Pan Terra Industries Inc.
TSX VENTURE : PNT.H

Pan Terra Industries Inc.

April 28, 2008 13:30 ET

Pan Terra Provides Update on Status of Change of Business and Will Resume Trading on a Pre-Consolidated Basis

CALGARY, ALBERTA--(Marketwire - April 28, 2008) - PAN TERRA INDUSTRIES INC. ("Pan Terra" or the "Corporation") (TSX VENTURE:PNT.H), Mr. Aaron Lane, President of Pan Terra is pleased to announced that Pan Terra shareholders approved the previously announced change of business transaction ("COB") at an Annual and Special Meeting held on March 18, 2008 ("Meeting"). The information circular dated February 14, 2008 (the "Information Circular) mailed to the shareholders of Pan Terra detailing the motions presented to shareholders, including the COB and share consolidation, as well as other matters, was filed February 28, 2008 on SEDAR. The board of Pan Terra unanimously approved the COB and recommended that shareholders vote in favour of the COB, as well as all other motions presented to shareholders. At the time of mailing the Information Circular, it was management's intention to solicit proxies from shareholders to complete a one for four share consolidation, as disclosed in the Information Circular. However subsequent to mailing the Information Circular, management concluded that it was in the best interest of the Corporation and its shareholders to amend the special resolution to consolidate the share capital on a one for two basis rather than a one for four, as it was disclosed in the Information Circular. Accordingly, at the Meeting, the special resolution was amended such that the board proposed to consolidate the share capital on a one for two basis rather than a one for four. The amendment was duly approved by Pan Terra shareholders present at the Meeting in accordance with applicable corporate law, however as at the date of this press release, the consolidation has yet to be implemented by Pan Terra or approved by the TSXV, and there is no assurance that TSXV approval will be obtained. Accordingly, the trading of Pan Terra common shares, as contemplated under the section entitled Private Placement Amendment, will trade on a pre consolidation basis.

As a result of the amendment, certain sections of the disclosure in the Information Circular that was mailed to shareholders contained information that was materially different as a result of the one for two consolidation. All capitalized terms not defined herein shall have the same meaning as defined in the Information Circular. All of the information presented in the following tables is based on the assumption that the consolidation will be completed.

Revised Pro Forma Consolidated Capitalization of the Resulting Issuer

The following table sets forth the revised capitalization of the pro forma share and loan capital of the Resulting Issuer following the COB:



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Designation of Security Authorized Amount Outstanding
Resulting Issuer
Shares after Giving
effect to the
COB (1)(2)(3)
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Common Shares Unlimited 16,614,257
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Preferred Shares Unlimited Nil
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Notes:
(1) Prior to giving effect to the exercise of the Warrants, Finders
Warrants, or common shares issued pursuant to the Amended Private
Placement (as such term is defined below);
(2) Subject to adjustment based on the Amended Private Placement; and
(3) Includes 62,500 common shares issue to a former officer of Pan Terra
pursuant to a Settlement Agreement and 150,000 common shares issued to
Black Goose under the Joint Exploration Agreement.


Revised Fully Diluted Share Capital of the Resulting Issuer

The following table states the diluted share capital and the percentage of the Resulting Issuer after giving effect to the one for two consolidation:



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Common Shares Percentage of Common
Outstanding (Diluted) Shares Outstanding
After Giving Effect (Diluted) After Giving
to the COB (1)(2) Effect to the COB
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Pan Terra shares outstanding
on the completion date of
the COB 16,614,257 75.2%
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Pan Terra shares reserved for
issuance upon exercise of
warrants issued in connection
with the May 2007 private
placement 2,750,000 12.4%
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Pan Terra shares reserved for
issuance upon exercise of
broker warrants issued in
connection with the May 2007
private placement 550,000 2.5%
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Pan Terra shares reserved for
issuance upon exercise of the
Resulting Issuer stock options 2,192,795 (3)(4) 9.9%
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Total 22,107,052 100%
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Notes:
(1) Does not include common shares and warrants to be issued pursuant to
the Amended Private Placement, as such term is defined herein;
(2) Excludes common shares to be issued pursuant to the exercise of
Warrants and Finders Warrants;
(3) Pursuant to TSXV policies, the number of stock options available for
grant cannot exceed 10% of the Corporation's issued and outstanding
common shares after giving to the COB and the Amended Private
Placement; and
(4) 168,631 previously issued stock options are held by a consultant of
the Corporation who was a former officer of the Corporation. 170,000
stock options expired during the current quarter.


Amendments to Proposed Grant of Stock Options

Subject to the completion of the COB, the Resulting Issuer proposes to grant options to acquire an aggregate of 2,192,795 common shares of the Resulting Issuer at a price equal to the price of Amended Private Placement to the following directors, officers, employees and consultants of the Resulting Issuer. These figures are subject to change based on the actual number of common shares outstanding upon completion of the Amended Private Placement and COB.



----------------------------------------------------------------------------
Number of Proposed Date
Name Options of Grant Expiry Date
----------------------------------------------------------------------------
Aaron Lane 600,000 Closing Date Five years from closing date
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Gregory Marr 200,000 Closing Date Five years from closing date
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Murray Tildesley 500,000 Closing Date Five years from closing date
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Ron Alexander 200,000 Closing Date Five years from closing date
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Pete Aubry 200,000 Closing Date Five years from closing date
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Tony Pezzotti 200,000 Closing Date Five years from closing date
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David Heighington 100,000 Closing Date Five years from closing date
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Employees and
Consultants 192,795 Closing Date Five years from closing date
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TOTAL 2,192,795
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Private Placement Amendment

The Information Circular disclosed that Pan Terra would complete a non-brokered private placement consisting of up to the issuance of 3,500,000 units at a price of $1.00 per unit for gross proceeds of up to $3,500,000 prior to closing the COB. Due to the prevailing weak market conditions, management of Pan Terra wishes to re-price the private placement based on a five day weighted trading average (the "Amended Private Placement"). Accordingly, trading will be reinstated on April 30, 2008 and the $3,500,000 Amended Private Placement will be re-priced in the context of the market and priced based on applicable TSXV policies. After the Amended Private Placement is re-priced, trading will again be halted until Pan Terra has satisfied all conditions for listing on the TSXV.

The Amended Private Placement will consist of units whereby each unit will be comprised of one common share and one-half of one purchase warrant, with each full warrant entitling the holder to acquire one additional common share within 12 months from closing. The terms of the Amended Private Placement and the fully diluted share capital of the Resulting Issuer will be fully disclosed in a press release to be issued subsequent to the five day trading period. The use of proceeds will remain the same as was disclosed in the Information Circular. Investors may incur additional dilution if the Amended Private Placement is priced on less favorable terms than as disclosed in the Information Circular.

The Resulting Issuer will operate as a junior oil and gas exploration, development and production company and will be sufficiently capitalized to meet its business objectives. Management's intention is to direct its exploration strategy in the Western Canadian Sedimentary Basin.

Principal Security holders of the Resulting Issuer

None of the directors, officers, promoters or the associates and affiliates of such directors and officers, directly and indirectly, and to the knowledge of management of the Corporation, no other person, directly or indirectly, exercises control or will hold more than 10% of the issued and outstanding common shares of the Resulting Issuer, upon completion of the COB and the Amended Private Placement.

Insiders and Board of Directors of the Resulting Issuer

Pursuant to the COB, the following directors and officers will be the directors and officers of the Resulting Issuer: Aaron Lane, President, Chief Executive Officer and director; Murray Tildesley, Chairman and director; Gregory Marr, Chief Financial Officer; Antonio Pezzotti, director; Peter Aubry, director; Ronald Alexander, director; and David Heighington, Corporate Secretary. More detailed information about the directors and officers of the Resulting Issuer can be found in the Information Circular of Pan Terra filed on SEDAR. Upon completion of the Amended Private Placement and the COB, the directors and officers of the Resulting Issuer will own or control, as a group, 1,218,000 common shares, as follows:



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Number and Number and Percentage of
Percentage of Pan Resulting Issuer Shares
Proposed Directors Terra Shares as upon completion
and Officers at the date hereof of the COB (1)(2)
----------------------------------------------------------------------------
Aaron Lane 500,000 250,000
(1.5%)
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Murray Tildesley 506,000 253,000
(1.5%)
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Gregory Marr Nil Nil
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Ronald E. Alexander 580,000 290,000
(1.7%)
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Peter Aubry 350,000 175,000
(1.1%)
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Antonio Pezzotti 500,000 250,000
1.5%
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David Heighington Nil Nil
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Notes:
1. Subject to escrow. See "Information Concerning the Resulting Issuer -
Escrowed Shares of the Resulting Issuer" for details;
2. All percentages are subject to change based on the number of common
shares issued pursuant to the Amended Private Placement; and
3. These percentages may change if the directors or officers participate in
the Amended Private Placement, however management of Pan Terra believes
that insider participation will not exceed 10% of the offering.


Other Disclosure Amendments

The amended consolidation also had an impact on the pro forma financial statements of Pan Terra, a copy of which is attached hereto as Schedule A. Pan Terra confirms that since the date of the Pro Forma financial statements, the Corporation has carried on the business and conducted its operations and affairs only in the ordinary course and no material financial changes have occurred since the date of Pro Forma financial statements. In addition, Pan Terra advises that the disclosure in the Information Circular should have stated that the petroleum and natural gas reserves attributable to in the Sylvan Lake assets as at December 31, 2007 as evaluated by Sproule Associates Limited was based on a mechanical update of the Sproule Report effective December 31, 2007.

Description of Significant Conditions to Closing

The closing of the COB is conditional, among other things, on the following:

(i) obtaining TSXV approval; and

(ii) completion of the Amended Private Placement.

The transactions described herein cannot close until the required approvals are obtained. There can be no assurance that the transaction will be completed as proposed or at all. If Pan Terra does not close the COB, it will remain listed on the NEX.

Investors are cautioned that, except as disclosed in the Information Circular, 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 TSXV listed companies should be considered highly speculative.

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

Forward-Looking Statements

This press release may include forward-looking statements including opinions, assumptions, estimates and expectations of future results, cash flow and earnings. Forward-looking statements are subject to a wide range of risks and uncertainties and although the Corporation believes that the expectations represented by such forward-looking statements are reasonable; there can be no assurance that such expectations will be realized.

SCHEDULE A

COMPILATION REPORT ON PRO FORMA CONSOLIDATED BALANCE SHEET

To the Board of Directors of Pan Terra Industries Inc.

We have read the accompanying unaudited pro forma consolidated balance sheet of Pan Terra Industries Inc. ("Pan Terra") as at September 30, 2007 and have performed the following procedures:

1. Compared the figures in the column captioned "Pan Terra Industries Inc." to the unaudited consolidated financial statements of Pan Terra as at September 30, 2007 and found them to be in agreement.

2. Made enquiries of certain officials of Pan Terra who have responsibility for financial and accounting matters about:

(a) the basis for determination of the pro forma adjustments; and

(b) whether the pro forma consolidated balance sheet complies as to form in all material respects with the published requirements of the various securities commissions and regulatory authorities in Canada.

3. The officials:

(a) described to us the basis for determination of the pro forma adjustments; and

(b) stated that the pro forma consolidated balance sheet complies as to form in all material respects with the published requirements of Canadian securities legislation.

4. Read the notes to the pro forma consolidated balance sheet and found them to be consistent with the basis described to us for determination of the pro forma adjustments.

5. Recalculated the application of the pro forma adjustments to the amounts in the column captioned "Pan Terra." as at September 30, 2007 and found the amounts in the column captioned "Pro Forma" to be arithmetically correct.

A pro forma consolidated balance sheet is based on management assumptions and adjustments which are inherently subjective. The foregoing procedures are substantially less than either an audit or a review, the objective of which is the expression of assurance with respect to management's assumptions, the pro forma adjustments, and the application of the adjustments to the historical financial information. Accordingly, we express no such assurance. The foregoing procedures would not necessarily reveal matters of significance to the pro forma consolidated balance sheet, and we therefore make no representation about the sufficiency of the procedures for the purposes of a reader of such statement.

(Signed) MacKay LLP

Chartered Accountants

Calgary, Canada

March 18, 2008



Pan Terra Industries Inc.
Pro Forma Consolidated Balance Sheet
Unaudited - See Compilation Report
September 30, 2007

Pan Terra
Industries Pro Forma
Inc. Adjustments Notes Pro Forma
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$ $ $
Assets
Current assets
Cash 519,561 2,637,000 3(a) & (b) 3,156,561
Accounts receivable 26,477 - 26,477
Prepaid expenses 5,802 - 5,802
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551,840 2,637,000 3,188,840
Property, plant and
equipment 2,592 1,859,250 3(a) & (c) 1,861,842
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554,432 4,496,250 5,050,682
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Liabilities
Current liabilities
Accounts payable and
accruals 146,480 1,261,875 3(c) & (d) 1,408,355
Asset retirement
obligations - 40,000 3 (a) 40,000
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146,480 1,301,875 1,448,355
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Shareholders' equity
Share capital 11,133,751 3,153,375 3(b), (c) & 14,287,126
(d)
Warrants 75,481 56,000 3 (b) 131,481
Contributed surplus 911,315 911,315
Deficit (11,712,595) (15,000) 3 (a) (11,727,595)
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407,952 3,194,375 3,602,327
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554,432 4,496,250 5,050,682
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See accompanying notes to the Pro Forma Consolidated Balance Sheet


1. Change of Business and Private Placement

Pan Terra Industries Inc. ("Pan Terra") entered into a Letter Agreement dated February 4, 2008 (the "Letter Agreement") with Rotex Energy Ltd. ("Rotex") for an arm's length acquisition of certain producing gas assets from Rotex (the "Purchased Assets"). The proposed transaction will form part of Pan Terra's change of business (the "COB") and constitute Pan Terra's Qualifying Transaction in accordance with the policies of the TSXV. Following the completion of the COB, and the necessary regulator approvals, Pan Terra with be classified as an oil and gas issuer and Pan Terra will graduate from its current NEX listing to a listing on the TSXV. As part of the transaction Pan Terra shall pay $383,000 in cash, as well as standard effective versus closing date adjustments to be satisfied in cash, to complete the acquisition.

As a condition of the COB, Pan Terra intends to complete a non-brokered private placement of up to $3,500,000 (the "Private Placement") through the issuance of up to 3,500,000 units at a price of $1.00 per unit. Each unit will consist of one common share and one-half common share purchase warrant, with each whole warrant entitling the holder thereof to purchase one additional common share at a price of $1.50 for a period of 12 months from the closing date.

2. Basis of presentation

The accompanying unaudited pro forma consolidated balance sheet of Pan Terra has been prepared by management of Pan Terra to give effect to the completion of the Proposed transaction and Private Placement as if they had occurred on September 30, 2007. In management's opinion, this pro forma consolidated balance sheet includes all material adjustments necessary for a fair presentation in accordance with Canadian generally accepted accounting principles.

The pro forma consolidated balance sheet is not necessarily indicative of the results that actually would have occurred if the events reflected herein had taken place on the date indicated. In addition, the pro forma consolidated balance sheet does not give effect to any transactions that are not considered significant by management and do not meet the significance test rules as defined by various securities regulators. Accounting policies used in the preparation of the pro forma consolidated balance sheet are in accordance with those disclosed in Pan Terra's audited consolidated financial statements as at and for the year ended March 31, 2007 and the interim consolidated financial statements for the period ended September 30, 2007.

It is the recommendation of Pan Terra's management that this financial information should be read in conjunction with Pan Terra's audited consolidated financial statements as at and for the year ended March 31, 2007.

3. Pro Forma September 30, 2007 Balance Sheet and Assumptions

The unaudited pro forma balance sheet gives the effect of the following transactions and assumptions as if they had occurred on September 30, 2007.

(a) The allocation of the purchase price is as follows:



Cost of acquisition:

Cash proceeds 383,000
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Net assets acquired:
Property and equipment 423,000
Asset retirement obligations (40,000)
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383,000
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The allocation of the purchase price to the assets will be finalized for the year ended March 31, 2008 and once the fair value of the assets and liabilities have been determined as at the acquisition date, the above allocation will change.

Transaction costs for the acquisition of assets are estimated to be $15,000 and have been charged to operations and deficit.

(b) The pro forma balance sheet assumes that Pan Terra completes a non-brokered private placement of 3,500,000 units at $1.00 per units for proceeds of $3,500,000. Each unit will consist of one common share and one-half common share purchase warrant, with each whole warrant entitling the holder thereof to purchase one additional common share at a price of $1.50 for a period of 12 months from the closing date.

The warrants were assigned a value of $56,000 using the Black-Scholes option pricing model with the following assumptions: expected life of 1 year; expected volatility of 35%, risk free interest rate of 4.02%, and a dividend yield of 0%.

As part of the non-brokered private placement, Pan Terra may pay Finders' fees of 8% of the gross proceeds of the Offering attributable to purchases that are either introduced to Pan Terra, and or the offering by the finder for the purpose of participating in the Offering. In addition, subject to regulatory approval, Pan Terra will issue to the Finder a warrant entitling it to acquire a number of units under the same terms and conditions as above that is 8% of the Units subscribed for by the Subscribers.

The anticipated cash commission will be 8% of eligible proceeds raised. Total costs associated with the transaction are estimated at $465,000 including the 8% commission costs.

(c) The pro forma balance sheet assumes that Pan Terra will raise gross proceeds of $3,500,000. This financing will result in a required equalization payment of $660,000 representing 55% of the land costs incurred as well as a buy-in payment of $656,250 based upon the financing raised as a result of the Joint Exploration Agreement signed August 21, 2007 between Pan Terra and Black Goose Holdings Inc. The total amount of $1,316,250 has been included in property, plant and equipment and accounts payable and accrued liabilities. In addition, as part of the above agreement 150,000 common shares (post consolidation) are to be issued as additional compensation to Black Goose Holdings Inc. at a deemed value of $0.80 per share for a total of $120,000. The share value has been calculated on the basis of the value in the concurring private placement discounted 20% to represent the absence of an attached warrant and has been included in property, plant and equipment.

The aforementioned amounts are preliminary and will attempt to be finalized for the year ending March 31, 2008.

(d) The pro forma balance sheet also incorporates the issuance of 62,500 common shares (post consolidation) at the fair value of $54,375 to Pan Terra's former president pursuant to terms of his severance agreement July 7, 2007. The fair value of these shares was included in accounts payable and accrued liabilities. The issuance of these shares is subject to regulatory approval.



4. Pro Forma Share Capital

Authorized share capital:
Unlimited number of voting common shares
Unlimited number of non-voting preferred shares, issuable in series

Common shares issued: Number Amount($)

Balance as at September 30, 2007 32,803,514 11,133,751
Effect of 1 for 2 share consolidation (16,401,757) -
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16,401,757 11,133,751

Issued pursuant to:
Joint venture agreement 150,000 120,000
Severance agreement 62,500 54,375
Private placement 3,500,000 3,500,000
Less value assigned to warrants - (56,000)
Anticipated share issue costs - (465,000)
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Proforma share capital 20,114,257 14,287,126
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The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Pan Terra Industries Inc.
    Mr. Aaron Lane
    President
    (403) 705-8566
    or
    Pan Terra Industries Inc.
    1800, 250-6th Ave SW
    Calgary, Alberta T2P-3H7
    Website: www.panterraindustries.com