Skyberry Capital Corp.
TSX VENTURE : SKR.P

November 24, 2010 15:01 ET

Skyberry to Acquire Lipari Coal Holdings, Inc. to Complete Its Qualifying Transaction

TORONTO, ONTARIO--(Marketwire - Nov. 24, 2010) -

NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA OR THROUGH U.S. NEWSWIRE SERVICES

Skyberry Capital Corp. (TSX VENTURE:SKR.P) ("Skyberry") is pleased to announce that it has signed a non-binding letter of intent (the "LOI") with Lipari Coal Holdings, Inc. a Delaware corporation ("Lipari" or the "Company"), which outlines the general terms and conditions pursuant to which Skyberry and Lipari would be willing to complete a transaction that will result in a reverse take-over of Skyberry by the shareholders of Lipari and a corporation ("Lipari Finco") to be incorporated to facilitate the business combination (the "Transaction"). The LOI was negotiated at arm's length.

The LOI is to be superseded by a definitive share exchange agreement between Skyberry and the shareholders of each of Lipari and Lipari Finco, to be signed on or before December 31, 2010 (or such other date as may be mutually agreed in writing between Skyberry and Lipari). The Transaction is subject to requisite regulatory approval, including the approval of the TSX Venture Exchange (the "TSXV"), and standard closing conditions, including the approval of the directors of each of Skyberry and Lipari of the definitive agreement and completion of due diligence investigations to the satisfaction of each of Skyberry and Lipari, as well as the conditions described below. The legal structure for the Transaction will be determined after the parties have considered all applicable tax, securities law, and accounting efficiencies.

Skyberry is a capital pool company and intends for the Transaction to be its qualifying transaction for purposes of the policies of the TSXV (the "Qualifying Transaction"). Concurrent with completion of the Qualifying Transaction, Skyberry will apply to list the common shares of the resulting issuer (the "Resulting Issuer") on the Toronto Stock Exchange.

Since the Transaction is not a non-arm's length transaction, Skyberry is not required to obtain shareholder approval for the Transaction. However, Skyberry intends to hold a special meeting of shareholders to approve certain matters ancillary to the Transaction, including a name change, election of new directors, a continuance under the laws of British Columbia and a consolidation of its shares.

Conditions to Transaction

Prior to completion of the Transaction (and as conditions of closing):
  • Lipari Finco must complete a subscription receipt financing (the "Offering") for gross proceeds of not less than approximately CDN$40,000,000 at an issue price to be determined in the context of the market (the "Issue Price"). Lipari has retained Canaccord Genuity Corp. ("Canaccord" or the "Agent") to act as lead agent for the financing. Canaccord will have the right to form a syndicate of agents, (together with Canaccord, the "Agents") and may determine the compensation of the members of such syndicate. It is expected that the gross proceeds of the Offering will be escrowed with a third party escrow agent, and the subscription receipts will convert into non-voting preferred shares of Lipari Finco ("Finco Preferred Share"), and the net proceeds of the Offering will be released to Lipari Finco immediately prior to or after closing of the acquisition by Skyberry of the shares of common stock of Lipari or will be cancelled if the Transaction is not completed on or before the date that is 90 days following the closing of the Offering, with the gross proceeds being refunded to investors in the Offering. The agents for the financings will receive a 6.5% cash commission and broker warrants entitling them to acquire that number of non-voting preferred shares of Lipari Finco that is equal to 6.0% of the number of subscription receipts issued in the Offering for a period of 24 months at a price equal to the Issue Price. The net proceeds from the Offering will be used to repay debt, for corporate acquisitions and for general corporate purposes.

  • Skyberry will, with appropriate shareholder approval, consolidate its common shares at a to be determined ratio.

  • Skyberry will, with appropriate shareholder approval, change its name to a name that is selected by Lipari.

  • Skyberry will, with appropriate shareholder approval, change its authorized capital to provide for the issue of a class of restricted voting shares.

  • Skyberry will, with appropriate shareholder approval, implement a new stock option plan for directors, officers, employees and consultants.

  • Skyberry will, with appropriate shareholder approval, continue itself under the Business Corporations Act (British Columbia).

  • Skyberry will prepare a filing statement in accordance with the rules of the TSXV (the "Filing Statement"), outlining the terms of the Transaction. Lipari will provide assistance and details as to the business, assets, properties and operations of Lipari and will be responsible for any and all audited financial statements related to its business and operations (and pro forma financial statements) as well as the National Instrument 43-101 compliant technical report with respect to the material properties of Lipari, located in Kentucky.

The Transaction

Skyberry will acquire all of the shares of common stock of Lipari and all of the shares of Lipari Finco. It is expected that each shareholder of Lipari and of Lipari Finco will receive one share of Skyberry (on a post-consolidation basis) in exchange for each common share of Lipari or Finco Preferred Share, as the case may be (the "Exchange Ratio"). Holders of Finco Preferred Shares will receive their consideration in Skyberry common shares. For U.S. securities law purposes, shareholders of Lipari will receive their consideration in a combination of common and restricted voting shares of Skyberry. It is expected that Skyberry will also acquire any outstanding voting securities of Lipari Finco. All convertible securities, including the broker warrants issued to Canaccord Genuity, will be exchanged for convertible securities of Skyberry, with the number and type of underlying shares and the exercise price being appropriately adjusted to take into account the Exchange Ratio. The precise number of securities to be issued by Skyberry to acquire Lipari and Lipari Finco is unknown at this time and will depend on (i) the consolidation ratio to be approved by shareholders of Skyberry (the shareholders of Skyberry will approve such consolidation ratio within a certain range), and (ii) the final size and terms of the financing being undertaken by Lipari Finco. The exchange will be based on an assumed market capitalization for Skyberry of CDN$664,000.

On closing, all directors and officers of Skyberry will resign and nominees of Lipari will be appointed. Assuming the proposed financings are fully subscribed, following closing (and the consolidation) former shareholders of Skyberry will own approximately 0.5% of the shares of Skyberry and former shareholders of Lipari and Lipari Finco, on a combined basis, will own approximately 99.5% of the shares of Skyberry, each on a fully diluted in-the-money basis. 

About Lipari

Lipari was organized under the laws of the State of Delaware on August 27, 2008 and is the successor to Lipari Holdings, LLC, which was established on June 17, 2008. Lipari is a privately-held, thermal coal producer with current operations and additional development properties in the Central Appalachian region of the United States. The Company has been in production since 2008 and has diversified production across surface, highwall miner and underground mining operations. Lipari sells predominantly to regional utilities through a mix of forward contracts and short-term sales.

Lipari's growth strategy includes continued growth in reserve size over the next five years under its current drilling program, as well as strategic acquisitions. The Company is incorporated under the laws of Delaware and its corporate office is located in London, Kentucky.

Selected Financial Information Concerning Lipari

The table below sets out certain selected financial information regarding Lipari as at, and for the 12 months ended December 31, 2009 and as at, and for the 6 months ended June 30, 2010. The selected information for the 12 months ended December 31, 2009 is audited and was prepared in accordance with U.S. generally accepted accounting principles. The selected information for the 6 months ended June 30, 2009 is unaudited and was prepared in accordance with Canadian generally accepted accounting principles.

Balance Sheet   As at June 30, 2010   As at December 31, 2009
         
    (US$)   (US$)
         
    (unaudited)   (audited)
             
Current assets   $ 10,765,714   $ 9,426,023
             
Property, plant and equipment, including mineral rights and mine development costs, net   $ 39,023,896   $ 36,478,747
             
Restricted Cash   $ 9,061,788   $ 6,004,171
             
Total assets   $ 59,544,810   $ 53,279,135
             
Current liabilities   $ 22,322,585   $ 17,903,806
             
Royalty payable to TCW, net of current portion   $ 7,009,317   $ 7,334,903
             
Long-term debt, net of current portion   $ 8,459,740   $ 10,550,829
             
Total Liabilities   $ 41,644,760   $ 40,005,084
             
Shareholders equity   $ 17,900,050   $ 13,274,051
             
Total liabilities and equity   $ 59,544,810   $ 53,279,135
         
         
         
Statement of Operations   For the six months ended June 30, 2010   For the year ended December 31, 2009
         
    (US$)   (US$)
         
    (unaudited)   (audited)
             
Coal Sales   $ 39,649,987   $ 68,820,305
             
Gross Profit   $ 11,765,416   $ 20,692,273
             
Income from Operations (loss)   $ 9,805,691   $ 17,825,185
             
Net income (loss)   $ 4,697,103   $ 6,179,528

Insiders, Officers and Board of Directors of the Resulting Issuer

Upon completion of the Transaction all of the existing directors and officers of Skyberry will resign and it is anticipated that the board of directors will consist of John Liperote, Richard Liperote, David Warner, Daniel Geiger and Peter Mordaunt.

Lipari currently has seven shareholders, all of whom deal at arm's length to Skyberry. The current shareholders of Lipari who own more than 10% of the outstanding shares of common stock are John Liperote, Richard Liperote and Thomas Liperote. Prior to the completion of the Transaction, it is expected that certain funds managed by TCW Asset Management Company ("TCW") will exercise warrants to acquire shares of common stock of Lipari which will result in such funds collectively holding more than 10% of the then outstanding shares of common stock of Lipari.

The following sets outs the names and backgrounds of all persons who are expected to be considered insiders of the Resulting Issuer;

John Liperote (London, Kentucky), Chief Executive Officer and Director: Mr. John Liperote, 56 years old, joined Lipari as Chief Executive Officer in August 2008 and has over 30 years of experience in the coal industry. Prior to joining Lipari, Mr. John Liperote also served as President of Darmac Coal Inc. and was the former director of underground operations at Darmac Associates Inc. Mr. John Liperote will hold the position of Chief Executive Officer with the Resulting Issuer and will work full time for the Resulting Issuer.

Richard Liperote (London, Kentucky), President and Director: Mr. Richard Liperote, 42 years old, joined Lipari as President in August 2008 and has over 15 years of experience in the coal industry. Prior to becoming President of Lipari, Mr. Richard Liperote held the position of director (coal sales and acquisitions) at Lipari. Mr. Richard Liperote previously also served as Vice President of Liperote Coal Sales. Mr. Richard Liperote will hold the position of President with the Resulting Issuer and will work full time for the Resulting Issuer.

Thomas Liperote (London, Kentucky), Chief Operating Officer: Mr. Thomas Liperote, 53 years old, joined Lipari as director of surface operations in 2008 and has over 25 years of experience in the coal industry. Prior to joining Lipari, Mr. Thomas Liperote also served as Vice President of Darmac Coal Inc. and was the former director of surface operations at Darmac Associates Inc. Mr. Thomas Liperote will hold the position of Chief Operating Officer with the Resulting Issuer and will work full time for the Resulting Issuer.

David Stetson (London, Kentucky), Chief Financial Officer: Mr. Stetson, 54 years old, joined Lipari as Chief Financial Officer in July 2010. Mr. Stetson was an independent provider of financial and legal consulting services from November 2007 until July 2010 and from November 2002 until July 2006. Mr. Stetson has also served as Vice President of Finance and General Counsel of Trinity Coal Corporation, Genesis Coal Corporation, American Resources and Sunrise Coal. Mr. Stetson obtained his Bachelor of Science from Murray State University in May 1978, his Juris Doctorate from University of Louisville Law School in May 1982 and his MBA from the University of Notre Dame in May 2003. Mr. Stetson will hold the position of Chief Financial Officer with the Resulting Issuer and will work full time for the Resulting Issuer.

David Warner (Toronto, Canada), Director: Mr. Warner, 63 years old, was a partner at KPMG, LLP for 30 years until his retirement in October 2010. Mr. Warner has significant engagement experience with initial public offerings and regulatory matters. Mr. Warner graduated from McMaster University with a Bachelor of Commerce degree in 1970 and obtained his MBA from McMaster University in 1974. He is a member of the Canadian Institute of Chartered Accountants and the Institute of Chartered Accountants of Ontario.

Daniel Geiger (Lexington, Kentucky), Chairman: Mr. Geiger, 61 years old, was Chairman and CEO of Lexington Coal Company from August 2004 until July 2010 and served as Vice-President, Engineering of James River Coal Company from May, 1982 until August 2004. Mr. Geiger graduated from Ohio University in 1972 with a Bachelor of Science in Civil Engineering. Mr. Geiger is a Professional Engineer and is currently licensed by the State Board of Licensure for Professional Engineers and Land Surveyors in Kentucky and the West Virginia State Board of Registration for Professional Engineers. Mr. Geiger is a member of the National Society of Professional Engineers, the American Society of Civil Engineers and the Society for Mining, Metallurgy, and Exploration, Inc. Mr. Geiger also serves as Chairman of the mining practice group of the Kentucky Society of Professional Engineers.

Peter Mordaunt (Tucson, Arizona), Director: Mr. Mordaunt, 51 years old, was the founder of Stingray Copper Inc. (acquired by Mercator Minerals Ltd. in December 2009) and also served as its President and Chief Executive Officer from October 28, 2003 until January 2010. Mr. Mordaunt also served as CEO and Chairman of Stingray Copper Inc. from October 28, 2003 to January 2010. He also served as the Chairman and President of Corner Bay Silver Inc. from August 1992 until March 2003. He has been an independent director of Messina Minerals Inc. since June 2005 and Escape Gold Inc. since April 2007. He has been director of Pediment Gold Corp. since March 2010. He was also a director of Boulder Mining Corp. from August 2000 until June 2005. He has 25 years of experience in a wide range of Canadian and international resource projects. He is a Registered Professional Geoscientist. He is a member of the Institute of Corporate Directors and has the Professional Certification as ICD.D which is recognized both nationally and internationally. Mr. Mordaunt received a B.Sc. from the University of Guelph in 1982.

TCW: Certain investment funds managed by TCW are current holders of warrants to acquire 170 shares of common stock of Lipari (representing 20% of the currently issued and outstanding shares of common stock of Lipari on a fully diluted basis). Founded in 1971, TCW develops and manages a broad range of innovative, value-added investment products that strive to enhance and protect clients' wealth. The firm has approximately $110 billion in assets under management. TCW clients include many of the largest corporate and public pension plans, financial institutions, endowments and foundations in the United States, as well as a substantial number of foreign investors and high net worth individuals. TCW is a subsidiary of the French Bank Société Générale. For more information, please refer to www.tcw.com.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSXV unless exempt in accordance with TSXV policies. Skyberry is currently reviewing the requirements for sponsorship and may apply for an exemption from the sponsorship requirements pursuant to the policies of the TSXV, however there is no assurance that Skyberry will ultimately obtain this exemption.

Skyberry will make a subsequent press release of information regarding sponsorship, the board of directors, any additions to the management team, Lipari's coal reserves and resources, and details of the Offering.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to the requirements of the Exchange, 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. 

This news release and the information contained herein does not constitute an offer of securities for sale in the United States. The securities described in this press release have not been registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or exemption from registration.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to: the terms and conditions of the proposed transaction; the terms and conditions of the proposed Financing; future exploration and testing; use of funds; and the business and operations of Skyberry or Lipari after the proposed transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; the price of crude oil and natural gas; and the results of current exploration and testing. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Skyberry and Lipari disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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. 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.

Contact Information

  • For further information regarding the Transaction,
    please contact: Jesse Kaplan
    (647) 638-8740
    Jkaplan@plazacorp.com
    or
    Lipari Coal Holdings, Inc.
    David Stetson
    Chief Financial Officer
    606-599-8227
    606-599-0612 (FAX)