Vancouver, British Columbia--(Newsfile Corp. - February 10, 2022) - VAR Resources Corp. (TSXV: VAR) (the "Company") is pleased to announce that the Company has entered into an amalgamation agreement dated February 10, 2022 (the "Amalgamation Agreement") with VAR Resources (Newco) Corp., a wholly-owned subsidiary of Company ("NewCo") and Grounded Lithium Corp. ("Grounded"), a private arm's length company incorporated under the Business Corporations Act (Alberta) ("ABCA"), pursuant to which the Company will acquire all of the issued and outstanding securities of Grounded (the "Transaction"). In connection with the Transaction, Grounded is conducting a non-brokered private placement of up to $5,710,000 (the "Grounded Financing"), which, pursuant to the terms of the Amalgamation Agreement, shall include an investment by certain shareholders of the Company identified to Grounded equal to $1,800,000 (the "Grounded Investment").
The Transaction is subject to the approval of the TSX Venture Exchange (the "TSXV"), and is intended to constitute a reverse takeover (an "RTO") of the Company by Grounded as defined in TSXV Policy 5.2 - Change of Business and Reverse Takeovers. The combined company that will result from the completion of the Transaction (the "Resulting Issuer") will be renamed "Grounded Lithium Corp." or such other name as agreed to by the Company and Grounded. Subject to TSXV approval, the common shares of the Resulting Issuer will trade on the TSXV under a new trading symbol to be determined by the parties and the Resulting Issuer will continue to be listed on Tier 2 of the TSXV as a mineral exploration issuer.
Grounded Lithium Corp.
Grounded is a private lithium brine exploration and development company incorporated pursuant to the laws of Alberta. Grounded holds mineral leases over 70 sections of land in Saskatchewan, prospective for lithium opportunities. Grounded seeks to add to its opportunity base while in parallel, commence delineation operations of the lithium brine potential across its current mineral rights position.
Grounded was incorporated in October 2020 with the intent to participate in the energy transition shift, specifically targeting lithium resource development in Western Canada. To date, Grounded has been successful in acquiring land holdings both through government land sales in addition to contractual arrangements with certain freehold landowners. In total, Grounded has 18,904 gross hectares (17,841 net hectares) of land holdings. Grounded has not generated sales to date and does not anticipate commercial production of its lithium resources for several years. Grounded is well capitalized in conjunction with the Grounded Financing to execute on early stages of its business plan and remains debt-free.
The following list sets forth selected management prepared historical financial information of Grounded for the fiscal year ended December 31, 2021, and selected balance sheet data as of such date (management prepared draft, unaudited):
- Assets: $2,469,600
- Liabilities: $69,856
- Revenues: $nil
- Net profits (losses): $(314,920)
General Terms of the Transaction
Amalgamation
The Transaction will be effected by way of a three-cornered amalgamation, without court approval, under the ABCA, pursuant to which, following the acquisition of all the issued and outstanding securities of Grounded, NewCo and Grounded will amalgamate (the "Amalgamation") to form a new amalgamated entity ("AmalCo"), and AmalCo will be a wholly-owned subsidiary of the Company. At the time of the closing of the Transaction (the "Closing"):
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each of the common shares in the capital of Grounded (each, a "Grounded Share") will be cancelled and, in consideration for such Grounded Shares, each Grounded shareholder (collectively, the "Grounded Shareholders") will receive one (1) common share in the capital of the Company (each, a "Share") at a deemed price of $0.18 per Share for each one (1) Grounded Share held by such Grounded Shareholder;
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all of the holders of share purchase warrants of Grounded (each, a "Grounded Warrant") outstanding immediately prior to the Amalgamation shall receive, in exchange for their Grounded Warrants, an equal number of Share purchase warrants of the Company (each, a "VAR Replacement Warrant"), each on the same terms and conditions as such Grounded Warrants;
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the holder of share purchase warrants of Grounded issued in connection with the Grounded Financing (each, a "Grounded Finder Warrant") outstanding immediately prior to the Amalgamation shall receive, in exchange for the Grounded Finder Warrants, an equal number of Share purchase warrants of the Company (each, a "VAR Finder Replacement Warrant"), each on the same terms and conditions as such Grounded Finder Warrants; and
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each of the stock options of Grounded (each, a "Grounded Option") outstanding immediately prior to the Amalgamation shall receive, in exchange for their Grounded Options, an equal number of stock options of the Company (each, a "VAR Replacement Option"), each on the same terms and conditions as such Grounded Options.
In connection with the Transaction, the Company shall seek the approval of its shareholders (collectively, the "VAR Shareholders") for the continuance of the Company out of the Province of British Columbia and the provisions of the Business Corporations Act (British Columbia) and in to the Province of Alberta under the provisions of the ABCA (the "Continuation"). Immediately following the Closing, AmalCo will, subsequent to the Continuation, be wound up into the Company and the assets of AmalCo will be transferred to the Company by operation of law and the Company shall continue under the name "Grounded Lithium Corp."
The Transaction is an Arm's Length Transaction. In connection with the announcement of the Transaction, trading in the Shares has been halted and is expected to remain halted until the Closing.
Grounded Financing
In connection with the Transaction, Grounded has completed two tranches of the Grounded Financing. Collectively, Grounded has issued an aggregate of 21,722,221 Grounded Shares for gross proceeds of $3,909,999.78 under the Grounded Financing. As a condition to the Closing, certain shareholders of the Company will participate in the Grounded Financing in an amount equal to the Grounded Investment.
The anticipated use of proceeds from the Grounded Financing are to be used by the Resulting Issuer for exploration of its mineral properties and for general working capital purposes.
For more information on the Grounded Financing, see Grounded's news releases disseminated by Cision's Newswire Services on November 30, 2021, December 21, 2021, and February 10, 2022.
Voluntary Escrow
In addition to any resale restrictions applicable to the Shares issued in connection with the Transaction pursuant to the polices of the TSXV or applicable securities laws, 90% of the Shares issued to the Grounded Shareholders in exchange for their Grounded Shares and any Shares issued or to be issued upon the exercise of any VAR Finder Replacement Warrants (collectively, the "VAR Escrowed Shares") shall be subject to a voluntary escrow pursuant to the terms and conditions of the Amalgamation Agreement. Accordingly, the escrow provision requires the VAR Escrowed Shares to be locked up and released in accordance with the following schedule: 20% of the VAR Escrowed Shares on the date that is 6 months from the effective date of the Amalgamation (the "Effective Date"); 20% of the VAR Escrowed Shares on the date that is 12 months from the Effective Date; 25% of the VAR Escrowed Shares on the date that is 15 months from the Effective Date; and 25% of the VAR Escrowed Shares on the date that is 18 months from the Effective Date.
Change of Directors and Officers
Upon the completion of the Amalgamation and subject to prior acceptance by the TSXV, it is expected that each of the current directors of the Company will resign and there will be appointed in their place as directors of the Resulting Issuer individuals designated by each of the Company and Grounded, provided that a majority of the directors shall be designated by Grounded (the "Board Reconstitution"). In addition, each of the current officers of the Company is expected to resign and there will be appointed in their place as officers of the Company, such individuals as designated by Grounded (the "Management Reconstitution").
Additional information regarding the nominee directors and officers of the Resulting Issuer will be set out in a management information circular to be prepared by the parties in accordance with the policies of the TSXV as well as in a follow-up news release once determined.
Conditions to the Transaction
The Closing of the Transaction is subject to the satisfaction of various conditions standard for a transaction of this nature, including but not limited to:
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the Company and Grounded having had the reasonable opportunity to perform searches and other due diligence, and being satisfied with the results of such due diligence;
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the Company and Grounded obtaining all necessary consents, orders and regulatory approvals, including the conditional approval of the TSXV;
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the absence of any material adverse change in the business, affairs or operations of the Company or Grounded, as applicable;
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all outstanding Share purchase warrants of the Company, (each, a "VAR Warrant") on or before Closing, being 6,250,000 VAR Warrants with an exercise price of $0.14 per VAR Warrant, shall have been exercised;
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the completion of the Grounded Financing, with certain shareholders of the Company identified to Grounded participating in an amount equal to the Grounded Investment;
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the Company shall have relinquished its exclusive option to acquire a 100% undivided right, title, ownership and beneficial interest in and to the Hook Bay Property;
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each of the Board Reconstitution and the Management Reconstitution;
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approval of the Continuation by the VAR Shareholders, as required by applicable corporate law; and
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approval of the Transaction by the shareholders of the Company and Grounded, as required by applicable corporate law and the policies of the TSXV, as applicable.
In connection with the Transaction, Grounded has agreed to pay customary advisory fees to an eligible arm's length third party, including the issuance of 208,333 Grounded Shares at a deemed price of $0.18 per Grounded Share.
It is expected that, immediately prior to the Closing, there will be 38,327,447 Grounded Shares issued and outstanding (assuming completion of the Grounded Financing together with those subscriptions equal to the Grounded Investment) and, accordingly, an aggregate of 38,327,447 Shares (each, a "Consideration Share") are expected to be issued at a deemed price of $0.18 per Consideration Share. The Company intends to rely on Section 2.11 of National Instrument 45-106 - Prospectus Exemptions for an exemption from the prospectus requirements for the issuance of the Consideration Shares to the Grounded Shareholders, the VAR Replacement Warrants to the former Grounded Warrant holders and the grant of the VAR Replacement Options to the former Grounded Option holders.
Assuming the completion of the Transaction and that no convertible securities of the Company or Grounded are exercised prior to Closing other than the 6,250,000 VAR Warrants, a minimum of 56,872,750 common shares of the Resulting Issuer (each, a "Resulting Issuer Share") are expected to be issued and outstanding on the Closing, of which approximately 32.6% Resulting Issuer Shares will be held by the current VAR Shareholders, approximately 11.6% will be held by the former Grounded Shareholders, and 55.8% will be held by the subscribers under the Grounded Financing.
Sponsorship
Sponsorship of a RTO is required by the TSXV unless exempt or waived in accordance with TSXV policies. The Company intends to apply for a waiver from the sponsorship requirements. There is no assurance that the Company will be able to obtain such a waiver.
Additional Information
All information contained in this news release with respect to the Company and Grounded was supplied, for inclusion herein, by each respective party and each party and its directors and officers have relied on the other party for any information concerning such other party.
Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable, 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 Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this news release.
Contact Information
For further information on Grounded, contact:
Grounded Lithium Corp.
Gregg Smith
President & CEO
E: gregg.smith@groundedlithium.com
Greg Phaneuf
VP Finance & CFO
E: greg.phaneuf@groundedlithium.com
For further information on the Company, contact:
VAR Resources Corp.
Ron Schmitz
CFO, Corporate Secretary and Director
E: ron@asi-accounting.com
P: (604) 685-7450
Disclaimer for Forward-Looking Information
Certain statements in this news release are forward-looking statements, which reflect the expectations of management regarding the Company's completion of the Transaction and related transactions. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future, including but not limited to, the Company completing the Transaction, the completion of the Grounded Financing, statements regarding the prospective lithium opportunities of Grounded's mineral assets, the anticipated use of proceeds of the Grounded Financing, the conditions to be satisfied for completion of the Transaction, completion of the Continuation, the name and business carried on by the Resulting Issuer, the capitalization of the Resulting Issuer, the Board Reconstitution, the Management Reconstitution, the reliance on a prospectus exemption for the issuance of the Consideration Shares, and obtaining a waiver from the TSXV sponsorship requirements. Such statements are subject to assumptions, risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including risks related to factors beyond the control of the Company. The risks include the following: the requisite corporate and shareholders approvals of the directors and shareholders of the Company or Grounded, as applicable, may not be obtained; Grounded may be unable to close the Grounded Financing in full or in part; the TSXV may not approve the Transaction; that the parties may be unable to satisfy the closing conditions in accordance with the terms and conditions of the Amalgamation Agreement; and other risks that are customary to transactions of this nature. The novel strain of coronavirus, COVID-19, also continues to pose risks that are currently indescribable and immeasurable. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. The reader is cautioned not to place undue reliance of any forward-looking statements. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.
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