Tickers: PINX:CWNHF, XTSX:CNH
VANCOUVER, BRITISH COLUMBIA - TheNewswire - April 24, 2020 - Crownia Holdings Ltd. (TSXV:CNH) (OTC:CWNHF) ("Crownia" or the "Company") announce that, further to its news releases of September 11, 2019 and November 18, 2019, the signed non-binding LOI and the Amendment with Thena Potash Corporation have been terminated and shall be of no further force or effect, except those provisions that expressly survive the termination thereof.
The Company is also pleased to announce that it has entered into a legally binding letter agreement (the "Letter Agreement") dated March 31, 2020 with Magnifacent Business Co., Ltd. ("Magnifacent"). The Company will complete a business combination (the "Transaction") with Magnifacent by acquiring all of the issued and outstanding securities of Magnifacent from its shareholders. The proposed Transaction is intended to constitute a "Reverse Takeover" of Crownia, as such term is defined in policy 5.2 (the "Policy") of the TSX Venture Exchange (the "TSXV").
On closing (the "Closing") of the Transaction, it is anticipated that the resulting issuer (the "Resulting Issuer") will be listed as a Tier 2 "Industrial" issuer on the TSXV.
Pursuant to the Letter Agreement, the Transaction will be effected by the Company issuing 9,650,000 common shares (the "Consideration Shares") to the shareholders of Magnifacent to acquire all of the issued and outstanding securities of Magnifacent, which will result in Magnifacent becoming a wholly-owned subsidiary of the Resulting Issuer. It is currently anticipated that the 9,650,000 common shares will be issued at a deemed price of $0.55 per share for an aggregate deemed purchase price of $5.3075 million. There are no deposits, advances or loans contemplated to be made from Crownia to Magnifacent.
In addition to the Consideration Shares, the Company will issue, a) up to additional 2,000,000 common shares, at a deemed price of C$0.55 per share to the holders of the convertible preferred shares (the "MGC CPS") issued by Magnifacent to certain investors who will receive 2,000,000 Magnifacent common shares on a one-to-one basis because such Magnifacent CPS will be automatically converted into Magnifacent common shares at a predetermined conversion of C$0.55 per share; and, b) 9,650,000 convertible preferred shares (the "Convertible Preferred Shares") to the shareholders of Magnifacent whereby each Convertible Preferred Share will, subject to the Release Schedule as hereinafter defined, entitle the holder thereof to convert into one additional common share from the Resulting Issuer without additional consideration. Until converted into common shares of the Resulting Issuer, the Convertible Preferred Shares will not carry any voting rights and not be entitled to receive any dividends or payouts. The Convertible Preferred Shares will be escrowed and subject to the following release schedule (the "Release Schedule"):
a) 16.66% of the Convertible Preferred Shares will be released on the date that Magnifacent signs the 1st regional copyright distribution contract with a third party;
b) 16.66% of the Convertible Preferred Shares will be released on the date that Magnifacent signs the 2nd regional copyright distribution contract with a third party;
c) 16.66% of the Convertible Preferred Shares will be released on the date that Magnifacent signs the 3rd regional copyright distribution contract with a third party;
d) 16.66% of the Convertible Preferred Shares will be released on the date that Magnifacent receives $250,000 net revenue from the 1st regional copyright distribution contract with a third party;
e) 16.66% of the Convertible Preferred Shares will be released on the date that Magnifacent receives $250,000 net revenue from the 2nd regional copyright distribution contract with a third party;
f) 16.66% of the Convertible Preferred Shares will be released on the date that Magnifacent receives $250,000 net revenue from the 2nd regional copyright distribution contract with a third party;
The Company intends to complete the following financing plans, and the numbers and prices referred herein in this section are on a post Share Consolidation basis:
1. The Company intends to conduct a brokered or non-brokered private placement (the "Bridge Financing"), pursuant to which Crownia intends to issue a maximum of 700,000 units (the "Bridge Financing Unit") at a price of $0.50 per unit to arm's length subscribers for maximum gross proceeds of $350,000 to be used for interim working capital, due diligence costs, audit and legal fees and other necessary documentation costs for the Transaction and general corporate purposes of the Resulting Issuer. Each Bridge Financing Unit consists of one (1) common share (the "Common Share") and one-half of one (1/2) common share purchase warrant (the "Bridge Financing Warrant") of Crownia. Each whole Bridge Financing Warrant entitles the holder thereof to purchase one additional Common Share of Crownia at an exercise price of C$0.60 per share for a period of 24 months from the issuance date.
Both Parties agree that the gross proceeds of the Bridge Financing will only be used to settle certain outstanding payables of Crownia and to pay for the audit, accounting, legal and any other expenses to be incurred in connection to the Transaction. For further clarity, the gross proceeds of the Bridge Financing will not be used to settle or pay for any outstanding debts, payables or liabilities of Crownia's subsidiaries.
2. The Company also intends to complete a brokered or non-brokered private placement (the "Concurrent Financing") which will close concurrently with the closing of the Transaction, pursuant to which Crownia intends to raise a minimum amount gross proceeds of C$1,000,000 which will lead to an issuance of a maximum amount of 1,818,182 units of the Resulting Issuer (the "Concurrent Financing Unit") at a price of $0.55 per unit to arm's length subscribers. Each Concurrent Financing Unit consists of one (1) common share (the "Concurrent Financing Share") and one-half (1/2) common share purchase warrant (the "Concurrent Financing Warrant"). A total of 1,818,182 Concurrent Financing Shares and 909,091 Concurrent Financing Warrants will be issued by the Resulting Issuer to the subscribers based on the maximum issuance of 1,818,182 Concurrent Financing Units. Each Concurrent Financing Warrant entitles the holder thereof to purchase one additional common share of the Resulting Issuer at an exercise price of C$0.65 per share for a period of 24 months from the conversion date. The Concurrent Financing is intended to be used for working capital and general corporate purposes of the Resulting Issuer. The parties may agree to amend the maximum number of Concurrent Financing Units based on corporate needs and/or market interest.
The finders for Concurrent Financing (the "Concurrent Financing Finders") are entitled to receive a proposed cash commission equal to 7.0% of the gross proceeds of the Concurrent Financing associated with the Concurrent Financing Finders (the "Concurrent Financing Finder's Commission") and will be granted warrants (the "Concurrent Financing Finder's Warrant") by the Resulting Issuer to acquire the number of common shares equal to 7.0% of the aggregate number of Concurrent Financing Units associated with the Concurrent Financing Finders under the Concurrent Financing, exercisable at a price of C$0.65 per Concurrent Financing Finder's Warrant for a period of 24 months from the closing date of the Concurrent Financing. A maximum amount and number of the Concurrent Financing Finder's Commission and Concurrent Financing Finder's Warrants are C$70,000 and 127,273 respectively based on the gross proceeds of C$1,000,000 from Concurrent Financing.
Concurrent to or immediately prior to the completion of the Transaction, the Company intends to effect a share consolidation (the "Share Consolidation") whereby every ten old shares Crownia existing as of the date hereof will be consolidated to one new share of Crownia. All the outstanding options and warrants of Crownia existing as of the date hereof will be adjusted based on the same 10-to-1 ratio of the Share Consolidation. The Share Consolidation shall not apply to the securities issued in connection with the Bridge Financing, the Consideration Shares, the Convertible Preferred Shares or the Concurrent Financing.
The proposed Transaction is expected to be subject to shareholder approval. The proposed Transaction constitutes an Arm's Length Transaction, as such term is defined in policy 1.1 of the TSXV. There is no direct or indirect beneficial interest of any of the non-arm's length parties of Crownia in Magnifacent. There are no non-arm's length parties of Crownia who are insiders or non-arm's length parties of Magnifacent.
The Company currently has 55,278,944 common shares issued and outstanding (5,527,894 - post Share Consolidation basis). The Company currently also has outstanding incentive stock options to acquire 1,495,000 common shares (149,500 - post Share Consolidation basis) at an average price of $0.35 per share ($3.50 - post Share Consolidation basis) and outstanding warrants to acquire 10,913,866 common shares (1,091,387 - post Share Consolidation basis) at a price of $0.15 per share ($1.54 - post Share Consolidation basis).
Following the Closing of the Transaction, the completion of the Bridge Financing and Concurrent Financing, the issuance of the Finder's Shares and the Share Consolidation, approximately 17,696,076 common shares of the Resulting Issuer would be issued and outstanding on a non-diluted basis. Shareholders of the Company will hold common shares representing approximately 31.24% of the capital of the Resulting Issuer following the Closing of the Transaction on a non-diluted basis. On a partially diluted basis assuming all the Convertible Preferred Shares are converted into common shares, the shareholding of Crownia's current shareholders is expected to represent 20.91% of the capital of the Resulting Issuer.
The proposed Transaction is subject to a number of terms and conditions, including the execution of the definitive agreement (the "Definitive Agreement"); the completion of the Concurrent Financing; the receipt of all necessary regulatory, corporate and third party approvals, including the approval of shareholders from both Parties, the approval of the Exchange, and compliance with all applicable regulatory requirements and conditions in connection with the Transaction; the confirmation of the representations and warranties of each Party to the Definitive Agreement as set out in such agreement; the absence of any material adverse effect on the financial and operational condition or the assets of each of the Parties to the Definitive Agreement; the delivery of standard closing documentation from both Parties including, but not limited to, legal opinions from Canadian, BVI and Hong Kong legal counsels, officers' certificates and certificates of good standing or compliance; the settlement by cash from the Bridge Financing or write-off of the liabilities of Crownia, except those items as agreed by Magnifacent prior to Closing (the "Disposition"); the disposition or transfer of Crownia's BVI subsidiary and all the subsidiaries of Crownia's BVI subsidiary (collectively referred to as the "Crownia Subsidiaries") to the major shareholders or their nominees of Crownia (collectively referred to as the "Transferees") will be done on an "as is" basis. For further clarity, the assets and liabilities of the Crownia Subsidiaries as of the Closing Date together with the ownership of the Crownia Subsidiaries shall be transferred to the Transferees upon completion of the Transaction. Magnifacent, and the Resulting Issuer upon completion of the Transaction, shall not be responsible for paying any of the liabilities of the Crownia Subsidiaries. Both Parties hereby also agree that all the intercompany loans between Crownia and the Crownia Subsidiaries will be eliminated or written off upon closing of the Transaction; and other condition precedents customary for a transaction such as this Transaction. The Disposition will be subject to certain disclosure requirements pursuant to the TSXV Policy 5.9 and Multilateral Instrument 61-101 which will be disclosed in a follow-on news release.
The completion of the Transaction is expected to occur following the satisfaction or waiver of the conditions precedent. The parties have agreed to use best efforts to close the Transaction as soon as possible. Each of the Company and Magnifacent will be responsible for the payment of their own professional fees and the Company has agreed to bear the sponsorship fee, listing fee and any other expenses in connection with the foreign due diligence searches required by the TSXV.
Trading in the common shares of the Company is halted and will remain halted pending the satisfaction of all applicable requirements of the TSXV. There can be no assurance that trading in the common shares of the Company will resume prior to the completion of the Transaction.
Information concerning Magnifacent
Magnifacent is a private company incorporated in January 2015 under the laws of Samoa.
Magnifacent, together with its wholly owned subsidiaries, is engaged in the business of acquiring and developing assets in the entertainment industry, including television and movie scripts, production rights and other entertainment intellectual properties ("IPs").
Upon completion of the Transaction and under the direction of the new management team, the Resulting Issuer will initially focus on the following areas:
1. It will continue to develop the assets and IPs that it currently owns into sustainable and valuable franchises that include the production of TV series and movies in the streaming market for direct box office revenues and licensing fees.
2. It will initiate the development of high-tech products, such as artificial reality applications, in the high recurring revenue markets of internet and mobile games leveraging on its movie stories and character IPs.
3. It will start channeling of other franchising projects through IP collaborations with other parties.
The Resulting Issuer will continue to develop its corporate franchise in the visual entertainment industry, including film production, distribution, new IP development and IP derivative products licensing business and artist brokering. In addition, the Resulting Issuer will also provide its expert services as a movie producer and distributor for third-party TV series and movies as well as investing in some of these ventures if deemed attractive.
Magnifacent is in the process of completing its new corporate holding structure within a few weeks. Under the new structure, Magnifacent will wholly own Dream Winner Limited ("Dream Winner"), a Samoa company incorporated in May 2015. Magnifacent and Dream Winner have been collaborating on movie projects since 2015 whereby the latter has mostly been acting as a consultant or agent for the former. Dream Winner, in turn, will wholly own All Best Creative Culture Technology Limited ("All Best"), a Taiwanese company incorporated in September 2019 with a focus on the various business domains of the entertainment industry. Magnifacent and All Best have the same controlling shareholder.
Magnifacent, through its wholly owned Taiwan-based subsidiary, All Best, has been involved with a movie series called "Mulan Angels". The first two episodes of the planned twelve-episode series, with each being an independent movie by its own right, have already been completed. All Best is the production company for both completed movie episodes. In addition, All Best has also created its own IP series called "Angel Heart" which has very promising prospects to be a big hit in the visual entertainment markets.
Board of Directors and Management of the Resulting Issuer
Upon Closing, the board of directors will be increased to five (5) members, whereby four (4) members will be nominated by Magnifacent and one (1) member will be nominated by Crownia. All the nominated directors will be subject to the acceptance of the Exchange. At least two (2) of the five (5) members of the board will be qualified as independent non-executive directors.
The Company will disclose the background of all the five proposed director is a follow-on news release.
The Company is in the process of engaging a sponsor to satisfy the sponsorship requirements under the policies of the TSXV.
1.About Crownia Holdings Ltd.
As a specialty steel trading company, Crownia provides value-add by identifying suitable suppliers for products that best suit customer needs, establishing distribution centers in optimal locations, and providing superior sales and after-sale services to customers.
On behalf of the Board of Directors,
3.Crownia Holdings Ltd.
7.Chairman and CEO
9.FOR FURTHER INFORMATION PLEASE CONTACT:
10.Xizhou Tong - Chairman and CEO
13.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 news release.
This press release may contain "forward-looking information" within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein may be forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminology such as "plans" "expects" or "does not expect", "proposed", "is expected", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. This forward-looking information in respect of the Company reflects the Company's as the case may be, current beliefs and is based on information currently available to the Company and on assumptions the Company as the case may be, believes are reasonable.
15.Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable, disinterested 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 Crownia Holdings Ltd. should be considered highly speculative.
17.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 news release.
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