Lida Resources to acquire Continental Potash in RTO

2022-07-07 07:01 ET - News Release

Mr. Anthony Zelen reports

LIDA RESOURCES INC. ANNOUNCES LETTER OF INTENT TO ACQUIRE CONTINENTAL POTASH

Lida Resources Inc. has entered into a letter of intent dated July 6, 2022, with Continental Potash Corp., a private corporation existing under the laws of British Columbia, pursuant to which Lida is proposing to acquire all of the issued and outstanding securities of Continental Potash, whereby the securityholders of Continental Potash will become securityholders of the combined entity (the resulting issuer). Upon completion of the proposed transaction, the resulting issuer will continue to carry on the business of Continental Potash as currently constituted. The proposed transaction is an arm's-length transaction and will constitute a reverse takeover of Lida by Continental Potash. In connection with the proposed transaction, the resulting issuer currently intends to delist from the Canadian Securities Exchange and will apply to list its common shares on the NEO exchange.

About Continental Potash Corp.

Continental Potash holds an option to acquire up to a 100-per-cent interest in certain rights, title and interests (subject to certain royalties) in the Disley prospect area, located 50 kilometres northwest of Regina, Sask., and 215 kilometres southeast of Saskatoon, Sask.

Terms of proposed transaction and financing

Pursuant to the terms of the letter of intent, the existing securityholders of Continental Potash will receive securities of Lida in exchange for their securities of Continental Potash. The final form of the proposed transaction will be set forth in a definitive agreement to be entered into among the parties that will replace the letter of intent.

It is expected that, on the closing of the proposed transaction, Lida will issue pro rata to the shareholders of Continental Potash 36,666,667 common shares as consideration for 100 per cent of the issued and outstanding common shares of Continental Potash at a deemed price of 25 cents per payment share and will issue 6,666,667 common share purchase warrants exercisable at a price of 25 cents per replacement warrant for a period of 18 months.

Prior to the closing date, Continental Potash will complete a brokered private placement for aggregate gross proceeds of up to $6.3-million (subject to a 15-per-cent overallotment option), subject to a minimum aggregate net proceeds requirement of $5.7-million, involving the issuance of: (i) up to $2-million in subscription receipts of Continental Potash at a price of 25 cents per subscription receipt; and (ii) up to $4.3-million in flow-through subscription receipts of Continental Potash at a price of 30 cents per flow-through subscription receipt. Each subscription receipt issued under the offering will be automatically exchanged into one unit of the resulting issuer and each flow-through subscription receipt issued under the offering will be automatically exchanged into one flow-through unit of the resulting issuer, in each case without further payment or action on the part of the holder upon satisfaction of certain escrow release conditions.

Lida and Continental Potash have entered into an engagement letter with Research Capital Corp., pursuant to which the agent has agreed to act as lead agent and sole bookrunner, on a best-effort basis. Upon closing of the proposed transaction, all subscription receipts and flow-through subscription receipts issued in connection with the offering will automatically convert without additional consideration or further action on behalf of the holder into units and flow-through units. Each unit will consist of one common share of the resulting issuer and one-half of one share purchase warrant, with a whole warrant exercisable to purchase one common share of the resulting issuer at an exercise price equal to 50 cents at any time up to 24 months from the date of issue. Each flow-through unit will consist of one common share of the resulting issuer and one-half of one warrant.

On closing of the offering, the gross proceeds of the offering shall be placed in escrow with a Canadian trust company or other entity acceptable to Lida, Continental Potash and the agent, to be held in escrow and released either: (i) to the resulting issuer (other than the agent fees, which shall be released to the agent) on satisfaction of the release conditions; or (ii) to the holders of the subscription receipts in the event the release conditions have not been met by Dec. 31, 2022, or if prior to such date Continental Potash advises the agent that it does not intend to satisfy the release conditions. In the latter case, the subscription receipts will be cancelled on the return of subscription funds to subscription receipt investors.

Continental Potash has agreed to pay a cash commission of 6 per cent and an advisory fee of 2 per cent of the gross proceeds of the offering to the agent on satisfaction of the release conditions. As additional consideration, the agent will be granted on the subscription receipt closing non-transferable compensation options and advisory options equal to an aggregate of 8 per cent of the number of subscription receipts issued under the offering. On completion of the transaction, each compensation option will be exchanged into a compensation option of the resulting issuer and will be exercisable into one unit at the subscription price for a period of 24 months following the date of satisfaction of the release conditions. The parties have also agreed to pay the agent a work fee of $25,000 (subject to satisfaction of the release conditions) and will pay certain expenses of the agent.

The resulting issuer intends to use the net proceeds from the offering to pay for expenses incurred in connection with the proposed transaction, to complete a work program on the property, and for working capital and general corporate purposes.

An aggregate of 2,769,155 common shares of Lida are currently issued and outstanding. Assuming the offering is fully subscribed (with no exercise of the overallotment option), upon completion of the proposed transaction, there will be 61,769,155 common shares issued and outstanding in the resulting issuer, of which former shareholders of Continental Potash, together with subscribers in the offering, will hold 59 million resulting issuer shares (95.52 per cent) and current shareholders of Lida will hold 2,769,155 resulting issuer shares (4.48 per cent).

In addition, Lida will assume all rights and obligations of Continental Potash under certain agreements that have been or will be entered into by Continental Potash prior to the closing date.

Completion of the proposed transaction is subject to a number of conditions, including, but not limited to, regulatory and shareholder approval. In addition, completion of the proposed transaction is subject to certain standard closing conditions, including the completion of due diligence investigations to the satisfaction of each of Lida and Continental Potash, execution of the definitive agreement, completion of the minimum offering, and there being no material adverse change in the business of Lida or Continental Potash prior to completion of the proposed transaction.

The parties also anticipate that, in conjunction with and upon closing of the proposed transaction, the board of directors of the resulting issuer shall be appointed by Continental Potash in consultation with Lida.

It is currently expected that trading in Lida's shares will remain halted pending receipt and review by the exchange of acceptable documentation regarding the resulting issuer following completion of the proposed transaction or upon termination of the letter of intent (or definitive agreement).

We seek Safe Harbor.

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