Fiber-optic network services provider Urban Communications Inc. (TSX VENTURE: UBN) says it has reached agreement with GC Capital Inc. to help fund an expansion of its fiber infrastructure. Once regulatory approval is granted, Urban will receive CAN$500,000 that it will use over the next four months to defray the costs of network extensions from its backbone fiber-optic network to connect residential and commercial buildings.
The agreement enables further collaboration between the two parties. This includes an additional CAN$500,000 in investment on the same terms, as well as GC Capital providing another CAN$4.0 million in a deal that would give GC the right to become an authorized reseller of Urban's OTT video product.
Urban recently announced an expansion of its fiber cable network into Vancouver (see "Urban Communications adds to Vancouver fiber-optic network"). It also operates in Victoria.
"We are very excited to be a part of Urban's growth now and into the future," said Gary Chen, president of GC Capital. "It is our intention to invest up to $1 million this year and potentially another $4 millioin over the next three years to fund Urban's capital needs and help roll out gigabit internet services across metro Vancouver and Vancouver Island."
In return for the funds, Urban has agreed to share revenues with GC for up to 11 years on a declining basis over time. The company will have the ability in certain circumstances to commute the revenue sharing agreement prior to the scheduled termination date.
"Urban is very pleased to be working with Gary Chen and his partners," said Urban CEO, John Farlinger. "This revenue share deal represents a capital expenditure funding mechanism through which Urban can significantly reduce its need for external capital without introducing substantial shareholder dilution."
In light of the deal, Urban will issue 250,000 bonus warrants to purchase 250,000 common shares of the company, exercisable at a price of $0.20 per warrant share for a period of 3 years from the closing date. The agreement is scheduled to close immediately upon receiving TSX Venture Exchange approval.
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