The company said in a statement that raising of the funds would be subject to shareholder approval which would be sought at its annual general meeting in November.
The funds can be drawn in two tranches of $500,000 each and four tranches of $250,000.
The drawdowns are conditional on the volume-weighted average price of the company's share price being greater than $3, with 15 days being allowed for the first drawdown and 30 days for subsequent drawdowns.
The share price was $3.03 at the time the note was announced and MGM has made the first drawdown of $500,000.
The following conditions are attached to the fund raising:
- The conversion price will be the lower of $3.50 or at a 20% discount to any future shares issued;
- Investors will have a right to convert at any time;
- The company may issue a redemption notice at any time, but investors have a preferential right to convert within the notice period;
- The term of the note is two years;
- A total of 250,000 options will be issued pro-rata to investors as a facility fee. The options will expire two years from issuance and will be exercisable at $4. A further 300,000 options on the same terms will be issued to Gleneagle as part of its fee; and
- The note is unsecured.
MGM Wireless chief executive Mark Fortunatow, said: “The note allows us to draw funds as we require them. It is unsecured at an attractive interest rate and doesn’t restrict us from raising additional debt or equity. We are confident the conversion price will be $3.50, which is a significant premium to the last traded price of $3.10.
“We believe the note serves to minimise dilution, whilst we retain maximum funding flexibility. We continue to see strong demand for our SPACETALK watch and anticipate making announcements on new customers and bricks and mortar expansion in time for the Christmas selling season.
"As such, having the note in place gives us and our customers surety that we can continue to aggressively grow the company in the fast growing wearables category.”