improves balance sheet
• Strategic consolidation of share structure through preferred shares conversion
• Management's increased stake shows confidence in company's future

Negative

• Significant shareholder dilution through new share issuance
• Small private placement amount of only $52,500 may not substantially improve working capital
• Creation of new Control Person (42.95% ownership) could reduce float and stock liquidity

Toronto, Ontario--(Newsfile Corp. - June 11, 2025) - DGTL Holdings Inc. (NEX: DGTL.H) ("DGTL" or the "Company"), reports that, further to its news release dated May 13, 2025, the Company has revised the terms of its previously announced non-brokered private placement (the "Private Placement") of common shares ("Common Shares") and preferred shares ("Preferred Shares"). The Private Placement will instead be offered at a price of $0.05 per one Common Share, and, with fifteen (15) Preferred Shares convertible into one Common Share ("Preferred Share Units"), each Preferred Share Unit will also be offered at a price of $0.05 per unit. The Private Placement is for aggregate gross proceeds of up to $52,500 and will consist of up to a total of 1,050,000 Common Shares, which may be offered through the sale of Common Shares directly or indirectly through the sale of Preferred Share Units, or any combination of the two. The Company anticipates that, upon completion of the Private Placement, a new Control Person (as defined below), Mr. John Belfontaine ("Mr. Belfontaine"), will be created, subject to obtaining requisite approval from the shareholders of the Company and the TSX Venture Exchange (the "TSXV").

The Company also announces that it will enter into debt settlement agreements with certain insiders of the Company (the "Creditors") to settle an aggregate amount of $437,500 in outstanding debt through the issuance of 8,750,000 Common Shares at a deemed price of $0.05 per Common Share (the "Debt Settlement").

Private Placement & Debt Settlement

The Private Placement and the Debt Settlement are subject to receiving the requisite disinterested shareholder approval at the Company's upcoming annual general and special meeting, to be held in July 2025 (the "Meeting") in accordance with Section 5.2 of the NEX board of the TSXV and section 6.2(k) of TSXV Policy 4.4 - Security Based Compensation.

The Preferred Shares underlying the Preferred Share Units have the following material terms: (i) the Preferred Shares will bear interest at a rate of 4% per annum and will mature on August 4, 2025; (ii) each fifteen (15) Preferred Shares are convertible into one (1) Common Share of the Company; and (iii) the Preferred Shares are non-voting and non-participating.

All securities issued in connection with the Private Placement and Debt Settlement will be subject to a statutory hold period of four months plus a day from the date of issuance in accordance with applicable securities legislation in Canada. The Private Placement is subject to all necessary corporate and regulatory approvals, including approval of the TSXV pursuant to TSXV Policy 4.1 - Private Placements ("Policy 4.1"). The use of proceeds will be dedicated to general working capital with no specific use of proceeds representing 10% or more of the gross, nor will any proceeds be used for investor relations activities.

None of the securities issued in the Private Placement and Debt Settlement will be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), and none of them may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the 1933 Act. This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of the securities in any state where such an offer, solicitation, or sale would be unlawful.

Creation of New Control Person

Mr. Belfontaine, the CEO of the Company, directly and indirectly holds 1,779,312 Common Shares, representing approximately 16.72% of the current issued and outstanding shares of the Company. Mr. Belfontaine intends to acquire up to 7,000,000 Common Shares pursuant to the Debt Settlement. Upon the completion of the Debt Settlement, Mr. Belfontaine will have control or direction over, directly or indirectly, 42.95% of the 20,442,071 issued and outstanding Common Shares on an undiluted basis (the "Belfontaine Subscription"). The Belfontaine Subscription will be held in escrow, pending the Company receiving all applicable regulatory approvals and receiving disinterested shareholder approval of the creation of a new Control Person at the next annual shareholder meeting. Should such approvals not be obtained, the funds would be returned to Mr. Belfontaine.

Section 5.2 of the NEX policies, shareholder approval is required if: (a) a listed company proposes to issue more than 100% of its outstanding shares in any 12 month period; and (b) a new "Control Person" is created. Pursuant to the policies of the NEX, a "Control Person" is any person, or a combination of persons, that holds or controls more than 20% of the outstanding common shares of an issuer.

Policy 4.1 of the TSXV Corporate Finance Manual requires shareholder approval where a transaction creates a shareholder that holds or controls 20% or more of an issuer's shares (a "Control Person"). The Company anticipates that the Belfontaine Subscription will create a new Control Person pursuant to Policy 4.1. To fulfil the requirements of Policy 4.1, the Company intends to seek approval of shareholders holding or controlling more than 50% of its Common Shares to approve the creation of the new Control Person at the next shareholder meeting of the Company.

Related Party Transactions

The Debt Settlement constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transaction ("MI 61-101") because C$437,500 of debt will be settled with the insiders of the Company. Mr. Belfontaine, Mr. Foster, and Mr. Kovalyov, are each deemed to be a "related party" of the Company under MI 61-101 as Mr. Belfontaine is the CEO and Chairman of the Company, as well as a 10% securityholder, Mr. Foster, and Mr. Kovalyov are directors of the Company. The Company is relying on the exemptions from the formal valuation requirement set out in Sections 5.5(g) and 5.7(1)(e) Financial Hardship of MI 61-101, as the Company is in a situation of serious financial difficulty and the Debt Settlement is designed to improve the financial position of the Company.

Conversion of Preferred Shares

The Company is also proposing to amend its articles of incorporation such that all of the issued and outstanding Preferred Shares, consisting of the 3,499,262 Preferred Shares that are issued and outstanding, together with up to an additional 15,750,000 Preferred Shares that may be issued pursuant to the Private Placement, would be exchanged for Common Shares on the basis of 15 Preferred Shares for one Common Share (the "Amendment"). Under the terms of the Amendment, the accrued dividends on the outstanding Preferred Shares would be terminated and the holders of Preferred Shares would not receive any cash or stock dividend in respect of such accrued dividends. The result of the foregoing is that an aggregate of between 233,284 Common Shares (if no Preferred Shares are issued pursuant to the Private Placement) and 1,283,284 Common Shares (if 15,750,000 Preferred Shares are issued pursuant to the Private Placement) would be issued as a result of the Amendment. The Common Shares will be issued at a deemed price of $0.05 per Common Share. The holders of the Preferred Shares are currently, and are anticipated to be as at the effective date of the Amendment, entirely held by arm's-length shareholders.

The Amendment is subject to prior approval of the Exchange, and shareholder approval and, as such, requires approval by not less than 66 2/3% of the votes cast by the holders of Preferred Shares and not less than 66 2/3% of the votes cast by the holders of Common Shares at the Meeting, each voting separately as a class. The holders of Preferred Shares will be entitled to dissent in the manner set forth pursuant to Section 190 of the Canada Business Corporations Act.

Meeting

At the Meeting, the holders of Common Shares will be asked to consider and, if thought advisable, to approve the following resolutions pertaining to special business of the Company, in addition to standard ordinary business matters:

1. To consider and, if thought advisable, pass an ordinary resolution of disinterested shareholders to re-approve the Company's Long Term Omnibus Incentive Equity Plan, as more particularly described in the accompanying information circular prepared for the purposes of the Meeting;
2. To consider and, if thought advisable, pass an ordinary resolution of disinterested shareholders to approve the proposed Private Placement of 1,050,000 Common Shares for aggregate gross proceeds of up to $52,500, as more particularly described in the accompanying information circular prepared for the purposes of the Meeting;
3. To consider and, if thought advisable, pass an ordinary resolution of disinterested shareholders to approve the proposed Debt Settlement of $437,500 of existing debt owing to certain creditors by way of issuance of an aggregate of approximately 8,750,000 Common Shares at a deemed price of $0.05 per Common Share, as more particularly described in the accompanying information circular prepared for the purposes of the Meeting;
4. To consider and, if thought advisable, pass a special resolution to approve the amendment to the articles of the Company to convert all its issued and outstanding Preferred Shares into Common Shares, on the basis of fifteen (15) Preferred Shares into one (1) Common Share, as more particularly described in the accompanying information circular prepared for the purposes of the Meeting;
5. To consider and, if thought advisable, pass a special resolution to approve the amendment to the articles of the Company cancel the Preferred Shares as a class in the capital of the Company authorized for issuance after the completion of the proposed Debt Settlement, Private Placement and the conversion of its issued and outstanding Preferred Shares into Common Shares, as more particularly described in the accompanying information circular prepared for the purposes of the Meeting; and
6. To transact such other business as may properly be transacted at such meeting or at any adjournment thereof.

At the Meeting, the holders of Preferred Shares will be asked to consider and, if thought advisable, to approve, solely with respect to the following special resolution of the Company:

1. To consider and, if thought advisable, pass a special resolution to approve the amendment to the articles of the Company to convert all its issued and outstanding Preferred Shares into Common Shares, on the basis of fifteen (15) Preferred Shares into one (1) Common Share, as more particularly described in the accompanying information circular prepared for the purposes of the Meeting;

Additional information on the Private Placement, Debt Settlement and Amendment will be available under the Company's information circular for the Meeting posted on its SEDAR+ profile at www.sedarplus.ca.

For more Information

John Belfontaine, Director
Email: IR@dgtlinc.com
Phone: +1 (877) 879-3485
Website: www.dgtlinc.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

Certain information contained herein constitutes forward-looking information or statements under applicable securities legislation and rules. Such statements include, but are not limited to, statements with respect to the shareholder meeting, any approval thereof by the TSXV or by shareholders of the Company, and the Belfontaine Subscription. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of DGTL to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to: (i) any inability of DGTL to obtain shareholder approval of the proposed creation of a new Control Person; and (ii) the ability to attract prospective mergers, acquisitions or funding opportunities on a go forward basis. Although management of DGTL has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Neither party will update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws. The parties caution readers not to place undue reliance on these forward-looking statements and it does not undertake any obligation to revise and disseminate forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of or non-occurrence of any events.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/255306

FAQ

What are the revised terms of DGTL Holdings' private placement?

DGTL Holdings is offering common shares and preferred share units at $0.05 per unit for total proceeds of up to $52,500, consisting of up to 1,050,000 common shares.

How will DGTL Holdings' debt settlement affect shareholders?

The company will issue 8,750,000 common shares at $0.05 per share to settle $437,500 in debt, leading to significant dilution but improving the balance sheet.

What is the conversion ratio for DGTL Holdings' preferred shares?

Preferred shares will be converted to common shares at a ratio of 15 preferred shares for 1 common share, potentially creating between 233,284 and 1,283,284 new common shares.

How much ownership will CEO John Belfontaine have after the transactions?

After the debt settlement, Belfontaine will control 42.95% of outstanding shares, becoming a new Control Person subject to shareholder approval.

When will DGTL Holdings shareholders vote on these proposals?

Shareholders will vote on the private placement, debt settlement, and preferred share conversion at the annual general and special meeting in July 2025.