Mr.Guy Goulet reports
CLOSING OF THE MERGER WITH CERRO DE PASCO, THE SPIN-OFF, THE PRIVATE PLACEMENT AND RELATED TRANSACTIONS AND CHANGE OF NAME
Genius Properties Ltd. and Genius Metals Inc. (SpinCo) have closed a series of transactions involving:
The spinoff of substantially all of the assets and liabilities of Genius to SpinCo and the distribution of the shares of SpinCo to shareholders of Genius;The acquisition of Cerro de Pasco Resources SA by Genius;The closing by SpinCo of the first tranche of the private placement for aggregate gross proceeds of more than $900,000; The change of name of Genius to Cerro de Pasco Resources Inc.
Acquisition of Cerro de Pasco
As announced in a press release on Aug. 28, 2018, Genius acquired Cerro de Pasco, effective Aug. 31, 2018, in consideration for which Genius issued an aggregate of 176,360,232 common shares to the former securityholders of Cerro de Pasco pursuant to a merger agreement between Genius and Cerro de Pasco dated Nov. 9, 2017, as amended. As a result of the merger, Genius acquired all of the rights, titles and interests of Cerro de Pasco in the El Metalurgista mining concession in Peru.
The 176,360,232 Genius shares issued to the former securityholders of Cerro de Pasco pursuant to the Merger are held in escrow by Computershare Investor Services Inc., as escrow agent, and will be automatically released from escrow based on the schedule as shown in the attached table.
Release datesPercentage to be releasedNov. 1, 20182% Feb. 1, 20195% Aug. 1, 2019 15%Feb. 1, 2020 15%Aug. 1, 2020 15%Feb. 1, 2021 15%Aug. 1, 2021 15%Feb. 1, 2022 The remaining escrowed securities
The Canadian Securities Exchange has conditionally approved the listing of the 176,360,232 Genius shares issued pursuant to the merger, subject to fulfilling all of the requirements of the CSE.
Spinoff
Prior to the merger, Genius transferred substantially all of its assets and liabilities, including all of its Canadian mining properties, to SpinCo in consideration for 9,797,790 common shares of SpinCo pursuant to an asset transfer agreement between Genius and SpinCo dated June 6, 2018, as amended. Genius distributed the 9,797,790 SpinCo shares to its own shareholders as at the record date of Aug. 30, 2018, on the basis of one SpinCo share for six Genius shares.
The spinoff is a related party transaction as defined in Regulation 61-101, Protection of Minority Security Holders in Special Transactions, since SpinCo was an affiliate controlled by Genius at the effective time of the spinoff. The spinoff is exempt from the formal valuation and minority shareholder approval requirements under Part 5 of Regulation 61-101 since the parties to the spinoff consisted solely of Genius and SpinCo, which was a wholly owned subsidiary of Genius at the effective time of the spinoff. Moreover, the spinoff was a downstream transaction of Genius under MI 61-101.
Private placement
Further to a press release dated Aug. 20, 2018, SpinCo completed the first tranche of a non-brokered private placement offering for gross proceeds to SpinCo of $918,617.
SpinCo expects to close a second tranche of the private placement with the participation of certain institutional investors of the province of Quebec within the next 30 days.
Under the first tranche of the private placement, SpinCo issued and sold:
2,486,667 common share units at a price of 25 cents per common share unit, with each such unit comprising one SpinCo share and one common share purchase warrant of SpinCo entitling the holder thereof to purchase one SpinCo share at an exercise price of 35 cents for a period of 12 months; 848,429 flow-through share units at a price of 35 cents per flow-through unit, with each such unit comprisingone flow-through SpinCo share and one-half of one warrant entitling the holder of one whole warrant to purchase one SpinCo share at an exercise price of 45 cents for a period of 12 months.
The net proceeds of the private placement will be used for exploration of the Meaghers property (Nova Scotia), the care and maintenance of the Sakami property (Quebec) and the Robelin property (Quebec), and for general corporate purposes.
In connection with the first tranche of the private placement, SpinCo paid finders' fees to arm's-length third parties in the amount of $25,136.
All securities issued pursuant to the private placement are subject to a hold period under applicable securities laws, which will expire four months plus one day from the date of their issuance.
Four directors and officers of SpinCo have participated in the private placement and were issued an aggregate of 100,000 common share units and 121,419 flow-through share units. Such participation in the private placement is a related party transaction as defined in Regulation 61-101. The private placement is exempt from the formal valuation and minority shareholder approval requirements of Regulation 61-101 as neither the fair market value of the securities issued to insiders nor the consideration for such securities by insiders exceed 25 per centof SpinCo's market capitalization. SpinCo did not file a material change report 21 days prior to closing of the private placement as the participation of insiders of SpinCo in the private placement had not been confirmed at that time.
Debt settlements
SpinCo issued an aggregate of 168,000 SpinCo shares to certain creditors of Genius. On March 30, 2018, Genius had entered into debt settlement agreements with certain creditors whereby the creditors agreed to convert certain debts for the unpaid services in the aggregate amount of $42,000 in consideration for SpinCo shares. The liabilities of Genius under the debt settlement agreements were transferred to SpinCo pursuant to the asset transfer agreement.
One director of the issuer has participated in the debt settlements and was issued an aggregate of 30,000 SpinCo shares. Such participation in the debt settlements is a related party transaction as defined in Regulation 61-101. The debt settlements is exempt from the formal valuation and minority shareholder approval requirements of Regulation 61-101 as neither the fair market value of the securities issued to the insider nor the consideration for such securities by the insider exceed 25 per cent of SpinCo's market capitalization.
Adjustment warrants
SpinCo issued an aggregate of 2,212,097 common share purchase warrants to holders of common share purchase warrants of Genius as at the record date, on the basis of one adjustment warrant for six Genius warrants as adjustment of the Genius warrants resulting from the spinoff. Each adjustment warrant entitles the holder thereof to purchase one SpinCo share at an exercise price of 35 cents per share for a period of 12 months.
Change of name
Genius changed its name to Cerro de Pasco Resources Inc. in the English version and Ressources Cerro de Pasco Inc. in the French version. After the change of name, Genius will trade under the symbol CDPR.
Listing on CSE
The CSE has conditionally approved the listing of SpinCo shares, subject to fulfilling all of the requirements of the CSE. The listing of SpinCo shares on the CSE is expected to be completed during the week of Oct. 15, 2018. The SpinCo shares will trade under the symbol GENI.
About Genius Properties Ltd.
Genius Properties is a Canadian mineral exploration company focused on exploring and developing the El Metalurgista mining concession located in Peru.
About Genius Metals Inc.
Genius Metals is a Canadian mineral exploration company focused on developing projects with some of the world's most critical metals and minerals.
We seek Safe Harbor.
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