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VANCOUVER, April 20, 2015 /CNW/ - Tapango Resources Ltd. ("Tapango") (NEX: TPA.H) is pleased to announce that it has entered into a non-binding letter agreement dated April 17, 2015 (the "LOI") with Palo Duro Energy Inc. ("Palo Duro" or the "Resulting Issuer") (NEX: PDE.H) and CarbonOne Technologies Inc. ("CarbonOne"). Tapango and Palo Duro are jointly pursuing the acquisition of all of the issued and outstanding common shares of CarbonOne (the "CarbonOne Acquisition"). The LOI sets out the general framework for the CarbonOne Acquisition and related transactions (the "Transaction"). On closing of the Transaction, Palo Duro will be the resulting issuer, operate in the Tier 2 industrial sector and change its name to "CarbonOne Technologies Inc.". Tapango, Palo Duro and CarbonOne are all at arm's length to each other.
CarbonOne, through its subsidiaries, is engaged in the development, production, manufacturing and commercialization of advanced materials. CarbonOne holds exclusive world-wide licenses for a suite of intellectual property with proprietary developments in resin, furnace, and milling technologies that will allow CarbonOne to cost-effectively produce carbon ceramic composite materials that compete with traditional materials including wood, metal, concrete, panel insulation and plastic.
Trading in the common shares of Palo Duro and Tapango were halted on September 18, 2014 and on April 16, respectively, and will remain halted until such time as permission to resume trading has been obtained from the TSX Venture Exchange ("TSX-V").
Summary of the Transaction
CarbonOne Acquisition and Tapango Acquisition
In connection with the CarbonOne Acquisition, Palo Duro will consolidate its shares on a 4:1 basis (such shares after giving effect to the consolidation, the "Palo Duro Consolidated Shares").
Palo Duro will acquire 100% of the issued and outstanding common shares of CarbonOne (the "CarbonOne Shares") by issuing to CarbonOne shareholders one Palo Duro Consolidated Share for each issued and outstanding CarbonOne Share held by such shareholders.
Palo Duro will offer to acquire 100% of the issued and outstanding common shares of Tapango (the "Tapango Acquisition") by issuing 1.071 of a Palo Duro Consolidated Share to shareholders of Tapango for each issued and outstanding Tapango Share (the "Tapango Ratio"). All of the outstanding stock options and warrants of Tapango will be converted to stock options and warrants of Palo Duro after giving effect to the 4:1 consolidation of Palo Duro's shares and subject to adjustments based on the Tapango Ratio.
CarbonOne will use reasonable commercial efforts to complete a CDN$1,250,000 private placement of 6,250,000 CarbonOne Shares issued at $0.20 per CarbonOne Share prior to closing of the Transaction ("Private Placement").
Upon completion of the Transaction, Palo Duro will pay a finders' fee of 500,000 and 1,065,600 Palo Duro Consolidated Shares to two finders, respectively (the "Finders' Fees").
On closing of the Transaction (including the Private Placement and Finders' Fees), it is anticipated that Palo Duro will have between 76,953,839 and 77,328,839 Palo Duro Consolidated Shares issued and outstanding (between 81,482,243 and 81,857,243 Palo Duro Consolidated Shares fully diluted) of which 8,054,587 Palo Duro Consolidated Shares will be held by existing shareholders of Palo Duro, 7,803,652 Palo Duro Consolidated Shares will be held by existing shareholders of Tapango and between 59,530,000 and 59,905,000 Palo Duro Consolidated Shares will be held by former shareholders of CarbonOne.
Reconstitution of Board of Resulting Issuer
On closing of the Transaction, the board of directors of the Resulting Issuer is expected to be composed of Jack Khorchidian, John Proust, Murray Flanigan, Robert Cross, Morris Klid, Gordon Keep and one additional director to be mutually agreed upon by the parties.
Reconstitution of Management of Resulting Issuer
On closing of the Transaction, the management of the Resulting Issuer is expected to be composed of John Proust – Chief Executive Officer, Jack Khorchidian – Chief Operating Officer, Danny Lee – Chief Financial Officer, Steve Rohring – Chief Technology Officer, William Hill – VP Production and Engineering, Rhylin Bailie – VP Communications and Investor Relations, and Eileen Au – Corporate Secretary.
Upon completion of the Transaction, common shares of the Resulting Issuer held by individuals or entities who are principals of the Resulting Issuer will be placed in escrow pursuant to the policies of the TSX-V, under the terms of a Tier 2 Surplus Security Escrow Agreement. Common shares of the Resulting Issuer issued pursuant to the CarbonOne Acquisition to certain shareholders of CarbonOne who are not principals of the Resulting Issuer will be subject to the TSX-V's Seed Share Resale Restrictions. In addition, 40,677,800 common shares (the "Pooled Shares") of the Resulting Issuer that are issued to shareholders of CarbonOne pursuant to the CarbonOne Acquisition will be subject to additional voluntary pooling restrictions with release terms more restrictive than, and which will run concurrently with, those imposed by the Tier 2 Surplus Security Escrow Agreement or the Seed Share Resale Restrictions. In particular, 35% of the Pooled Shares will be released (in 5% tranches every 6 months, with the first release occurring upon completion of the Transaction) over a period of 3 years and 65% of the Pooled Shares will be released based on the Resulting Issuer meeting cumulative gross revenue targets. Additional details of the voluntary pooling restrictions will be set out in the Information Circular referred to below.
Conditions to Closing
The closing of the Transaction is subject to various conditions, including the parties negotiating and entering into a definitive agreement, obtaining the approval of their respective shareholders and obtaining all required regulatory and stock exchange approvals. In addition, the closing of the Transaction is subject to CarbonOne completing the Private Placement.
Capital Resources Upon Completion of Transaction
Palo Duro had $770,940 (audited) in cash as at December 31, 2014, $250,000 of which has been subsequently loaned to CarbonOne (see March 30, 2015 news release). Tapango had approximately $1,200,000 (un-audited) in cash as at March 31, 2015. CarbonOne had approximately $150,200 (unaudited) in cash as at March 31, 2015. On closing of the Transaction, Palo Duro's cash will be combined with net proceeds from the Private Placement, Tapango's cash and CarbonOne's cash.
A joint information circular in respect of the Transaction will be prepared, sent to Palo Duro shareholders and Tapango shareholders and filed on SEDAR at www.SEDAR.com in accordance with TSX-V policies. A press release will each be issued by Palo Duro and Tapango once the information circular has been filed on SEDAR.
Information on CarbonOne Technologies Inc.
CarbonOne is a company incorporated under the Business Corporations Act (British Columbia). CarbonOne, through its subsidiaries, is engaged in the development, production, manufacturing and commercialization of advanced materials. CarbonOne holds exclusive world-wide licenses for a suite of intellectual property with proprietary developments in resin, furnace, and milling technologies that will allow CarbonOne to cost-effectively produce carbon ceramic composite materials that compete with traditional materials including wood, metal, concrete, panel insulation and plastic. CarbonOne intends to use its advanced technology and manufacturing processes to supply low-cost, high-performance composite materials for industrial and structural applications. The company believes its intellectual property and technologies will allow it to create higher-quality products, at a lower cost than its competitors. CarbonOne aims to become a trusted supplier in the emerging industry of applied carbon ceramic composite materials, initially focusing on the RV, rebar and pre-engineered building materials sectors. Additionally, CarbonOne plans to become a low-cost supplier of activated carbon. CarbonOne has established a research and development and manufacturing facility in Buffalo, NY.
CarbonOne is currently preparing audited consolidated financial statements to be included in the Information Circular.
Information on Palo Duro Energy Inc.
Palo Duro is a company continued under the Business Corporations Act (British Columbia) whose common shares are listed on the NEX under the symbol "PDE.H". Palo Duro's principal business activities to date have been the acquisition of rights to explore for oil and gas interests. Palo Duro previously held oil and gas interests in the United States; however, its rights in these interests have expired. Consequently, Palo Duro is currently seeking new business opportunities.
The latest financial information for Palo Duro is its financial statements for the period ended December 31, 2014, which can be found on SEDAR.
Information on Tapango Resources Ltd.
Tapango is a company incorporated in British Columbia under the jurisdiction of the Company Act whose common shares are listed on the NEX board of the TSX Venture Exchange under the symbol "TPA.H". Tapango's current principal activities are seeking opportunities in the natural resource sector or near term cash flow business opportunities.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Completion of the transaction is subject to a number of conditions, including Exchange acceptance and Shareholder approval. 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 Information Circular 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 Palo Duro and Tapango should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release .
This news release contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively "forward-looking statements"). Palo Duro and Tapango caution the reader that there is no guarantee that any of the potential outcomes from the LOI will actually occur or be finalized. Certain information contained herein constitutes "forward-looking information" under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to: the completion of the Transaction; the Resulting Issuer; the name of the Resulting Issuer; the halt and resumption of trading of Palo Duro and Tapango; the common shares of the Resulting Issuer that are to be received by shareholders of CarbonOne and Tapango; the treatment of Tapango options and warrants; the completion of the Private Placement; the issuance of the Finders' Fees; the capital structure and issued and outstanding common shares of the Resulting Issuer; the composition of the board and management of the Resulting Issuer; the issuance of new Palo Duro options; the escrow and pooling restrictions with respect to common shares of the Resulting Issuer; the release of the Pooled Shares; the financial position of the Resulting Issuer upon closing of the Transaction; the preparation, sending and filing of an information circular and subsequent news releases related thereto; and the business plan and strategy of CarbonOne. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "intends", "believes", "plans to", "expects" or "it is expected", or variations of such words and phrases or statements that certain actions, events or results "will" occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Palo Duro, Tapango or CarbonOne to be materially different from those expressed or implied by such forward-looking statements or forward-looking information, including: the receipt of all necessary regulatory approvals, the ability to conclude the Transaction, capital expenditures and other costs, and financing and additional capital requirements. Although management of Palo Duro, Tapango or CarbonOne have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward looking information. Neither Palo Duro, Tapango nor CarbonOne undertakes to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws.
SOURCE Tapango Resources Ltd.
For further information: about Palo Duro please contact: Kurt Bordian, President and CEO, Palo Duro Energy Inc., Suite 1560, 505 Burrard Street, Vancouver, B.C. V6X 1M5; Or Investor Relations: 778-373-3740, Email: email@example.com; For further information about CarbonOne, please contact: John Proust, CEO and Director, CarbonOne Technologies Inc., Suite 1680, 200 Burrard Street, Vancouver, B.C. V6C 3L6, Tel: (604) 424-8261; For further information about Tapango, please contact: Geir Liland, President and Director, Tapango Resources Ltd., Suite 3123, 595 Burrard Street, Vancouver, B.C. V7X 1J1, Tel: (604) 609-6110