Cannon Oil & Gas Ltd.
TSX VENTURE : COO

March 21, 2006 14:13 ET

Cannon Announces Conversion of Debt

CALGARY, ALBERTA--(CCNMatthews - March 21, 2006) - Cannon Oil & Gas Ltd. (TSX VENTURE:COO) ("Cannon") announces that its major shareholder, Marla Resources Inc. ("Marla") has agreed to convert outstanding indebtedness in the principal amount of $2,000,000 (the "Debt") of Cannon into Common Shares of Cannon, subject to regulatory approval. Marla has agreed to convert the Debt into 5,000,000 Common Shares of Cannon at a conversion price of $0.40 per Common Share.

As a result of the conversion of the Debt, Marla, owns or exercises control or direction over 11,224,644 Common Shares of Cannon representing approximately 42.61% of the issued and outstanding Cannon Common Shares. The conversion was undertaken by Marla for investment purposes and Marla may, in the ordinary course of its business, increase or decrease its holdings in Cannon.

Marla is a private issuer controlled by Robert J. Tessari (a senior officer and director of Cannon) and Marla M. Johnson. As a result of the conversion of the Debt by Marla, Mr. Tessari owns or exercises control or direction over an aggregate of 10,386,011 Common Shares of Cannon or 39.42% of the issued and outstanding Common Shares of Cannon prior to the exercise of any convertible securities. Mr. Tessari also holds options to purchase 250,000 Common Shares of Cannon. Assuming exercise of all convertible securities held, Mr. Tessari would own or control 10,636,011 (40.37%) of the Common Shares of Cannon then issued and outstanding. Mr. Tessari may, in the ordinary course of his business, increase or decrease his holdings in Cannon. As a result of the conversion of the Debt by Marla, Marla M. Johnson owns or exercises control or direction over an aggregate of 4,350,100 Common shares of Cannon or 16.51% of the issued and outstanding Common Shares of Cannon. Ms. Johnson may, in the ordinary course of her business, increase or decrease her holdings in Cannon.

The Board considered the proposed debt settlement transaction and unanimously passed a resolution approving the terms of the debt settlement transaction. In reviewing the terms, management and the Board also considered the requirements of Ontario Securities Rule 61-501. Section 5.6 and 5.8 of the Rule 61-501 provides an exemption from the formal valuation and minority shareholder approval requirements if the fair market value of the transaction, insofar as it involves all interested parties, is less than 25% of the issuers market capitalization. Cannon advises that fair market value of all interested parties is $2,000,000 which is less than 25% of Cannon's market capitalization.

Upon completion of the issuance of 5,000,000 shares for the debt settlement transaction, Cannon will have 26,344,484 issued and outstanding Common Shares.

Cannon is an emerging oil and gas exploration company based in Calgary, Alberta.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Cannon Oil & Gas Ltd.
    Robert J. Tessari
    President
    (403) 237-8407