MATERIAL CHANGE REPORT
1. Reporting Issuer
Fantom Technologies Inc.
1110 Hansler Road
Welland, Ontario
L3B 5S1
2. Date of Material Change
May 4, 2001
3. Press Release
A press release was issued by the Reporting Issuer through the
facilities of Canada NewsWire Ltd. of Toronto, Ontario on May 4, 2001. A copy
of that press release is attached hereto as Schedule A.
4. Summary of Material Change
On May 4, 2001, the Reporting Issuer entered into a new secured, non-
revolving, term credit facility with Trimin Capital Corp. ("Trimin") for
$10,000,000 and, in conjunction with that facility, issued to Trimin a warrant
to purchase common shares of the Reporting Issuer.
5. Full Description of Material Change
On May 4, 2001, the Reporting Issuer entered into a credit agreement
with Trimin (the "Trimin Credit Agreement") which permits the Reporting Issuer
to borrow up to $10,000,000 on a non-revolving basis. On such date, the
Reporting Issuer borrowed $3,000,000 pursuant to the Trimin Credit Agreement,
leaving a balance of $7,000,000 which is available for borrowing by the
Reporting Issuer in $1,000,000 increments.
All amounts owing by the Reporting Issuer under the Trimin Credit
Agreement are secured by charges on the Reporting Issuer's assets in favour of
Trimin which rank subordinate to the rights of a Canadian chartered bank
pursuant to the Reporting Issuer's existing $30 million demand operating
facility with such bank. Amounts borrowed from Trimin bear interest at rates
ranging from 12% to 24% per annum. All principal amounts owing under the Trimin
Credit Agreement are scheduled to become due on March 31, 2002.
In accordance with the provisions of the Trimin Credit Agreement, the
Reporting Issuer has issued to Trimin a warrant expiring on May 4, 2004 to
purchase common shares of the Reporting Issuer. Each advance of $1,000,000
under the credit facility entitles Trimin to purchase 60,000 common shares to a
maximum of 600,000 common shares if the full $10,000,000 is advanced.
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The price at which the common shares of the Reporting Issuer may be
purchased under the warrant will be equal to the weighted average trading price
of such common shares on the Toronto Stock Exchange during the ten trading days
following the public announcement by the Reporting Issuer of its financial
results for the quarter ended March 31, 2001. Such financial results were
announced on May 11, 2001.
The new facility will provide additional working capital to assist the
Reporting Issuer in introducing its planned range of innovative new products.
6. Senior Officer
If further information is required, contact Allan D. Millman,
President and Chief Executive Officer of the Reporting Issuer at (416) 622-9740
Ext. 232.
7. Statement by Senior Officer
The foregoing accurately discloses the material change referred to
herein.
Dated at Toronto, Ontario, this 14/th/ day of May, 2001.
/s/ Allan D. Millman
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Allan D. Millman
President and Chief Executive Officer
Fantom Technologies Inc.
Schedule A
NEWS RELEASE
________________________________________________________________________________
Fantom Technologies Inc. Announces
New Credit Facility
Also Estimates Q3 Results
TORONTO, May 4, 2001 - Fantom Technologies Inc. (TSE: FTM; NASDAQ: FTMTF) today
announced that it has entered into a new secured, non-revolving, term credit
facility with Trimin Capital Corp. for $10 million. This facility, which is in
addition to the existing $30 million demand operating facility with The Bank of
Nova Scotia, will become due on March 31, 2002. The Company has drawn $3
million against this new facility and the balance of $7 million is available in
$1 million increments.
In conjunction with the new facility, the Company has issued to Trimin a warrant
expiring on May 4, 2004 to purchase the Company's common shares. Each advance
of $1 million under the credit facility entitles Trimin to purchase 60,000
common shares to a maximum of 600,000 common shares if the full $10 million is
advanced.
The new facility will provide additional working capital to assist the Company
in introducing its planned range of innovative new products.
The Company also announced that, although its financial results for the fiscal
quarter ended March 31, 2001 have not yet been finalized, it is expecting to
incur a loss of approximately $7 million for the period on an after-tax basis.
Financial results are expected to be released next week. The after-tax loss
from ongoing operations is anticipated to be approximately $4 million as the
Company continues to experience significant competitive pressures in its floor-
care business. In addition, the Company expects to incur, or accrue for, costs
of approximately $2 million after tax related to the transition to its new
products. The anticipated quarterly loss also includes a $1 million after-tax
charge resulting from the devaluation of the Canadian dollar relative to the
U.S. dollar.
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During the fiscal quarter ended March 31, 2001, the Company changed its method
of accounting for sales returns on shipments to customers. The Company now
reduces sales and earnings based on its best estimate of what goods will be
returned by its customers. Previously, sales returns were recorded as they
occurred. This accounting change will be applied by retroactively restating the
financial statements of prior periods. The impact of this accounting change is
not expected to have a material impact on fiscal 2000 and 2001 earnings.
The Company's introduction of its first water-treatment entry - the FANTOM(R)
CALYPSO(TM) Microbiological Water Processor - is underway. Shipments have
commenced in Canada, and will begin to the United States following Underwriters
Laboratories Inc. approval, which is anticipated in the current quarter. This
approval will permit the Company to market its CALYPSO(TM) machine in 48 of the
50 states. Two states, Iowa and California, have separate certification
requirements that the Company is continuing to pursue.
Within the floor-care field, the Company has commenced production of enhanced
versions of two of its existing uprights under the CROSSWIND(R) trademark.
These pearl-blue products, a departure from Fantom's traditional black vacuums,
feature new, proprietary technology providing improved performance, and
incorporate a filtration system requiring no replacement parts.
The Company is also about to introduce an entirely new upright vacuum under the
WILDCAT(TM) trademark. This product will be offered in striking new colours and
will be the Company's most powerful, yet lightest vacuum. The WILDCAT(TM)
product is positioned to sell at higher retail price points than the Company's
current range of uprights and will be supported by national television
advertising in the United States and Canada.
In late summer, the Company plans to expand its line further with the launch of
its full-performance wireless vacuum. When all of these floor-care
introductions are complete, the Company will have a much broader assortment of
vacuum products, available in a variety of colours and industrial designs, and
spanning a wide range of retail price points.
The foregoing information includes certain statements relating to the Company
which are forward-looking statements under Section 21E of the United States
Securities Exchange Act of 1934. The words "planned", "expecting",
"anticipated" and similar expressions, as they relate to the Company or its
management, are intended to identify forward-looking statements. Such
statements are based on assumptions made by, and information available to, the
Company. However, there are important factors that could cause actual
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results to differ materially from those in such forward-looking statements
including, among others, the contingencies arising from the uncertainties which
are inherent in the development of new technology and the unanticipated costs
and time delays which often arise in the process of developing new products
based on innovative technology. The Company does not intend, and assumes no
obligation, to update the forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting such statements.
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For more information, please contact:
Allan Millman
President & CEO
416-622-9740 Ext. 232
Steve Doorey
Vice President, CFO
905-734-7476 Ext. 281