Breaking Point Developments Inc.

August 11, 2009 14:11 ET

Breaking Point Announces Acquisition of Oil & Gas Assets as Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - Aug. 11, 2009) - BREAKING POINT DEVELOPMENTS INC. (the "Corporation" or "Breaking Point") (TSX VENTURE:BPD.P), a capital pool company, is pleased to announce that it has entered into a binding letter agreement dated May 5, 2009 as amended July 16, 2009 (the "Agreement") with 1089814 Alberta Ltd. (the "Vendor"), a private Alberta oil & gas company, regarding the acquisition of all rights, title and interests held by the Vendor in certain oil & gas properties located in the Dyberg area of Alberta, as more particularly described below (such properties are collectively referred to as the "Assets"). The acquisition of the Assets will be Breaking Point's proposed qualifying transaction (the "Qualifying Transaction") subject to the approval of and pursuant to the policies of the TSX Venture Exchange (the "Exchange").

About Breaking Point

Breaking Point, a capital pool company ("CPC") as defined in Policy 2.4 (the "CPC Policy") of the Exchange, was incorporated under the provisions of the Business Corporations Act (Alberta) on August 8, 2007 and completed its initial public offering in January of 2009. Breaking Point currently has 3,839,162 Class "A" common shares (each a "Breaking Point Share") outstanding, of which 2,333,332 Breaking Point Shares are subject to a 3 year escrow agreement with releases of 10% on closing of the Qualifying Transaction and 15% every six months thereafter. In addition, Breaking Point has granted stock options to its directors and officers to purchase 366,666 Breaking Point Shares at a price of $0.15 per share and 150,583 non-transferable agent's options relative to Breaking Point's initial public offering (each an "Agent's Option") each Agent's Option being exchangeable for one Breaking Point Share at an exercise price of $0.15 per Breaking Point Shares for a period of 24 months from the date of listing of the Breaking Point Shares on the Exchange. The current directors of Breaking Point are Michael Windle, Ken Johnson, Doug Hassell and Don McIvor.

About the Vendor

1089814 Alberta Ltd. is a private corporation incorporated pursuant to the laws of Alberta on February 5, 2004, with interests in oil and gas production and exploration in Alberta and British Columbia. The sole director of the Vendor is John Burlington of Calgary, Alberta and the sole shareholder of the Vendor is Ms. Eileen Burlington of Calgary, Alberta.

John Burlington, Director

Mr. Burlington is currently President of two private companies, both active in production and exploration in Western Canada. Barrier Reef Resources operates in Alberta and is primarily an oil producer. 1089814 Alberta Ltd. or the Vendor operates gas production in Alberta and British Colombia. Mr. Burlington was a director and President of Warburg Resources Inc. from 2004 to 2007 and was President of Interquest Incorporated (CNQ) in 2007, since 2006 Mr. Burlington has also been a director of Lions Gate Energy Inc. (TSX-V, symbol LG) and WellStar Energy Corp. (TSX-V, symbol WST). Between 2003 and 2004 Mr. Burlington was a director and President of Launch Resources Inc. (TSX-V), he was also a director and the President of Cannon Oil & Gas Ltd. (TSX-V) between 1999 and 2000. Mr. Burlington has B.Sc. and M.Sc. degrees, obtaining his Masters Degree in Geology from the University of Western Ontario in 1985.

The Assets

The Assets consist of an oil and gas property comprising 640 acres of land and a single gas well (the "Well"), 100% owned by the Vendor. The property is located in Sec. 16, Twp. 44, Rge. 23 W4M, in the Dyberg area of the Province of Alberta. The Well is dually completed in two Mannville Formation gas zones and is awaiting tie-in to the local gathering system.

The Vendor has engaged Ryder Scott Company ("Ryder Scott") for the purposes of updating a 2006 reserves report related to the Assets in accordance with NI 51-101. That report will include a proposed work program and budget for the exploration and development of the Assets. Based on the Vendor's preliminary assessments of the Assets, it is anticipated that the first development program will consist of a tie-in program and possible second well (the "Possible Second Well") and that the budget for completion of this program will be approximately $200,000, not including the Possible Second Well, Ryder Scott will be verifying the specifics of proposed program. It is expected that the Corporation will be able to cover the costs of this program with its existing resources and the funds obtained through the Private Placement, as more particularly described below, but should the actual amounts be greater than this amount, the Corporation may need to obtain further financing.

Summary of the Proposed Qualifying Transaction

Pursuant to the Agreement, as consideration for the acquisition of the Assets, Breaking Point has agreed to pay $160,450 and issue an aggregate of 2,033,333 units of Breaking Point (the "Units") to the Vendor at an ascribed price of $0.15 per Unit for an aggregate value of $465,450. Each Unit will consist of one Breaking Point Share and one common share purchase warrant (each a "Warrant"). Each Warrant will be exercisable into one Breaking Point Share upon payment of $0.15 per Breaking Point Share on or before the date that is 18 months from the date of issue.

Prior to the closing of the proposed Qualifying Transaction, Breaking Point will raise a minimum of $200,000 to a maximum of $250,000 through a non-brokered private placement of Breaking Point Shares at a purchase price of $0.15 per Breaking Point Share (the "Private Placement"). Breaking Point intends to use the proceeds from the Private Placement to fund the general working capital expenses of the Resulting Issuer. The transaction will also be subject to the payment, at closing of a finder's fee in the maximum amount of $31,000 to Rubix Capital Partners Inc. ("Rubix").

In order to preserve the opportunity to purchase the Assets, 1368143 Alberta Ltd. ("1368143"), a single purpose company, 1368143 entered into an option agreement with the Vendor dated March 27, 2008. 1368143 paid the sum of $155,000 to the Vendor to obtain an option to purchase the Assets, the sum of which, by the terms of the option agreement is payable towards the purchase price of the Assets. As such, 1,033,333 of the aggregate number of Units paid to the Vendor for the Assets (representing the pre-paid portion of $155,000) will be assigned by the Vendor at closing to 1368143. Certain directors and management of Breaking Point hold an aggregate of 57% of the issued and outstanding shares in the capital stock of 1368143.

Other that the Private Placement described above, Breaking Point does not currently anticipate completing any further financings concurrent with the closing of the Qualifying Transaction, as it anticipates having sufficient capital to complete the first phase of its expected development plan (as described above). Breaking Point's cash on hand as at the date hereof is approximately $155,890.

As the Corporation and the Vendor are at arm's length, the Qualifying Transaction is not expected to be a related party transaction. Accordingly, a valuation will not be required and the Qualifying Transaction will not be subject to approval by a majority of the minority of the shareholders of the Corporation. Upon completion of the Qualifying Transaction, it is anticipate that prior to the assignment of 1,033,333 to 1368143, as described above, the Vendor will hold, directly and indirectly, approximately 2,033,333 of the then 5,872,495 outstanding Breaking Point Shares or approximately 34.6%, of Breaking Point Shares not including those Breaking Point Shares issued pursuant to the Private Placement. Breaking Point intends to apply to the Exchange for a waiver from the requirement to retain a Sponsor in connection with the Qualifying Transaction, but there is no assurance that such a waiver will be granted.

A filing statement in respect of the proposed Qualifying Transaction will be prepared and filed in accordance with Policy 2.4 of the Exchange on SEDAR at www.sedar.com. A press release will be issued once the filing statement has been filed as required pursuant to the Exchange policies.

Completion of the Qualifying Transaction is subject to a number of conditions, including, but not limited to: the satisfaction of the minimum listing requirements of the Exchange; Exchange approval of the Qualifying Transaction; a satisfactory due diligence review by Breaking Point; receipt of a report completed in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"); completion or waiver of sponsorship; the entering into of a definitive purchase and sale agreement and the approval of the board of directors of Breaking Point.

The shares of the Corporation will remain halted pending receipt by the Exchange of certain required materials from the Corporation. The Corporation will issue a further news release upon finalization and filing of the aforementioned report pursuant to NI 51-101.

The Resulting Issuer

Following completion of the Qualifying Transaction the resulting issuer will operate the Assets and proceed to carry on business in the oil and gas sector. Breaking Point's current management will continue as officers and directors of the Corporation upon completion of the Qualifying Transaction. Accordingly, the directors of the Corporation upon closing of the Qualifying Transaction will be Michael Windle, Doug Hassell, Don McIvor and Ken Johnston. Mr. Windle will continue to serve as President and Chief Executive Officer, Mr. Johnston will serve as Chief Financial Officer and Scott Reeves will act as Corporate Secretary. The following are brief descriptions of the current directors and officers that will, collectively, continue to bear management responsibility for the Corporation upon completion of the Qualifying Transaction:

Mike Windle, President, Chief Executive Officer and Director - Mr. Mike Windle was a Manager of SAP with PetroKazakhstan Overseas Inc., an oil and gas development company from 1999 to 2004 and is currently the President of 1143536 Alberta Ltd., a private company engaged in business development consulting to the oil and gas industry. He is currently on the Board for Seaway Energy Services Inc; a public company engaged in providing environmental services to the oil and gas industry. He also served on the Board of Directors of Dolce Enterprises Inc., a public company trading on the TSX Venture Exchange from 2006 to 2007. Mr. Windle holds a Bachelor of Commerce degree from the University of Alberta (1978).

Ken Johnston, Chief Financial Officer and Director - Mr. Johnston is a retired investment advisor, having spent the last twenty eight years as an investment advisor most recently with PI Financial Corp. Prior thereto he was with Global Securities Corp. He was originally licensed as a securities broker in 1980 and has been employed in many roles in the industry since then, including option trading supervisor. Mr. Johnston holds a Bachelor of Arts degree (Psychology) from the University of New Brunswick (1980).

Don McIvor, Director - Mr. McIvor is President and Partner of StormFront Promotions Inc., an advertising and promotional products company. Prior thereto he was the President of Perfect Image, another advertising firm. He was previously in sales several large transportation companies. Don brings over 20 years of sales and marketing experience to the Board.

Doug Hassell, Director - Mr. Hassell is President of Hassell Construction Ltd. He has been building and renovating houses in higher end neighborhoods of Calgary and rural acreages since 1981. He has recently started Bedwell Homes Ltd. to build speculative new homes in and around Calgary. Mr. Hassell graduated from Queen's University with a Bachelor of Arts degree in 1975.

Scott Reeves, Corporate Secretary - Mr. Reeves is a partner at the law firm of TingleMerrett LLP. He has acted for numerous Canadian and International public and private corporations, including technology, oil and gas, mining and industrial issuers, and has wide experience in private and public debt and equity offerings, corporate acquisitions of assets and/or shares, corporate structurings and debt financing. He has extensive experience assisting issuers intending to list and operate on Canadian stock exchanges and teaches nationally in the area of e-Commerce financing. He is currently a director or officer of the several Canadian public and private companies Mr. Reeves has been with TingleMerrett LLP since 2003 prior to which he was an associate with Bennett Jones LLP. Mr. Reeves has a Bachelor of Commerce degree (hons.-1990) from the University of Alberta and a Bachelor of Laws (hons.-1995) degree from the University of Alberta.

Other Information

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority 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 filing statement to be prepared in connection with the transaction, any information released or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The 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.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Except as required pursuant to applicable securities laws, neither the Vendor nor the Corporation will update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by the Corporation.

Neither 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.

Contact Information

  • Breaking Point Developments Inc.
    Michael Windle
    President and CEO
    (403) 863-4578
    (403) 252-0898 (FAX)
    or
    Breaking Point Developments Inc.
    109 Scenic Park Place NW
    Calgary, Alberta
    T3L 1N8