Doxa & Prostar Geocorp Sign Letter of Intent for Proposed Reverse Takeover Transaction
Doxa Energy Ltd ("Doxa" or the "Company") and ProStar Geocorp Inc. ("ProStar") jointly announce that they have entered into a binding letter agreement dated October 26, 2018 whereby Doxa will acquire all of the issued and outstanding securities of ProStar by way of a share exchange, amalgamation or such other form of business combination as the parties may determine.
Upon successful completion of the proposed acquisition of the securities of ProStar (the "Transaction"), it is anticipated that the Company will be listed as a Tier 2 Technology issuer on the TSX Venture Exchange ("TSX-V") and will carry on the business of ProStar.The Transaction constitutes a 'reverse takeover' of the Company pursuant to Policy 5.2 of the TSX-V.
Pursuant to the Transaction, the Company will issue common shares ("DXA Shares") to the holders of common shares in the capital of Prostar ("ProStar Shares") on the basis of approximately four post-Consolidation (as defined below) DXA Shares for each Prostar Share. It is anticipated that approximately 59.3 million DXA Shares will be issued pursuant to the Transaction based on the current capital structure of ProStar. It is a condition to the closing of the Transaction that the Prostar shareholders will hold at least 80.01% of the issued and outstanding DXA Shares on completion of the Transaction, but prior to the completion of a concurrent financing (as discussed below).
The Transaction is an arm's length transaction.Upon the completion of the Transaction, it is expected that ProStar will become a wholly-owned subsidiary of the Company (the "Resulting Issuer").
Pursuant to the letter agreement, it is agreed that ProStar will complete a pre-Transaction private placement through the issuance of not more than 3,500,000 ProStar Shares and will settle a portion of its existing debt through the issuance of not more than 2,400,000 ProStar Shares.
The Transaction is subject to a number of terms and conditions, including, but not limited to, the parties entering into a definitive agreement with respect to the Transaction on or before December 15, 2018 (such agreement to include representations, warranties, conditions and covenants typical for a transaction of this nature), the completion of satisfactory due diligence investigations, the completion of a private placement by the Company as further described below, the completion of a debt settlement of the Company's related party debt as further described below, the completion of the Consolidation, the completion of the sale of the Company's oil and gas interests, and the approval of the TSX-V and other applicable regulatory authorities. All dollar figures referenced herein, unless otherwise specified, refer to Canadian dollars.
Trading in the DXA Shares will remain halted pending the satisfaction of all applicable requirements of Policy 2.4 of the TSX-V.There can be no assurance that trading of Doxa Shares will resume prior to the completion of the Transaction.Further details concerning the Transaction (including additional financial information) and other matters will be announced if and when a definitive agreement is reached.
Information Concerning ProStar
ProStar is incorporated under the laws of the State of Delaware and is a Software as a Service (SaaS) company that provides patented Geospatial Intelligence Software(tm). ProStar's flagship solution is Transparent Earth(r), a natively Cloud and Mobile solution designed to capture, record and display the precise location of subsurface assets, including buried utilities and pipelines. Additional information concerning ProStar is available at www.prostarcorp.com.
As of September 30, 2018, Prostar had approximately US $500,000 in assets,liabilities of approximately US $3.4 million and estimated (unaudited) revenues for 2018 of US$1.6 million.
Page Tucker, the Chief Executive Officer of ProStar, holds 1,476,677 ProStar Shares, representing 16.88% of the outstanding ProStar Shares. Peter and Lillian Lylick together hold 964,300 ProStar Shares, representing 11.02% of the outstanding ProStar Shares.
Management and Board of Directors of Resulting Issuer
With the exception of Paul McKenzie, all of the current members of the Company's board of directors will resign and the following individuals will be appointed as management and directors of the Resulting Issuer:
Page Tucker, Chief Executive Officer and Director
Page Tucker is a visionary in terms of the development of cloud and geospatial technologies. He has extensive experience with early stage technology start-ups, including software design and development, intellectual property, management, marketing, recruiting and capital financing.Mr. Tucker was named entrepreneur of the year in 2016 by the Colorado Technology Association (CTA) and ProStar was named an award winner as a Colorado Company to Watch for 2017 by CCTW.
Paul McKenzie, Director
Paul McKenzie brings over 30 years of capital and public markets experience to ProStar. Mr. McKenzie has served in the capacity of, Co-Founder, CEO, CFO, President and/or Director to several successful, publicly traded companies. Most recently, Mr. Mckenzie co-founded NexOptic Technology Corp. which engineers some of the most efficient depth to aperture ratio camera lenses in the world as well as cutting-edge AI for image stabilization and image capture. NexOptic was previously named to the Toronto Venture Stock Exchange Top 50 list for two consecutive years. Several of the companies that Mr. Mckenzie either co-founded and/or managed have made significant resource discoveries globally and he has overseen and negotiated joint-venture and alliance partnerships with companies whose market-capitalizations have exceeded $20 billion. Mr. Mckenzie currently serves on the Doxa board of directors .
Herb McKim, Chairman and Director
Herb McKim is co-founder of McKim & Creed, a comprehensive engineering and surveying firm that employs 500 people in 22 offices throughout the United States and generates over $US 90 million in annual revenues. McKim & Creed has been consistently ranked among ENR's top 500 design firms in the United States and Public Works' top AEC firms. During his tenure as President and COO, Mr. McKim managed the company's technical services, which included engineering, surveying and planning. Mr. McKim has served on numerous Boards and has received several prestigious awards and honors, including: Fellow, ACEC and Professional Engineers of North Carolina; Outstanding Technical Achievement Award and Distinguished Service Award, Professional Engineers of North Carolina; and Community Service Award, Consulting Engineers Council of North Carolina.
Jonathan Richards, Chief Financial Officer and Director
Jonathan Richards brings over 15 years of public company accounting, finance and regulatory experience to ProStar as CFO and Board member. Formerly, Mr. Richards began his career with KPMG and then accumulated extensive experience working as CFO with numerous private companies all over the world. In the past ten years Mr. Richards has served as CFO for several firms listed on both the Toronto Stock Exchange and Toronto Venture Stock Exchange. Mr. Richards holds a bachelor's degree in management studies with first-class honors from the University of Waikato, New Zealand, and is a member of the Institute of Chartered Accountants of British Columbia.
The completion of the Transaction is subject to the completion by the Company of a consolidation of its share capital on a 17 old for one new basis (the "Consolidation").
The parties to the Transaction have agreed that prior to or concurrently with the closing of the Transaction, the Company will settle approximately $3,490,396 in debt (including accrued and unpaid interest to September 30, 2018) owed collectively to Armada Investments Ltd. (a company owned and controlled by Chairman and director, G. Arnold Armstrong) and Harvco LLC (a company owned and controlled by President and CEO, John Harvison) through the issuance of 218,149,750 pre-Consolidation DXA Shares at a price of $0.016 per pre-Consolidation DXA Share (the "Debt Settlements").
The Debt Settlements will result in the creation of a new control position to be held by Harvco LLC, which will be issued 49,579,486 pre-Consolidation DXA Shares representing 21% of the Company, prior to the completion of the Transaction and any private placement. The Debt Settlements are also "related party transactions" as defined under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") as the debts are held indirectly by President and CEO John Harvison (through Harvco LLC) and Chairman and Director, G. Arnold Armstrong (through Armada Investments Ltd.). As a result, the completion of the Debt Settlements will be subject to majority of the minority shareholder approval requirements of MI 61-101.
Pursuant to the letter agreement, it is a condition of the Transaction that the Company completes a private placement of up to 10,000,000 post-Consolidation DXA Shares or units at a price of $0.50 per post-Consolidation DXA Share. Additional details concerning the terms of the private placement will be provided in a subsequent press release.
The Company intends to use the net proceeds of the private placement to fund the Transaction, to develop the business of the resulting issuer and for working capital and general corporate purposes.
This news release does not constitute an offer to sell and is not a solicitation of an offer to buy any securities in the United States. The securities of the Company and Prostar have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws unless pursuant to an exemption from such registration.
Disposition of Oil and Gas Assets
At or prior to the closing of the Transaction, the Company will dispose of its existing oil and gas interests and related equipment in assets through the sale of its U.S. subsidiary (the "Disposition") to Dynamic Production, LLC ("Dynamic"), a company controlled by John Harvison, the President and CEO of the Company, at their fair market value. As a condition of the Disposition, the Company will be released from the outstanding revolving secured credit facility with UMB Financial Corporation, of which US$153,333 is currently outstanding and matures on June 1, 2019 and accounts payable due to Dynamic of which US$1,729,844 is currently outstanding(collectively the "Credit Facility"). As it is expected that the fair market value of the oil and gas assets is less than the outstanding balance of the Credit Facility, the Disposition will not result in any payments to the Company.
As the Disposition results in the sale of all or substantially all of the assets of the Company, the Disposition is subject to the approval, by way of a special resolution, of at least 66 2/3% of the shareholders of the Company, voting in person or by proxy, in accordance with the requirements of the Business Corporations Act (British Columbia). Additionally, as Dynamic is owned and controlled by President and CEO John D. Harvison, the Disposition is also a "related party transaction" as defined under MI 61-101 and is subject to majority of the minority shareholder approval requirements of MI 61-101.
Approval for the Consolidation, Debt Settlements and Disposition will be sought from the Company's shareholders at its annual and special general meeting to be held on December 12, 2018.
The Company does not anticipate seeking shareholder approval for the Transaction as:
(a) the Transaction is not a related party transaction with in the meaning of MI 61-101 or the policies of the TSX-V and no other circumstances exist which may compromise the independence of the Company
(b) the Company is without active operations, its existing assets being passive investments;
(c) the Company is not and will not be subject to a cease trade order and will not otherwise be suspended from trading on completion of the Transaction; and
(d) shareholder approval of any aspect of the Transaction is not required under applicable corporate laws or securities laws.
The Transaction is subject to the sponsorship requirements of the TSX-V, unless an exemption from those requirements is granted.There can be no assurance that an exemption will be obtained,if an exemption from the sponsorship requirements is not obtained, a sponsor will be identified at a later date.An agreement to act as sponsor in respect of the Transaction should not be construed as any assurance with respect to the merits of the Transaction or the likelihood of its completion.
Trading in the DXA Shares has been halted as of October 26, 2018 and will remain halted pending the satisfaction of all applicable requirements pursuant to Policy 5.2 of the TSX-V.
Upon completion of the Transaction, the Company intends to change its name to "ProStar Holdings Inc." or such other name as Prostar and the Company may determine, and the parties expect that the TSX-V will assign a new trading symbol for the Resulting Issuer
This news release contains certain "forward looking statements" including, for example, statements relating to the completion of the Transaction and Private Placement and the Resulting Issuer's anticipated share capital.Such forward-looking statements involve risks and uncertainties, both known and unknown.The results or events depicted in these forward-looking statements may differ materially from actual results or events.In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding and are implicit in, among other things: receipt of regulatory approvals, the Company's ability to complete the Transaction and Private Placement, the state of the capital markets, tax issues associated with doing business internationally, the ability of the Resulting Issuer to successfully manage the risks inherent in pursuing business opportunities in the technology industry, and the ability of the Resulting Issuer to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business.Any forward-looking statement reflects information available to the Company as of the date of this news release and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise.
On behalf of the board of directors of the Company:
John D. Harvison
President and Chief Executive Officer
For further information contact:
Paul McKenzie, director at 604.669.7330
All information contained in this news release relating to Prostar was provided by Prostar to the Company for inclusion herein. The Company has not independently verified such information and shall bear no liability for any misrepresentation contained therein.
Completion of the Transaction is subject to a number of conditions, including but not limited to, TSX-V acceptance and if applicable pursuant to TSX-V requirements, disinterested shareholder approval. Where applicable, 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 management information circular or filing statement 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 the Company should be considered highly speculative.
The TSX-V has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this news release.
Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.