Mr. Stan Lis reports
CARBON FRIENDLY SOLUTIONS INC. ANNOUNCES ENTERING INTO LETTER OF INTENT WITH MICROCOAL INC, THE PROPOSED TRANSACTION AND FINANCING OF ITS PROJECTS
Carbon Friendly Solutions Inc. has entered into a letter of intent ("LOI") with MicroCoal Inc. MicroCoal is a clean-energy company focused on reducing greenhouse gas ("GHG") emissions in coal-fired plants by its patented clean coal technology to upgrade low-rank coals to match the energy levels of high quality coals for use by power utilities. The deployment of MCI's technology not only allows for significant savings for the utilities but also for the generation of substantial carbon credits in an industry that is one of the world's largest producers of emissions.
On Sept. 17, 2010, the company entered into a LOI with MicroCoal, whereby Carbon Friendly and MicroCoal intend to complete a purchase agreement (the "Definitive Agreement"), where CFS will acquire 100 per cent of the issued and outstanding securities of common stock of MicroCoal in exchange for common shares of CFS, on the terms and subject to the conditions set out in the definitive agreement to be entered into between the parties (the "Proposed Transaction").
The proposed transaction is subject to, among other conditions set out below, approval of the TSX Venture Exchange and completion of a concurrent brokered private placement of units of CFS in the minimum amount of $6-million (the "Concurrent Financing"). The concurrent financing will consist of a minimum of 17,142,857 CFS Units at a price per CFS Unit of 35 cents. Each unit will comprises one CFS share and one common share purchase warrant of CFS (a "CFS Warrant"), with each whole CFS warrant exercisable into an additional CFS share (a "CFS Warrant Share") for a period of two years from issuance at a price per CFS warrant share of 50 cents.
In addition to the Concurrent Financing, on or before the completion of the Proposed Transaction, CFS expects to complete a non-brokered private placement of approximately CAD$2-million in CFS Units (the "Non-Brokered Financing"). The Non-Brokered Financing will consist of approximately 5,714,285 CFS Units at a price per CFS Unit of CAD
.35. Each CFS Unit will comprise of one CFS Share and one CFS Warrant, with each whole CFS Warrant exercisable into a Warrant Share for a period of two years from issuance at a price per CFS Warrant Share of
.50.
The securities of CFS will be issued by way of private placement exemptions in Canada under National Instrument 45-106 - Prospectus and Registration Exemptions and in other jurisdictions where they can be issued on a private placement basis, exempt from any prospectus, registration or other similar requirements. All CFS securities issued in connection with the Proposed Transaction, the Concurrent Financing and the Non-Brokered Financing will be subject to a statutory hold period of four months plus one day from the date of issuance of such securities, in accordance with applicable securities legislation. Such securities may also be subject to Exchange escrow restrictions.
Trading in CFS's Shares have been halted pending a determination as to whether the Proposed Transaction is a Change of Business under the policies of the Exchange.
Proposed Transaction
The Proposed Transaction will involve an exchange of CFS Shares for 1,411 MicroCoal Shares (the "Vendors' Shares") that will be outstanding at closing of the Transaction. As consideration for the Vendors' Shares, CFS will issue to the Vendors $3-million (U.S.) worth of CFS Shares at a deemed price per share of 35 cents.
MicroCoal has agreed to be free of all liabilities, liens, charges, restrictions or encumbrances at Closing, which MicroCoal intends to achieve by settling shareholder and other indebtedness with a cash payment of $1,085,000 (U.S.) (the "Debt Repayment") and the cancellation of certain MicroCoal Shares (the "Share Cancellation"). As part of the purchase consideration, CFS has agreed to make cash payment in the amount of the Debt Repayment at Closing.
The closing of the proposed transaction, following the conclusion of satisfactory due diligence investigations and negotiations between the parties will be no later than Dec. 31, 2010, or on such other date as agreed to in writing by the Parties prior to Closing. The Proposed Transaction is subject to Exchange approval, the approval of by both parties and the following conditions:
- The execution of the Definitive Agreement, which will contain representations and warranties customary to transactions of this type, on or before Oct. 1, 2010;
- completion of the Concurrent Financing by the Closing Date or the mutually agreed upon Extension;
- obtaining all requisite regulatory, administrative, governmental, shareholder or third party authorizations and consents, including approval of the Exchange;
- absence of a material adverse change in the condition (financial or otherwise) of MicroCoal and CFS;
- absence of pending or threatened litigation, claims, investigations or other matters affecting the Definitive Agreement;
- physical inspection by a representative of CFS and an independent third party assessment of MicroCoal's properties and operations;
- independent valuation as may be required by any regulatory authority;
- review by MicroCoal of the financial statements and budgets of CFS as well as any due diligence activity that MicroCoal deems is necessary;
- completion of the Debt Repayment and the Share Cancellation; and
- receipt by CFS of general releases from certain shareholders and creditors.
The LOI will terminate upon mutual agreement or the failure by the parties to execute and deliver the Definitive Agreement on or before October 1, 2010 or to complete the Concurrent Financing within 90 days of the date of the Definitive Agreement, subject to the Extension.
Pursuant to the LOI, MicroCoal has agreed to terminate any existing discussions or negotiations with, and shall cease to provide information to or otherwise cooperate with, any party other than CFS with respect to the Proposed Transaction. In addition, until the termination of the LOI, MicroCoal, and its representatives, will not encourage, solicit, initiate, have or continue any discussions or negotiations with or participate in any discussions or negotiations with or provide any information to or otherwise cooperate in any other way with, any other person concerning any merger, joint venture, recapitalization, reorganization, sale of substantial assets, investment or similar transaction involving MicroCoal or any subsidiary or division of MicroCoal.
The Financings
Pursuant to the Concurrent Financing and the Non-Brokered Financing (the "Financings"), CFS expects to issue up to a maximum of 22,857,143 CFS Units at a price per CFS Unit of CAD
.35. Each Unit will be comprised of one CFS Share and one CFS Warrant, with each whole CFS Warrant exercisable into a CFS Warrant Share for a period of two years from issuance at a price per CFS Warrant Share of 50 cents (Canadian).
The Financings are subject to a number of conditions, including receipt of all necessary corporate and regulatory approvals, including Exchange approval, as well as the negotiation and execution of certain documentation, including an agency agreement for the brokered portion of the Financings. A finder's fee will be paid in connection with the Financings, in accordance with the policies of the Exchange.
The net proceeds anticipated from the Financings (up to approximately CAD$7,200,000) will be utilized, in part: (a) to provide for the anticipated costs (legal, accounting, sponsorship and regulatory) associated with the proposed transaction of approximately $250,000 (Canadian); (b) to provide for debt repayment of $1,085,000 (U.S.) (approximately CAD$1,120,480); (c) to provide for MicroCoal's minimum required development costs during the next 18 months from Closing of approximately US$2,000,000 (approximately CAD$2,065,400); (d) to provide for general working capital and new corporate development costs of CFS of approximately US$500,000 for the 12 months from closing (approximately CAD$516,350); and (e) approximately CAD$3,247,770 will be utilized by CFS for ongoing working capital and the development of existing company business
TSX Venture Exchange Approval
The roposed Transaction is subject to Exchange approval as a reviewable acquisition by CFS. CFS does not believe that shareholder approval of the proposed transaction or a sponsor is required since the proposed transaction will not result in the creation of a new control person (as defined in the policies of the Exchange), no securities of CFS will be issued to a non-arm's length party (as defined in the policies of the Exchange) as part of the proposed transaction, and the proposed transaction does not constitute a change of business (as defined in the policies of the Exchange).
We seek Safe Harbor.