Breaking Point Developments Inc.
TSX VENTURE : BDP.P

L1 Capital Corp.
TSX VENTURE : LOA.P

March 08, 2010 18:52 ET

L1 Capital Corp. and Breaking Point Developments Inc. Announce a Merger and Proposed Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - March 8, 2010) - L1 Capital Corp., ("L1") listed on the TSX Venture Exchange Inc. as a capital pool company (the "TSXV" or the "Exchange") under the trading symbol "LOA.P" and Breaking Point Developments Inc. ("BPD") (TSX VENTURE:BPD.P) listed on the TSXV as a capital pool company under the trading symbol "BPD.P" are pleased to announce that they have entered into a Letter of Intent ("LOI") in respect of a proposed merger ("Amalco") in connection with BPD's purchase of the certain assets (the "Asset") of 1089814 Alberta Ltd. (the "Vendor") (the "Proposed Transaction"). It is expected that when the Proposed Transaction is completed, it will constitute Qualifying Transaction for Amalco.

About the Acquisition

It is proposed that pursuant to the Proposed Transaction all of the shares of L1 would be exchanged for common shares of BPD (each a "BPD Share") on the basis that the shares of L1 shall be attributed a value of $0.20 per share and the BPD Shares shall be attributed a value of $0.15 per BPD Share, such that approximately 1.333 BPD Shares shall be issued in exchange for each share of L1. The purchase would be affected by way of a merger between L1 and a wholly owned subsidiary of BPD to be created for that purpose. The amalgamation would be completed concurrently with BPD the Asset Acquisition from the Vendor as described in the asset purchase agreement between BPD and the Vendor dated November 12, 2009, (the "Asset Purchase Agreement") and shall be conditional upon the completion of the Asset Acquisition. 

Summary of the Proposed Transaction

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

The amalgamation of L1 and BPD will result in an issuer (the "Resulting Issuer") with sufficient working capital to fund the general working capital expenses of the Resulting Issuer as well as the capital requirements necessary to place the assets in production. The Proposed 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, 2009. 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 BPD hold an aggregate of 57% of the issued and outstanding shares in the capital stock of 1368143. 

BPD 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). BPD's cash on hand as at September 30, 2009 was approximately $66,630. L1's cash on hand as at September 30, 2009 is approximately $438,000, for a combined cash on hand of Amalco as of the date hereof of approximately $500,000.

As L1 and the Vendor are at arm's length, the Proposed Transaction is not expected to be a related party transaction. Accordingly, a valuation will not be required and the Proposed Transaction will not be subject to approval by a majority of the minority of the shareholders of either BPD or L1. Upon completion of the Proposed Transaction, it is anticipated that prior to the assignment of 1,033,333 Units to 1368143, as described above, and before the amalgamation with L1, the Vendor will hold, directly and indirectly, approximately 2,033,333 of the then 5,872,495 outstanding BPD Shares or approximately 34.6%, of BPD Shares. Amalco intends to apply to the Exchange for a waiver from the requirement to retain a Sponsor in connection with the Proposed Transaction, but there is no assurance that such a waiver will be granted.

Completion of the Proposed 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 each of BPD and L1; 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 ( the "Definitive Agreement") and the approval of the board of directors of L1 and BPD.

Further, certain directors of BPD shall purchase 500,000 "escrowed shares" of L1 from the three directors of L1 for a consideration of $60,000, being $0.12 per share. These directors will retain a total of 500,000 escrowed shares after the sale. These escrowed shares are subject to escrow over 3 years from the date of the close of the Proposed Transaction. The purchase and sale of the escrowed shares and the completion of the Proposed Transaction shall each be conditional on the other.

Advances

Upon acceptance of this LOI, but subject to the provisions of TSXV Policy 2.4, L1 and BPD agree to advance to the Vendor and its' associated company, Barrier Reef Resources Ltd., $250,000 and $100,000 respectively subject to approval of the TSXV. This loan will be used to provide a refundable security deposit to the Energy Resources Conservation Board of Alberta.

Said funds shall be secured by a secured loan agreement between the parties and approval of the TSXV.

Information regarding Amalco.

The Definitive Agreement shall, subject to TSXV and regulatory approval, provide that the Board of Directors of BPD shall remain as presently constituted with the option to appoint an additional member from L1 (pursuant to the articles of the BPI). In addition, on completion of the Proposed Transaction the officers of BPD will be appointed as follows: Mike Windle, President and CEO and a Director, Ken Johnston, CFO and Director, Scott Reeves, Secretary and Don McIvor, Director. A nominee of L1 may be appointed to the Board of Amalco.

Information regarding Breaking Point Developments Inc.

Breaking Point Developments Inc. is a capital pool company which was listed on the TSXV January 9, 2009, following the completion of its initial public offering. BPD is a capital pool company ("CPC") within the meaning of the policies of the Exchange. BPD has not commenced operations and has no assets other than cash. Copies of BPD documents may be obtained electronically from the SEDAR system at www.sedar.com.

Information regarding L1 Capital Corp.

L1 Capital Corp. is a capital pool company which was listed on the TSXV April 2, 2008, following the completion of its initial public offering. L1 has 3,950,000 basic common shares issued. L1 is a capital pool company ("CPC") within the meaning of the policies of the Exchange. L1 has not commenced operations and has no assets other than cash. As previously announced on February 18, 2010, the proposed merger with BNP Resources Inc. has been terminated. Copies of L1 documents may be obtained electronically from the SEDAR system at www.sedar.com.

Completion of the foregoing 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 information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the foregoing 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 L1 or BPD 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 corporations.

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

  • L1 Capital Corp.
    Gordon Travis
    President & CEO
    (403) 338-1001
    or
    Breaking Point Developments Inc.
    Mike Windle
    President & CEO
    (403) 863-4578