/NOT FOR DISSEMINATION TO U.S. NEWSWIRE SERVICES/
(TSXV-NEX: SVN.H)
TORONTO, Sept. 5, 2013 /CNW/ - 71 Capital Corp. (the
"Corporation") (TSXV-NEX: SVN.H) announced today that it has
entered into a letter of intent (the "Letter of Intent")
whereby the Corporation will acquire all of the issued and
outstanding securities (the "ADL Shares") of ADL Oilfield
Consulting Ltd. ("ADL") in exchange for the issuance of
post-consolidation common shares (as described below) to the
shareholders of ADL. The acquisition of the ADL Shares will
constitute the Qualifying Transaction of the Corporation (the
"Qualifying Transaction") as such term is defined in the
policies of the TSX Venture Exchange (the "Exchange").
It is anticipated that the acquisition of the
ADL Shares will be effected through the amalgamation of a wholly
owned subsidiary ("SubCo") of the Corporation and ADL.
ADL is a privately held Calgary based oil and gas services company
engaged in providing cleanouts, stimulation, optimization and
remediation of oil and gas wells in Canada using a patented Stable Foam process.
The Corporation is a capital pool company.
Since the Qualifying Transaction is not a
non-arm's length transaction, the Corporation is not required to
obtain shareholder approval for the Qualifying Transaction. Trading
in the common shares of the Corporation is halted at present. It is
unlikely that the Corporation's common shares will resume trading
until the Qualifying Transaction is completed and approved by the
Exchange.
Terms of Qualifying
Transaction
Pursuant to the terms of the Letter of Intent,
subject to completion of satisfactory due diligence, a definitive
amalgamation agreement (the "Agreement") and receipt of
applicable approvals, SubCo will amalgamate with ADL and the
shareholders of ADL will receive post-consolidation shares (as
described below) in the capital of the Corporation in exchange for
their shares of the new amalgamated company.
The Qualifying Transaction is an arm's length
transaction. No insiders of the Corporation own securities in
ADL and no insiders of ADL own securities in the Corporation. It is
intended that the Corporation will complete an 4.58296 (old shares)
for 1 (new share) consolidation of its shares and a name change in
connection with the Qualifying Transaction. The
Corporation intends to call a meeting of its shareholders in the
near future in order to approve the consolidation and name
change.
Upon completion of the Qualifying Transaction,
ADL will be a wholly owned subsidiary of the Corporation and the
Corporation will be engaged in the business of ADL.
ADL
ADL was founded in October 1993 under the laws of Alberta as 584125 Alberta Ltd. and
subsequently changed its name to ADL Oilfield Consulting Ltd. in
December 1993. ADL is a private
company engaged in oil and gas well services in Canada. ADL has a license agreement for
the worldwide, exclusive use of a patented technology that creates
stable foam at surface, utilizing 10% water by volume, which always
results in an under-balanced environment in the well bore.
The technology was originally designed for shallow gas well clean
outs, but over the last 18 months ADL has expanded the application
into deep and horizontal oil well applications, which has resulted
in the need to build new heavy duty equipment capable of performing
the deep well cleanouts in significantly less time. Over the course
of the last 10 years, ADL has successfully cleaned out over 800
wells.
ADL has introduced the concept of using the
patented technology for other oil and gas applications, including
drilling, milling, perforating, and fracture stimulation. These new
applications will be engineered and proven out over the next 12-18
months. ADL has also introduced the technology into the United States, China and Mexico and believes that the technology will
be well received in such countries.
ADL is currently in discussions with seasoned
oil-field service veterans about joining the ADL team, including
potential Directors, Management, Engineers and field operators. ADL
will also ensure it has Board representation with public markets
experience. ADL expects to announce additions to the team as the
amalgamation and financing proceed.
ADL expects it will take approximately 3 months
to construct the new equipment, once the financing is completed. It
is anticipated that a re-launch of its operations using the new,
more effective equipment will commence around the beginning of
January 2014 once the equipment and
operating staff are ready to be deployed.
The controlling shareholders of ADL are
James Paul and Gerry Mendyk, both residents of Calgary, Alberta, who in the aggregate,
together with their associates, own or control approximately 45% of
the issued and outstanding securities of ADL.
Management and Board of Directors of the
Resulting Issuer
Upon completion of the Qualifying Transaction,
it is anticipated that the resulting issuer's Board of Directors
will consist of Wayne Isaacs,
Gerry Mendyk and James Paul with three additional independent
board members to be named later. In addition, it is expected that
the officers of the resulting issuer shall be James Paul (Chief Executive Officer &
President) and Gerry Mendyk (Chief
Financial Officer).
Wayne
Isaacs
Mr. Isaacs will be named Non Executive Chairman of the Board upon
completion of the amalgamation. Mr. Isaacs has been active in
senior management and board positions of publicly traded companies
over the past 25 years. Mr. Isaacs has founded a number of
public companies primarily in the resource exploration sector and
has had extensive experience on Bay Street as a financial
consultant in investment banking, corporate finance and public
listings. In addition to his role with ADL, Mr. Isaacs is
currently engaged in investment banking consulting and works with
junior companies on matters of financing, mergers and acquisitions
and public listings.
Gerry
Mendyk
Mr. Mendyk is currently a Director, Chief Executive Officer and
Chief Financial Officer of ADL, and has over 30 years experience in
the oil and gas industry, mostly in public companies. Mr. Mendyk
has been with ADL for almost 3 years and has been instrumental in
arranging private financing and managing the financial affairs of
ADL. Prior to ADL, Mr. Mendyk was CFO of a TSX.V listed oil and gas
producer for two years. Prior to that, Mr. Mendyk was President of
a private real estate development company for 5 years, after
spending 20 years working in various financial capacities for a
multi-billion dollar public energy service company. Mr. Mendyk will
retain his roles of Director, CEO and CFO of the amalgamated
Company.
James
Paul
Mr. Paul has been a Director and President of ADL for over 3 years.
Mr. Paul was the initial visionary for the newly restructured ADL
and chose the team to take it forward. He has been instrumental in
the domestic and international incubation process, as well as
managing the operations and redesigned business plan of ADL. Prior
to ADL, Mr. Paul had spent many years on international business
development, corporate financing and business restructuring. Mr.
Paul has extensive experience with new technology exploitation,
both domestically and internationally, with a special focus on
environmentally conscious technologies, of which ADL's patented
process is an industry leader. Mr. Paul is also active in water
remediation technologies, some of which will be a good compliment
to the ADL business. As the development for new applications is
already well underway, Mr. Paul's focus going forward will be on
technology acquisition and international development, once a
seasoned oil-field service veteran is recruited to take over as
President of ADL.
Sponsorship of Qualifying
Transaction
Sponsorship of a qualifying transaction of a
capital pool company is required by the Exchange unless exempt in
accordance with the Exchange policies. The Corporation is currently
reviewing the requirements for sponsorship and may apply for
exemption from sponsorship requirements pursuant to the policies of
the Exchange, however there is no assurance that the Corporation
will ultimately obtain this exemption.
Proforma Capital Structure
As a condition to the completion of the
Qualifying Transaction, ADL will complete a private placement (the
"Private Placement") for minimum gross proceeds of
$2,000,000 up to a maximum of
$3,500,000. The Private Placement
will be for common shares at a deemed price of $0.55 per share.
The Corporation currently has 4,411,271 common
shares issued and outstanding and 305,060 common shares reserved
for issuance on the exercise of options. The shares and options
will be consolidated on the basis of 4.58296 old shares for each 1
new share, resulting in 962,537 new shares and 66,564 new options
prior to the amalgamation. ADL shareholders will be issued
11,917,550 post-consolidation shares on a one-for-one basis. New
investors will be issued 6,363,636 post-consolidation shares
assuming the maximum financing is achieved. There will also be
share purchase warrants issued to investors in the new financing,
on the basis of one-half warrant per common share purchased,
exercisable based on one full warrant plus $0.75 per share will be entitled to 3,181,818
common shares.
Following completion of the amalgamation,
shareholders of the Corporation will hold equity interests equal to
approximately 5% of the combined entity (assuming the maximum
financing) with the remaining equity interests being held by
shareholders of ADL and new investors participating in the Private
Placement.
Termination
The letter of intent will terminate (i) on the
mutual consent of both the Corporation and ADL, (ii) if the
Corporation is not satisfied with its due diligence review of ADL
at 5:00 p.m. (Toronto time), on or before September 23, 2013, (iii) if a Definitive
Agreement is not executed on or before 5:00
p.m. (Toronto time) on
September 20, 2013.
Sponsorship
Sponsorship of a qualifying transaction of a
capital pool company is required by the TSXV unless exempt in
accordance with TSXV policies. The Corporation is currently
reviewing the requirements for sponsorship and may apply for an
exemption from the sponsorship requirements pursuant to the
policies of the TSXV, however, there is no assurance that the
Corporation will ultimately obtain this exemption. The Corporation
intends to include any additional information regarding sponsorship
in a subsequent press release.
Further Information
All information contained in this news release with respect to
the Corporation and ADL was supplied by the parties respectively,
for inclusion herein, and each party and its directors and officers
have relied on the other party for any information concerning the
other party.
Completion of the transaction is subject to a number of
conditions, including but not limited to, TSXV acceptance and, if
applicable, pursuant to the requirements of the TSXV, majority of
the minority shareholder approval. Where applicable, the
transaction cannot close until the required shareholder approval is
obtained. There can be no assurance that the transaction will be
completed as proposed or at all.
Investors are cautioned that, except as
disclosed in the management information circular or filing
statement to be prepared in connection with the transaction, any
information released or received with respect to the transaction
may not be accurate or complete and should not be relied upon.
Trading in the securities of a capital pool company should be
considered highly speculative.
The TSX Venture Exchange Inc. has in no way
passed upon the merits of the proposed transaction and has neither
approved nor disapproved the contents of this press
release.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS
REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE
POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR
THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Cautionary Statements
This news release contains "forward-looking
statements" within the meaning of applicable securities laws
relating to the proposal to complete the Qualifying Transaction and
associated transactions, including statements regarding the terms
and conditions of the Qualifying Transaction and associated
transactions. Readers are cautioned not to place undue
reliance on forward-looking statements. Actual results and
developments may differ materially from those contemplated by these
statements depending on, among other things, the risks that the
parties will not proceed with the Qualifying Transaction and
associated transactions, that the ultimate terms of the Qualifying
Transaction and associated transactions will differ from those that
currently are contemplated, and that the Qualifying Transaction and
associated transactions will not be successfully completed for any
reason (including the failure to obtain the required approvals or
clearances from regulatory authorities). The statements in this
news release are made as of the date of this release. The
Corporation undertakes no obligation to comment on analyses,
expectations or statements made by third parties in respect of the
Corporation, ADL, or their respective financial or operating
results or (as applicable), their securities.
SOURCE 71 Capital Corp.