Yes MeToo I have heard of convertible debt. What do you think we...

Yes MeToo I have heard of convertible debt. What do you think we have here: convertible, redeemable, non-participating debt?

Kogi's ASX announcement of 26 April 2021 - "Capital raising of up to $10.3m..." - refers to the transaction with Diversified Metals Holdings as a share placement. In fact, that is what shareholders approved. As far as I am aware, the term debt has not been used in any ASX announcement made by Kogi in relation to the DMH transaction.

You do, however, raise a very interesting point: where would DMH rank should Kogi be wound up prior to the number of shares (required by the formula described in the announcement) being issued (9.8m shares having been issued on receipt of the $2.14m)? Would DMH rank ahead of the existing shareholders? If so, were shareholders aware of that fact when they approved the share placement arrangement?

Let's try a hypothetical: suppose that prior to the issue of all DMH's shares, DMH's cash advance ranks ahead of equity, ie it is treated as an unsecured liability. In that case, if Kogi was wound up, DMH would be in the box seat to grab Kogi's assets when the liquidator held a fire sale. (I am assuming it would be a fire sale because based on the current interest in the company's shares I can't see there being much of a bidding war.) Anyway, in this scenario DMH is in the box seat and you can reach your own conclusions from here.

Presumably Kogi's accounts will explain how the advance from DMH has been treated If it is debt I think it is non-participating but I really think it is just a poorly constructed equity instrument that is going cause confusion for potential investors until the shares are allocated to DMH. Bottom line, a securities lawyer would need to review the agreement between the parties before a definitive opinion could be provided.