The acquisition described is expressed as an intent .. and an expection, to wit: (bold emphasis is my own)
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The Asset Acquisition
Pursuant to the terms of a letter of intent dated effective May 17, 2016 entered into between the Corporation and Kasten Energy Inc. ("Kasten"), the Corporation and Kasten expect to enter into an asset acquisition agreement, pursuant to which the Corporation will acquire all of Kasten's interests on the lands of the Cold Lake First Nations (the "Asset Acquisition") for the aggregate purchase price of $17,490,000 (the "Purchase Price"). The Purchase Price shall be payable as follows: (i) by the issuance of 70,000,000 Common Shares at a deemed price of $0.157 per share; (ii) $3,500,000 in cash at closing (the “Cash Consideration”); and (iii) by the issuance by the Corporation of a secured debenture of the Corporation in favour of Kasten in the amount of $3,000,000. Subject to certain conditions, the secured debenture may be convertible into Common Shares at the option of Kasten or at the option of the Corporation.
The TSXV requires that the Corporation seek approval with respect to the creation of a new Control Person from a simple majority of the votes cast by Shareholders, excluding the votes attaching to Common Shares beneficially owned by the proposed Control Person, its affiliates, associates and joint actors (collectively, "Disinterested Shareholders"). Kasten, the proposed Control Person, its affiliates, associates or joint actors beneficially own an aggregate of 1,029,083 Common Shares. Under the policies of the TSXV, a "Control Person" includes any person that holds or is one of a combination of persons that holds more than 20% of the outstanding voting common shares of an issuer except where there is evidence showing that the holder of those securities does not materially affect the control of the issuer. Upon the completion of the Asset Acquisition, Kasten will hold approximately 70,000,000 Common Shares, or approximately 46.8% of the outstanding Common Shares, which will be over 20% of the issued and outstanding Common Shares and as such will result in the creation of a new Control Person of the Corporation.
Pursuant to the letter of intent, over the next few months the Corporation intends to complete a best efforts private placement of Common Shares issued on a "flow-through" basis pursuant to the Income Tax Act (Canada). Should the Corporation complete the private placement for aggregate gross proceeds of $2 million at a price per share equal to the Asset Acquisition price, the Corporation expects that the number of shares then held by Kasten will constitute approximately 43% of the issued and outstanding Common Shares.
The closing of the private placement is not a condition to the closing of the Asset Acquisition. Kasten is a private oil and gas exploration and development company continued under the laws of Alberta with its head office in Calgary, Alberta. Kasten operates domestically in the east central region of Alberta, principally in the Cold Lake area. Kasten is focused on advancing its joint ventures with the Cold Lake First Nations, which already involve significant land holdings.
Al Kroontje, a director of the Corporation, owns approximately 9.9% of the outstanding shares of Kasten. DAC Financial Group (1997) Inc., a company controlled by Mr. Kroontje, has loaned Kasten approximately $4.5 million. A portion of the Cash Consideration payable as part of the Purchase Price will be used to reduce this loan (together with a portion of the secured debenture, when it is repaid upon maturity). Kelly Kimbley, a proposed director nominee of PetroFrontier, is the President and a director of Kasten. First "M" Investments Ltd., an Alberta corporation wholly-owned by Roland O. Mullen, owns approximately 25.79% of the outstanding shares of Kasten.
Mr. Iverach and Mr. Cheung have each provided verbal confirmation to the Corporation that they each intend to vote their respective Common Shares, representing an aggregate of 17,185,968 Common Shares in favor of the Control Person Resolution (as defined below) representing an aggregate of 21.9% of the issued and outstanding Common Shares held by Disinterested Shareholders. 11
Prior to closing the Asset Acquisition, the Corporation will provide further information about, among other things, the Asset Acquisition, the Assets, Kasten and the Corporation, (assuming completion of the Asset Acquisition), in a Filing Statement, which will be filed and made available on SEDAR under the Corporation’s corporate profile at www. sedar.com. The Corporation will issue a news release at the time that the Filing Statement is filed on SEDAR.