TORONTO, Oct 02, 2020 (GLOBE NEWSWIRE) – Crystal Peak Minerals Inc. (Crystal peak or the Society) (TSXV: CPM, OTCQB: CPMMF) today provided an update on the Company’s financial condition.
As reported in Crystal Peak’s September 9, 2020 press release, the company’s cash balance fell below $ 500,000, putting Crystal Peak in violation of the minimum cash balance commitment included in the agreement. on convertible notes (To lend) with EMR Capital Investment (No. 5B) Pte. Ltd., an affiliate of EMR Capital Resources Fund 1, LP (DME). The Company has failed to raise additional funds or sell assets to remedy the breach of commitment or repay the loan. Therefore, EMR has informed the Company that it will enforce its collateral provision under the Loan and intends to seize the Company shares of its wholly owned subsidiary, Peak Minerals Inc. (Advanced minerals) in accordance with his rights.
In an attempt to preserve value for minority shareholders, the board of directors of Crystal Peak (Advice) negotiated a restructuring agreement with EMR in order to fully meet the obligations arising from the Loan (the Restructure). As part of this restructuring, EMR will acquire 100% of the shares of Peak Minerals, the operating subsidiary of Crystal Peak which owns the Sevier Playa project. The Company expects that unless there is a valid objection to the DME lockout, it will take effect in approximately 15 days.
EMR will also sell 120.0 million shares it owns in the Company, reducing its stake from approximately 61% to 36%. The restructuring will increase the percentage of ownership of the remaining shareholders and improve the free float of the shares. In addition, two of EMR’s board nominees, Roderick Lyle and Donald Carroll, will resign from the board upon execution. The main terms of the restructuring are described in the table below.
The Company believes that the restructuring will result in the assumption of responsibilities by EMR and that it will preserve value for existing shareholders who may not otherwise be available through other restructuring avenues. The Board considers that the Restructuring is in the best interests of all shareholders since it allows the Listed Company to pursue a strategy of acquiring a new project. In addition, Board members have not received quarterly compensation for seven quarters and have agreed to waive such fees.
The Board will begin a process to identify and secure a new project. The current focus will be on the gold and base metals sectors given the renewed optimism in the market and the large number of projects commercialized. EMR has confirmed its intention to continue supporting the Company with its strong network of potential projects across North and South America.
Restructuring – Key Tuh
|Voluntary foreclosure||EMR will issue a notice of intention to enforce a security under section 244 of the Bankruptcy and Insolvency Act (Canada and a notice of acceptance of security under the Personal Property Security Act (Ontario) by advising that it intends to accept the shares of Peak Minerals in full satisfaction of the loan.
After the completion of the voluntary foreclosure,
The jurisdiction for voluntary foreclosure will be Ontario.
|Shell Company and Share Abandon||Following the voluntary foreclosure, the company will continue to be a TSX Venture Exchange listed shell company.
EMR will sell 120.0 million shares of the Company’s capital, which will reduce the number of issued and outstanding shares to approximately 178.2 million, of which approximately 63.3 million will belong to EMR (approximately 36% of the shares in circulation).
|Nominated to EMR’s Board of Directors||Following the application, EMR board nominees Roderick Lyle and Donald Carroll will resign from the board so that only Robert Curtis will be appointed to the EMR board.|
|Hourly||EMR will immediately begin the voluntary foreclosure process and, in the absence of a valid objection, the foreclosure is expected to take effect on or around October 17, 2020.|
The conclusion of the restructuring agreement with EMR constitutes a “related party transaction” as that term is defined in multilateral instrument 61-101 – Protection of holders of minority securities in special transactions (MI 61-101). The shares of Peak Minerals that EMR will acquire as a result of the restructuring exceed 25% of the market capitalization of the company and, therefore, the restructuring requires shareholder approval under NI 61-101. However, if the Company had not entered into the restructuring agreement, EMR could still assert its rights under the loan agreement and enforce its securities to take the shares of Peak Mineral. The Company believes that it was important to enter into the restructuring agreement to clearly state the conditions under which the loan obligations will be fully and definitively satisfied and, in return, to arrange for EMR to agree to cede 120 000,000 common shares of the Company and allow the Company to move forward as a front company to complete another transaction.
Therefore, the Company relies on the “Financial Hardship Exemption” set out in paragraphs 5.5 (g) and 5.7 (1) (e) of NI 61-101 of the Minority Approval Requirements because the Company is aware of serious financial difficulties. The Board of Directors of the Company and at least two-thirds of its independent directors have determined that: (i) the Company is in serious financial difficulty and, therefore, is unable to pay the loan, which EMR was not unwilling to convert given the loan’s conversion price is out of the money; (ii) the Restructuring is designed to improve the financial position of the Company as it will provide the Company with release from its obligations under the Loan and allow the Company to move forward with cash on hand to find a other transaction for shareholders; and (iii) the terms of the transaction are reasonable in the circumstances, given that without the restructuring agreement EMR would have been entitled to all of the Company’s cash balances and assets and would not have been obligated to cede any ordinary actions.
MM. Curtis, Carroll and Lyle, who are directors of the Company, disclosed their interest in the loan and the restructuring agreement and abstained from voting on the board resolutions approving the restructuring agreement due to the fact that they were EMR’s non-independent candidates for the Board. This press release and the corresponding material change report, including details of the related party transaction, have been and will be filed less than 21 days prior to the announcement of the restructuring agreement. The Company considers this period to be reasonable in the circumstances in order to be able to avail itself of the restructuring agreement in light of its default under the loan in a prompt manner and no other financing opportunity or alternative transaction being available to the Company.
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Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This press release contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes, without limitation, the breach of the minimum cash balance restrictive covenant in the convertible note with EMR Capital; the effectiveness of voluntary foreclosure and restructuring; and the future activities of Crystal Peak. Generally, forward-looking information can be identified by the use of forward-looking terms such as “plans”, “is expected”, “expects” or “does not expect”, “budget”, “planned” , “Estimates”, “anticipates”, “intends”, “anticipates” or “does not anticipate”, “believes”, or variations of these words and expressions; or words stating that certain actions, events or results “may”, “could”, “would”, “could”, or “will be taken”, “could occur” or “be achieved”. Forward-looking information is based on the opinions and estimates of management as of the date the information is made, and is based on a number of assumptions and is subject to known and unknown risks, uncertainties and risks. ‘other factors, including, but not limited to, the inability to meet the convertible note commitment with EMR, which could result in the loss of the Company’s interest in the Sevier Playa project. Although Crystal Peak has attempted to identify important factors which could cause actual results to differ materially from those contained in forward-looking information, other factors may cause results not to be as anticipated, estimated or planned. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Therefore, readers should not place undue reliance on forward-looking information. Crystal Peak does not undertake to update forward-looking information except in accordance with applicable securities laws.