Zenyatta's Brian Bosse sweetheart deal.
Int'l Corona enters definitive change of business deals
2019-01-04 16:09 ET - News Release
Mr. Brian Bosse reports
INTERNATIONAL CORONA CAPITAL CORP. ANNOUNCES CHANGE OF BUSINESS TRANSACTIONS AND PRIVATE PLACEMENT
International Corona Capital Corp. has entered into definitive agreements in connection with its proposed change of business to become a Tier 2 investment issuer on the TSX Venture Exchange. The company's initial investments include the acquisition of Murenbeeld & Co. Inc., a gold-focused subscription research business, and the acquisition of certain fixed income debentures in the aggregate principal amount of $2,097,000. In connection with the change of business, the company also intends to complete a consolidation of its issued and outstanding common shares on the basis of one postconsolidation share for two preconsolidation shares and to raise up to $1-million pursuant to a non-brokered private placement of postconsolidation common shares. Following completion of the change of business, the company will operate as a merchant bank with initial assets consisting of the company's mineral exploration properties, Murenbeeld and the debentures, and will continue to pursue investment opportunities in accordance with its investment policies.
Brian Bosse, chief executive officer of the company, said, "Our board unanimously desires the company become self-funding to ensure survival and allow success over time."
Murenbeeld acquisition
Murenbeeld & Co. is a growing subscription business which provides services for the gold industry. Mining companies and asset managers use Murenbeeld's work to inform their decision making about capital allocation, treasury operations and business risk assessment. Murenbeeld is a private Ontario corporation founded in January, 2017.
Pursuant to a share purchase agreement dated Dec. 20, 2018, with Bluespring Investment Strategies Inc., the company has agreed to acquire the single issued and outstanding share of Murenbeeld for $400,000, which shall be satisfied by the issuance to Bluespring of 6,666,667 postconsolidation common shares in the capital of the company at a deemed price of six cents per postconsolidation share. Pursuant to the share purchase agreement, the company has also agreed to enter into employment and consulting agreements with key individuals who provide services to Murenbeeld and to settle the amounts owed to the Murenbeeld service providers in the estimated aggregate amount of $135,000 on the terms and conditions of the service agreements either by the payment of cash, issuance of postconsolidation shares at a deemed price of six cents per postconsolidation share (up to a maximum of 2,333,334 postconsolidation shares) or a combination thereof.
Completion of the acquisition of Murenbeeld pursuant to the share purchase agreement remains subject to a number of conditions, including approval of the TSX Venture Exchange, approval of a majority of minority shareholders, completion of the acquisition of the debentures and the private placement, and other conditions customary to transactions of this nature. Bluespring is a private company owned by Brian Bosse, a director and the chief executive officer of the company. The postconsolidation shares to be issued pursuant to the share purchase agreement are expected to be subject to a hold period expiring four months and a day following the date of issuance, and may be subject to additional hold periods and escrow pursuant to the requirements of the TSX-V. Financial information regarding Murenbeeld will be provided in the disclosure document to be sent to shareholders in connection with approval of the Murenbeeld acquisition.
Debenture acquisition
The company has also entered into debenture purchase agreements dated Dec. 20, 2018, to purchase the debentures of the Stone Investment Group Ltd. in the aggregate principal amount of $2,097,000, as to $750,000 of debentures from an arm's-length party and as to $1,347,000 of debentures from Brian Bosse, a director and officer of the company, and Bluespring, a company owned and controlled by Mr. Bosse. The debentures are governed by a trust indenture dated Dec. 28, 2006, as amended, between the issuer of the debentures and Computershare Trust Company of Canada, a copy of which is available under the SEDAR profile of the issuer of the debentures at SEDAR. The debentures pay 7 per cent interest per annum, payable in cash quarterly, and mature in December, 2021. The company expects the debentures to generate more than $140,000 of revenue in 2019 from interest payments.
Pursuant to the terms of the debenture purchase agreement with the arm's-length party, the company has agreed to pay consideration of $850,000 for the first debentures, which is less than the redemption value of the first debentures, partly by the payment of cash and partly by the issuance of postconsolidation shares at a deemed price of six cents per postconsolidation share. A large majority of the share consideration will be paid on closing of the acquisition of the first debentures, with the balance payable in cash and/or postconsolidation shares on or before the maturity date. The company estimates that approximately $345,000 will be paid in cash consideration; however, the allocation between the cash and share portion of the consideration payable under the first debenture purchase agreement may vary.
Pursuant to the terms of the debenture purchase agreement with Bluespring and Mr. Bosse, the company has agreed to acquire from Bluespring and Mr. Bosse: (i) the second debentures, (ii) the 112,810 common shares in the capital of the issuer of the debentures owned by Bluespring, and (iii) an exclusive licence to use and benefit from certain materials belonging to Bluespring and Mr. Bosse in connection with the debentures and the issuer of the debentures. In consideration for the acquisition of the Bluespring debentures, subject shares and licence, the company has agreed to: (a) on the closing date of the acquisition to issue postconsolidation shares to Bluespring at a deemed price of six cents per postconsolidation share in respect of: (1) the second debentures, (2) the expenses incurred by Bluespring and Mr. Bosse in connection with the transaction, (3) the vendor's cost of the subject shares estimated to be $4,512, and (4) the licensee payment fee of $200,000. In addition, the company has agreed that, if it acquires any additional debentures of the issuer of the debentures from holders other than the vendors of the debentures at any time during the period from closing up to and including Dec. 31, 2025, and the cost base for such additional debentures is greater than the cost base of the second debentures, then on the closing date of the acquisition of any such additional debentures during the additional acquisition period, the company will issue additional postconsolidation shares at a deemed price equal to the greater of six cents per postconsolidation share and the minimum price permitted by the TSX-V at the relevant time equal to the cost difference between the second debentures and the additional debentures. The company estimates that up to 19,456,866 postconsolidation shares will be issued pursuant to the second debenture purchase agreement, not including any shares to be issued in connection with the acquisition of additional debentures.
The closing of the acquisition of the debentures remains subject to a number of conditions, including approval of the TSX-V, approval of the requisite majority of shareholders, completion of the acquisition of Murenbeeld and the private placement, and other conditions customary to transactions of this nature. Bluespring is a private company owned by Mr. Bosse. The postconsolidation shares to be issued pursuant to the share purchase agreement are expected to be subject to a hold period expiring four months and a day following the date of issuance, and may be subject to additional hold periods and escrow pursuant to the requirements of the TSX-V.
Private placement financing
In connection with the change of business, the company plans to undertake a non-brokered private placement financing to raise aggregate gross proceeds of up to $1-million. The company plans to issue postconsolidation shares at a deemed price of six cents pursuant to the private placement and flow-through postconsolidation shares at a deemed price of eight cents. The company intends to use of the proceeds raised by the private placement for working capital requirements and to pay for certain costs in connection with the change of business transactions. The company expects that insiders will subscribe for over $330,000 of the securities offered under the private placement, although the extent of insider participation is unknown at this time. The company does not expect to pay any finders' fees in connection with the private placement. The postconsolidation shares issued pursuant to the private placement will be subject to a hold period expiring four months and one day after the date of issuance.
Share consolidation
Immediately prior to the completion of the change of business transaction, the company intends to complete a consolidation of its outstanding common shares pursuant to which it will issue one postconsolidation share for every two preconsolidation shares. Currently, a total of 68,504,461 shares are issued and outstanding. Accordingly, upon the consolidation becoming effective, a total of 34,252,230 would be issued and outstanding, subject to adjustments for rounding. There is no maximum number of authorized shares. TSX Trust Company, the transfer agent of the company, will mail letters of transmittal to the shareholders providing instructions on exchanging preconsolidation share certificates for postconsolidation share certificates. Shareholders are encouraged to send their share certificates, together with their letter of transmittal, to TSX Trust in accordance with the instructions in the letter of transmittal. In addition to the consolidation, the company may elect to change its name concurrent to the completion of the change of business.
Multilateral Instrument 61-101 disclosure
Mr. Bosse is the chief executive officer and director of the company and is the sole director, officer and shareholder of Bluespring. Accordingly, each of the share purchase agreement and the Bluespring debenture purchase agreement constitutes a related-party transactions as such term is defined in Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions), which requires that the company, in the absence of exemptions, obtain a formal valuation for, and minority shareholder approval of, each related-party transaction. As such, both the share purchase agreement and the Bluespring debenture purchase agreement will be exempt from the valuation requirement of MI 61-101 by virtue of the exemption contained in Section 5.5(b) as the company's shares are not listed on a specified market.
Other matters
Transaction in connection with the change of business
In connection with the change of business, the company is considering a change of name and certain amendments to its articles and bylaws. TSX-V and shareholder approval, as applicable, will be sought for any name change or amendment to the articles and bylaws of the company. The company is also considering the settlement of the aggregate of approximately $170,000 payable to certain directors and officers of the company in connection services rendered to the company in 2018 by the issuance of postconsolidation shares at a deemed price of six cents per postconsolidation share.
Proposed investment policy
As required by the TSX-V's listing requirements for an investment issuer, the company will adopt an investment policy to govern its investment activities. The investment policy will set out, among other things, the company's investment objectives and strategy based on the fundamental principles set out below. The investment policy will be posted on the company's website and filed on SEDAR prior to the completion of the change of business.
The investment policy will provide the company with broad discretion with respect to the form of investments made. The company may employ a wide range of investment instruments, including: equity, bridge loans, secured loans, unsecured loans, convertible debentures, warrants, options and other hybrid instruments. The company may acquire limited partnership interests, joint venture or real property interests. Where appropriate, the company may act as a third party adviser with respect to opportunities with target or other companies in exchange for a fee. Notwithstanding the foregoing, the company may authorize investments outside of these structures for the benefit of the company and its shareholders.
Principals of the resulting issuer
The directors and officers of the company are expected to remain the same following completion of the change of business Transactions. Bluespring and Mr. Bosse are collectively expected to own greater than 10 per cent of the total issued and outstanding postconsolidation shares of the resulting issuer following completion of the change of business transactions, although the exact amount is unknown at this time. Additional information on the principals of the resulting issuer and their shareholdings will be provided in the disclosure document to be prepared in connection with shareholder approval of the change of business transactions.
Mineral properties
Mineral exploration and development will continue to be an area of interest to the company, in particular precious metals, gold and metals needed for making the batteries that power electric vehicles (EVs). The company currently has a 64-per-cent interest in the Schefferville gold property (and can earn up to 80 per cent by completing a bankable feasibility study) and 100 per cent of the Retty Lake property, a nickel, copper, platinum, palladium and cobalt exploration project. Both projects are located in the prolific Labrador Trough area, province of Quebec, Canada. Each of the properties is currently carried on the company balance sheet, at a value of $1.
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