Silk Road Energy Inc.
TSX VENTURE : SLK.P

January 27, 2014 18:20 ET

Silk Road Energy Inc. Announces Acquisition Agreement and Completion of Qualifying Transaction

CALGARY, ALBERTA--(Marketwired - Jan. 27, 2014) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Silk Road Energy Inc. (the "Corporation" or "Silk Road") (TSX VENTURE:SLK.P) is pleased to announce that the Corporation has entered into a formal acquisition agreement ("Acquisition Agreement") with Gold Note Resources Inc. ("Gold Note"), pursuant to which the Corporation has completed the purchase of certain oil production, oil and gas reserves, lands, leases and miscellaneous interests held by Gold Note in the Bashaw, Columbia and Thornbury areas of Alberta (the "Acquisition"). The Acquisition constitutes the Corporation's qualifying transaction (the "Qualifying Transaction") under the applicable policies of the TSX Venture Exchange (the "TSXV"), as further set out in the press releases of the Corporation dated November 7, 2013 and December 23, 2013 and the Corporation's filing statement dated December 23, 2013 (the "Filing Statement"), all as filed on the Corporation's SEDAR profile at www.sedar.com.

The Corporation is incorporated under the provisions of the Business Corporations Act (Alberta) and has a registered office in Calgary, Alberta. Silk Road is a "reporting issuer" (as defined under applicable securities law) in the provinces of British Columbia, Alberta and Ontario. Gold Note is a private corporation incorporated under the provisions of the Canada Business Corporations Act with its registered and head office in Montreal, Quebec. Michael Judson of Westmount, Quebec is the sole director and sole voting shareholder of Gold Note.

The Qualifying Transaction has been carried out by parties dealing at arm's length to one another and therefore is not considered to be a Non-Arm's Length Qualifying Transaction, as such term is defined in the policies of the TSXV. As a result, a meeting of the shareholders of the Corporation to approve the Acquisition is not a condition required to complete the Qualifying Transaction.

Assuming that all TSXV conditions are satisfied and assuming that the Corporation receives from the TSXV final TSXV approval of the Acquisition as the Qualifying Transaction of the Corporation, the Corporation will no longer be considered a Capital Pool Company (as defined under TSXV policies). It is expected that the Corporation will meet the Initial Listing Requirements for a Tier 2 oil and gas issuer under the policies of the TSXV, and will resume trading under the stock symbol "SLK" on or about January 29, 2014.

Acquisition Agreement

Pursuant to the terms of the Acquisition Agreement, the Corporation purchased, on industry standard terms, certain non-operated petroleum and natural gas rights, oil and gas production, tangibles, oil and gas reserves, lands, leases and miscellaneous interests including seven (7) gross producing wells (the "Assets") located in the Bashaw, Columbia and Thornbury areas in Alberta, Canada for an aggregate purchase price of $500,000 inclusive of applicable taxes and in Canadian funds, payable by way of 2,352,941 common shares of Silk Road ("Consideration Shares") at a deemed price of $0.17 per Common Share and $100,000 cash. The Consideration Shares are subject to the terms and conditions of an escrow agreement between Silk Road, Gold Note, and Olympia Trust Company dated January 24, 2014, which is available for review on the Corporation's SEDAR profile at www.sedar.com.

The completion of the Acquisition by the Corporation has been approved by the board of directors of the Corporation and the Acquisition has been conditionally approved by the TSXV as the Qualifying Transaction of the Corporation pursuant to a conditional acceptance letter dated December 20, 2013.

The completion of the Acquisition as the Qualifying Transaction of the Corporation is subject to final approval of the TSXV, assuming that all TSXV conditions are satisfied. The conditions above do not necessarily represent a complete list of all the conditions contained in the Acquisition Agreement. They are, however, conditions that may be reasonably considered to be material to the completion of the Acquisition by the Corporation.

Summary of Financial Information of the Assets

The following table sets forth certain select annual audited and interim unaudited financial and operational information of the Assets for the periods indicated.

Six months ended September 30, 2013
(unaudited)
Six months
ended
September 30, 2012
(unaudited)
Year
ended
March 31, 2013
(audited)
Year
ended
March 31,
2012
(audited)
Year
ended
March 31,
2011
(audited)
Revenue
Petroleum sales $ 238,325 $ 201,465 $ 436,663 $ 518,008 $ 622,329
Royalty expenses (73,412 ) (48,114 ) (103,089 ) (118,864 ) (141,430 )
164,913 153,351 333,574 399,144 480,899
Expenses
Production Costs 103,842 127,446 241,951 247,908 253,923
Operating income (loss) $ 61,071 $ 25,905 $ 91,623 $ 151,236 $ 226,976

Issuance of Stock Options

The Corporation also announces that its board of directors has granted stock options concurrently with the closing of its Qualifying Transaction in respect of an aggregate of 235,294 class A common shares of the Corporation to certain directors, officers, consultants and employees of the Corporation. The exercise price of the options is $.17 per share, with each stock option vesting over three years and expiring five years from the date of grant. The grants are subject to approval of the TSXV.

Management of the Resulting Issuer

Assuming final TSXV approval of the Acquisition as the Qualifying Transaction of the Corporation is received, the management team of the Corporation and the board of directors of the Corporation will be comprised of the individuals outlined below (the "Management Team"). The following is a brief description of the position, background and experience of the Management Team of the Corporation:

Vladimir Katic - Anchorage, Alaska - President, Chief Executive Officer and Director

Mr. Katic is currently the Managing Director of Pacific States Energy LLC, a limited liability corporation formed in the state of California. From May 2000 to September 2009, Mr. Katic was the President, Chief Executive Officer and a director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. - listed on the TSXV), an oil & gas company based in California and listed on the Toronto Stock Exchange. Mr. Katic obtained a Diploma in Petro-Chemical Engineering in 1966 from the University of Zagreb in Croatia.

Richard Derrick Colling - Sherwood Park, Alberta - Chief Financial Officer

Mr. Colling is a member of the Society of Certified Management Accountants of Alberta with more than 25 years of experience in the field of accounting, both in the banking industry and private practice. He holds a Bachelor of Management (Commerce) from the University of Lethbridge.

Patrick Devlin - North Vancouver, British Columbia - Corporate Secretary and Director

Mr. Devlin has over 29 years of experience in the securities industry, as a lawyer, regulator, certified management accountant and entrepreneur. From March 2004 to April 2009, Mr. Devlin was a Director and then President, Chief Executive Officer and Director (August 2004 to April 2009) of NEMI Northern Energy & Mining Inc., a mining company listed on the Toronto Stock Exchange. Mr. Devlin was also a Director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. - listed on the TSXV), an oil & gas company, from 1993 to November 2010. Mr. Devlin obtained a Diploma of Technology in Finance from the British Columbia Institute of Technology in May 1974, the designation of Certified Management Account from the University of British Columbia in May 1976, and his Bachelor of Laws from the University of British Columbia in 1981.

Zulfikar Rashid - Calgary, Alberta - Director

Mr. Rashid has been the owner of Rodeo Express Delivery Ltd., a mail and courier service, since January 1976. He obtained a Bachelor of Engineering in Electrical and Electronics Engineering from the University of Napier in Edinburgh, Scotland in 1974. Mr. Rashid has also been a member of the Association of Science and Engineering Technology Professionals of Alberta (ASET) since 1976.

Michael Judson - Westmount, Quebec - Director

Mr. Judson has 20 years of experience forming, financing and operating private and public companies. He has raised approximately $185 million for natural resource exploration and production projects through two public company vehicles. Mr. Judson graduated from Concordia University in 1986 with a Bachelor of Arts (Communication Studies), graduated from the Institute of Corporate Directors (ICD) and the Desautels Faculty of Management, McGill University Directors Education Program in 2007 and became an Institute-Certified Director (ICD.D) in 2011.

Dr. Paul Craig - Anchorage, Alaska - Director

Dr. Craig is a board-certified clinical neuropsychologist with over twenty-five years of experience. Recognized for his excellence in the field, Dr. Craig has evaluated and/or treated more than 10,000 patients with a broad array of known or suspected psychological and neuropsychological conditions. Dr. Craig is a Clinical Professor in the Department of Psychiatry & Behavioral Sciences at the University of Washington School of Medicine. He has also served as an elected member of the Board of Directors of the American Psychological Association and American Board of Clinical Neuropsychology.

Cautionary Statements:

Certain statements contained in this press release constitute forward-looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Corporation's current belief or assumptions as to the outcome and timing of such future events. Forward-looking information included in this press release includes statements with respect to final approval of the TSXV of the Acquisition as the Qualifying Transaction of the Corporation. This press release also contains forward-looking information relating to the management team of the Corporation. Readers are cautioned not to place undue reliance on forward-looking statements. Although the Corporation believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Corporation can give no assurance that they will prove to be correct. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Corporation. The material factors and assumptions include the parties to the agreements underlying the Acquisition being able to obtain the necessary director, shareholder and regulatory approval and TSXV policies not changing. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: conditions imposed by the TSXV, obligations under the Alberta Licence Liability Rating Program, the Corporation having insufficient financial resources to advance its business, changes in tax laws, general economic and business conditions; and changes in the regulatory environment. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with associated transactions, and that the Acquisition and associated transactions will not be successfully approved by the TSXV as the Qualifying Transaction of the Corporation for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release.

Completion of the Acquisition as the Qualifying Transaction of the Corporation is subject to a number of conditions, including but not limited to, TSXV acceptance. There can be no assurance that the Acquisition as the Qualifying Transaction of the Corporation will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Filing Statement, any information released or received with respect to the Acquisition 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 TSXV has in no way passed upon the merits of the proposed Acquisition and has neither approved nor disapproved the contents of this press release.

Neither TSXV Venture Exchange Inc. nor its Regulations Services Provided (as that term is defined in the policies of the TSXV Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Silk Road Energy Inc.
    Zulfikar Rashid
    Director
    (403) 240-1821