Satori Resources to acquire COC Greenhouses in RTO
2014-12-02 17:01 ET - News Release
Shares issued 60,403,500
BUD Close 2014-12-01 C$ 0.03
Mr. Walter Henry reports
SATORI RESOURCES INC. ANNOUNCES LOI TO ACQUIRE COC GREENHOUSES INC., $1,000,000 PRIVATE PLACEMENT, SPIN-OUT OF MINING ASSETS AND PROPOSES AND A 15:1 SHARE CONSOLIDATION
Satori Resources Inc. and COC Greenhouses Inc. have entered into a letter of intent dated Dec. 2, 2014, setting out the terms upon which COC will be acquired by the company. The transaction, as defined hereafter, is subject to any regulatory, director or other approvals that may be required, the completion of satisfactory due diligence by the company and other conditions contained in the letter of intent, and the definitive agreement to be signed by the parties. Closing of the transaction will result in COC acquiring approximately a 62.5-per-cent interest in the company post a 15:1 share consolidation, in exchange for all of the assets and intellectual property belonging to COC. As agreed to under the terms of the LOI, COC agrees to spin out, by way of a plan of arrangement or otherwise, all of the mining assets of Satori Resources along with all remaining cash as a separate company to the current (preclosing) shareholders of Satori Resources on closing the transaction.
The transaction
The company intends to acquire 100 per cent of the common shares of COC in a reverse takeover transaction, which will be effected by way of a three-cornered amalgamation pursuant to which a newly formed wholly owned subsidiary of the company will amalgamate with COC, resulting in the amalgamated company becoming a wholly owned subsidiary of COC. Pursuant to the amalgamation, 6,711,500 consolidated company shares, as defined hereafter, will be issued to the existing shareholders of COC. Upon completion of the transaction, it is expected that the resulting issuer, as defined in TSX Venture Exchange Policy 5.2, will be listed on the exchange as a Tier 2 industrial issuer.
As a condition of the transaction, the shareholders of the company will be asked to approve a consolidation of the company's common shares on the basis of approximately 15 old shares for one new share. The company shares as so consolidated are hereinafter referred to as the consolidated company shares. The existing shareholders of Satori Resources will own 4,026,900 consolidated company shares.
Concurrently with closing of the transaction, the company will change its name to COC Greenhouses Inc. or such other name as may be selected by COC. If requested and approved, the share consolidation would become effective prior to completion of the transaction. All share numbers and pricing herein assume the completion of the share consolidation prior to closing of the transaction.
The company and COC are at arm's length; accordingly the transaction is not a non-arm's-length party transaction.
Notwithstanding the finder's fee associated with the private placement noted below, the company and COC confirm that there are no finder's fees or other similar fees payable to any person or party with respect to the transaction.
Contemplated $1-million private placement
In conjunction with the transaction, COC will undertake a non-brokered private placement of $1-million. Under the terms of the offering, the company will issue up to two million units at a price of 50 cents per unit. Each unit will consist of one consolidated company share and one-half of one common share purchase warrant. Each whole warrant will entitle the holder to acquire one consolidated company share at the exercise price of 75 cents for a period of 18 months from closing.
The company may pay finder's fees to arm's-length parties in an amount equal up to 7 per cent of the proceeds raised under the offering payable in cash and in finder's warrants.
It is anticipated that the net proceeds of the offering will be used to finance the transaction, secure a location for operations and finance construction of the resulting issuer's Marihuana for Medical Purposes Regulations (MMPR) greenhouse showcase project.
Spinout of mining and related assets
As agreed to under the terms of the LOI, COC agrees to spin out, by way of a plan of arrangement or otherwise, all of the mining assets of Satori Resources along with all remaining cash as a separate company to the current (preclosing) shareholders of Satori Resources on closing the transaction. COC will be responsible for the cost, including legal and accounting costs, of spinning out these assets. It is anticipated that the spinout will occur simultaneously with the closing of the transaction.
Resulting issuer capital structure
Assuming completion of the share consolidation and the transaction, and that the offering is fully subscribed, the resulting issuer will have outstanding approximately 12,738,400 consolidated company shares, 1,431,133 warrants, 388,334 stock options and up to 140,000 finder's warrants.
Officers, directors and insiders of resulting issuer
Following the completion of the transaction, the officers, directors and insiders of the resulting issuer will be as follows:
- Christopher Skidmore, chief executive officer, president and director. Mr. Skidmore serves as the CEO, president and a director of COC. The founder and controlling shareholder of COC. He is also the founder and owner of Beat the Market Stock Picks, a paid newsletter service. Mr. Skidmore graduated with an accounting degree from the British Columbia Institute of Technology in 2006. Mr. Skidmore is a fourth-generation glazier who has worked in all aspects of the glass industry, including the company his grandfather (Herbert Skidmore) and great uncle (Art Skidmore) started, Speedy Auto Glass, now a 60-year-old company;
- Fred Beck, director. Mr. Beck serves as the CEO, president and director of Beck Glass Inc., a company that focuses on the residential and commercial glass replacement markets. In 1978, Mr. Beck founded Broco Auto Glass with his brother. In 2003, they diversified into residential and commercial glass replacement, offering glass assurance contracts, forming Broco Technologies Inc. and Broco Glass Network Ltd. In 2012, Mr. Beck decided to focus solely on the residential and commercial replacement glass market, and started Beck Glass and divested himself from his interest in his previous companies;
- Walter Henry, certified financial analyst and ICD.D, director. Mr. Henry was appointed the CEO and president of the company on Sept. 11, 2014. He had been a director of the company and of its predecessor company, St. Eugene Mining Corp., prior to its acquisition by Claude Resources Inc. in 2012. Mr. Henry is the president and CEO of Frontline Gold Corp. since June, 2010, and is the chairman of Alexandria Minerals Corp. and Alturas Minerals Corp. Mr. Henry has previously held the positions of vice-president, finance, and chief financial officer of Royal Nickel Corp.; CFO of Juno Special Situations Corp., Alturas Minerals and Tiberon Minerals Ltd. Mr. Henry sits on the board of directors of other companies, and has extensive experience in the areas of international project financing, capital markets financing, commercial bank financing, financial reporting, controls and taxation matters, and treasury and financial risk management;
- Tom Hussey, director. Mr. Hussey was appointed as an independent director of the company on Sept. 11, 2014. Mr. Hussey is currently CFO of N-Dimensions Solutions Inc., and CFO and a director of Frontline Gold Corp. He has been a member of the Canadian Institute of Chartered Accountants for over 40 years (chartered public accountant and chartered accountant) and is a KPMG LLP alumnus. Over the last 30 years, Mr. Hussey has held senior positions, including CFO, in many companies in the packaging industry, and recently retired as executive vice-president and CFO of a global equipment manufacturer. Mr. Hussey was also the CFO of Wallbridge Mining Company prior to and after the company's initial public offering. Mr. Hussey is currently a member of the board of directors and chairman of the audit committee of Miocene Metals Inc., a company listed on the TSX-V. He has also been and is currently a member of the board of directors of many organizations in both private companies and not-for-profit organizations. Mr. Hussey is also the audit chairman for Platinex Inc.;
- An additional nominee from COC to be announced at a later date.
About COC Greenhouses Inc.
COC was incorporated on June 4, 2014, to build, supply and service greenhouses for MMPR-licensed companies. COC plans to specialize in the construction of greenhouses for MMPR producers and potential applicants. Greenhouses are one of the faster growing production mediums for medical marijuana in North America. COC has identified greenhouses as a secure, low-cost production medium for hydroponic and natural light medical marijuana production. They can be designed specifically for hydroponic medical marijuana production using simple free-standing greenhouse systems or high-tech solar powered Venlo structures, which are virtually energy self-sufficient. Hydroponic greenhouses can be built at a relatively inexpensive cost of $2-million, up to and exceeding $5-million per acre. As Satori Resources notes in its press release dated June 25, 2014, Health Canada has rigorous rules and regulations that are required to be complied with on a continuing basis, which adds significant costs to doing business in this industry, namely, extraordinary requirements for infrastructure and equipment, including physical barriers, sophisticated video surveillance, air quality and filtration systems, and ultimately site visit inspection approval, all of which must be complied with prior to operating an MMPR business. It is anticipated that the greenhouses will be designed to meet laws in Canada as regulated by the MMPR regulations, but there are no assurances.
Greenhouses can produce medical marijuana typically at a third to half the operating cost of an indoor hydroponic system. They are also less capital intensive to build than an indoor system while providing a healthy gross margin for the builder. Greenhouses can also produce much larger yields per square foot than a typical indoor MMPR hydroponic system's operation.
Conditions to the transaction
The closing of the transaction is subject to a number of conditions, including but not limited to the following:
- Completion of all due diligence reviews;
- Receipt of all director and shareholder approvals as may be required under applicable laws or regulatory policies;
- Execution of a formal agreement;
- The COC shareholders entering into such escrow agreements as may be required by the exchange and applicable securities regulatory policy;
- Completion of the proposed offering;
- Confirmation that the COC shares will be free and clear of all liens, claims, charges or encumbrances;
- There being no material actions, suits or proceedings at the time of closing involving either party;
- There being no material adverse change to the assets, technology, liabilities, business, operations, or financial condition of either party at the time of closing;
- Completion or waiver of sponsorship;
- Receipt of all required regulatory approvals, including the approval of the exchange, of the transaction;
- Satisfaction of the initial listing requirements of the exchange and all requirements under the exchange rules relating to completion of a reverse takeover transaction;
- A new slate of directors be appointed as agreed to by the parties;
- The company shares be consolidated prior to closing, subject to shareholder approval as noted in item 2 above.
Cautionary statement
Completion of the transaction is subject to a number of conditions, including but not limited to, exchange acceptance and if applicable pursuant to exchange requirements, 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 the company should be considered highly speculative.
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