Covalon Announces Closing of Non-Brokered Private Placement

MISSISSAUGA, ON, Aug. 30, 2013 /CNW/ - Covalon Technologies Ltd. (the "Company" or "Covalon") (TSXV: COV), an advanced medical technologies company, today announced that further to its press release of August 16, 2013, it has completed, subject to final approval of the TSX Venture Exchange, a non-brokered private placement comprised of 750 units (the "Units") at a price of $1,000 per Unit for gross proceeds of $750,000. Each Unit consists of $1,000 principal amount of 12% senior secured convertible debenture (the "Debentures" and each a "Debenture") and 6,451 warrants (each, a "Warrant"). Proceeds of the private placement will be used by Covalon to fund the market launch of the Company's new products IV Clear™ and SurgiClear™ and for general working capital.

Each Debenture is convertible at the holder's option into 6,451 common shares of the Company (the "Common Shares") at a conversion price of $0.155 at any time on or prior to August 30, 2016. These conversion rights are subject to standard anti-dilution provisions. The Debentures bear interest at the rate of 12% per annum and are direct secured obligations of the Company ranking senior to all indebtedness of the Company.  Interest will accrue and be added to the principal amount outstanding under the Debentures.  Each Warrant entitles the holder thereof to acquire one Common Share at an exercise price of $0.155 at any time on or prior to August 30, 2016.  The Debentures and the Common Shares issuable upon conversion of the Debentures and exercise of the Warrants will be subject to a hold period of four months and one day following August 30, 2013.

The private placement is subject to final TSX Venture Exchange approvals.

Pursuant to the private placement, and as already approved by shareholders of the Company, Abe Schwartz announced that he has acquired 330 Units. After giving effect to this acquisition, Mr. Schwartz directly or beneficially holds an aggregate of: (i) $330,000 principal amount secured convertible debentures, representing 44.0% of the outstanding convertible debentures of the Company; (ii) 1,038,740 Common Shares representing 11.2% of the issued and outstanding Common Shares; (iii) 2,903,830 Common Share purchase warrants, representing 44.0% of the Warrants issued pursuant to the Offering and 50.1% of all outstanding share purchase warrants of the Company (including the Warrants); and (iv) 220,000 stock options. If all share purchase warrants held by Mr. Schwartz were to be fully exercised and all convertible debentures held by Mr. Schwartz were to be fully converted, Mr. Schwartz would beneficially own approximately 30.5% of the Company's Common Shares on a diluted basis, which results in Mr. Schwartz becoming a 'control person' as defined in the TSX Venture Exchange Corporate Finance Manual. Mr. Schwartz has acquired the securities of the Company for investment purposes. Mr. Schwartz has no present intention of acquiring other securities of the Company or disposing of any of the securities of the Company he currently holds.

Of the remaining 420 units, directors and officers of the Company subscribed for 120 Units for gross proceeds of $120,000. No commission or finder's fee was paid in connection with the private placement.  As Insiders participated in the private placement, any such subscriptions will be considered to be related party transactions within the meaning of TSXV Policy 5.9 and Multilateral Instrument 61-101 ("MI 61-101"). The Company intends to rely on the exemptions from the valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(b) and 5.7(a) of MI 61-101 in respect of such Insider participation. The terms of the private placement were reviewed and received the unanimous approval of the Company's board of directors.

For further information regarding the acquisition of securities of the Company by related parties, or to obtain a copy of the early warning report in respect of this transaction, please refer to the Company's SEDI profile available at www.sedi.ca.

About Covalon
Covalon Technologies Ltd. researches, develops and commercializes new healthcare technologies that help save lives around the world. Covalon's patented technologies, products and services address the advanced healthcare needs of medical device companies, healthcare providers and individual consumers. Covalon's technologies are used to prevent, detect and manage medical conditions in specialty areas such as wound care, tissue repair, infection control, disease management, medical device coatings and biocompatibility. To learn more about Covalon, visit our website at www.covalon.com

Neither 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.

This news release contains forward-looking statements which reflect the Company's current expectations regarding future events. The forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan, "estimate", "expect", "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions. These forward-looking statements involve risk and uncertainties, including the difficulty in predicting product approvals, acceptance of and demands for new products, the impact of the products and pricing strategies of competitors, delays in developing and launching new products, the regulatory environment, fluctuations in operating results and other risks, any of which could cause results, performance, or achievements to differ materially from the results discussed or implied in the forward-looking statements. Many risks are inherent in the industry; others are more specific to the Company. Investors should consult the Company's ongoing quarterly filings for additional information on risks and uncertainties relating to these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. The Company assumes no obligation to update or alter any forward-looking statements whether as a result of new information, further events or otherwise.

SOURCE Covalon Technologies Ltd.



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