Vancouver, British Columbia--(Newsfile Corp. - October 17, 2014) - Palo Duro Energy Inc. (TSXV: PDE.H) (NEX: PDE.H) ("Palo Duro" or the "Resulting Issuer") is pleased to announce that it has entered into a definitive agreement (the "Agreement") dated October 15, 2014 with CarbonOne Technologies Inc. ("CarbonOne") that sets out the terms of a proposed share exchange between Palo Duro and CarbonOne (the "Share Exchange"). Pursuant to the Share Exchange, Palo Duro will acquire all of the issued and outstanding common shares of CarbonOne and CarbonOne will become a wholly-owned subsidiary of Palo Duro. Pursuant to TSX Venture Exchange ("TSX-V") policies, the Share Exchange and related transactions (collectively, the "Transaction") will constitute a reverse takeover of Palo Duro by CarbonOne. Upon completion of the Transaction, Palo Duro will change its name to CarbonOne Technologies Inc. and CarbonOne will change its name prior to the completion of the Transaction. Palo Duro and CarbonOne are at arm's length to each other.
CarbonOne holds exclusive worldwide licenses for a suite of intellectual property with developments in resin, furnace, and milling technologies to cost-effectively produce carbon ceramic composite materials that replace wood, metal, concrete and plastic.
Trading in the common shares of Palo Duro was halted on September 18, 2014, and will remain halted until such time as permission to resume trading has been obtained from the TSX-V.
Summary of the Transaction
Share Exchange
Pursuant to the Agreement, Palo Duro will acquire all of the issued and outstanding common shares of CarbonOne by issuing to the shareholders of CarbonOne one new common share of Palo Duro for each common share of CarbonOne held by such shareholders.
All outstanding stock options of Palo Duro will remain unchanged. Without giving effect to the Private Placement and the Finder's Fee described below, it is anticipated that Palo Duro will have 121,718,347 common shares issued and outstanding of which 32,218,347 will be held by existing shareholders of Palo Duro and of which 89,500,000 will be held by former shareholders of CarbonOne upon completion of the Transaction.
Private Placement
Pursuant to the Agreement, Palo Duro has agreed to use reasonable commercial efforts to complete a non-brokered private placement for gross proceeds of up to $2,000,000 prior to closing of the Transaction ("Private Placement"). The Private Placement is currently being priced.
Reconstitution of Board of Resulting Issuer
On closing of the Transaction, the board of directors of the Resulting Issuer is expected to be composed of Jack Khorchidian, John Proust, Neil Maedel, Mahlon Dennis, Fred Deans and Murray Flanigan (see Proposed Board of Directors and Management).
In addition, upon closing of the Transaction the Resulting Issuer will create and appoint a strategic advisory committee, expected to be composed of Jeffrey Taylor, Benjamin Dorfman, Alan Everett, Mary Wetzel and Marc LaCounte (see Proposed Board of Strategic Advisors).
Finder's Fee
Upon completion of the Transaction, Palo Duro has agreed to pay a finder's fee of 500,000 common shares of Palo Duro (the "Finder's Fee").
Resale Restrictions
Upon completion of the Transaction, common shares of the Resulting Issuer held by individuals or entities who are principals of the Resulting Issuer will be placed in escrow pursuant to the policies of the TSX-V, under the terms of a Tier 2 Surplus Security Escrow Agreement. Common shares of the Resulting Issuer issued pursuant to the Share Exchange to shareholders of CarbonOne who are not principals of the Resulting Issuer will be subject to the TSX-V's Seed Share Resale Restrictions. In addition, 79,500,000 common shares of the Resulting Issuer that are issued pursuant to the Share Exchange to shareholders of CarbonOne will be subject to additional voluntary pooling restrictions with release terms more restrictive than, and which will run concurrently with, those imposed by the Tier 2 Surplus Security Escrow Agreement or the Seed Share Resale Restrictions. Details of the voluntary pooling restrictions will be set out in the Filing Statement referred to below.
Conditions to Closing
Closing of the Transaction is subject to various conditions, including obtaining the approval of the shareholders of Palo Duro, completing the Private Placement and obtaining all required regulatory and stock exchange approvals.
Capital Resources Upon Completion of Transaction
After completing the Loan (described below), Palo Duro had approximately $800,000 (unaudited) in cash as at September 30, 2014. CarbonOne had approximately $484,100 (unaudited) in cash as at October 15, 2014. On closing of the Transaction, Palo Duro's remaining cash will be combined with net proceeds from the Private Placement and CarbonOne's remaining cash.
Filing Statement
A filing statement in respect of the Transaction will be prepared, sent to Palo Duro shareholders and filed on SEDAR at www.SEDAR.com in accordance with TSX-V policies. A press release will be issued by Palo Duro once the filing statement has been filed on SEDAR.
Sponsorship
Palo Duro has retained Salman Partners Inc. ("Salman Partners") to act as sponsor for the Transaction. Salman Partners expects to submit a Sponsorship Acknowledgment Form to the TSX-V in due course.
Loan
Upon execution of the Definitive Agreement, Palo Duro advanced a $500,000 non interest bearing secured loan to CarbonOne (the "Loan"). If the Transaction has not closed by March 30, 2015, CarbonOne will be obligated to repay the Loan to Palo Duro within 12 months of such date.
Information on CarbonOne Technologies Inc.
CarbonOne is a vertically integrated carbon company with exclusive worldwide licenses for a suite of intellectual property with developments in resin, furnace, and milling technologies to cost-effectively produce carbon ceramic composite materials that replace wood, metal, concrete and plastic. CarbonOne intends to use its advanced technology and manufacturing processes to supply low-cost, high-performance carbon ceramic composite materials for industrial and structural applications. The company believes its intellectual property and technologies will allow it to create higher-quality products, at a lower cost than its competitors. CarbonOne aims to become a trusted supplier in the emerging industry of applied carbon composite materials, initially focusing on the RV, container, industrial pallets and pre-engineered building materials sectors. Additionally, CarbonOne plans to become a low-cost supplier of activated carbon. CarbonOne has established industry joint venture partners to reduce capital, operating and staffing requirements and to accelerate growth. CarbonOne has also established a manufacturing facility in Buffalo, NY.
CarbonOne is currently preparing audited consolidated financial statements to be included in the Filing Statement.
Information on Palo Duro Energy Inc.
Palo Duro is a company incorporated pursuant to the Alberta Business Corporations Act whose common shares are listed on the NEX under the symbol "PDE.H". Palo Duro's principal business activities to date have been the acquisition of rights to explore for oil and gas interests. Palo Duro previously held oil and gas interests in the United States; however, its rights in these interests have expired. Consequently, Palo Duro is currently seeking new business opportunities.
The latest financial information for Palo Duro is its financial statements for the period ended June 30, 2014, which can be found on SEDAR.
Proposed Board of Directors and Management
The following are brief biographies of the proposed directors and officers upon completion of the Transaction.
John Proust, Interim Chief Executive Officer and Director
Mr. Proust is the founder and principal shareholder of numerous public and private companies. He has managed, directed and advised public and private companies regarding debt and equity financing, mergers and acquisitions, and corporate restructuring since 1986. Mr. Proust has held senior positions and served on the boards of numerous private and TSX-V/CSE listed companies. He is currently Chairman and CEO of Southern Arc Minerals Inc., CEO and a director of New Zealand Energy Corp., Chairman and Interim CEO of Eagle Hill Exploration Corporation, Chairman and a director of Canada Energy Partners Inc., a director of Outrider Energy Corp., and a director of American Potash Corp. Mr. Proust received the designation of Chartered Director (C.Dir) from McMaster University, Directors College, Michael G. DeGroote School of Business.
Jack Khorchidian, Chief Operating Officer and Chairman
Mr. Khorchidian was the President of CoveCap Consulting, a venture capital company. Previously he was the Chief Technology Officer for Printlux.com, where he was involved in the company's public listing in 2001 and was responsible for a development program for online print ordering systems. The company's activities grew to cover Asia, Europe and North America as it developed tools that enabled the global marketing and sale of complex print products.
Steve Rohring, Chief Technology Officer
Mr. Rohring is the Former Vice President of Nuclear Alloys Corporation, which manufactured steam turbine components for the U.S. Naval nuclear fuel industry. He founded Apex Technologies, a developer of high volume material processing technologies for the automotive, food and other industries. He also founded Ceramic Matrix Composites and Composite Systems Technologies, where he developed low-cost nano materials and invented composite and oxide and non-oxide ceramic technologies. He is the President of United Materials International, LLC ("UMI"), based in Buffalo, NY, which has granted worldwide licenses to CarbonOne. He has co-authored research papers on ultra-high pressure with Dr. Benjamin Dorfman, a proposed advisor to the Resulting Issuer and the founder of UMI.
Danny Lee, Chief Financial Officer
Mr. Lee is a Chartered Accountant with more than 20 years of experience, including eight years as a Chief Financial Officer. Mr. Lee's experience includes financial reporting for both Canadian and US listed companies with international subsidiaries, strategic planning, tax planning, corporate governance, equity financings and due diligence for acquisitions. As an employee of J Proust & Associates, an organization providing public company management and venture capital to start-up and junior companies, Mr. Lee holds the position of Chief Financial Officer for Southern Arc Minerals Inc., Eagle Hill Exploration Corporation and Canada Energy Partners Inc. Mr. Lee is also a director of Edgewater Exploration Ltd., a TSX-V listed company. Mr. Lee has a Bachelor of Commerce degree from the University of British Columbia and articled with Deloitte & Touche.
William Hill, Vice President, Production and Engineering
Mr. Hill was the Lead Manufacturing Engineer for Assembly Systems for General Motor's World Engine Program. He collaborated with European engineers at Opel and Lotus to design a world-class engine produced at competitive cost. Mr. Hill formed alliances with Global Manufacturers to design and build a state-of-the-art, TS16949 (based on the ISO 9001 Standard) quality certified engine assembly system that was replicated at two additional sites. In 2001 he became the Director of Operations for Saint-Gobain Advanced Ceramics' Boron Nitride facility in Amherst, NY where he planned and completed a $7 million plant expansion project while simultaneously running and producing product to serve eight distinct market segments. His education includes an MBA from the State University of New York at Buffalo and a BSc in Industrial Administration from Kettering University in Flint, Michigan (Formerly General Motors Institute).
Neil Maedel, Director
Mr. Maedel's focus is the finance and development of micro-cap companies. He founded Zurich, Switzerland based Protrader Finanz AG and the Minicap Analyst publication. More recently, as Director of Business Development for Manas Petroleum, Mr. Maedel was part of the team that assembled a global exploration portfolio that led to farm-outs in excess of $250 million. He was also Chairman and CEO of Pan American Goldfields, leading its restructuring prior to the company's takeover by a Hong Kong based investment group. Mr. Maedel is currently a director of Indoterra Resources Corp., a private Canadian company developing mineral properties in Indonesia.
Mahlon Dennis, Director
Dr. Dennis has experience in the development and commercialization of advanced materials. During the 1970s he led the team at General Electric that developed its worldwide business for polycrystalline diamond compacts ("PCD"), a new synthetic diamond coated insert to be used in diamond drill bits. In the early 1980s he founded The Strata Bit Corporation, which in 1985 was sold to Sandvik, a global industrial company focused on materials technologies. In 1988 he founded the Dennis Tool Company which developed advanced super abrasive materials, including diamond PCD and cubic BN for fixed cutter bits, and microwave sintered carbide inserts and diamond carbide composite wear components. Dennis Tool was sold to Logan International in 2011.
Dr. Dennis continues to develop and commercialize technologies incorporating advanced materials with new processes. Dr. Dennis received his PhD in Ceramics Science at Penn State University in 1969. In 2007 he received the David Ford McFarland Award of the Department of Material Sciences at Penn State University. In April 2014 he received the Penn State MATSE Alumnus of the Year Award.
Fred Deans, Director
Mr. Deans has extensive experience in product evaluation, processing, production, and product engineering, and in coordinating new product introductions. He was a Production Engineer for PPG Industries and an Application Development Engineer for GE Plastic's AZDEL Division, where he developed thermoplastic composite materials for automotive, material handling, and infrastructure applications. Mr. Deans is credited with engineering the development of an automotive glass-forming process that introduced monolithic tempered privacy glass for sport-utility vehicles; developing the first unidirectional GMT composites for new-generation automotive bumper systems; and managing a next-generation long-fiber thermoplastic composite development for under-hood and off-road vehicle load floors. He is currently a director of the Society of Plastics Engineers' ("SPE") Automotive and Composites Divisions, past chair of the SPE Automotive Composites Conference & Exhibition, and an SPE Honored Service Member. Mr. Deans is the owner of Allied Composite Technologies where he provides consulting and application engineering development for composite-based companies and end users. Mr. Deans holds an MBA degree from University of Pittsburgh and a BSME from Valparaiso University, and is a Registered Professional Engineer.
Murray Flanigan, Director
Mr. Flanigan is a management consultant providing financial advisory services to a number of public and private oil and gas and technology companies in North America and abroad. Mr. Flanigan is a Chartered Accountant and a Chartered Financial Analyst with expertise in corporate finance, mergers and acquisitions, international taxation, risk management, banking, corporate restructuring and accounting, and has served as Chief Financial Officer for various public companies. Prior to founding his own consulting company, Mr. Flanigan served as Senior Vice President, Corporate Development and CFO of Qwest Investment Management Corp. where he was responsible for regulatory reporting and corporate filings for over 15 private and publicly listed companies and limited partnerships in Qwest's portfolio, as well as arranging and closing numerous equity and debt financings. Mr. Flanigan also served as VP of Corporate Development for Adelphia Communications Corporation, overseeing the company's financial restructuring and ultimate sale to Time Warner Inc. and Comcast Corporation for approximately US$18 billion.
Proposed Board of Strategic Advisors
The following are brief biographies of the proposed board of strategic advisors upon completion of the Transaction.
Jeffrey Taylor
Mr. Taylor is an entrepreneur and business development executive with over 25 years of public and private corporate experience in a range of industries. Mr. Taylor served on the executive management teams and board of directors of several public and private corporations including Ultra Petroleum Corporation, Onshore Energy Partners, BakBone Software Inc. (acquired by Quest Software). He was also Founder and Chairman of Pennaco Energy, which was acquired only three years after its inception by USX Marathon Group for approximately $500 million. Until December 2012, Mr. Taylor was a founding owner and served on the board of directors of Philadelphia Financial Group ("PFG"), a leader in U.S. strategic insurance. PFG evolved from a startup with neither assets nor clients to a major life insurance company consisting of over 70,000 clients with approximately $42.0 billion under management and administration. Mr. Taylor holds a Bachelor of Science degree with an emphasis in Entrepreneurial Studies from the University of Southern California, and earned his M.B.A. from the University of San Diego.
Benjamin Dorfman
Dr. Dorfman is the founder of Buffalo, NY based United Materials International, LLC, which has licensed technology to CarbonOne Technologies. Dr. Dorfman is an expert in advanced materials, including synthesis and characterization of metals, semiconductors, dielectrics, nano- and atomic-scale composites; solid-state physics, physical chemistry, thin solid films and surface engineering; material and solid-state micro and nanotechnology; and quantitative strategic technical forecasting. He is a retired Research Professor of Clarkson University in the Physics Department and is the Chief Scientist, Founder and Chairman of Atomic-Scale Design. Under his guidance, ultra-light-weight hard quasiamorphous carbon ("QUASAM") was discovered using newly developed synergetic thermal-impact activated synthesis of solids. He holds numerous U.S. patents including patents for QUASAM materials and surface nano engineering. He established a full-scale DLN technology with Brookhaven National Laboratory and was the head of Thin Solid Films Laboratory, Moltech Corp., at Stony Brook University and Brookhaven National Labs. He accomplished the first demonstration of stabilized diamond-like carbon film deposition in the USA and has published over 200 scientific articles and 10 books. Dr. Dorfman holds 30 Russian patents and 16 U.S. patents, with additional patents pending. He has a Ph.D. in Thin Solid Films Physics and Physical Chemistry from the Moscow Institute of Electronic Controlling Machines, and also earned the degree of Dr. of Sciences.
Alan Everett
Mr. Everett is a United Materials International, LLC partner and the founder and president of Buffalo, NY based EverFab Inc., a hi-tech manufacturer whose focus includes ceramics, super alloys, precision 3D modelling and prototype fabrication. In 2006 EverFab received the Group Achievement Award from the National Aeronautics and Space Administration for its contribution to studies that were performed as an integral part of the Return to Flight activities following the accident that occurred during the re-entry of the Space Shuttle Columbia. In the Award, NASA noted that "EverFab's fully Digital Manufacturing Environment opened up an entirely new quality of information for the manufacturing and design for the engineers of NASA including significant time and money savings as inspection and approval can be completed in hours instead of weeks, enabling a much faster product development cycle." EverFab's clients include NASA and the US military.
Mary Wetzel
Ms. Wetzel is the President and co-founder of TekModo Structures LLC, an Indiana based RV supplier that leads the industry in composite technologies. TekModo Structures currently supplies composite products to companies such as Thor Industries, Forest River, and Jayco in its goal to displace traditional products, such as plywood, currently in use today. Ms. Wetzel has an extensive operational, financial, marketing, and technical background. Her knowledge in composites stems from her experience in the automotive industry, where she held increasingly strategic leadership roles with Pontiac, Chrysler and Dodge, including as DaimlerChrysler's Senior Manager for Business Management and Market Intelligence. Ms. Wetzel and her business partner, Marc LaCounte, were also managing directors of Group Impact, an advanced polymer material science and complex thermoplastic material development company. Ms. Wetzel was inducted into the Automotive Hall of Fame in 2004, receiving the Young Leadership and Excellence Award in recognition of her significant contributions to the automotive industry. Ms. Wetzel holds a degree in Business Management and Automotive Marketing from Northwood University.
Marc LaCounte
Mr. LaCounte has extensive experience in developing and marketing new technologies. He is the co-founder and the Head of Business Development for TekModo LLC. He was the Senior Business Unit Manager of Specialty Markets for Webasto Thermosystems, a wholly-owned division of Webasto, one of the world's largest automotive industry suppliers. At Webasto, he was responsible for the strategy, product development, and commercial conversion of new technologies, where he managed all aspects of the military, industrial/commercial, marine, cargo, and RV market groups. He is credited with introducing a revolutionary cargo heating system to the market from concept through to global distribution. Mr. LaCounte was the Senior Business Unit Manager for Hoff and Associates Company, which supplies advanced computer-aided engineering and design services. Mr. LaCounte was also a managing director of Group Impact, an advanced polymer material science and complex rehologic thermoplastic material development company.
PALO DURO ENERGY INC.
Per: "Kurt Bordian"
President and CEO
For further information about Palo Duro please contact:
Investor Relations: 778-373-3740
Email: info@paloduro.ca
For further information about CarbonOne, please contact:
John Proust
Interim CEO and Director
CarbonOne Technologies Inc.
604-424-8261
Completion of the transaction is subject to a number of conditions, including Exchange acceptance and Shareholder approval. 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 Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of Palo Duro should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release .
This news release contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively "forward-looking statements"). Completion of the Transaction is subject to a number of conditions, including Exchange acceptance and shareholder approval. The Transaction cannot close until all required approvals have been 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 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 Palo Duro should be considered highly speculative. Salman Partners Inc., subject to completion of satisfactory due diligence, has agreed to act as sponsor to Palo Duro in connection with the Transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Transaction or the likelihood of completion of the Transaction.
Palo Duro and CarbonOne caution the reader that there is no guarantee that any of the potential outcomes from the Agreement will actually occur or be finalized. Certain information contained herein constitutes "forward-looking information" under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to: the completion of the Share Exchange; the completion of the Transaction; the name of the Resulting Issuer and CarbonOne; the common shares of the Resulting Issuer that are to be received by shareholders of CarbonOne; the Palo Duro stock options remaining unchanged; the issued and outstanding common shares of the Resulting Issuer; the financial position of the Resulting Issuer upon closing of the Transaction; the composition of the board and strategic advisory committee of the Resulting Issuer; the escrow and pooling restrictions with respect to common shares of the Resulting Issuer; the preparation and filing of a filing statement and subsequent news releases related thereto; the submission of a Sponsorship Acknowledgment Form; the Loan repayment; and the business plan and strategy of CarbonOne. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "intends", "believes", "plans to", "expects" or "it is expected", or variations of such words and phrases or statements that certain actions, events or results "will" occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Palo Duro or CarbonOne to be materially different from those expressed or implied by such forward-looking statements or forward-looking information, including: the receipt of all necessary regulatory approvals, the ability to conclude the Transaction, capital expenditures and other costs, and financing and additional capital requirements. Although management of Palo Duro or CarbonOne have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward looking information. Neither Palo Duro or CarbonOne undertakes to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws.
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.