Morro Bay (MRW.P-V) changed its name from Morro Bay Capital to Morro Bay Resources.
Jan 22, '14 - NR
Morro Bay Capital Ltd., further to its news release of Jan. 17, 2014, has completed its previously announced qualifying transaction, whereby it has acquired from Sierra Madre Developments Inc. an option to earn up to a 65-per-cent interest in mining concessions in Mexico comprising the Penoles project owned by Riverside Resources Inc. and a drill rig that has been used on the Penoles project. A more detailed description of the transaction is contained in Morro Bay's management information circular dated Dec. 18, 2013, which has been filed on SEDAR. Morro Bay is also pleased to announce that in connection with the transaction it completed a brokered private placement of common shares for gross proceeds of $633,000, as described further below. The election of Carl von Einsiedel, Garth Kirkham and Elmer Stewart as directors of Morro Bay, as further described in Morro Bay's press release dated Jan. 17, 2014, is now effective. As previously announced, Morro Bay changed its name from Morro Bay Capital to Morro Bay Resources Ltd. on Jan. 15, 2014.
Qualifying transaction
Upon receipt of final acceptance from the TSX Venture Exchange, the transaction will constitute Morro Bay's qualifying transaction (as that term is defined in Policy 2.4 -- capital pool companies of the exchange). Morro Bay's common shares will resume trading on the exchange under ticker symbol MRB after the exchange issues its final exchange bulletin confirming completion of the transaction. Trading of the common shares on the exchange is expected to resume at market open on or about Jan. 27, 2014.
As consideration for the transaction, Morro Bay issued 16 million common shares at a deemed price of 10 cents and eight million common share purchase warrants, each exercisable into one common share at a price of 15 cents until June 15, 2014, and thereafter at a price of 25 cents until Jan. 22, 2015. Sierra Madre has agreed that, as soon as possible after closing of the transaction, it intends, subject to exchange acceptance, to distribute all of the 16 million common shares and eight million warrants to its shareholders as a dividend-in-kind distribution.
All of the common shares and warrants distributed under the dividend in kind will be subject to a four-month-and-one-day hold period by Sierra Madre shareholders expiring on May 23, 2014. As more particularly described in the information circular, subject to any change in the share ownership of the parties, prior to the record date for the dividend in kind, approximately 3.97 million (25 per cent) of the 16 million Morro Bay common shares to be issued to Sierra Madre will be held in escrow until Dec. 31, 2014. Furthermore, all of the directors and officers of Morro Bay who receive common shares under the dividend-in-kind distribution will also have their common shares held in escrow under exchange Form 5D, Tier 2 value security escrow agreements, which will result in some of their common shares being released from escrow in tranches for a period 36 months following the date of the final exchange bulletin. There will be approximately 1.3 million common shares held in escrow under the exchange escrow agreement following closing.
Pending completion of the dividend in kind, Sierra Madre has provided an undertaking to hold the common shares and warrants it receives as if they are subject to an exchange escrow agreement, and to enter into an exchange escrow agreement and deposit such common shares and warrants into escrow if the dividend in kind is not completed within 45 days of completion of closing of the transaction.
Private placement
The corporation raised gross proceeds of $633,000 through the private placement of 6.33 million common shares at a price of 10 cents per common share. All of the common shares issued under the private placement are subject to a four-month-and-one-day hold period expiring on May 23, 2014. Richardson GMP Ltd. acted as agent for the private placement pursuant to an agency agreement between the corporation and the agent dated effective Dec. 12, 2013. Pursuant to the agency agreement, Morro Bay paid the agent certain corporate finance fees and a commission of 10 per cent of the gross proceeds raised under the private placement. As additional compensation, Morro Bay issued the agent warrants to purchase 633,000 common shares. Each agent warrant is exercisable at a price of 10 cents per common share until Jan. 22, 2016.
Four directors of Morro Bay subscribed for 510,000 common shares under the private placement, representing an aggregate amount of $51,000. The issuance of common shares to directors of Morro Bay pursuant to the private placement is a related-party transaction as defined in Multilateral Instrument 61-101, protection of minority securityholders in special transactions, as adopted by TSX-V Policy 5.9. The private placement is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as neither the fair market value of the common shares being issued to such directors or the consideration paid by such directors exceeded 25 per cent of Morro Bay's market capitalization.
Option grants
Morro Bay also announces the grant of an aggregate of 2.9 million stock options pursuant to its stock option plan, of which 2.2 million were granted to directors and officers, and 700,000 were granted to employees and consultants. All of the options granted have an exercise price of 10 cents per common share, expire on Jan. 22, 2018, vest as to one-third at the end of each of the three anniversary dates following the date of grant and are subject to the terms of Morro Bay's stock option plan. |
