Avalite Inc. Signs Proposed Business Combination Letter with True Productions
Services Inc. and New Financing
TSX-NEX: ALV.H
About the Business Combination
Avalite and True will complete the Business Combination pursuant to a share exchange, amalgamation or plan of arrangement, to be determined after receipt of advice from professional advisors, whereby the continuing corporation (whether Avalite or a new corporation) (hereinafter called "Avalite") will be renamed to "True Production Services Corp." or to such other name as the parties may agree upon and which is available for use.
Pursuant to the terms of the Business Combination:
(a) a new class of Avalite preferred shares ("Avalite Preferred Shares") will be created having the same terms and conditions as the True Preferred Shares; (b) all of the issued Avalite Common Shares will be consolidated on a 3.75 for 1 basis (the "Consolidation"); (c) the holders of consolidated Avalite Common Shares ("Avalite Consolidated Shares") shall receive new Avalite warrants (the "Avalite New Warrants") on the basis of one half (1/2) of an Avalite New Warrant for each Avalite Consolidated Share held. Each Avalite New Warrant shall entitle the holder to subscribe for one Avalite Consolidated Share at a price of $0.50 for twelve months. If True has issued True New Warrants pursuant to the Offering (as discussed below) on more preferential terms than set out herein, then the terms of the Avalite New Warrants shall be adjusted accordingly; (d) the holders of True Common Shares shall receive one (1) Avalite Consolidated Share for each True Common Share owned; (e) the holders of True Preferred Shares shall receive one (1) Avalite Preferred Share for each True Preferred Share owned; (f) the holders of True warrants and Avalite warrants outstanding at closing shall be entitled to receive new warrant certificates of Avalite in adjusted numbers based on the exchange ratios of the Business Combination set out above, but with all exercise periods and other terms remaining the same as in their original warrant instruments; and (g) the share and warrant entitlements referred to above shall be issued after the completion of all of the steps of the Business Combination.
The Definitive Agreement for the Business Combination is anticipated to be executed on or about
Financing
Prior to or concurrently with the Business Combination and as a condition, True will raise a minimum of
Pro forma Capitalization
Upon completion of the Offering and the Business Combination, an aggregate of 20,711,087 Avalite Consolidated Shares (in the case of the minimum Offering), and up to an aggregate of 25,711,087 Avalite Consolidated Shares (in the case of the maximum Offering), will be issued and outstanding. The following table provides the anticipated breakdown of the Avalite Consolidated Shares upon completion of the Offering and Business Combination (assuming current shareholders of Avalite and True do not subscribe to the offering):
------------------------------------------------------------------------- Number of Avalite Shares Ownership % of Ownership % of Shareholder (Post-Offering and Avalite Shares Avalite Shares Group Consolidation) (Minimum Offering) (Maximum Offering) ------------------------------------------------------------------------- Current Avalite shareholders 4,464,773 21.56% 17.37% ------------------------------------------------------------------------- Current True shareholders 11,246,314 54.30% 43.74% ------------------------------------------------------------------------- Subscribers to the Offering (minimum) 5,000,000 24.14% - ------------------------------------------------------------------------- Subscribers to the Offering (maximum) 10,000,000 - 38.89% -------------------------------------------------------------------------
No persons will own or control, directly or indirectly, more than 10% of the Avalite Shares upon closing of the Business Combination (assuming none of such persons participate in the Offering).
The completion of the Business Combination is subject to, among other things, obtaining all necessary regulatory approvals, including the acceptance from the TSX Venture Exchange, Avalite shareholder approval, True shareholder approval and completion of the minimum Offering prior to or concurrently with the Business Combination. It is a further condition precedent that the shareholders of each of True and Avalite holding at least 30% of the shares of their respective corporations enter into agreements whereby they agree to vote their respective shares in favour of the Business Combination.
There can be no assurance that the Business Combination will be completed as proposed or at all.
As a condition of the TSX Venture Exchange approving the Business Combination, it may require that certain shareholders of Avalite to enter into escrow agreements in respect of their Avalite Consolidated Shares, which they will receive pursuant to the Business Combination.
Avalite's stock option plan, under which no options are currently granted, will remain in force following completion of the Business Combination.
Summary of Biographies of the Board of Directors and Executive Officers
It is proposed that upon the closing of the Business Combination, a new board of directors of Avalite will be elected or appointed, consisting of at least five directors, all of whom will be nominees of True. The nominees are as follows: Robert J. Iverach,
Robert J. Iverach, Q.C., ICD.D - Proposed Director
Christopher T. Seaver - Proposed Director
Christopher T. Seaver retired as Chairman of the Board, President and Chief Executive Officer of Hydril Company ("Hydril") (Nasdaq), an oil and gas services company specializing in pressure control equipment and premium connections for tubing and casing, when it was sold in 2007.
Boris Mackowecki - Proposed Director
Boris Makowecki is a founding partner and current Executive Vice President of Hyduke Energy Services Inc.
Jeffrey W. Holmgren - Proposed Vice
Principal Shareholders of True
The following table lists those persons who own 10% or more of the issued and outstanding True Common Shares:
------------------------------------------------------------------------- Name and Municipality Type of Number of True Percentage of True of Residence Ownership Common Shares Owned Common Shares Owned ------------------------------------------------------------------------- Dan Ardiel, Registered and 1,649,999 14.67% Calgary, Alberta Beneficial ------------------------------------------------------------------------- Allan Albertson, Registered and 1,469,999 13.07% Calgary, Alberta Beneficial ------------------------------------------------------------------------- Michael Hale, Registered and 1,424,002 12.66% Calgary, Alberta Beneficial -------------------------------------------------------------------------
About True Production Services Inc.
True is a private company incorporated under the laws of the Province of Alberta on
In operation since early 2008, True provides production testing, wireline services and ancillary services to oil and gas exploration and production companies operating in the Western Canadian Sedimentary Basin ("WCSB"). In the second and third quarters of 2009, True developed and had built a slickline services truck with significant improvements and modifications over conventional slickline trucks in the WCSB and named it the "WellRunner". The development of the WellRunner was in response to the industry's desire for a full service slickline truck at more affordable rates, operational through all seasons of the year including the seasonal spring and fall road ban periods during which the majority of slickline trucks are left sitting idle for up to eight weeks in each year. Management of True believes that WellRunner delivers the following advantages to industry over existing units commonly utilized in the WCSB.
- Lower operating cost structure provides significant savings to customers. - A lightweight design provides full-service capabilities during extreme road bans exceeding 65% thereby providing uninterrupted operations during spring/fall seasons. - The WellRunner has been designed to provide full service operations up to depths of 6,500 meters, comparable to significantly heavier and costlier conventional slickline trucks currently operating in the WCSB.
True has operated the first WellRunner truck since the beginning of
Selected Financial Information of True
The following is a summary of certain financial information derived from audited annual financial statements for the year ended
September 30, June 30, 2009 2009 ------------------------------------------------------------------------- ($) ($) ASSETS Current Cash and cash equivalents - 33,909 Accounts receivable 713,568 182,434 Prepaid expenses and deposits 60,793 58,931 ------------------------------------------------------------------------- 774,361 275,274 Future income taxes 223,844 223,844 Property, plant and equipment (Note 4) 2,644,170 2,530,731 ------------------------------------------------------------------------- 3,642,375 3,029,849 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current Accounts payable, accrued liabilities 905,984 456,584 Government remittances payable (Note 6) 291,674 129,294 Current portion of long term debt (Note 5) 507,889 684,461 ------------------------------------------------------------------------- 1,705,547 1,270,339 SHAREHOLDERS' EQUITY Long term debt (Note 5) 387,847 204,989 Common Share capital (Note 7) 1,659,679 1,648,607 ------------------------------------------------------------------------- 2,093,394 1,475,328 Share subscriptions - 65,000 Preferred Class A share capital (Note 7) 365,000 - Deferred acquisition (Note 2 and 7) 800,000 800,000 Loans from Shareholders (Note 7) 462,500 470,000 Preferred Shares dividends paid (Note 7) (10,875) - Deficit (1,727,323) (1,429,086) ------------------------------------------------------------------------- 1,548,981 1,554,521 ------------------------------------------------------------------------- 3,642,375 3,029,849 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended, Year ended, September 30, June 30, 2009 2009 ------------------------------------------------------------------------- ($) ($) REVENUES Operating revenues 928,339 1,841,871 ------------------------------------------------------------------------- EXPENSES Operating 894,782 1,578,259 General and administrative 231,115 1,143,150 Interest and financing 19,594 74,999 Amortization of property and equipment 81,085 533,906 ------------------------------------------------------------------------- 1,226,576 3,330,314 ------------------------------------------------------------------------- LOSS FROM OPERATIONS (298,237) (1,488,443) ------------------------------------------------------------------------- -------------------------------------------------------------------------
Description of Resulting Issuer
Upon completion of the Business Combination, the resulting issuer (the "Resulting Issuer") intends to continue carrying on the business of production testing, wireline services and ancillary services to oil and gas exploration and production companies operating in the WCSB. The business of the Resulting Issuer will be the same as the business of True.
All information provided in this news release relating to True has been provided by management of True and has not been independently verified by management of Avalite.
Sponsor
If required, Avalite and True will engage a sponsor ("Sponsor"), subject to satisfactory due diligence, and will pay the Sponsor a financial advisory fee.
Cautionary Statements
As part of the regulatory approval process, Avalite anticipates submitting for review by the TSX Venture Exchange a management information circular. The Avalite Common Shares will remain halted until such time as permission to resume trading has been obtained from the TSX Venture Exchange and submission of required documentation to the TSX Venture Exchange.
Completion of the Business Combination is subject to a number of conditions including, but not limited to, the parties entering into a definitive agreement, TSX Venture Exchange acceptance and shareholder approval of both Avalite and True. The Business Combination cannot close until the required Shareholder approval is obtained. There can be no assurance that the Business Combination will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular prepared in connection with the Business Combination, any information released or received with respect to the reverse take-over may not be accurate or complete and should not be relied upon. Trading in the securities of Avalite should be considered highly speculative.
All information contained in this news release with respect to Avalite and True was supplied by Avalite and True, respectively, for inclusion herein, and with respect to such information, Avalite and its board of directors and officers have relied on True.
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 may contain forward-looking statements based on assumptions and judgments of management of Avalite and True regarding future events or results. Such statements are subject to a variety of risks and uncertainties, which could cause actual events or results to differ materially from those reflected in the forward-looking statements. Avalite disclaims any intention or obligation to revise or update such statements except as may be required by law.
%SEDAR: 00023242E
For further information: Avalite Inc., R.A. (Ralph) Misener, CEO, (613) 791-7780, Email: [email protected]; True Production Services Inc, Jeffrey W. Holmgren, VP Finance and CFO, (403) 718-3877, [email protected]
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