71 Capital Corp. Announces Entering into of Letter of Intent for Qualifying
/NOT FOR DISSEMINATION TO U.S. NEWSWIRE SERVICES/
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
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 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).
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.
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.
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
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 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.
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
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.
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.
For further information regarding the Transaction, please contact:
Eric Roblin, Director, 71 Capital Corp.
Gerry Mendyk, Chief Executive Officer, ADL Oilfield Consulting Ltd.
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CO: 71 Capital Corp.
-0- Sep/05/2013 16:34 GMT
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