KAPA Capital Inc. and Quantus Resources Corp. Provide Update on Qualifying Transaction with Quantus Resources Corp.
2475 Queens Avenue West Vancouver, BC V7V 2Y9
Quantus Resources Corp.
Registered Office:
Suite 1400 – 1125 Howe Street Vancouver, BC V6Z 2K8
KAPA Capital Inc. and Quantus Resources Corp. Provide Update on Qualifying Transaction with Quantus Resources Corp.
February 14, 2022: KAPA Capital Inc. (TSX-V: KAPA.P) (“KCI”) and Quantus Resources Corp. (“Quantus”) wish to provide an update on the status of the transaction between KCI and Quantus which is intended to constitute KCI’s “Qualifying Transaction” in accordance with Policy 2.4 of the TSX Venture Exchange (the “Exchange”). KCI and Quantus entered into an amended and restated acquisition agreement and an amended and restated arrangement agreement (the “Arrangement Agreement”) both dated for reference September 22, 2020 and amended effective March 21, 2021, pursuant to which KCI has agreed to acquire all of the issued and outstanding common shares of Quantus (the “Qualifying Transaction”).
Quantus is a privately held company incorporated under the laws of the province of British Columbia on June 16, 2010. Quantus holds an option to earn a 100% interest, subject to certain royalties, in a natural resource exploration and development project targeting gold and other metals and minerals located near the Lucerne Valley in San Bernardino County, California (the “Blackhawk Property”). Under the Arrangement Agreement, Quantus shall make a final payment of 750,000 common shares completing all option payment obligations and in doing so, earn a 100% interest in the Blackhawk Property subject to certain royalties. The royalties include the following:
a. a 2% gross rock royalty payable to Blackhawk Rising, LLC (“Blackhawk Rising”) in regard to any sales of gravel, sand or rock derived from the Blackhawk Property;
b. a 2% net smelter returns royalty payable to Blackhawk Rising in regard of any sales of minerals other than gravel, sand or rock derived from the Black Property;
c. a 1% gross rock royalty payable to each of Blackhawk Rising and Raven Royalty Development Corp. (“Raven Royalty”) in regard of any sales of minerals other than gravel, sand or rock derived from the Area of Influence (as defined herein); and
d. a 1% net smelter returns royalty payable to each of Blackhawk Rising and Raven Royalty in regard of any sales of minerals other than gravel, sand or rock derived from the Area of Influence.
The “Area of Influence” is an area delineated by the perimeter of the Blackhawk Property and a boundary of three miles immediately surrounding the perimeter of the Blackhawk Property. Both Blackhawk Rising and Raven Royalty are arm’s length parties to KCI and Quantus.
History of the Blackhawk Property
The Blackhawk Property comprises of eight patented claims in three non-contiguous groups and 179 mineral claims under Bureau of Land Management registration. The Blackhawk Property mineralization is best described as carbonate-hosted epithermal gold-silver and base metal bearing skarn deposit types. Exploration conducted at the Blackhawk Property during the period 2016 to 2018 includes geological mapping, structural analysis, mineral deposit analysis, lightning strike geophysical data interpretation, rock and talus sampling, airborne geophysics and ground based induced polarization, magnetics and VLF-EM surveys.
Resulting Issuer
KCI, after completion of the Qualifying Transaction, is referred to in this news release as the “Resulting Issuer”. Upon completion of the Qualifying Transaction, the parties anticipate that the Resulting Issuer will be listed as a Tier 2 Mining Issuer on the Exchange. The Qualifying Transaction is at arm’s length and is therefore not a Non-Arm’s Length Qualifying Transaction under Policy 2.4 of the Exchange. Accordingly, KCI is not required to obtain shareholder approval of the Qualifying Transaction. There are no Non-Arm’s Length Parties in respect of the Qualifying Transaction.
Details of the Qualifying Transaction
The Qualifying Transaction will be effected by way of a court approved plan of arrangement under the Business Corporations Act (British Columbia). The Resulting Issuer will acquire 100% of the outstanding common shares of Quantus by issuing to each shareholder of Quantus one (1) common share in the capital of Resulting Issuer in exchange for one (1) Quantus common share held by such shareholder. All convertible securities of Quantus shall be converted into convertible securities of Resulting Issuer without modification to the exercise price or term. Following the closing of the Qualifying Transaction, the Resulting Issuer will own 100% of Quantus’ outstanding common shares. A total of 50,947,473 Resulting Issuer shares are expected to be issued to the shareholders of Quantus at a deemed price of $0.25 per Resulting Issuer share.
The completion of the Qualifying Transaction is subject to the satisfaction of certain conditions being met, including but not limited to: (i) the filing of the draft completed Exchange Form 3B2 (Information Required in a Filing Statement for the Qualifying Transaction); (ii) public filing of the NI 43-101F1 Report on the Blackhawk Property; (iii) public court filing of a fairness opinion; (iv) conditional approval of the Exchange in respect of the Arrangement Agreement; (v) the completion of a non-brokered unit private placement by Quantus resulting in gross proceeds of $2,811,300, which is expected to consist of 11,245,200 units at the price of $0.25 per unit, where each unit comprises one common share and one–half of one share purchase warrant, with each whole warrant exercisable to purchase one common share at the price of $0.40 for a period of 24 months (the “Concurrent Financing”); (vi) the payment of 750,000 common shares of Quantus to the beneficial owners of Blackhawk Rising; (vii) settlement of $29,869.86 of debt convertible into 298,699 Quantus common shares; and (viii) the issuance of 500,000 common shares to Asty Capital AG. The aggregate number of issued and outstanding Resulting Issuer common shares upon completion of the proposed Qualifying Transaction is expected to be 56,060,744.
The Arrangement Agreement is subject to final approval of the Supreme Court of British Columbia and is conditional upon the Resulting Issuer receiving approval for listing on the Exchange.
Finder’s fees of $16,500 and 66,000 finder’s fee warrants will be issued in relation to the Concurrent Financing. Additional finder’s fees may be paid in connection with the Concurrent Financing, in accordance with the policies of the Exchange. Further finder’s fees are not expected to be paid in connection with the Qualifying Transaction.
There has not been a sponsor retained in connection with the Qualifying Transaction. Quantus is seeking a waiver from the sponsorship requirements pursuant to section 3.4 of Policy 2.2 of the Exchange on the following basis: (i) the directors of the Resulting Issuer shall collectively meet a high standard of corporate governance, (ii) the mineral exploration experience of the directors of the Resulting Issuer individually and collectively includes appropriate technical experience in the industry, and (iii) the qualifications and history of the directors of the Resulting Issuer is suitable both on an individual basis and as a group, such that the board of directors of the Resulting Issuer collectively possess adequate knowledge for the daily management and administration of the Resulting Issuer. There is no assurance that such a waiver will be granted.
Select Financial Information of Quantus
| Nine month period ended September 30, 2021 (unaudited) ($) | Year ended | Year ended December 31, 2019 (audited) ($) |
|---|---|---|
| December 31, | ||
| 2020 | ||
| (audited) ($) |
Nil Nil Nil
Revenue
(117,961) (321,115) (594,159)
Net Income (Loss)
1,660,493 996,268 689,688
Total Assets
498,783 1,006,143 586,125
Total Liabilities
Principals and Insiders of the Resulting Issuer
The principals of the Resulting Issuer are expected to be as follows:
1. David K. Paxton, East Sussex, U.K., Chief Executive Officer. Mr. Paxton will be the CEO and a director of the Resulting Issuer. He is currently the CEO and a director of Quantus, and has been in those positions since November 6, 2017. He was a director at Pelangio Exploration Inc. from December 2017 to August 2020. Mr. Paxton trained as a mining engineer in the South African mining industry from November 2008 to April 2014. Mr. Paxton served as CEO of Vatukoula Gold Mines, PLC, a U.K. publicly listed gold production company with assets in Fiji.
2. George E. Nicholson, Vancouver, Canada, Director. Mr. Nicholson will be a director of the Resulting Issuer. He is presently a director of Quantus and has been since June 2010. He was formally the President of Quantus from June 2017 to November 2017. He is presently a director of EVI Global Group Developments Corp., a position he has held since August 2014. Mr. Nicholson was a director of Canabo Medical Inc. from March 2010 until April 2013. Mr. Nicholson’s principal occupation is a geologist.
3. Alexander P. Tsakumis, Vancouver, Canada, Director. Mr. Tsakumis will be a director of the Resulting Issuer. He has been a director at Quantus since November 6, 2017. He is a public markets specialist with over 25 years of experience in mining industry in all areas from exploration to production. He’s represented mining resource companies listed on major stock exchanges (including the Toronto Stock Exchange and the New York Stock Exchange). His responsibilities have included corporate governance, corporate communications, finance and maintaining strong relationships within investment banking and institutional investors. Mr. Tsakumis was formally the Vice President of Belcarra Group, Alio Gold/Timmins Gold Corp. and Orko Silver, as well as a founding director of the gold producer Magna Gold.
4. Darren Prins, Vancouver, Canada, Chief Financial Officer. Mr. Prins will be the CFO of the Resulting Issuer. He has been the CFO of Quantus since November 2017. He is a Chartered Professional Accountant and has been a partner at Invictus Accounting Group LLP since August 2018. He was the CFO of Founders Advantage Capital Corp from June 2016 to June 2017, the CFO at Timmins Gold Corp. from August 2011 to May 2016, and a corporate controller at Rusoro Mining from October 2009 to July 2011.
5. Anjula Trikala, Vancouver, Canada, Corporate Secretary. Ms. Trikala will be the corporate secretary at the Resulting Issuer. She is currently the corporate secretary for Regency Silver Corp. Her prior experience also includes being the office manager at Timmins Gold Corp. from 2006 to 2016.
6. Vivian Katsuris, Vancouver, Canada, Director. Ms. Katsuris will be a director of the Resulting Issuer. Ms. Katsuris has been the CFO, Corporate Secretary and a director at KCI since January 2018. Ms. Katsuris has been the President of Vivkor Holdings Inc. since August 2014. Vivkor Holdings Inc. is a private company that provides corporate development, management, consulting, and corporate services. She has over 28 years of financial experience in the brokerage industry and in North American capital markets and public financings. Ms. Katsuris was an Investment Advisor for over 20 years with Global Securities Corp. and for 10 years with Canaccord Capital Corp. (now Canaccord Genuity Group Inc.) in the Canadian and United States divisions. Since 2014, she has held director and officer positions with several Canadian Securities Exchange and TSX Venture Exchange listed companies.
7. Alan Williams, Vancouver, Canada, Director. Mr. Williams will be a director at the Resulting Issuer. He has been a director at KCI since January 2018. Mr. Williams has been the director of various publicly traded companies including: Goldhills Holding Ltd. (formally Greatbanks Resources Ltd.) from July 2003 to April 2018; Maritime Resources Corp. from 2007 to 2018; True Grit Resources Ltd. from January 2012 to April 2018; and Goldrush Resources Ltd. from October 2003 to January 2016.
On Behalf of Quantus’ Board On Behalf of KCI’s Board
“David K. Paxton” “Charalambos (Harry) Katevatis”
David K. Paxton Charalambos (Harry) Katevatis CEO and Director President, CEO and Director
For further information, contact Charalambos (Harry) Katevatis at 604 836-6667 or email: [email protected]
“Statements in this press release regarding KCI which are not historical facts are “forward-looking statements” that involve risks and uncertainties, such as the completion of the proposed Qualifying Transaction. Such information can generally be identified by the use of forwarding-looking wording such as “may”, “expect”, “estimate”, “anticipate”, “intend”, “believe” and “continue” or the negative thereof or similar variations. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties such as the risk that the closing may not occur for any reason. Forwarding-looking statements in this news release include the statements that: (i) the parties anticipate that the Resulting Issuer will be listed as a Tier 2 Resource Issuer and (ii) list out the terms of the Quantus Financing.
Actual results in each case could differ materially from those currently anticipated in such statements due to factors such as: (i) the decision to not close the Qualifying Transaction for any reason, including adverse due diligence results and Exchange refusal of the Qualifying Transaction; (ii) adverse market conditions; and (iii) the need for additional financing. Except as required by law, KCI does not intend to update any changes to such statements.
Completion of the Qualifying 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 Qualifying Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Qualifying 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 Qualifying 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 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.