TSX Symbol: ORI
WOODBRIDGE, ON, Aug. 29 /CNW/ - Organic Resource Management Inc. ("ORMI"
or the "Company") today announced that, subject to regulatory approval, the
Company has reached an agreement for three related party transactions which
will eliminate the existing related party relationships for software and
patents. These transactions are scheduled to close on or about September 19,
Eliminating related party relationships is part of a multi-step
restructuring program that includes simplifying the Company's balance sheet
and organizational structure and strengthening its management. The
restructuring program began on June 1, 2007 with the conversion of all the
outstanding preferred shares into common shares. It continued on July 1, 2007
with the amalgamation of the Company with its largest subsidiary, and
concurrent name change to Organic Resource Management Inc., and most recently
on August 20, 2007 with appointments at the board and executive level.
The three related party transactions will see the Company purchase: (i)
100% of the shares of Path Information Systems Inc. ("Path"), a related
software company; (ii) the Canadian patents for Direct Land Application
Process ("DLAP") and Organic Resource Recovery System ("ORRS") from a related
company; and (iii) the 30% equity interest in NCS Environmental Services Ltd.
that it does not already own, from a related company.
Path Information Systems Inc.
ORMI will purchase 100% of the issued and outstanding shares of Path for
$700,000. Charles Buehler, the Company's Chairman, CEO and control block
holder, owns a majority of the shares of Path. The purchase price will be paid
as to $100,000 cash on closing and the remainder over six years with interest
at 7% per annum. The shares of Path will be pledged to the vendors as security
until the balance has been paid. Also as part of the transaction, the vendors
will obtain a perpetual and exclusive license, including access to the source
code, for the software outside of the liquid organic industry.
Path owns proprietary route optimization and management information
software. Through licensing and marketing agreements, ORMI has exclusive
rights to Path's software in the non-hazardous liquid waste industry in Canada
and throughout the rest of the world. Although the Company does have a
perpetual license to the software it does not own the source code and is
required by the terms of the license to use Path programmers to do
maintenance, perform upgrades and do development work on the software. The
software is a critical element of ORMI's operational success and a key
component to ORMI's future. The Company must continually develop and upgrade
the software in order to remain competitive. Consequently, there would be
on-going charges paid to Path for software support and development, and the
potential for an on-going conflict of interest in the determination of the
appropriate market charges for those services. By purchasing Path and thereby
the software, this issue is permanently resolved because the Company will be
able to maintain and develop its own software.
Canadian DLAP and ORRS Patents
ORMI will purchase the Canadian patents for DLAP and ORRS from Organic
Resource Technologies Inc ("ORTI"), a company owned as to one third by Mr.
Buehler, and one third by Douglas Carruthers, an officer and director of ORMI,
for $15,000 cash. As part of the terms of this transaction, a note payable
from ORMI to ORTI, with 24 blended monthly installments of principal and
interest of $4,292 maturing in December 2008 which has a current outstanding
balance of $65,729, will also be paid in full on closing.
Purchasing the DLAP patent eliminates the requirement for the Company to
pay an annual fee of $25,000 under the existing license.
DLAP is a patent protected solution for recycling high-fat content
organic waste that uses the natural digestion ability of microbes found in
soil to convert organic waste into stable soil organic matter.
ORRS is a patent protected process for on-site collection of organic
waste. Produce and other food related wastes are ground into slurry by a mill
and discharged into the holding tank where it is stored until collected by a
vacuum truck. Current efforts by the Company to deploy its ORRS have been
focused on a few large industrial, commercial and institutional organics
generators and have been effectively stalled by the severe lack of viable
low-cost recycling alternatives in Ontario and British Columbia. The Company
believes that the establishment of anaerobic digesters will make ORRS a more
financially viable organic residuals handling technology. Purchasing this
patent eliminates any requirement for the Company to pay royalties on new ORRS
30% Equity Interest in NCS Environmental Services Ltd. ("NCSESL")
ORMI will purchase the 30% equity interest in NCSESL that it does not
already own from Organic Resource Technologies International Inc ("OII"), a
company owned as to one third by Mr. Buehler, one third by Mr. Carruthers for
The Company already owns 70% of the NCSESL through its wholly owned
subsidiary NCS Holdings,. The US ORRS and DLAP patents were originally
transferred by OII into NCSESL in exchange for a 30% equity interest in
NCS Holdings and NCSESL are Bermuda companies that were originally
incorporated as a tax strategy which is no longer applicable. After the
transaction is complete, the Company will own 100% of NCSESL and will transfer
the US patents into ORMI and wind-up both Bermuda companies simplifying its
Approvals and Disclosure
Other than Mr. Buehler and Mr. Carruthers, all other ORMI directors are
independent. The transactions described above were assessed in detail and
negotiated on behalf of the Company by a committee of all seven independent
directors, and all resolutions approving these transactions were passed
unanimously. Negotiations were extensive and lasted over a number of months
and finally concluded on August 21, 2007 when a purchase agreement for Path
An original proposal from the vendors of Path to ORMI's independent
directors, which was rejected, sought a purchase price of $1,744,000 for the
shares of Path. In this proposal, there was no requirement for the vendors to
receive a perpetual and exclusive license, including access to the source
code, for the software outside of the liquid organic industry. Kalex
Valuations Inc. was retained by the independent directors to issue a fairness
opinion on this proposal. On May 6th, 2007, Kalex issued an opinion which
concluded that Path's value to ORMI exceeds $1,744,000. The value was derived
from ending ORMI's obligation under the existing software license agreement to
pay Path for software maintenance and development.
A copy of the Kalex fairness opinion is available for inspection at the
Company's offices at 3700 Steeles Avenue W., Suite 601, Woodbridge, Ontario
L4L 8K8, and will be sent to a security holder upon request for a nominal
charge to cover printing and postage.
Total fair market value of all three transactions, including the early
repayment of the ORTI note is $790,729, or 9% of the Company's market
capitalization determined in accordance with Ontario Securities Commission
Rule 61-501 ("OSC Rule 61-501"). Accordingly, pursuant to section 5.5-2 of OSC
Rule 61-501, the Company is exempt from a requirement for a formal valuation
because the total fair market value of these transactions of the Company is
not more than 25% of the market capitalization of the Company and, as a result
minority approval is also not required under OSC Rule 61-501 section 5.7(1)-2.
This press release is available on the Company's official on-line
investor relations site for investor commentary, feedback and questions.
Investors are asked to visit the investor relations section of the Company's
website at http://www.ormi.com/ORMI_Investor.asp. Alternatively, investors are
asked to e-mail all questions and correspondence to email@example.com where they
can also request addition to the Organic Resource investor e-mail list to
receive all future press releases and updates directly.
About Organic Resource Management Inc.
Organic Resource is Canada's largest provider of vacuum truck services
for the collection, treatment and disposal of organic and other non-hazardous
liquid waste. ORMI services in excess of 8,000 commercial, industrial,
institutional and residential customers in Ontario, Quebec, and British
Columbia. Further information about ORMI may be obtained at the Company's web
site at www.ormi.com.
Note: Certain information contained in this press release may be
forward-looking and therefore subject to unknown risks or uncertainties. The
actual results, performance or achievements of Organic Resource Management
Inc. may differ materially from the results, performance or achievements of
the Company expressed or implied by such forward-looking statements.
For further information:
For further information: Corporate Inquiries, Charles H. Buehler,
Chairman & Chief Executive Officer, firstname.lastname@example.org