Penfold Capital Acquisition IV Corporation
TSX VENTURE : PLD.P

March 07, 2012 16:28 ET

Penfold Capital Acquisition IV Corp. Enters Into Letter of Intent With SLM Logistics Corporation

TORONTO, ONTARIO--(Marketwire - March 7, 2012) - Penfold Capital Acquisition IV Corp. ("Penfold") (TSX VENTURE:PLD.P), a capital pool company (as defined in Policy 2.4 (the "CPC Policy") of the TSX Venture Exchange (the "Exchange")), is pleased to announce that it has entered into a non-binding letter of intent dated February 22, 2012 (the "Agreement") with SLM Logistics Corporation ("SLM"), to pursue a possible business combination transaction (the "Proposed Transaction") with SLM and its shareholder (the "Vendor").

If the Proposed Transaction is completed as currently envisioned (the "Closing"), Penfold would acquire all of the issued and outstanding common shares in the capital of SLM (the "SLM Shares") in exchange for the issuance of an aggregate of 32,222,222 of common shares in the capital of Penfold (the "Penfold Shares") at a price per Penfold Share equal to $0.09. Immediately after the Closing and as a result of the issuance of the Penfold Shares, (i) SLM would be a direct, wholly-owned subsidiary of the Resulting Issuer (the "Resulting Issuer" being Penfold immediately after the Closing), and (ii) the holders of SLM Shares will collectively exercise control over the Resulting Issuer. The parties, along with their advisors, will consider and confirm that a share exchange is the most effective means to structure and consummate the Proposed Transaction.

About SLM:

SLM was incorporated in Ontario in 2004 and is dedicated to manage consumer and retail store returns, defective and problematic electronics to product end of life management. SLM provides accountable management of returns from receiving to end of life with quality assurance testing; factory servicing of returns; resale of returns through non traditional channels; and recycling of non saleable product to support a closed loop first tier distribution process. SLM is unique in that it is able to fully recycle the non saleable returns it receives thereby allowing customers' return processes to have a very low environmental impact. SLM has had an independent Waste Audit Report completed which shows SLM is able to achieve a waste diversion rate of 98.61%. This means that companies working with SLM's processes are able to divert 98.61% of their product from landfill sites.

SLM is currently working on rolling out this product offering to a number of retailers to allow them to better capture the environmentally conscious consumer. SLM currently operates only in Ontario.

Based on SLM's audited financial statements for the years ended September 30, 2011 and September 2010, revenues in 2011 were $2.5 million compared to $2.9 million in the prior year. Despite this decrease, gross margin remained unchanged at $1.9 million as SLM focused on higher margin business. Net income for fiscal 2011 was $65,000 thousand compared to $68,000 in the prior year. Fiscal 2009 unaudited financial statements have been reviewed and reported revenues of $3.3 million, gross margin of $1.1 million and after tax net income of $164,000.

Assets as at September 30, 2011, were $2,363,000 compared to $1,995,000 and $1,284,000 for 2010 and 2009 respectively. Liabilities as at September 30, 2011 were $2,193,000 compared to $1,890,000 and $1,248,000 for 2010 and 2009 respectively. As a result, Shareholders Equity as at September 30, 2011 was $170,000 compared to $105,000 and $36,000 for 2010 and 2009 respectively.

Terms of the Proposed Transaction:

As stated above, the Agreement provides that on the Closing, Penfold will acquire all of the SLM Shares in exchange for the issuance to the Vendor of an aggregate of 32,222,222 Penfold Shares (the "Share Consideration") at a price per Penfold Share equal to $0.09. Immediately after the Closing, SLM will be a direct, wholly-owned subsidiary of the Resulting Issuer and the Vendor will exercise control over the Resulting Issuer.

It is expected that on Closing, the Resulting Issuer will be a Tier 1 issuer pursuant to the policies of the Exchange. As the Proposed Transaction does not constitute a Non Arm's Length Qualifying Transaction (as defined in the CPC Policy), it does not require the approval of the holders of Penfold Shares. There are currently 12,600,000 Penfold Shares issued (of which, 2,600,000 are subject to escrow requirements pursuant to the policies of the Exchange). Immediately after the Closing and after payment of the Share Consideration (but before the exercise of outstanding Penfold options, or any other capital transactions, there will be 44,822,222 issued common shares of the Resulting Issuer (the "Resulting Issuer Shares"). The Vendor will own approximately 72% of the Resulting Issuer Shares on a non-diluted basis, and the current holders of Penfold Shares will collectively own approximately 28% of the Resulting Issuer Shares on a non-diluted basis.

If completed, the Proposed Transaction is expected to constitute Penfold's Qualifying Transaction (as defined in the CPC Policy).

As part of the Proposed Transaction, SLM has granted to Penfold escrow shareholders the right, but not the obligation to transfer their seed shares within escrow at a price of $0.065 per seed share. These transfers are subject to Exchange approval.

Loan:

Subject to Exchange acceptance in accordance with paragraph 8.5 of Policy 2.4, Penfold intends to make a secured loan to SLM in the amount of $150,000 bearing interest at 10% per annum. The loan shall be secured by a general security agreement and shall be guaranteed by the Vendor.

In the event the Proposed Transaction is terminated or should the Proposed Transaction not close for any reason whatsoever, including failure to obtain Exchange approval as required in accordance with the policies of the Exchange, SLM shall forthwith refund to Penfold all costs incurred by Penfold, including legal, accounting and financial advisory/sponsorship fees and expenses. In addition SLM shall provide to Penfold the sum of $30,000 as a one time fee for its efforts and other costs incurred by Penfold. All of the foregoing amounts shall be secured pursuant to the secured loan referred to above.

Potential Financing:

Prior to or in conjunction with the Closing, SLM may complete an equity financing(s) for gross proceeds of up to $1.0 million (the "Financing") to fund capital expenditures and general working capital. Penfold and SLM will also seek to engage a sponsor for the Proposed Transaction.

Proposed Directors and Senior Management Team:

It is currently expected that following completion of the Proposed Transaction, the Resulting Issuer's board of directors would be comprised of five (5) members. All five nominees shall be made by SLM. The only proposed Director and Officer at this time is Vito Buffone, the current President and CEO of SLM who will retain that position with the Resulting Issuer and will also be appointed to the Board. SLM is currently conducting a search for a permanent Chief Financial Officer as well as additional Board members.

Vito Buffone, Chief Executive Officer and Director, SLM Logistics Corporation. - Mr. Buffone is the founder and currently the sole shareholder of SLM and has served as its Chairman and Chief Executive Officer since its formation in 2004. Mr. Buffone previously operated several companies internationally gaining international business experience. In 2001 Mr. Buffone recognized the value to companies' in-terms of returns and processing requirements. The identification of those improvements to the reverse logistics business resulted in the formation of SLM. Mr. Buffone is resident of Caledon, Ontario.

Additional information about the Directors and Officers of the Resulting Issuer shall be provided in an updated press release as soon as they have been determined.

As indicated above at this time Mr. Buffone is the sole shareholder at this time, should any other shareholder become a 10% shareholder after the date hereof, which is not anticipated, the same will be disclosed in a future press release.

Conditions to Completion of the Proposed Transaction:

The Closing is subject to satisfaction or waiver of terms and conditions, customary or otherwise, including but not limited to, acceptance by the Exchange of the Proposed Transaction and other applicable regulatory approvals. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

SLM and Penfold plan on issuing additional press releases and updates as the definitive agreement is signed, a sponsor is engaged, due diligence is completed, additional terms of the financing become available and other milestones are achieved. The shares of Penfold will remain halted until the completion of the Qualifying Transaction.

About Penfold Capital

Penfold Capital is a private holding company. We invest in public and private assets operating in telecommunications, clean technology, real estate and financing services. We work with private and public company's developing and implementing succession planning and completing strategic reviews. Penfold Capital Acquisition IV Corp. is a CPC company founded by Penfold Capital Corporation.

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.

Cautionary Note Regarding Forward-looking Statements

Certain information in this press release may contain forward-looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results may differ materially from results inferred or suggested in any forward-looking statements. Penfold assumes no obligation to update the forward-looking statements, or to update the reasons why actual results may differ from those reflected in forward-looking statements unless and until required by applicable securities laws. Additional information identifying risks and uncertainties is contained in Penfold's filings with the Canadian securities regulators, which filings are available at www.sedar.com.

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.

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