NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRES
Sabre Graphite Corp. (the "Corporation" or "Sabre") (TSX VENTURE:SAG) is pleased
to announce additional details with respect to its proposed arm's length
business combination as previously announced on February 12, 2014. The
Corporation entered into a definitive agreement on May 29, 2014 with StarClub,
Inc. ("StarClub"), a private company incorporated under the laws of the State of
Delaware, whereby the parties have agreed to complete a business combination
(the "Transaction") pursuant to which the Corporation will acquire all of the
outstanding shares of common stock (the "StarClub Common Shares") and shares of
preferred stock (the "StarClub Preferred Shares") of StarClub through the
issuance of subordinate voting shares (the "Subordinate Voting Shares") and
multiple voting shares (the "Multiple Voting Shares") of Sabre. The Transaction,
when completed, will be considered a "Reverse Takeover" for the purposes of the
TSX Venture Exchange (the "TSXV") and, subject to final acceptance by the TSXV,
will result in the listing of the Resulting Issuer (as defined below) as a Tier
1 Technology Issuer on the TSXV. For the purposes of this press release, the
term "Resulting Issuer" means the Corporation upon completion of the
Transaction. The Transaction has been conditionally accepted by the TSXV.
Shareholders of Sabre will be asked to approve the Transaction at the annual and
special meeting to be held on June 25, 2014 (the "Meeting"). For more
information regarding the Meeting and the Transaction, shareholders of Sabre are
encouraged to review the management information circular of Sabre dated May 29,
2014 available on SEDAR at www.sedar.com.
About StarClub, Inc.
StarClub is a private interactive media company, whose core business is
providing proprietary technological tools and expert marketing and data-mining
guidance to assist celebrities, athletes and brands in monetizing and optimizing
their presence in the digital space. The StarClub model incorporates a
vertically integrated social media network, the exclusive rights in North
America and South America for the media and entertainment market segment for a
patent-pending interactive video-broadcast platform and a proprietary data
mining research function, with a special emphasis on social commerce. As part of
its system services, StarClub builds vertical-market interactive channels (each,
a "Channel") for stars, celebrities and global brands.
StarClub was founded in December, 2008 and had been a development-stage company
until recently, developing and refining its technology platform and negotiating
talent partner agreements with top brands and stars. In September 2012, StarClub
launched its first Channel in beta form for Jessica Simpson and launched its
first Channel in non-beta form, featuring Enrique Iglesias, in the second
quarter of 2014. As a result of the launch of its first Channel and StarClub's
intention to complete the Transaction, management of StarClub has focused its
attention in fiscal 2014 on concluding Channel agreements with stars,
celebrities and global brands. As at the date hereof, StarClub has entered into
several Channel agreements with top stars and brands. As at the date hereof,
StarClub has raised approximately US$32,000,000 in capital (debt and equity) and
paid approximately US$52,000,000 in consideration (cash and common stock) for
the rights to its technology from arm's length parties.
Bernhard Fritsch, the founder, Chairman and Chief Executive Officer of StarClub,
is the controlling stockholder of StarClub. Mr Fritsch controls 68.16% of the
aggregate votes in respect of the StarClub Common Shares and StarClub Preferred
Shares.
Selected StarClub Financial Information
The following table contains selected annual consolidated financial and
operating information with respect to StarClub and has been derived from
StarClub's annual audited financial statements for the periods ended December
31, 2013, December 31, 2012 and December 31, 2011.
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Audited Audited Audited
Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011
(US$) (US$) (US$)
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Sales 0 0 0
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Gross profit (loss) 0 0 0
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Net income (loss) 16,723,607 (72,352,479) (2,454,986)
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Total assets 3,550,655 2,754,557 547,531
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Long term financial liabilities 4,076,685 0 0
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Total Shareholders' Equity (2,397,163) 1,501,525 (11,189,188)
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Note:
(1) StarClub's annual audited financial statements are prepared in
accordance with International Financial Reporting Standards.
Transaction Terms
The purchase price for the StarClub shares will be satisfied by the issuance of
30,329,584 Subordinate Voting Shares and 2,226,706 Multiple Voting Shares,
including those Subordinate Voting Shares issuable upon conversion of the
outstanding 12% convertible debentures (the "StarClub Debentures") and lines of
credit of StarClub (the "StarClub Lines of Credit"), but exclusive of the
Private Placement (as defined below). The acquisition will be effected by way of
a three-cornered merger in accordance with Delaware law, whereby a wholly-owned
subsidiary of Sabre will merge with and into StarClub, in consideration for
which (i) each holder of StarClub Common Shares other than Mr. Fritsch will be
issued approximately 1.1130 Subordinate Voting Shares for each one StarClub
Common Share held by such holder immediately prior to the merger, and (ii) Mr.
Fritsch, the sole holder of StarClub Preferred Shares, will be issued
approximately 0.0029 Multiple Voting Shares for each one StarClub Preferred
Share and approximately 1.1133 Multiple Voting Shares for each one StarClub
Common Share held by him immediately prior to the merger. After giving effect to
the Transaction, StarClub will become a wholly-owned subsidiary of Sabre.
The deemed price of each Subordinate Voting Share and each Multiple Voting Share
issued in connection with the Transaction will be approximately US$3.26, being
approximately Cdn$3.60 (at an exchange rate of 1.1042 Canadian dollars for each
U.S. dollar), resulting in an aggregate purchase price of approximately US$106
million for the acquisition of StarClub, taking into account the StarClub
Debentures and the StarClub Lines of Credit, exclusive of the Private Placement
(as defined below). Without giving effect to the Consolidation (as defined
below), the deemed price of each Subordinate Voting Share and each Multiple
Voting Share issued in connection with the Transaction, without taking into
account the Private Placement but including the StarClub Debentures and the
StarClub Lines of Credit, would be approximately $0.10.
Each Multiple Voting Share, which will be created in connection with the
Transaction, will entitle the holder to 26 votes on all matters to be voted on
by shareholders of Sabre. The Multiple Voting Shares (i) will not be listed on
the TSXV, (ii) will be convertible into Subordinate Voting Shares on a
one-for-one basis at the option of the holder, (iii) will be entitled to
dividends as and when declared by the board of directors pari passu with the
holders of Subordinate Voting Shares, (iv) upon liquidation, will be entitled to
receive such assets of the Corporation as are distributable to the holders of
the Multiple Voting Shares pari passu with the holders of the Subordinate Voting
Shares and (v) will not be transferable, other than to certain permitted
transferees of Mr. Fritsch, who will be associates or affiliates of Mr. Fritsch,
unless converted into Subordinate Voting Shares.
One of the conditions to the closing of the Transaction is the completion by
StarClub of a brokered equity financing (the "Private Placement") for gross
proceeds of a minimum of US$6,000,000 (the "Minimum Private Placement") and a
maximum of US$20,000,000 (the "Maximum Private Placement"). StarClub has
retained Salman Partners Inc. as lead agent for the Private Placement. Pursuant
to the Private Placement, StarClub will issue a minimum of 1,578,947 units and a
maximum of 5,263,158 units at a price of US$3.80 per unit, each unit consisting
of one StarClub Common Share and one-half of one warrant to purchase a StarClub
Common Share at an exercise price of US$4.75 per share. The net proceeds of the
Private Placement are expected to be used principally for Channel-related
expenses, as well as for general corporate purposes.
Currently, Mr. Fritsch holds shares of StarClub representing 68.16% of the
outstanding votes attached to all voting shares of StarClub. Immediately
following the Transaction, without taking into account the conversion of the
StarClub Debentures or the StarClub Lines of Credit, the Subordinate Voting
Shares held by current shareholders of Sabre or the Private Placement, Mr.
Fritsch will hold shares of the Resulting Issuer representing 68.16% of the
outstanding votes attached to all shares of the Resulting Issuer. Taking into
account the conversion of the StarClub Debentures and the StarClub Lines of
Credit, the Subordinate Voting Shares held by current shareholders of Sabre and
the Private Placement, Mr. Fritsch will hold shares of the Resulting Issuer
representing 63.83% of the outstanding votes attached to all Resulting Issuer
Shares (assuming the Minimum Private Placement) and 61.07% of the outstanding
votes attached to all Resulting Issuer Shares (assuming the Maximum Private
Placement) immediately following the Transaction.
Immediately prior to the Transaction, and subject to required shareholder and
regulatory approvals, Sabre proposes to consolidate its outstanding common
shares on the basis of one post-consolidation common share for each 35.22031
pre-consolidation common shares of Sabre (the "Consolidation"). As at the date
hereof, there are 26,085,086 common shares of Sabre issued and outstanding.
Immediately following the Consolidation and prior to the completion of the
Transaction, there will be 740,626 common shares of Sabre issued and
outstanding, subject to rounding of fractional share entitlements, which shall
be re-designated as "subordinate voting shares" concurrently with the creation
of the Multiple Voting Shares. Upon closing of the Transaction, and subject to
required shareholder and regulatory approvals, Sabre proposes to change its name
to "StarClub Networks Inc."
Following the completion of the Transaction, the Consolidation, the automatic
conversion of the principal and accrued interest of the StarClub Debentures, the
conversion of the StarClub Lines of Credit and the Minimum Private Placement, it
is expected that the Resulting Issuer will have approximately 32,827,646
Subordinate Voting Shares and 2,226,706 Multiple Voting Shares issued and
outstanding. Assuming the Maximum Private Placement, it is expected that the
Resulting Issuer will have approximately 36,928,332 Subordinate Voting Shares
and 2,226,706 Multiple Voting Shares issued and outstanding. The terms of the
Subordinate Voting Shares will include take-over bid protective provisions which
will comply with the guidelines of the TSXV and will allow holders of the such
shares to participate if a take-over bid is made for the Multiple Voting Shares.
Conditions to the Completion of the Transaction
The obligations of Sabre and StarClub to consummate the Transaction shall be
subject to, among other things: (i) receipt of all requisite regulatory
(including the TSXV), shareholder and third-party approvals and consents; (ii)
no material adverse effect on either Sabre or StarClub having occurred; (iii)
Sabre having not less than $1,795,000 in cash and/or cash equivalents on closing
of the Transaction; and (iv) StarClub completing the Minimum Private Placement.
None of the insiders of Sabre or their associates or affiliates has any interest
in the business of StarClub or is otherwise an insider of, or has any
relationship with, StarClub or its direct or indirect shareholders, and the
Transaction is an "Arm's Length Transaction" as defined under TSXV policies.
Directors and Officers of the Resulting Issuer
Upon completion of the Transaction, the directors and senior officers of the
Resulting Issuer are anticipated to be:
Position with the Present and Principal Occupation During
Name Resulting Issuer the Past 5 years
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Bernhard Fritsch Chief Executive Mr. Fritsch, 52, founded StarClub in
Officer and 2008 and serves as its Chairman and
Director Chief Executive Officer. Mr. Fritsch has
primary responsibility for the overall
strategic direction and the general
oversight of management, and is
responsible for the initial design,
specifications and development of
StarClub's social commerce platform.
Prior to StarClub, Mr. Fritsch was a
partner with GMI, Ltd., a merchant bank
focused on media opportunities in the
Americas, the Caribbean and Europe,
which acted as a lead manager, co-
investor and development partner for its
portfolio companies and projects. Prior
to StarClub's inception, Mr. Fritsch
served as Chairman and Chief Executive
Officer of MCY Music World, Inc. and
MCY.com, a digital media development and
distribution company Mr. Fritsch founded
in 1996 and sold five years later.
MCY.com developed the first patented and
commercially viable platform for the
secure retail distribution of digital
media. Mr. Fritsch graduated from the
Technical University of Berlin in 1988
with a Tonemeister degree in media
business and technology, and is the
holder of numerous technology patents in
the digital-download space, a vertical
market Mr. Fritsch pioneered. Mr.
Fritsch is a resident of the Bahamas.
James Polsen Chief Financial Mr. Polsen, 56, has served as the Chief
Officer and Financial Officer of StarClub since 2009
Corporate and is responsible for all financial
Secretary matters of StarClub. Mr. Polsen has over
25 years of wide-ranging experience in
corporate finance, treasury management,
strategic planning, and investment
banking. Mr. Polsen also has developed
extensive expertise in advising start-up
and early stage companies, having been
appointed as CFO/COO by several such
organizations (some of which he helped
found) to conduct strategic planning,
raise venture capital, scale out
business initiatives, and engender
merger and acquisition activity. Mr.
Polsen began his career at what is now
J.P. Morgan Chase, holding positions
over a 13 year period in corporate
finance, strategic planning, and
marketing and having been promoted as
one of the youngest Vice Presidents at
the company worldwide. Mr. Polsen
received his M.B.A. from the Stern
School of Business at New York
University, his B.B.A. from Iona
College, and has completed the Chase
Manhattan Bank Global Credit and
Corporate Finance M.B.A. Training
Program.
David M. Antony Director Mr. Antony, 51, is a Chartered
Accountant and is currently the Chief
Executive Officer of Sabre. In the last
five years, Mr. Antony has been Chief
Executive Officer of Southern Pacific
Resource Corp. (from 2006 to May 2009)
where he continues as Chairman of the
board of that company. Prior thereto,
Mr. Antony was a partner at an
accounting firm. He is currently a
director of Southern Pacific Resource
Corp., North Sea Energy Inc., Blackhawk
Resource Corp., Africa Hydrocarbons
Inc., Great Bear Resources Ltd.,
Valencia Ventures Inc. and Iron Tank
Resources Corp.
Charles Sanders Director and Mr. Sanders, 55, has been a director
General Counsel since 2014 and has been the General
Counsel of StarClub since 2009, and, as
such, is responsible for all internal
legal matters. Mr. Sanders' legal
expertise is focused on intellectual
property, with special emphasis in the
entertainment space. After serving for
two years as in-house counsel for G.
Schirmer Music Publishers (1984-86), Mr.
Sanders served for nearly two decades
(1986-2004) in various positions with
the National Music Publishers'
Association and its licensing
subsidiary, The Harry Fox Agency,
including as in-house counsel to both
organizations. Mr. Sanders is a member
of the bars of New York, California,
Washington, D.C. and the United States
Supreme Court. Mr. Sanders is a graduate
of New York University School of Law
(LL.M. 1984), where he was a
Derenberg/Brown Copyright Fellow and
assistant to copyright Professor Alan
Latman, and has taught in the NYU
graduate music business program as an
adjunct professor since 1994.
Michael Ravin Director Mr. Ravin, 72, is a Certified Public
Accountant, and who together with Mr.
Fritsch founded StarClub in 2009, has
served as a member of the board of
directors of StarClub since inception.
Previously, Mr. Ravin founded and
managed Michael J. Ravin, CPA, Inc., an
advisory firm focused on structured
finance services to multinational
companies. Previous to that, Mr. Ravin
was the Managing Partner since 1970 of
Schluter & Ravin, a full-service
accounting firm that was acquired in
1990 by Peat Marwick & Mitchell Co.
(today known as KPMG). Mr. Ravin
received his B.S. degree in Accounting
from California State University at
Northridge in 1964.
George Colwell Director Mr. Colwell, 41, a director of StarClub
since 2014, is a project executive,
focused on the transformation of
technology and processes of global
financial institutions. As SAP AG's
Financial Services Industry Principal,
Mr. Colwell has pioneered the
integration of social media, analytics,
and omni-channel processes, creating
customer experiences for retail and
commercial banking, wealth management,
insurance, and capital markets. As a
graduate from St. Mary's University with
a B.A. in Political Science, Mr. Colwell
began his career at Scotiabank where he
held progressively senior positions in
both domestic and international banking
groups over a 15 year career. Mr.
Colwell left Scotiabank, moving into
financial services consulting and was
subsequently recruited by SAP AG to help
build out its Financial Services
practice in North America.
Srinivas Boppana Chief Technology Mr. Boppana, 41, has served as the Chief
Officer Technology Officer of StarClub since
2013 and is responsible for all
technology matters of StarClub. Mr.
Boppana has over 18 years of wide-
ranging technology experience in various
technology verticals, including
application and product development, Web
and ecommerce. Previously, Mr. Boppana
held the position of Vice President,
eCommerce and Technology at SDC, where
he managed the building and development
of the technology platform for this
start-up initiative. Prior to that, Mr.
Boppana was the Senior Director,
eCommerce and Technology at Guthy-
Renker, a direct marketing company,
where he successfully managed digital
marketing, mobile, and Web operations
for over 25 national and international
brand websites, such as Proactiv, Wen
and Cindy Crawford's Meaningful Beauty.
Prior to Guthy-Renker, Mr. Boppana was
head of eCommerce and Web operations for
the world's then-second largest PC
manufacturer, Acer's PANAM division. Mr.
Boppana has also held numerous
management positions in both the
marketing and IT departments at Gateway,
including head of the Global Gateway
eCommerce and Web operations. Mr Boppana
holds a Bachelor of Engineering degree
in mechanical engineering from Karnatak
University, India.
Ruben Mamann Chief Operations Mr. Mamann, 53, currently oversees daily
Officer operations, management and business
development as Chief Operations Officer
of StarClub. His career has spanned over
30 years in multiple industries. An
entrepreneur, Mr. Mamann began his
career developing his own fashion
business in manufacturing, retail and
global sales. Mr. Mamann worked in the
entertainment industry for many years,
developing exclusive private label
promotional merchandise, key-art and
marketing collateral for major studios,
including Disney, Paramount, Sony, Fox,
Universal and Warner Bros.
Hazel Steward Senior Vice Ms. Steward, 42, has 18 years of
President - experience in the entertainment and
Channel digital industries, serving first at a
Operations leading cable and satellite broadcaster
in the UK as a producer and executive
producer and becoming responsible for
identifying key formats, ideas and
talent to bring to the channel, then as
an executive with various production
companies, developing and selling well
known shows in both scripted and non-
scripted genres. As Senior Vice-
President of Programming for StyleHaul,
the leading fashion, style and beauty
network on YouTube, Ms. Steward executed
the channel's launch into original
content, then served as Executive
Producer at The Talent Channels,
launching a new mobile digital platform,
overseeing its content and driving all
new business development in the United
States.
Convertible Securities
Each outstanding warrant and option to purchase StarClub Common Shares will be
exercisable or convertible, as the case may be, into Subordinate Voting Shares
on the same terms and conditions as the original warrant, option or other right,
adjusted to give effect to the exchange ratio for the Transaction. After
applying the exchange ratio to the outstanding warrants and options to purchase
StarClub Common Shares, the exercise price of each resulting warrant or option
to purchase Subordinate Voting Shares will be rounded up to the nearest cent,
and the number of Subordinate Voting Shares subject to such warrant or option
will be rounded down to the nearest whole share. Each currently outstanding
Sabre warrant and option will be exercisable into Subordinate Voting Shares on
the same terms and conditions as the original warrant or option, adjusted to
reflect the Consolidation. The Consolidation will not affect the warrants and
options to purchase StarClub Common Shares.
StarClub recently completed a brokered private placement of units consisting of
the StarClub Debentures and StarClub Common Shares for gross proceeds of
US$5,725,000. On closing of the Transaction, the outstanding principal amount of
the StarClub Debentures and all accrued and unpaid interest thereon will be
automatically converted into StarClub Common Shares at a conversion price equal
to a 30% discount to the deemed price per StarClub Common Share, which shares
will then be exchanged for Subordinate Voting Shares pursuant to the
Transaction.
As of the date of this press release, StarClub has: (i) granted 1,408,333
incentive stock options with exercise prices ranging from US$0.05 to US$4.00 per
share; (ii) granted 2,032,000 non-incentive stock options with exercise prices
ranging from US$0.05 to US$8.00 per share; and (iii) issued 470,444 warrants
with exercise prices ranging from US$0.40 to US$10.00 per share.
Sponsorship
Sabre has made an application to the TSXV for an exemption from sponsorship
requirements.
Trading Halt
Trading in the common shares of Sabre on the TSXV is halted and is expected to
remain so until completion of the Transaction.
Reader Advisory
Certain information set forth in this news release contains forward-looking
statements or information ("forward-looking statements"), including details
about the Transaction. By their nature, forward-looking statements are subject
to numerous risks and uncertainties, some of which are beyond the Corporation's
control, including the impact of general economic conditions, industry
conditions, volatility of commodity prices, currency fluctuations, environmental
risks, operational risks, competition from other industry participants, stock
market volatility, the risks that the parties will not proceed with the
Transaction, that the ultimate terms of the Transaction will differ from those
that currently are contemplated and the ability to access sufficient capital
from internal and external sources. Although the Corporation believes that the
expectations in its forward-looking statements are reasonable, its
forward-looking statements have been based on factors and assumptions concerning
future events which may prove to be inaccurate. Those factors and assumptions
are based upon currently available information. Such statements are subject to
known and unknown risks, uncertainties and other factors that could influence
actual results or events and cause actual results or events to differ materially
from those stated, anticipated or implied in the forward-looking statements.
Accordingly, readers are cautioned not to place undue reliance on the
forward-looking statements, as no assurance can be provided as to future
results, levels of activity or achievements. Risks, uncertainties, material
assumptions and other factors that could affect actual results are discussed in
our public disclosure documents available at www.sedar.com. Furthermore, the
forward-looking statements contained in this document are made as of the date of
this document and, except as required by applicable law, the Corporation does
not undertake any obligation to publicly update or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise. The forward-looking statements contained in this document
are expressly qualified by this cautionary statement.
Completion of the Transaction is subject to a number of conditions, including
but not limited to, TSXV acceptance and 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 dated May 29, 2014 in connection with the Meeting, any information
released or received with respect to the Transaction may not be accurate or
complete and should not be relied on. Trading in the securities of Sabre
Graphite Corp. 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 or disapproved the contents of
this press release.
All information contained in this press release with respect to the Corporation
and StarClub was supplied by the Corporation and StarClub, respectively, for
inclusion herein.
This news release is not an offer of securities for sale in the United States.
Securities may not be offered or sold in the United States or to or for the
account or benefit of U.S. persons (as such terms are defined in Regulation S
under the United States Securities Act of 1933, as amended (the "U.S. Securities
Act")), absent registration or an exemption from registration. The securities
offered have not been and will not be registered under the U.S. Securities Act
or any state securities laws and, therefore, may not be offered for sale in the
United States, except in transactions exempt from registration under the U.S.
Securities Act and applicable state securities laws.
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 press release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Sabre Graphite Corp.
David M. Antony
(403) 531-1710
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