Cypress Hills Resource has received the conditional approval of the TSX Venture Exchange to raise working capital by the issuance of four $100,000 debentures. These debentures are intended to meet the Company's near-term capital requirements to fund its' continuing participation in the Armstrong Ranch Project in Kennedy County, Texas.
The debentures will be unsecured, have a one year term, and bear a 12.0% annual interest rate. The debentures may be repaid at any time prior to their maturity by the Company. In the event the Company does a further financing, or asset sale, or if the debenture funds are not required for the Project, then the debentures will become repayable prior to their maturity. As bonus consideration for entering into the debentures the Company will issue 100,000 common shares to each of the debenture holders. These shares will be subject to a four-month hold period from the date they are issued.
Two of the four debentures will be purchased by directors of the Company, the third by an accredited investor and the fourth will be sold to an additional accredited investor.
The proceeds of the debentures will be used for the Company's portion of the costs to complete, fracture and to tie-in the Project's first well and to cover increased drilling costs of the first well due to lost circulation and an increase in depth drilled. The proceeds will also be used if the decision is made to go ahead with the Project's second well.
The Company is carrying 10% of the costs and receiving 10% of the revenues from the Project's first well until payout, reduced to 7.5% of costs and revenues upon payout. On any additional wells drilled on the 1,477 acre lease the Company will be responsible for 7.5% of the costs and will receive 7.5% of the revenues.
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