LeddarTech Announces Receipt of US$3.0 Million Following Disbursement of the Second Tranche of the Previously Announced Bridge Financing

Rhea-AI Summary

LeddarTech Holdings Inc. (Nasdaq: LDTC), an automotive software company, has received the second tranche of US$3.0 million from its previously announced bridge financing. This is part of a total US$9.0 million Bridge Financing provided by principal shareholders FS Investors, Investissement Québec, and Fédération des caisses Desjardins du Québec. The first tranche of US$6.0 million was funded on August 19, 2024.

Additionally, FS Investors converted US$1.5 million of existing convertible notes into common shares at US$2.00 per share. The company also received about US$334,000 in Bridge Loans from management and board members. The Bridge Financing is considered a 'related-party transaction' but qualifies for exemption from formal valuation and minority shareholder approval due to the company's serious financial difficulty.

Positive

• Secured additional US$3.0 million in bridge financing
• Total bridge financing of US$9.0 million available
• Conversion of US$1.5 million convertible notes to equity at above-market price
• Additional US$334,000 in loans from management and board members

Negative

• Company in serious financial difficulty
• Reliance on related-party transactions for financing
• Potential dilution of existing shareholders due to convertible note conversion

Insights

Financial Analyst

LeddarTech's receipt of the $3.0 million second tranche of bridge financing is a critical development for the company's short-term liquidity. This funding, part of a larger $9.0 million bridge financing package, provides essential capital to sustain operations. The company's reliance on the "financial hardship" exemption to bypass formal valuation and minority shareholder approval is a clear indicator of its precarious financial position.

The conversion of $1.5 million of convertible notes by FS Investors at an above-market price of $2.00 per share is a positive sign, reducing debt and demonstrating some investor confidence. However, the need for additional loans from management and board members suggests a lack of external funding options.

Investors should be cautious. While this financing provides a temporary lifeline, it doesn't address the underlying challenges facing LeddarTech. The company's ability to secure a strategic investor for a subsequent equity raise will be important for its long-term viability and growth prospects in the competitive automotive software market.

Legal Expert

The Bridge Financing transaction raises several legal considerations. As a "related-party transaction" under Regulation 61-101, LeddarTech's use of the "financial hardship" exemption to bypass formal valuation and minority shareholder approval requirements is noteworthy. This exemption is typically reserved for companies in dire financial straits, highlighting the severity of LeddarTech's situation.

The company's disclosure about the Board's unanimous determination of financial difficulty and the reasonableness of the financing terms is important for regulatory compliance. However, this could potentially expose the company to shareholder scrutiny or litigation if the financial situation doesn't improve.

Additionally, the statement regarding the unregistered status of the Bridge Loans under the Securities Act of 1933 is a necessary legal disclaimer. It indicates that these securities are being issued under an exemption from registration, likely Rule 506 of Regulation D, which restricts their resale and limits potential investors.

QUEBEC CITY, Canada, Oct. 15, 2024 (GLOBE NEWSWIRE) -- LeddarTech^® Holdings Inc. (“LeddarTech” or the “Company”) (Nasdaq: LDTC), an automotive software company that provides patented disruptive AI-based low-level sensor fusion and perception software technology, LeddarVision™, for ADAS, AD and parking applications, announced today that the Company received the second tranche of the bridge loans (the “Bridge Loans”) in an aggregate amount of US$3.0 million, which are part of a bridge financing in an aggregate amount of up to US$9.0 million (the “Bridge Financing”) made available to the Company by certain of its principal shareholders, namely FS Investors (“FS”), Investissement Québec (“IQ”) and its senior lender, Fédération des caisses Desjardins du Québec (“Desjardins” and, together with FS and IQ, the “Initial Bridge Lenders”). The principal details of the Bridge Financing were announced by the Company on August 19, 2024.

As previously announced, the Bridge Financing is comprised of two tranches, with the first tranche of US$6.0 million funded on August 19, 2024. The second tranche of the Bridge Financing, in an amount of up to US$3.0 million, was conditioned on the absence of a default under the Bridge Loans and the receipt by the Company of a commitment from a strategic investor of its intent to invest a minimum amount of US$5.0 million in a subsequent equity capital raise.

In connection with the Bridge Financing, FS converted US$1.5 million of its existing convertible notes into common shares in the capital of the Company at an above-market conversion price of US$2.00 per share, reducing the convertible note balance by US$1.5 million. The Company also received additional Bridge Loans in an aggregate amount of approximately US$334,000 from certain members of management and the board of directors (collectively, the “Additional Bridge Lenders” and, together with the Initial Bridge Lenders, the “Bridge Lenders”) in accordance with the terms of the Bridge Financing.

The Bridge Financing constitutes a “related-party transaction” within the meaning of Regulation 61-101 – Protections of Minority Security Holders in Special Transactions (“Regulation 61-101”) as FS, IQ and the Additional Bridge Lenders are all “insiders” of the Company under Canadian securities laws. However, in light of the fact that the Company’s board of directors (the “Board”) have determined that the Company is in serious financial difficulty, the Company is relying on the exemption from the formal valuation and minority shareholder approval requirements contained in Regulation 61-101 on the basis of the “financial hardship” exemption therein.

After considering and reviewing all of the circumstances currently surrounding the Company and the Bridge Financing, the Board, including all independent members of the Board who are free from interest in the Bridge Financing and unrelated to the Bridge Lenders, acting in good faith, unanimously determined that (i) the Company is in serious financial difficulty, (ii) the Bridge Financing is designed to improve the financial condition of the Company, and (iii) the terms of the Bridge Financing are reasonable in the Company’s circumstances.

The Bridge Loans have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or applicable State securities laws, and accordingly may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable State securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sales of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

About LeddarTech

A global software company founded in 2007 and headquartered in Quebec City with additional R&D centers in Montreal and Tel Aviv, Israel, LeddarTech develops and provides comprehensive AI-based low-level sensor fusion and perception software solutions that enable the deployment of ADAS, autonomous driving (AD) and parking applications. LeddarTech’s automotive-grade software applies advanced AI and computer vision algorithms to generate accurate 3D models of the environment to achieve better decision making and safer navigation. This high-performance, scalable, cost-effective technology is available to OEMs and Tier 1-2 suppliers to efficiently implement automotive and off-road vehicle ADAS solutions.

LeddarTech is responsible for several remote-sensing innovations, with over 160 patent applications (87 granted) that enhance ADAS, AD and parking capabilities. Better awareness around the vehicle is critical in making global mobility safer, more efficient, sustainable and affordable: this is what drives LeddarTech to seek to become the most widely adopted sensor fusion and perception software solution.

Additional information about LeddarTech is accessible at www.LeddarTech.com and on LinkedIn, Twitter (X), Facebook and YouTube.

Forward-Looking Statements

Certain statements contained in this Press Release may be considered forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (which forward-looking statements also include forward-looking statements and forward-looking information within the meaning of applicable Canadian securities laws), including, but not limited to, statements relating to LeddarTech’s anticipated strategy, future operations, prospects, objectives and financial projections and other financial metrics. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend” and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: (i) the possibility that anticipated benefits of LeddarTech’s recent business combination will not be realized; (ii) the risk that shareholder litigation in connection with the business combination or other settlements or investigations may result in significant costs of defense, indemnification and liability; (iii) changes in general economic and/or industry-specific conditions; (iv) possible disruptions from the business combination that could harm LeddarTech’s business; (v) the ability of LeddarTech to retain, attract and hire key personnel; (vi) potential adverse reactions or changes to relationships with customers, employees, suppliers or other parties; (vii) potential business uncertainty, including changes to existing business relationships following the business combination that could affect LeddarTech’s financial performance; (viii) legislative, regulatory and economic developments; (ix) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism, outbreak or escalation of war or hostilities and any epidemic, pandemic or disease outbreak (including COVID-19), as well as management’s response to any of the aforementioned factors; (x) access to capital and financing and LeddarTech’s ability to maintain compliance with debt covenants; (xi) LeddarTech’s ability to execute its business model, achieve design wins and generate meaningful revenue; and (xii) other risk factors as detailed from time to time in LeddarTech’s reports filed with the U.S. Securities and Exchange Commission (the “SEC”) and on the Company’s SEDAR+ profile at www.sedarplus.ca, including the risk factors contained in LeddarTech’s Annual Report on Form 20-F for the fiscal year ended September 30, 2023. The foregoing list of important factors is not exhaustive. Except as required by applicable law, LeddarTech does not undertake any obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:
Daniel Aitken, Vice-President, Global Marketing, Communications and Investor Relations, LeddarTech Holdings Inc. Tel.: + 1-418-653-9000 ext. 232 daniel.aitken@LeddarTech.com

• Investor relations website: investors.LeddarTech.com
• Investor relations contact: Kevin Hunt, ICR Inc. kevin.hunt@icrinc.com
• Financial media contact: Dan Brennan, ICR Inc. dan.brennan@icrinc.com
  

Leddar, LeddarTech, LeddarVision, LeddarSP, VAYADrive, VayaVision and related logos are trademarks or registered trademarks of LeddarTech Holdings Inc. and its subsidiaries. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify products or services of their respective owners.

LeddarTech Holdings Inc. is a public company listed on the Nasdaq under the ticker symbol “LDTC.”

FAQ

What is the total amount of bridge financing LeddarTech (LDTC) has secured?

LeddarTech (LDTC) has secured a total of US$9.0 million in bridge financing, with US$6.0 million in the first tranche and US$3.0 million in the second tranche.

Who are the main providers of the bridge financing for LeddarTech (LDTC)?

The main providers of the bridge financing for LeddarTech (LDTC) are FS Investors, Investissement Québec, and Fédération des caisses Desjardins du Québec.

At what price did FS Investors convert their convertible notes to LeddarTech (LDTC) shares?

FS Investors converted US$1.5 million of their existing convertible notes into LeddarTech (LDTC) common shares at an above-market conversion price of US$2.00 per share.

Why is LeddarTech (LDTC) exempt from formal valuation and minority shareholder approval for this financing?

LeddarTech (LDTC) is exempt due to the 'financial hardship' exemption in Regulation 61-101, as the company's board determined it is in serious financial difficulty and the financing is designed to improve its financial condition.