Calotto Capital Inc.
TSX VENTURE : TTO.P

June 11, 2008 12:29 ET

CORRECTION FROM SOURCE: Calotto Capital Inc. Announces Proposed Acquisition of Meikle Group Inc.

OTTAWA, ONTARIO--(Marketwire - June 11, 2008) - Due to multiple revisions in the press release issued at 10:02AM ET June 11, 2008, a correction from source has been issued. The complete and corrected release follows.

NOT FOR DISTRIBUTION IN THE UNITED STATES OR THROUGH UNITED STATES WIRE SERVICES.

Calotto Capital Inc. ("Calotto") (TSX VENTURE:TTO.P) announces that it signed a non-binding letter of intent dated June 9, 2008 to enter into an amalgamation agreement (the "Amalgamation Agreement") with Meikle Group Inc. ("Meikle"), a private company based in Kitchener, Ontario. The proposed transaction between Calotto and Meikle (the "Transaction") will serve as Calotto's qualifying transaction pursuant to Policy 2.4 of the TSX Venture Exchange (the "Exchange"). The Transaction, being an arm's length transaction, is not expected to be subject to the approval of the shareholders of Calotto but will be subject to a number of conditions as described hereinafter. For greater clarity references in this press release to "Meikle International" are references to Calotto following the closing of the Transaction, including its name change (which is subject to shareholder and other requisite approvals).

The Transaction

Subject to regulatory approval, including that of the Exchange and the shareholders of Meikle, Calotto and Meikle have agreed to effect the Transaction by way of an amalgamation between Meikle and a wholly-owned subsidiary of Calotto ("Subco"). The exact number of common shares ("Meikle International Shares") and other securities in the capital of Meikle International to be issued to security holders of Meikle will be determined in accordance with the exchange ratio to be provided for in a definitive amalgamation agreement along with other terms and conditions with respect to the transaction. It is expected that, subject to the receipt of requisite shareholder, director and regulatory approvals, on or prior to the closing of the Transaction, Calotto shall change its name to "Meikle International Inc.", Calotto shall consolidate its issued and outstanding shares on the basis of one common share for each five issued and outstanding common shares of Calotto, and each holder of issued and outstanding common shares of Meikle will be issued one Meikle International Share for each 1.036823555 common shares of Meikle ("Transaction Shares"). Following the completion of the Transaction, the entity resulting from the amalgamation of Meikle and Subco will be a wholly-owned subsidiary of Meikle International.

Under the terms of the Letter of Intent, the Meikle International Shares will be issued at a deemed price of $0.65 per Meikle International Share, for an aggregate deemed value of approximately $28,000,000. Calotto and Meikle acknowledge that the number of Meikle International Shares and other Meikle International securities to be issued is subject to change and will depend in part on the precise number of securities of each of Calotto and Meikle that are outstanding on the closing of the Transaction. Currently Calotto has 26,168,075 fully-diluted common shares outstanding and Meikle has 39,261,132 fully-diluted common shares outstanding (assuming the issuance of compensation options by Meikle to Haywood for advisory services and the cancellation of certain options upon the amalgamation of Meikle with Subco). Except for adjustments resulting from the issuance, exercise or cancellation of (a) options pursuant to the stock option plans of each of Calotto and Meikle, (b) agents options issued by Calotto in connection with its initial public offering, (c) special warrants issued by Meikle in connection with a prior financing, (d) securities of Meikle to be issued to syndicated loan lenders as described in greater detail below, (e) compensation options issued by Meikle to Haywood Securities Inc. for advisory services; and (f) agents options to be issued by Meikle International or Meikle in connection with the Transaction and Financing. It is the intention of the parties that upon completion of the Transaction and Financing, on a fully-diluted basis, the current shareholders of Calotto will own 11.11% of the common shares of Meikle International, the current shareholders of Meikle will own 80.40% of the common shares of Meikle International and the Financing investors will own 8.49% of the common shares of Meikle International.

The completion of the amalgamation and the issuance of the Transaction Shares will constitute Calotto's qualifying transaction under Policy 2.4 of the Exchange. It is expected that upon completion of the Transaction and Financing, Meikle International will be listed as a Tier 1 industrial issuer on the Exchange. It is intended that the Transaction shall be completed by way of an amalgamation between Subco and Meikle, although the structure of the Transaction may be revised by mutual agreement of the parties to accommodate efficiencies for various legal structures, tax and accounting treatment and securities regulation. The Transaction is intended to result in a reverse take-over of Calotto by Meikle.

Calotto and Meikle have agreed that the closing of the Transaction is conditional upon Meikle International raising gross proceeds of at least $3,000,000 through the issuance of common shares of Meikle International by way of a prospectus offering, to be closed concurrently with the Transaction, or, if preferable or required in the context of the Transaction, the completion of a financing in Meikle prior to the closing of the Transaction on economically equivalent terms (the "Financing"). Haywood Securities Inc. has presented an engagement letter dated June 9, 2008 to Calotto and Meikle to act, together with Jennings Capital Inc., as co-lead agents in connection with a prospectus offering of the common shares of Meikle International, on a best efforts basis. The terms and conditions of the Financing, including the issue price, have yet to be finalized and, in this regard, Calotto is expected to issue a separate news release shortly. As compensation in acting as co-lead agent, the co-lead agents will receive a commission equal to 7% of the gross proceeds received pursuant to the Financing, and compensation warrants to purchase a number of common shares of Meikle International equal to 7% of the common shares sold pursuant to the Financing, exercisable at the same price as the Financing for a period of two years from the closing of the Financing. Haywood Securities Inc. will also receive a corporate finance fee of $25,000 as additional compensation for acting as co-lead agent.

The completion of the Financing is dependent on the approval of third parties, including regulatory approval of the applicable securities authorities and the Exchange, and is therefore beyond the reasonable control of Calotto, Meikle or any other parties which are non-arm's length to either company or to the Transaction. The completion of the Financing is also subject to a number of other conditions including the satisfactory completion of the agents' due diligence and execution of formal documentation including an agency agreement between the agents, Calotto and Meikle. The proceeds from the Financing will be used to fund the acquisition of capital assets, to fund future growth and for working capital purposes.

Completion of the Transaction and Financing are also subject to a number of other conditions, including but not limited to the obtaining of all regulatory approvals, including Exchange and securities commission acceptance and appropriate shareholder and bank and syndicated loan lender approval. In particular, additional conditions of the closing of the Transaction include the conditions that Meikle receive an irrevocable waiver from each of its syndicated loan lenders of any rights such lender may have to prepayment or other penalty payments pursuant to the syndicate loan agreement as a result of the Transaction and Financing, and that Meikle receive binding commitments from individual syndicated loan lenders that immediately prior to the closing of the Transaction, lenders holding a significant amount of the approximately $2,600,000 aggregate outstanding principal amount of the syndicated loans that such holders will either (a) convert such loan amounts plus any accrued and unpaid interest into common shares of Meikle at Meikle's then-deemed share price, or (b) agree to a reduced interest rate on their loan in exchange for warrants of Meikle with an exercise price equal to Meikle's then deemed share price (with a corresponding cancellation in the number of stock options held by Meikle insiders). There can be no assurance that the Transaction and Financing will be completed as proposed or at all.

In connection with the Financing, Calotto will file with the regulatory authorities a prospectus containing all the required disclosure information concerning Calotto and Meikle and thus intends to seek from the Exchange an exemption from the requirement to prepare the filing statement required by Policy 2.4. Investors are cautioned that, except as disclosed in the prospectus to be prepared in connection with the Financing, 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 a capital pool company should be considered highly speculative.

The Exchange has in no way opined upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release. Trading of the common shares of Calotto will likely resume after filing with the Exchange of numerous documents, which is expected to take some time.

Business of Meikle

Meikle Group Inc., which is headquartered in Kitchener, Ontario, began operations 14 years ago as a highly specialized automated machine designer and builder for the automotive and medical industries. It has since evolved into a highly specialized, vision-oriented manufacturer of sophisticated vision-oriented high speed equipment for a wide range of industries based on its fundamental technology. Most recently it has successfully penetrated the rapidly emerging solar industry with both automated assembly lines and silicon deposition chambers.

Its strategic assets include:

- Approximately 300 employees, 6 facilities totalling 250,000 square feet, and a list of Fortune 500 customers

- 3 manufacturing facilities in Ontario, 1 in North Carolina, 1 in New York and 1 in Mexico

- ISO - 9001 - 2000 Certified

- Optimal plant staffing of 60 - 80 people per plant ensuring highly efficient engineering output

- World class reputation for designing, building, installing and servicing full factory automation solutions

- Diversified customer base including: Solar, Pharmaceutical, Life Sciences, Consumer Products, Healthcare, Industrials and Automotive

- Advanced production capabilities including; complete assembly lines, stand alone lean manufacturing cells, multi-station power and free palletized assembly lines, robotic-based assembly solutions, high-accuracy vision systems, ultra high precision assembly and test machines, machine vision, and machine control software.

Meikle has wholly-owned subsidiaries which address the international scope of its business operations as follows: Meikle Automation Inc., Meikle Group Corporation, Meikle Automation Corporation, Meikle Inc., Meikle Properties Inc., Meikle Services Inc., Meikle Holdings (Mexico) Inc., and Meikle Mexico S.A. de C.V. Meikle also owns 51% of Calvek S.A. de C.V, a Mexican business unit designing and building automated assembly and test machines and also specializing in the distribution of electrical hardware.

Meikle is now poised for sales growth in the solar sector that features high growth rates and higher margins, from both European and North American customers. Its "turn-key", "one-stop" machine building process solution, developed over the years in the manufacturing and industrial sectors, has been successfully proven and is being applied to the solar sector with deliveries of state-of the-art automated machines both "on time" and "on budget".

Principals of Meikle

It is anticipated that the current management of Meikle, as described below, will continue as the management of Meikle International following the closing of the Transaction.

Mr. Andrew Meikle, Founding Shareholder, Director, President & Chief Executive Officer of Meikle. Mr. Meikle has over 20 years experience in automation including sales, mechanical design, manufacturing and installation. His active role provides the direction, structure and operation for a profitable and growing corporation. Mr. Meikle is the chairman of the board of directors of TurboSonic Technologies Inc., a NASDAQ OTC Bulletin Board-quoted company. At the University of Waterloo Mr. Meikle received a Bachelor of Applied Science in Mechanical Engineering with a Management Science Option.

Mr. Andrew Stribling, Founding Shareholder, Director and Vice President of Meikle. Mr. Stribling has set up all administrative systems, purchasing, accounting and human resources for Meikle. His active role includes working with the project management, sales and applications engineering teams to develop new technology solutions. He has extensive experience in Process Engineering, Engineering Management and Plant Management. At the University of Waterloo Mr. Stribling obtained a B.A. Sc in Mechanical Engineering.

Mr. Jeff Hoffman, Chief Financial Officer of Meikle. Mr. Hoffman has worked with several manufacturing companies which ranged in size from 75 to 1,000 employees and up to 38 divisions, some of which were located in as many as 18 different countries. Prior to joining Meikle, Mr. Hoffman served as CFO for Alliance Automation Systems in Rochester, New York. Other positions Mr. Hoffman has held included Controller, Treasurer, VP Finance at Gleason Works and PSC, respectively, and CFO of several private and public manufacturing companies.

Mr. Shawn Smith, Vice-President Sales of Meikle. Mr. Smith has extensive experience in the field of automation. Formerly with Pacific Precision in Cambridge for over 12 years, Mr. Smith excelled as a Machine Designer / Project Manager with a unique capability to relate to and anticipate customers' requirements.

Ms. Fran Fisher, Vice-President, Human Resources of Meikle. Ms. Fisher joined Meikle Automation in October 2002 and is responsible for human resources at both a functional and strategic level. Ms. Fisher holds a Certificate in Human Resource Management from the University of Toronto, and a Certified Human Resources Professional (CHRP) designation from the Human Resources Professional Association of Ontario. Ms. Fisher is a member in good standing of the HRPAO, and belongs to Zonta International, a professional women's service organization dedicated to advancing the status of women worldwide.

Board and Management of Meikle International Post-Transaction

The board of directors of Calotto currently consists of Mr. Jonathan Drake, Mr. William Dunlop, Mr. Dean Gendron, Mr. Bruno Maruzzo, Ms. Naomi Morisawa De Koven, Mr. Joseph Shannon, and Ms. Susan Tataryn. The board of directors of Meikle currently consists of Mr. Julien Hradecky, Mr. Andrew Meikle, Mr. Andrew Stribling, Mr. Glen Wright and Mr. Carl Young.

It is expected that the board of directors of Meikle International following the closing of the Transaction will consist of seven directors, including five directors to be designated by Meikle (currently proposed to be Mr. Andrew Meikle, Mr. Andrew Stribling, Mr. Julien Hradecky, Mr. Glen Wright and Mr. Carl Young) and two directors to be designated by Calotto (currently proposed to be Mr. Dean Gendron and Mr. Bruno Maruzzo).

Mr. Julien Hradecky, Chairman and Director of Meikle. As President and CEO of R&J Engineering Corporation, Mr. Hradecky is responsible for all executive operations including worldwide sales and marketing. He also serves as the President of Epicenter Inc. Currently Mr. Hradecky is on the Board of Directors for Tacit Research Corporation and TurboSonic Technologies Inc. ("TurboSonic"), a NASDAQ OTC Bulletin Board-quoted company. Graduating from the University of Western Ontario he received a Bachelor's degree in Engineering Science. He also received an MBA from the Johnson School of Management, Cornell University. He is a member of the Association of Professional Engineers of Ontario.

Mr. Glen Wright, Director and Chair Compensation Committee of Meikle. As Chairman and CEO of GPark Consulting Inc., Mr. Wright has a successful career track record in both the public and private sectors and provided expertise in strategic planning, project management and corporate restructuring. Prior to his work with GPark, Mr. Wright founded Wright Mogg and Associates Ltd. (now part of the Cowan Insurance Group). He was also the founding Chairman of World Access Canada in partnership with Blue Cross Blue Shield, National Capital Region. He has also accepted several assignments by two former Ontario Premiers to Chair and reorganize the Workers' Compensation Board and as CEO to restructure Hydro One. Mr. Wright graduated from the Business Administration program at Durham College. He has served on many Boards including Gore Mutual Insurance Company, Cowan Insurance Group, World Access Canada, the Waterloo Chamber of Commerce, LeanCor, PrinterOn and TurboSonic.

Mr. Carl Young, Director and Chair of Audit Committee of Meikle. Mr. Young has had a diversified career in senior management and business ownership. Since 1998 he has provided associate management consulting services with firms in Toronto and Chicago for financial management, acquisitions/start-ups, ownership succession and project management. Mr. Young's experience has been applied to various industries including manufacturing, constructions, engineering services, distribution and e-commerce. In his current consulting capacity he has served as an interim CEO and interim CFO of a number of companies. Mr. Young is currently CFO of TurboSonic. Mr. Young is a Chartered Accountant who graduated from Wilfred Laurier University with a BA, and also received an MBA from McMaster University. Former management positions include Vice President Finance of Lackie Industrial Contractors Inc., and Vice President Finance/Director of CNG Fuel Systems Inc. Following these positions Mr. Young was President/Owner of both Provincial International Cranes Inc., and Mentor Dynamics Inc.

Mr. Andrew Meikle, Director of Meikle (please refer to biography above).

Mr. Andrew Stribling, Director of Meikle (please refer to biography above).

Mr. Dean Gendron, President, Chief Executive Officer and Director of Calotto. Mr. Gendron is an independent consultant who provided key leadership in the financing and growth of Critical Outcome Technologies Inc., a drug discovery and development company. In October 2005, he led the financing activities and concurrent reverse takeover by Critical Outcome Technologies Inc. of Aviator Petroleum Corp., a TSX-V-listed capital pool company. Currently, Mr. Gendron serves as a director of Critical Outcome Technologies Inc. From April 2006 to present, Mr. Gendron was the Vice-President Strategic Relationships of Critical Outcome Technologies Inc., and from September 2005 to June 2007 was also the President and Chief Executive Officer of DDP Therapeutics, an early stage drug development company. Mr. Gendron is also a founder and Director of KCC Capital Inc., a TSX-V listed capital pool company.

He has also assisted Mr. John Drake, President of Whippoorwill Holdings Ltd. with several of his personal investments since 2004.

Mr. Bruno Maruzzo, Director of Calotto. Mr. Bruno Maruzzo is President of TechnoVenture Inc., a technology consulting company. Mr. Maruzzo has worked with a variety of public and private high technology companies in the computer, medical instrumentation and biotechnology sectors, where he held positions in a range of areas including business development, corporate development, investor relations, engineering management and general management. He has also worked in the venture capital field sourcing, assessing and making investments in early stage technology based companies in Canada and the US. He has a BASc in Electrical Engineering from the University of Waterloo, an MASc in Biomedical Engineering and an MBA from the University of Toronto. Mr. Maruzzo is currently a Director of Pinetree Capital, a TSX-listed company and Critical Outcome Technologies Inc., a TSX-V-listed company.

Shareholders of Meikle

The issued and outstanding shares of Meikle are principally held by Andrew Stribling Family Trust, a Canadian resident trust, (4,038,468 shares - 12.63%), Wolverhampton Research Corp., a Barbados Corporation (4,038,468 shares - 12.63%), Sinngold Corporation, a Barbados corporation (7,269,242 shares - 22.73%), and Brengal Luxembourg S.A., a Luxembourg Corporation, (9,450,122 - 29.55%), respectively. Mr. Andrew Stribling, the Vice President of Meikle, is a trustee of Andrew Stribling Family Trust. Wolverhampton Research Corp., Sinngold Corporation and Bregal Luxembourg S.A. are investment companies. The remaining 22.46% of the shares of Meikle are held by 24 shareholders who are investors and employees of Meikle.

Selected Financial Information

The audited financial statements of Calotto for the financial period ended January 31, 2008 may be viewed through the internet on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) which can be accessed at www.sedar.com.

Meikle's audited financial statements for the 2005 fiscal year disclose total revenue of $52,013,315, cost of sales of $39,006,537, for a gross margin of $13,006,778, total expenses of $12,491,245 that include general and administrative expenditures of $9,871,223, interest and bank fees of $1,203,649, and amortization of deferred financing costs of $877,482, net income of $400,796, total assets of $30,411,621, total liabilities of $25,957,687 that include $8,000,000 in debentures, $5,381,133 in accounts payable and accrued liabilities, $4,401,636 in EDC borrowing, $3,916,371 in bank indebtedness, and $4,057,853 in billings in excess of cost and earnings.

Meikle's audited financial statements for the 2006 fiscal year disclose total revenue of $56,482,323, cost of sales of $41,551,434, for a gross margin of $14,930,889, total expenses of $14,538,207 that include general and administrative expenditures of $11,260,338, interest and bank fees of $1,657,782, and amortization of deferred financing costs of $695,290, net income of $141,987, total assets of $25,649,052, total liabilities of $20,811,304 that include $5,500,000 in debentures, $6,511,868 in accounts payable and accrued liabilities, $5,632,706 in bank indebtedness, and $3,035,417 in billings in excess of cost and earnings.

Meikle's unaudited financial statements for the most recently completed fiscal year ended December 31, 2007 disclose total revenue of $41,722,652, cost of sales of $34,280,108, for a gross margin of $7,442,544, fixed expenses of $11,260,383 that include G&A labour expenditures of $4,410,514, selling and promotion expenditures of $2,132,960, administration costs of $1,772,321, net income of ($4,048,740), total assets of $16,382,657, total liabilities of $13,929,082 that include $6,041,274 in accounts payable and accrued liabilities, $5,133,714 in bank indebtedness, $3,890,704 in billings in excess of cost and earnings, and net payable (receivable) of ($1,364,446).

Meikle's unaudited financial statements for the 2008 year to date discloses total assets of $18,060,000, total revenues of $11,182,000 and total liabilities of $16,758,000.

Sponsorship

Calotto will be relying upon exemption from the TSX-V's sponsorship requirements since the Financing is a prospectus offering involving a TSX-V member firm.

Trading Halt

Calotto's common shares are currently halted at Calotto's request and will remain so until the documentation required by the Exchange for the proposed Transaction can be provided to the Exchange.

Not for distribution in the United States or through United States wire services.

Investors are cautioned that trading in the securities of a capital pool company should be considered to be highly speculative. Calotto Capital Inc. is a capital pool company governed by the policies of TSXV. Its principal business is the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction. This press release contains certain forward-looking statements that reflect the current views and/or expectations of Calotto Capital Inc. with respect to performance, business and future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary significantly from those disclosed herein. Investors are cautioned not to rely on these forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this new release, and Calotto Capital Inc. does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities laws.

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 information circular or 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 a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Calotto Capital Inc.
    Mr. Dean Gendron
    CEO
    (613) 769-0453