AXEA Energy Inc. Announces Details of Qualifying Transaction
(PressMethod) - AXEA Energy Inc. ("AXEA" or the "Company") (TSX VENTURE:AXT.P - News) announces additional details concerning its proposed business combination with AgriMarine Industries Inc. ("AgriMarine"), which was first announced in the Company's January 3, 2008 news release.
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Pursuant to a letter agreement dated December 31, 2007 (the "Agreement"), the Company has agreed to acquire all of the issued shares of AgriMarine in exchange for common shares of the Company on the basis of 1 common share of the Company for every 3 common shares of AgriMarine (the "Share Exchange Ratio"). The business combination with AgriMarine (the "Transaction"), when completed, is intended to be AXEA's "qualifying transaction" for the purposes of the capital pool company requirements of the TSX Venture Exchange (the "TSX-V") and to enable the Company to qualify as a Tier 2 Technology Issuer on the TSX-V.
Upon completion of the Transaction, AgriMarine will be a wholly owned subsidiary of the Company and the Company plans to change its name to "AgriMarine Inc." (the "Name Change").
AgriMarine, a British Columbia private company located in Campbell River, British Columbia, was established in 1993 upon the amalgamation of Envirocon Pacific Ltd., a salmon fishery consulting firm, and Big Tree Creek Hatchery Corporation, a salmon hatchery business. In 1995, the company's name was changed to AgriMarine Industries Inc. and has since focused its business on salmon aquaculture and processing.
AgriMarine has developed the world's first marine based commercially scalable, environmentally sustainable, closed-containment fish farming technology. This technology, which can be readily implemented worldwide through joint venture partnerships and license agreements within the aquaculture industry, will support the emerging demand by retailers and food service outlets for ecologically and economically sustainable fresh fish.
AgriMarine's sustainable aquaculture technology involves solid wall containers which allow the capture of precipitated waste for removal in a settling chamber and thickening with fine filters. This means that there can be no escape or interaction of cultured fish with marine mammals and there are no waste deposits flowing into the sensitive marine eco-systems, thus reducing the transfer of pathogens and sea lice and reducing the nutrient load.
AgriMarine's technology for rearing salmon and other finned fish may be located near or within the sensitive marine eco-systems of coastal communities, such as Campbell River, BC. It utilizes existing infrastructures while providing local employment through the production and processing of salmon and other finned fish. This reduces the use of fossil fuels in transportation for feed into the farms and fish harvests out from the farms. It also allows access to existing hydro-electric energy sources, and does not impact the pristine remote environments.
AgriMarine conducted their initial research as part of the BC Government's initiative in the year 2000 to examine green technologies for salmon farming, operating a 7-tank land-based farm at Cedar British Columbia under a lease agreement for 5 years. During the research period, AgriMarine produced several harvests of Pacific salmon and one harvest of Atlantic salmon, while they developed the life support systems and design criteria for rearing healthy stocks of salmon in closed containment facilities. Although the fish performed well in closed containment land-based facilities, the operations on land were not economically viable due to high energy costs and construction costs, which was the catalyst for the development of AgriMarine's technology for a floating marine tank system which is currently being installed at Middle Bay on Vancouver Island. The Middle Bay site will be a solid wall floating salmon rearing tank farm with capacity of 1200 metric tonne production of Chinook salmon, and the first harvest is planned to commence in December 2008. The Middle Bay tank farm is being developed to demonstrate the technical, economic and environmental benefits of the AgriMarine technology.
Based on unaudited management-prepared financial statements for the fiscal year ended December 31, 2007, AgriMarine had gross revenues of $458,543 and operating expenses of $232,803 before extraordinary gain of $113,032, resulting in net income of $338,772. As at December 31, 2007, AgriMarine had a working capital deficiency of $90,644, total assets of $483,881 and total liabilities of $697,827 (of which $574,526 were current liabilities).
The Company plans to complete a brokered equity financing of up to $3,000,000 (the "Private Placement") in conjunction with the completion of the Transaction. The Company is currently in the process of negotiating the terms of the financing, details of which will be announced when settled. The net proceeds of the Private Placement will be used to develop the resulting issuer's British Columbia and China based operations and for general working capital purposes.
A finder's fee of 100,000 common shares of the Company will be paid to an individual who is at an arm's length to both AXEA and AgriMarine.
AXEA currently has 6,000,000 outstanding common shares and a further 800,000 common shares reserved for issuance pursuant to outstanding stock options and share purchase warrants. AgriMarine currently has 45,442,419 outstanding common shares (the "AgriMarine Shares") and no outstanding stock options, warrants or other securities convertible into shares of AgriMarine.
Based on the foregoing and the Share Exchange Ratio, upon completion of the Transaction, AXEA will have a total of 21,247,473 common shares issued and 800,000 common shares reserved for issuance for options and warrants. Of the issued shares, 71.3% will be held by existing holders of AgriMarine Shares and 28.7% will be held by existing AXEA shareholders. These share numbers and percentages do not include securities to be issued under the Private Placement.
The principal shareholder of AgriMarine is Big Tree Creek Investments Inc. ("Big Tree"), a British Columbia private company which owns approximately 77% of the outstanding AgriMarine Shares. Big Tree is controlled by Richard Buchanan, the President and Chief Executive Officer of AgriMarine.
Shares of the Company to be issued to AgriMarine shareholders will be subject to applicable regulatory hold periods. In addition, shares of the Company to be issued to the AgriMarine shareholders who will become principals of the Company will be subject to TSX-V escrow requirements.
None of the insiders of AXEA or their associates and affiliates has any interest in the business of AgriMarine or is otherwise an insider of, or has any relationship with, AgriMarine or its direct or indirect shareholders. The Transaction is not subject to AXEA shareholders' approval as the Transaction is an arm's length Qualifying Transaction. However, the Company may call a meeting of shareholders prior to the completion of the Transaction in order to effect the Name Change and appoint the new directors of the Company, as further described below.
The parties have agreed to enter into a definitive agreement outlining the specific terms of the Transaction (the "Definitive Agreement") and the procedure under which the Transaction will be completed, which may be by way of plan of arrangement, amalgamation or other statutory procedure, and will contain such terms, conditions, representations and warranties as are customary.
The parties have agreed to use their best efforts to complete the Transaction by April 30, 2008. Completion of the Transaction is subject to certain conditions, including any necessary shareholder and regulatory approvals (including TSX-V approvals) in respect of the Transaction, the Name Change and appointment of new board members of the Company, an independent valuation supporting at least $3.5 million fair market value of AgriMarine, the completion of the Private Placement, the approval or consent of any third party whose consent is required by AXEA to complete the Transaction, the results of AXEA's due diligence review of AgriMarine and such other closing conditions as may be specified in the Definitive Agreement.
Management of AXEA will prepare a filing statement to be filed on SEDAR outlining the details of the Transaction.
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