Hodgins Announces Plan of Arrangement to Spin Out Mineral Exploration Subsidiary

MELFORT, SK, Feb. 23, 2015 /CNW/ - Hodgins Auctioneers Inc. ("HAI") (TSXV: HA) wishes to announce that it shall be proposing to its shareholders a Plan of Arrangement ("Arrangement") to restructure the HAI by distributing 100 per cent of the common shares of its wholly owned subsidiary, Majesta Minerals Inc. ("MMI") to the shareholders of HAI and to provide warrantholders and optionholders with options and warrants in the spinout entity.  Under the Arrangement each shareholder of HAI will receive one (1) common share of MMI for every three (3) post Consolidation (defined below) common shares held in HAI in the aggregate of 3,786,250 common shares at a deemed price of $0.15 per MMI common share for an aggregate deemed consideration of $567,937.  Under the Arrangement each warrantholder of HAI will receive one (1) warrant of MMI for every three (3) post Consolidation warrants held in HAI. Each optionholder of HAI will receive one (1) option of MMI for every three (3) post Consolidation options held in HAI. Particulars of the exercise price and expiry dates of the warrants and options are set out below.

Plan of Arrangement

The Arrangement is subject to court and regulatory approval. The Arrangement is subject to a corporate law provision requiring shareholder approval of at least 66 2/3 percent of the shareholders and warrantholders, in separate classes, voting in person or by proxy at the Meeting (as defined below) in favour of the transaction. The Arrangement is subject to the securities law provisions of MI 61-101 requiring shareholder approval of at least 50.1% of the shareholders and warrantholders, in separate classes, voting in person or by proxy in favour of the transaction (in a vote where the votes of certain non-arm's length shareholders/warrantholders shall not be included in the calculation).  An Annual General and Special Meeting of the securitiesholders of HAI has been called for March 13, 2015 (the "Meeting").  If approved it is expected that the transaction will be completed shortly after March 13, 2015. The Arrangement will only be effected if MMI has obtained conditional approval to list the common shares of MMI on the Canadian Securities Exchange ("CSE") and satisfied such conditions prior to the completion of the Arrangement.  There is no assurance that the CSE will grant the conditional approval.   If approved, upon the completion of the Arrangement two companies will exist, as stand-alone public entities.  MMI will thereby become a reporting issuer in the Provinces of British Columbia and Alberta upon completion of the Arrangement and a reporting issuer in Ontario upon listing on the CSE.

The Arrangement is being proposed to facilitate the separation of HAI's current business activities into its constituent parts to reflect the different activities that are intended to be pursued by HAI (industrial) and MMI (mineral exploration). Because the two business activities seek to attract different investors with different risk profiles, it is believed that the ongoing financing of the mining part of the business will be accomplished if the mining business is in a separate entity. The Board of Directors has obtained a fairness opinion from Pin Services Ltd. which fairness opinion will be included in the Information Circular prepared in support of the approval of the Arrangement.

The Arrangement will occur by statutory arrangement under the Alberta Business Corporations Act ("ABCA"). The principle features of the Arrangement are summarized below, and the following is qualified in its entirety by reference to the full text of the Arrangement Agreement and the Plan of Arrangement, which will be incorporated by reference into an Information Circular. These items will also be available for review at www.sedar.com under HAI's profile.

The Arrangement shall become effective under the ABCA upon filing of all requisite documents with the Registrar of Corporations for the Province of Alberta. Pursuant to the Arrangement Agreement, the requisite documents will only be filed upon satisfaction of various conditions:

(a)		the Arrangement Agreement must be approved by the Shareholders and Warrantholders;
(b)		the Arrangement must be approved by the Court of Queen's Bench of Alberta;
(c)		all other consents, orders, regulations and approvals, including regulatory and judicial approvals and orders, required, necessary or desirable for the completion of the Arrangement must have been obtained or received, each in a form acceptable to HAI and MMI, including:
		(i)	TSXV approval of the Arrangement; and
		(ii)	conditional listing approval for MMI on the CSE and the satisfaction of all conditions necessary to effect the listing other than the timing of the trading of the shares of MMI.
(d)		consolidation of the common shares of HAI on a two (2) old for one (1) new basis ("Consolidation");
(e)		closing of a non-brokered private placement by MMI (minimum $525,000 and maximum $1,350,000 by the issuance of between 3,500,000 and 9,000,000  units at $0.15 per unit ("MMI Units").  Each unit to consist of one (1) MMI common share and one half of one (1/2) MMI common share purchase warrant entitling the holder of a full warrant to purchase one (1) MMI common share at any time within 1 year of issuance for $0.225 per MMI common share)("MMI Private Placement")  MMI is offering to pay finders a 8% cash fee plus ten (10) common shares for every one hundred (100) MMI Units sold to subscriber introduced by finder at a deemed price of $0.15 per share.  Insiders are not intending on participating in the MMI Private Placement;
(f)		the number of dissenting shareholders of HAI shall not exceed five (5) percent of the issued and outstanding shares of the HAI; and
(g)		the Arrangement Agreement must not have been terminated.

 

If any condition set out in the Arrangement Agreement is not fulfilled or performed, the Arrangement Agreement may be terminated, or, in certain cases, one or more of the parties thereto, as the case may be, may waive the condition in whole or in part. Management of HAI believes that all material consents, orders, regulations, approvals or assurances required for the completion of the Arrangement will be obtained in the ordinary course upon application thereof.

History of Majesta Minerals Inc. and Transactions Related to the Arrangement

MMI was incorporated on August 6, 2014, to acquire a 25% interest in 9 uranium prospective mineral claims ("Majesta Mineral Claims") which cover covers 39,125 hectares, 230 km north-north-west of La Ronge, Saskatchewan on parts of NTS 74G-01, 74B-16 and 74H-04, and 24 km southwest of the active Key Lake mill.   Pursuant to the terms of the Purchase/Option Agreement ("Purchase/Option Agreement") dated August 7, 2014 (as amended) between MMI and MRI Holdings Ltd. ("MRI") (formerly Majesta Resources Inc.) the following consideration was paid by MMI to MRI to acquire  25% interest on August 8, 2014:

Nature of Transaction	Interest In Majesta Mineral Claims	Assumption of Debt to Durama Enterprises Limited	Cash	Common Shares Of Hodgins Auctioneers Inc	Exploration Work Commitments	Total Consideration
Purchase	25%	$100,000	nil	2,000,000 ($100,000)	$300,000	$500,000

 

HAI raised $365,000 by non-brokered private placement on August 8, 2014.  MMI borrowed $365,000 from the HAI in order to pay for: (a) the exploration work commitment; and (b) $65,000 in soft costs associated with the Plan of Arrangement. Pursuant to the Arrangement, MMI will issue 3,786,250 common shares at a deemed price of $0.15 per share to HAI in exchange for the debt owing by MMI to HAI, being $567,937 consisting of: (a) $365,000; (b) $100,000 in shares issued by HAI to MRI Holdings Ltd. ("MRI") on August 8, 2014; and (c) $102,937 in debts paid by HAI to complete the Arrangement. Following completion of this issuance, HAI shall distribute the 3,786,250 common shares of MMI to the shareholders of HAI on a pro rata basis pursuant to the Arrangement.  Each shareholder will retain its existing common share in HAI. In addition, there will be 686,083 MMI warrants issued by MMI with an exercise price of $0.45 per MMI common share expiring August 8, 2015. There will also be 66,667 MMI options issued by MMI with an exercise price of $1.08 per MMI common share expiring August 24, 2017 and 61,500 MMI options issued by MMI with an exercise price of $0.60 per MMI common share expiring March 6, 2015.

If the Minimum MMI Private Placement is raised ($525,000), pursuant to the Purchase/Option Agreement, MMI will exercise an option ("Majesta Option #1") to acquire an undivided 35% interest in the Majesta Mineral Claims from MRI for the following consideration:

Nature of Transaction	Interest In Majesta Mineral Claims	Cash	Common Shares Of MMI $0.15 per share	Exploration  Work Commitments	Total Consideration
Majesta Option #1	35%	Nil	1,333,333 ($200,000)	$400,000	$600,000

 

If the Maximum MMI Private Placement is raised ($1,350,000), pursuant to the Purchase/Option Agreement, MMI will exercise the Majesta Option #1 and a second option ("Majesta Option #2") to acquire an undivided 40% interest in the Majesta Mineral Claims from for the following consideration:

Nature of Transaction	Interest In Majesta Mineral Claims	Cash	Common Shares Of MMI $0.15 per share	Exploration  Work Commitments	Total Consideration
Majesta Option #2	40%	$300,000	666,666 ($100,000)	Nil	$400,000

 

If the maximum MMI Private Placement is raised, in addition to the shares, warrants and options issued to HAI , the following payments or share issuances will be made: (a) $400,000 will be segregated into an exploration account to conduct the Phase 1 work program recommended by Mr. Andrew J. Gracie in the November 27, 2014 MI 43-101 Report (which will be attached to the Information Circular); (b) 1,333,333 common shares of MMI will be issued to MRI at a deemed price of $0.15 per MMI share; (c) $300,000 cash will be paid to MRI; (d) 666,666 common shares of MMI will be issued to MRI at a deemed price of $0.15 per MMI share; and (e) $100,000 cash will be paid to Durama Enterprises Limited ("DEL")(assumed as part of the 25% acquisition of the Majesta Mineral Claims on August 8, 2014. If the maximum finders shares were payable on all subscriptions this would result in an addition 900,000 MMI shares being issued. 

Information on MRI Holdings Ltd.

MRI is owned by Randy Studer and related parties (64.7%); Grant Hodgins 27.5%; Barrie Jung (5%) and 3 others 2.8%.  Grant Hodgins and Barrie Jung are directors of HAI. Grant Hodgins is the CEO of HAI.  Randy Studer is a director and controlling shareholder of DEL and an officer and director of MMI.  If the maximum MMI Private Placement is raised, there will be 14,786,249 MMI shares issued and outstanding consisting of: (a) 3,786,250 issued HAI (to be distributed to the shareholders of HAI); (b) 9,000,000 shares to be issued pursuant to the MMI Private Placement; and (c) 2,000,000 MMI shares issued to MRI upon exercise of the Majesta Option #1 and Majesta Option #2. 

Share Consolidation to Be Effected by the HAI Concurrently with the Plan of Arrangement

On January 12, 2015 the HAI announced its intention to: (a) carry out the Consolidation; and (b) seek to close a non-brokered private placement to raise $550,000 by the sale of 11,000,000 units at $0.05 per unit ("HAI Unit")(post Consolidation).  Each unit shall consist of one (1) post Consolidation common share and one half of one (1/2) post Consolidation common share. Each full warrant would entitle the holder to purchase a post Consolidation common share for $0.075 any time with 1 year of issuance of the warrant)("HAI Private Placement"). In connection with this private placement, HAI will pay cash finder's fees equal to 8% of the funds raised to eligible finders who introduce subscribers to the private placement and issue one (1) post Consolidation common share and one (1) post Consolidation finder's fee warrant for every 10 HAI Units issued to eligible subscribers.  Each post Consolidation finder's fee warrant will be issued to finders on the same terms as the warrants comprising the HAI Units.  Insiders are not intending on participating in the HAI Private Placement.

The Arrangement would be closed after the consolidation but before the closing of the HAI Private Placement.  The subscribers of the HAI Private Placement would not participate in the distribution of the MMI securities.  HAI has 22,717,500 common shares issued and outstanding.  There would be 11,358,750 common shares post Consolidation which would be entitled to participate in the distribution of MMI shares.  There will be 384,500 outstanding post Consolidation options which would be entitled to distribution of MMI options and 2,058,250 outstanding post Consolidation warrants entitled to distribution of MMI warrants as part of the Arrangement. The warrants will have an exercise price of $0.15 per post Consolidation common share expiring August 8, 2015. There will be 200,000 options with an exercise price of $0.36 per post Consolidation common share expiring August 24, 2017.  There will be 184,500 options with an exercise price of $0.20 per post Consolidation common share expiring March 6, 2015.  If the maximum HAI Private Placement is raised, there will be 22,358,750 common shares issued and outstanding consisting of: (a) 11,358,750 existing common shares post Consolidation; and (b) 11,000,000 shares to be issued pursuant to the HAI Private Placement. If the maximum finders shares were payable on all subscriptions this would result in an addition 1,100,000 post Consolidation common shares being issued.

HAI expects that following the completion of the Arrangement and if the MMI Private Placement is fully funded, MMI will own 100% of the Majesta Mineral Claims and MMI will continue to focus on pursuing the development of the Majesta Mineral Claims at Key Lake, Saskatchewan.  The Majesta Mineral Claims have no indicated resources or reserves.   The corporate headquarters of MMI is 203, 221 – 10th Avenue SE, Calgary, Alberta, T2G 0V9.   Presented below is the anticipated corporate structure of HAI before and after completion of the Arrangement.

Corporate Structure Prior to the Plan of Arrangement:

http://files.newswire.ca/1387/HA_Corp_Structure.pdf

Corporate structure after: (a) Consolidation; (b) Plan of Arrangement; (c) Maximum MMI Private Placement; (d) Maximum HAI Private Placement; and (e) Exercise of Majesta Option #1 and Majesta Option #2 by MMI to acquire a 75% interest in the Majesta Mineral Claims:

http://files.newswire.ca/1387/HA_Corporate_after.pdf

Non Approval of the Arrangement

If the Arrangement is not approved then MMI will remain a wholly owned subsidiary of HAI.  MMI will not be able to finance the monies needed to exercise Majesta Option #1 or Majesta Option #2 within HAI without the approval of the TSX Venture Exchange ("TSXV") because HAI will be deemed to be carrying on a "Change of Business" as defined under TSXV Policy 5.2. This will require TSXV approval and a new Information Circular and another shareholder meeting will need to be held.  There is no assurance that the TSXV will accept such "Change of Business".

Trading Halt

The common shares of the HAI will remain halted until the Arrangement is completed or terminated or pending receipt by the TSXV of applicable documentation.

About Hodgins Auctioneers Inc.

Hodgins Auctioneers is an auction company conducting business in Western Canada.  For further information, please contact Grant Hodgins, CEO, 306.752.2075 or visit www.hodginsauctioneers.com

Reader Advisory

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur.  In particular, forward-looking information in this press release includes, but is not limited to, statements with respect to the timing and completion of the proposed private placement and related information. Although we believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. 

"Completion of the transaction is subject to a number of conditions, including Exchange acceptance and disinterested Shareholder approval. 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  to be prepared in connection with the transaction, any information released or received with respect to the Arrangement may not be accurate or complete and should not be relied upon. Trading in the securities of Hodgins Auctioneers Inc. should be considered highly speculative.

The TSX Venture Exchange 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)

SOURCE Hodgins Auctioneers Inc.

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