Virtus Oil plans $1.15 million private placement of convertibles

Company selling convertible notes at discount to institutional investor

By Susanna Moon

Chicago, May 26 – Virtus Oil & Gas Corp. plans up to $1.15 million principal amount of senior convertible notes, according to an 8-K filing with the Securities and Exchange Commission.

The company said it entered into a securities purchase agreement on May 22 with an institutional investor.

Under the purchase agreement, the company sold to the investor an initial convertible note with a principal amount of $350,000 on May 22 for a purchase price of $250,000.

The investor also has agreed to purchase another convertible note on June 21 with an original principal amount of $500,000 for a purchase price of $250,000 and, on the second trading day after the effective date of the initial registration statement, an additional convertible note with an original principal amount of $300,000 for a fixed purchase price of $300,000.

Each convertible note matures on the 12-month anniversary of its issue and accrues interest at a rate of 7% per year. Interest is payable in shares of common stock, in cash or in a combination of cash and stock.

Upon the conversion or redemption of any outstanding principal amount of a convertible note prior to maturity, the investor will receive an interest make-whole equal to the amount of interest that would have accrued on the converted or redeemed principal amount from the conversion date or redemption date at the interest rate through maturity, the filing noted.

The outstanding principal amount of the initial convertible note will be reduced by $100,000 and the outstanding principal amount of the first additional convertible note reduced by $250,000 if

• The company has filed a registration statement with the SEC by July 6 covering the resale by the investor of shares of the common stock issued or issuable upon conversion of the notes;

• The resale registration statement is declared effective by the SEC by the earlier of Sept. 9 and the fifth trading day after the date the company is notified by the SEC that the registration statement will not be reviewed or will not be subject to further review, and the prospectus is available for use by the investor for its resale of the shares of common stock issued or issuable upon conversion of the notes; and

• No event of default or an event that with the passage of time or giving of notice would constitute an event of default has occurred by that date.

The notes are convertible at any time at a price equal to the lesser of $0.75 and the product of the arithmetic average of the lowest volume-weighted average prices of the common stock during the 12 consecutive trading days ending and including the trading day immediately preceding the conversion date and 65%.

The company is required to reserve at least 150% of the number of shares of common stock, which are needed to effect the conversion of notes then outstanding.

The investor may not convert any of the notes to the extent that it would cause the investor (to beneficially own more than 4.99% of the outstanding shares as of that date.

The company may at any time redeem all, but not less than all, of the total outstanding conversion amount then remaining under a convertible note at a price equal to 130% of that amount.

The energy company is based in Los Angeles.

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