Shermag Inc. - Filing of annual and quarterly financial statements and
corporate reorganization

SHERBROOKE, QC, Feb. 12 /CNW Telbec/ - Shermag Inc. ("Shermag" or the "Company") announces today the filing of its financial statements and the holding of an annual and special meeting of shareholders on Thursday, March 25, 2010. Shermag's shares were listed and traded on the TSX Stock Exchange (TSX: SMG) up to their suspension on May 1, 2009 and their delisting on July 31, 2009.

Filing of annual and quarterly financial statements with management discussion and analysis ("MD&A") reports

Shermag's Board of Directors and Management announce that the following documents were filed with regulatory authorities and can be consulted on SEDAR at www.sedar.com:

    
    (i)  the audited financial statements for fiscal years ended April 3,
         2009  and April 4, 2008 with the MD&A report for the same period,
         and
    (ii) the quarterly financial results for the three-month periods ended
         July 3, 2009 and October 2, 2009 with the MD&A reports.
    

Since the end to the stay of proceedings against Shermag under the Companies' Creditors Arrangement Act on October 9, 2009, the filing of its financial information enables Shermag to comply with the requirements of regulatory authorities on continuous disclosure.

The financial statements and MD&A reports will be forwarded to all shareholders with the Management Proxy Circular to be issued for the next annual and special meeting of shareholders of March 25, 2010.

Project of Shermag's corporate reorganization leading to privatization

The annual and quarterly financial statements indicate that Shermag's financial situation remains precarious and that its operations are still unprofitable. The restart initiatives of Shermag by Groupe Bermex Inc. will inevitably bring on cost reductions and major changes with Shermag's business process and strategic positioning.

In the light of these facts, the Board of Directors and Management believe that Shermag's status as a public company is actually inappropriate, particularly since this status generates, among others, important expenses and requires the use of liquidities necessitated for the restart initiatives of the Company's main activities.

Furthermore, the recent delisting of Shermag's shares on the TSX Stock Exchange (July 2009), holds back all possibility of liquidity to minority shareholders of the Company (all shareholders except Groupe Bermex Inc.) holding 10,735,824 common shares (or 19.5% of total outstanding shares). Consequently, the Board of Directors and Management believe that a corporate reorganization leading to the privatization of Shermag is required, that this is pursuant to the restructuring and restart plan and finally, the reorganization will give access to liquidity, otherwise inaccessible, to holders of common shares.

Therefore, the Board of Directors has duly approved, by way of resolution, the implementation of an important corporate reorganization of Shermag (the "Reorganization") which will be submitted for approval to minority shareholders of the Company at the Meeting of March 25, 2010.

The proposed Reorganization would imply:

    
    (i)   the creation of a new category of preferred shares, non-voting and
          non-participating and redeemable at the Company's and
          shareholders' option at $0.03 per share,
    (ii)  the conversion, on a one-to-one basis, of all common shares
          presently issued against newly created preferred shares,
    (iii) the issuance of 100 new common shares to Groupe Bermex Inc. in
          consideration of $100, and
    (iv)  the redemption by the Company of all the preferred shares newly
          issued at the price of $0.03 per share, payable immediately.
    

The Board of Directors and Management of Shermag consider that the established redemption price for the new preferred shares corresponds to the fair market value of the Company's common share before the Reorganization by taking into account the approval by the Superior Court - district of Montréal on September 15, 2009, of the subscription by Groupe Bermex Inc., by way of private placement, to 41,666,667 new common shares of Shermag for an aggregate cash consideration of $1,250,000, namely $0.03 per share.

Once this Reorganization is completed, Groupe Bermex Inc. would be the exclusive holder of voting and participating shares of the Company and Shermag would request to the appropriate authorities the authorization to cease being a reporting issuer.

The proposed corporate reorganization will be detailed in the Management Proxy Circular of Shermag.

If the Reorganization is approved by the shareholders and is finalized as aforementioned, the unregistered shareholders (holding their shares by the intermediary of the CDS system/Broker) will automatically receive the redeemed price of their preferred shares in their brokerage account. The registered shareholders (holding their shares in one's own right and not by a broker) will be invited to follow the instructions accompanying the Management Proxy Circular that will be sent shortly to all Shermag shareholders.

Profile

Shermag, headquartered in Sherbrooke, Québec, is an importer and a manufacturer of quality residential furniture. Shermag presently has more than 200 active employees and has manufacturing operations and a global sourcing division.

Groupe Bermex Inc., founded in 1983 and headquartered in Maskinongé, Québec, is one of North America's largest furniture manufacturers and presently has more than 600 active employees and has 13 plants.

Disclaimer

This news release contains forward-looking statements about the Company's operations, objectives, strategies, financial situation and performance. These statements are made based on assumptions and management's best estimates with regard to future events. However, the business of the Company is subject to risks and uncertainties that could cause actual results to differ from expected results. Important factors that could cause such differences are changes in pricing pressure being exerted by competitors, particularly Asian-based companies, or significant movement in the Canadian/US dollar exchange rate. This is not an exhaustive list. A broader evaluation of risk factors that could affect future performance can be found in the Company's Annual MD&A filed with Canadian securities regulatory authorities. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE SHERMAG INC.

For further information: For further information: Shermag Inc.: Mrs. Josée Girard, CA, Vice-President, Finance, (819) 566-1515; Groupe Bermex Inc.: Mr. Michel Martineau, CA, CBV, Vice-President, Strategic Development, (819) 601-8702

Organization Profile

SHERMAG INC.

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