Stratton Capital Corp.

TSX VENTURE : SNK.P


January 10, 2014 13:47 ET

Stratton Capital Corp. Enters Into Letter of Intent With Be Nourished Inc. for Proposed Qualifying Transaction

TORONTO, ONTARIO--(Marketwired - Jan. 10, 2013) - Stratton Capital Corp. (TSX VENTURE:SNK.P) ("Stratton") is pleased to announce that it has signed a letter of intent (the "LOI") with Be Nourished Inc., a corporation existing under the laws of Ontario ("Be Nourished"), which outlines the general terms and conditions pursuant to which Stratton and Be Nourished would be willing to complete a transaction that will result in a reverse take-over of Stratton by the shareholders of Be Nourished (the "Transaction"). The LOI was negotiated at arm's length and is effective as of January 8, 2014.

The LOI is to be superseded by a definitive merger, amalgamation or share exchange agreement (the "Definitive Agreement") to be signed on or before February 14, 2014 (or such other date as may be mutually agreed in writing between Stratton and Be Nourished). The Transaction is subject to requisite regulatory approval, including the approval of the TSX Venture Exchange (the "TSXV") and a number of additional closing conditions, including completion of financing by Be Nourished for gross proceeds of no less than $3.0 million, the approval of the directors of each of Stratton and Be Nourished of the Definitive Agreement and completion of due diligence investigations to the satisfaction of each of Stratton and Be Nourished, as well as the conditions described below. The legal structure for the Transaction will be confirmed after the parties have considered all applicable tax, securities law and accounting efficiencies, however, it is currently contemplated that the transaction will be structured as a securities exchange.

Stratton is incorporated under the provisions of the Business Corporations Act (Ontario) with its registered and head office in Toronto, Ontario. It is a capital pool company and intends for the Transaction to constitute its "Qualifying Transaction" as such term is defined in the policies of the TSXV. Stratton is a "reporting issuer" in the provinces of Ontario, British Columbia and Alberta.

Since the Transaction is not a non-arm's length transaction, Stratton is not required to obtain shareholder approval for the Transaction.

Trading in the common shares of Stratton has been halted. It is unlikely that the common shares of Stratton will resume trading until the Transaction is completed and approved by the TSXV.

Conditions to Transaction

Prior to completion of the Transaction (and as conditions of closing, among other things):

  • Be Nourished must complete a private placement financing (the "Offering") for minimum gross proceeds of not less than $3,000,000. The terms and pricing of such financing and the involvement of any agents has not yet been determined and will be dependent on various factors, including market conditions.
  • The parties will prepare a filing statement in accordance with the rules of the TSXV, outlining the terms of the Transaction.
  • Be Nourished and Stratton will enter into a Definitive Agreement in respect to the Transaction on or before February 14, 2014.
  • Be Nourished will obtain the requisite shareholder approvals for the Transaction.
  • All requisite regulatory approvals relating to the Transaction, including, without limitation, TSXV approval, will have been obtained.

The Proposed Transaction

Pre-Closing Capitalization of Stratton

As of the date hereof, Stratton has 7,953,251 common shares ("Stratton Shares") issued and outstanding and options to acquire an aggregate of 1,098,250 additional Stratton Shares at an exercise price of $0.10 per Stratton Share.

Pre-Closing Capitalization of Be Nourished

As of the date hereof, Be Nourished's authorized capital consists of an unlimited number of common shares ("Be Nourished Shares"), of which 249,546 are issued and outstanding. Be Nourished also has outstanding securities exercisable or exchangeable for, or convertible into, or other rights to acquire, an aggregate of 15,877 Be Nourished Shares.

Terms of the Transaction

Stratton proposes to acquire all of the Be Nourished Shares pursuant to the terms of the Definitive Agreement. It is expected that each shareholder of Be Nourished will receive 64.88 Stratton Shares for each Be Nourished Share held (the "Exchange Ratio") at a deemed issue price of $0.1088 per Stratton Share. It is expected that on completion of the Transaction, the Be Nourished shareholders will receive an aggregate of 17,497,152 Stratton Shares in exchange for their Be Nourished Shares. Assuming that $3,000,000 in gross proceeds is raised in the Offering, it is expected on completion of the Transaction that the Stratton Shareholders will hold approximately 15% of the outstanding common shares of the combined entity (the "Resulting Issuer") and former Be Nourished Shareholders will hold approximately 33% of the outstanding common shares of the Resulting Issuer, with the investors in the Offering holding approximately 52% of the outstanding common shares of the Resulting Issuer.

About Be Nourished

Be Nourished is a privately held company with its head office at 132 Avenue Road, Suite B, Toronto, Ontario, M5R 2H6. The company was incorporated under the Federal laws of Canada on October 27, 2010. Be Nourished (operating under the trade name "benourished") is a health food brand of premium, all natural and preservative-free vegan food and beverage products that include cold-pressed juices, superfood smoothies and raw superfood snack products. The company's goal is to support healthy lifestyles by creating and distributing healthy and nutrient-dense food and beverage products that are convenient, tasty and that work to optimize health, energy and vitality.

Be Nourished manufactures and distributes products for busy and health-conscious individuals. The company's products have been developed by experts in clinical nutrition and botanical medicine. Specifically, the company focuses on the development and distribution of products that contain superfood and antioxidant ingredients and ingredients that exclude common allergens such as dairy, corn, eggs, wheat, peanuts, shellfish and soy. Currently, the manufactured products are distributed locally within the province of Ontario.

Be Nourished prides itself on providing quality products and intends to continue its national expansion as well as its position as a supplier of vegan juices and superfood snacks to the health food industry. Be Nourished management believes that it is poised for significant growth given the growing trend toward healthier food and beverage choices and through expansion of the company's production and distribution.

Each of Julie McClure and Mike Hoehn who are each residents of Ontario own 20% or more of the issued and outstanding Be Nourished Shares

Financial Information Concerning Be Nourished

The table below sets out certain selected unaudited financial information regarding Be Nourished as at, and for the 12 months ended October 31, 2013 (unaudited). The selected information was prepared in accordance with International Financial Reporting Standards (IFRS).

Balance Sheet As at October 31, 2013
(unaudited)
Current Assets $705,047
Non-Current Assets $349,510
Total Assets $1,054,557
Current Liabilities $100,958
Non-Current Liabilities $65,000
Total Liabilities $165,958
Shareholders' equity $888,599
Total liabilities and equity $1,054,557
Statement of Comprehensive For the year ended
Income October 31, 2013
(unaudited)
Sales $488,523
Gross Profit $274,726
Net Profit/(Loss) for the Period $(588,367)

Insiders, Officers and Board of Directors of the Resulting Issuer

Upon completion of the Transaction, it is anticipated that the board of directors of the Resulting Issuer shall be comprised of: David Subotic, David Tsubouchi, Don Robinson, Julie McClure Joseph Murgel and John Zorbas. It is further anticipated that Don Robinson will be the Chief Executive Officer of the Resulting Issuer and Raphael Danon will be the Chief Financial Officer. Biographical information for each of the proposed directors and officers of the Resulting Issuer is below:

Don Robinson - Proposed Director and proposed Chief Executive Officer

Don Robinson has over 30 years of management and marketing experience in the hospitality and food service industries. He began his career in a general management and marketing role with Nabisco Brands, and then spent more than 20 years with Mars Incorporated before his role as President and CEO of Cara operations limited. Mr. Robinson was Executive Director of The Food & Consumer Products of Canada, and the Chairman of the Board of the Confectionery Manufacturers Association of Canada. Don is a member of various academic councils, including Ted Rogers School of Management Advisory Council, University of Guelph School of Hospitality & Tourism Management Policy Advisory Board and the Queen's University School of Business Advisory Board.

Julie McClure - Proposed Director and proposed President of Be Nourished

Ms. McClure is currently the president and CEO of Be Nourished Inc. Prior to founding Be Nourished, Julie worked for ten years in corporate finance, first as an investment banking analyst at Morgan Stanley in New York, then as Assistant Vice President at Borealis Capital, before becoming a Vice President, Institutional Equity Sales at Morgan Stanley in Toronto. Ms. McClure also holds a B.Sc., Biology, and an Honours in Business Administration degree.

Raphael Danon - Proposed Chief Financial Officer

Raphael Danon, CPA, CA, is a member of the Institute of Canadian Institute of Chartered Accountants. Mr. Danon has been Chief Financial Officer at NWT Uranium Corp., since 2008. Mr. Danon is a founding shareholder of Asian Coast Development Ltd., an international property developer, where he served as Interim Chief Financial Officer and VP of Finance. He helped raise over $80 Million for the project, in addition to setting up the company from its inception. Mr. Danon is a business builder, manning many roles in its infancy as the company developed.

David Subotic - Proposed Director

David Subotic has over fifteen years of experience in the financial services industry. David is currently the CEO and founder of DAS Capital. Mr. Subotic previously held positions in leading Canadian investment firms Yorkton Securities and Haywood Securities, during which time David participated in more than US$2B in financings, personally raising more than $500 million. David founded the international hospitality and development company, Asian Coast Development (Canada) Ltd., serving as its initial Chief Executive Officer.

David Tsubouchi -Proposed Director

David Tsubouchi is the Registrar and CEO of the Ontario College of Trades. Mr. Tsubouchi holds a B.A. from York University, a J.D. from Osgoode Hall Law School and an LL.D. from Assumption University in Windsor. Mr. Tsubouchi has served as the MPP for Markham for two terms and has held several cabinet posts in the Ontario Legislature including Minister of Consumer and Commercial Relations, Solicitor General, Chair of Management Board and Minister of Culture. Prior to serving in the Ontario Legislature, Mr. Tsubouchi served as a Councillor for the Town of Markham for two terms. He recently served as the Integrity Commissioner for the Town of Richmond Hill. Mr. Tsubouchi currently sits on the Board of Governors for Seneca College, and the board of directors for the Markham Stouffville Hospital. He has served on many boards of directors including Hitachi Canada, York University, the Canadian Professional Golf Tour and Teranet Income Trust. He was also appointed as the Co-Chair of the Canada Vietnam Business Council by the Republic of Vietnam.

Joseph Murgel - Proposed Director

Joe Murgel has founded and operated several successful businesses in several different industries, including marketing and promotions. Most notably Joe has over 40 years of experience in the construction industry, being involved in construction and development, and has extensive project management experience in the facilitation of new deployment projects. Mr. Murgel has been responsible for overseeing the management, sales, design and contract negotiation of award winning design-build and construction management projects.

John Zorbas - Proposed Director

John Zorbas is a director of NWT Uranium Corp., and a director of Stratton. Mr. Zorbas holds an Honors Bachelors degree in Economics from the University of Toronto.

Following completion of the Transaction and the Offering (assuming gross proceeds of $3 million), it is anticipated that Julie McClure will exercise direction or control over more than 10% of the issued and outstanding shares of the Resulting Issuer.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSXV unless exempt in accordance with TSXV policies. Stratton 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 an exemption is available or that Stratton will ultimately obtain an exemption if one is available. Stratton intends to include any additional information regarding sponsorship in a subsequent press release.

All information contained in this news release with respect to Stratton and Be Nourished was supplied by the parties respectively, for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.

Stratton will issue additional press releases when as the specific information related to the final legal structure of the Transaction, financing terms, sponsorship and other material information becomes available. For further information regarding the Transaction, please contact:

Raphael Danon, CFO
rdanon@dascapitalltd.com

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

NEITHER THE 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.

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 Offering; future developments; use of funds; and the business and operations of the Resulting Issuer 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; and the results of continued development, marketing and sales. 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. Stratton and Be Nourished 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.

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