- Concerned Shareholders' circular exposes major concerns
with Growmax's proposed acquisition of PrimaSea.
- Due to the essence of time, vote online or by telephone
using only the Yellow Proxy− FOR the
Concerned Shareholders' nominees and AGAINST the dilutive
acquisition of PrimaSea.
VANCOUVER, Sept. 10, 2018 /CNW/ - Kulwant Mahli and
BullRun Capital Inc. (the "Concerned Shareholders") today
announced that they have commenced the mailing of the Concerned
Shareholders' circular in advance of GrowMax Resources Corp.'s
(GRO:TSX-V) Annual and Special Meeting of Shareholders scheduled
for Tuesday September 25, 2018.
The Concerned Shareholders' circular includes a letter outlining
the reasons why GrowMax shareholders should vote AGAINST the
resolution to acquire PrimaSea and vote FOR the Concerned
Shareholders' director nominees, among other matters. GrowMax
shareholders are urged to read the Concerned Shareholders' circular
thoroughly and vote with the recommendations of the Concerned
Shareholders using only the YELLOW proxy. The Circular is filed on
SEDAR under GrowMax's profile and also on the Concerned
Shareholders' website at www.laurelhill.ca/abetter-growmax/.
A full copy of the Letter to shareholders is set out below:
Important Message to Shareholders of
GrowMax
Board Change is Needed to Save Your
Investment
Do Not Accept MASSIVE DILUTION and HAND OVER
50% of GrowMax to a Business that is Worthless
VOTE AGAINST the PrimaSea Acquisition and VOTE
FOR the Concerned Shareholder's Board Nominees
September 10, 2018
Dear Fellow Shareholder,
Shareholders of Growmax Resources Corp. ("GrowMax" or the
"Corporation") are at a crossroad and you have a great
opportunity to implement positive change in the Corporation. I,
Kulwant Malhi and BullRun Capital
Inc. (the "Concerned Shareholders") are writing to fellow
shareholders in GrowMax for your support at the upcoming annual and
special meeting (the "Meeting") of GrowMax to be held on
September 25, 2018. All of our
investments in GrowMax are in peril and WE can stop this
together. To do this, vote FOR the new slate of director
nominees (the "Concerned Shareholder Nominees") that the
Concerned Shareholders have put forward. The independent and
qualified Concerned Shareholder Nominees will act in shareholders'
best interests and properly steward GrowMax in the right
direction.
Time for Change
The current board of directors (the "Current Board") of
GrowMax are destroying value and are not serving the best
interests of shareholders. This was clearly shown in the
Current Board and management's decision to propose a transaction
whereby GrowMax would acquire a Corporation that is a money-losing
operation (the "PrimaSea Acquisition"). The time has come
for real and meaningful change in the oversight and management of
our company.
Under the Current Board, Shareholders have been presented with
impeding actions that have stalled the creation of value
including
- a lack of growth in GrowMax;
- a lack of focus and direction;
- the continuation of excessive payments into the pockets of the
Current Board and management; and
- the proposed highly dilutive and non-profitable PrimaSea
Acquisition.
Prior to voting, Shareholders are asked to consider the
following:
1. What has the Current Board and management
done for shareholders in the last 5 years?
- Dismal Shareholder Return. The Corporation's total
shareholder returns over the last 5 years have been dismal. From a
high of $1.83 on January 3, 2014 to a startling $0.10 on the closing of September 7, 2018. This represents a 95%
drop over approximately four and a half years.
- Lack of Proper Focus and Direction. During this time,
GrowMax changed strategy when it divested its oil assets in favour
of becoming a fertilizer corporation. In connection with this
change in strategy, the board has been shuffled so that almost all
of the director nominees proposed by GrowMax at the Meeting, are
now fertilizer specialists. Fertilizer is essentially all that
management's proposed board knows and we believe this is why they
continue to stubbornly pursue fertilizer projects regardless of
future profitability prospects.
- Excessive Compensation. Executive compensation is out of
line with the Corporation's performance. Share price has declined
95% since it's high point in January
2014, yet executive compensation for the last three years
has exceeded $8.4 million. Through
this time, the Corporation has failed to advance any projects, with
no active operations imminent or permitted, and has failed to
generate any revenue from operations.
2. The Questionable Dilutive and Non-Profitable
PrimaSea Acquisition
The PrimaSea Acquisition proposed by management and the Current
Board contemplates,
- Hand over 50% of the Corporation to the current shareholders of
PrimaSea, the parent Corporation of Fertimar which has negative
working capital, negative cash flow and unsustainable levels of
debt.
- Dilutive issuance of 213,925,645 common shares of GrowMax to
PrimaSea.
- Consolidation of the common shares of GrowMax ("Common
Share") on the basis of six pre-consolidation Common Shares for
every one post-consolidation Common Share.
- Creation of a controlling shareholder block whereby Management
and PrimaSea executives would have over 50% voting control of the
GrowMax shares and therefore, reducing the power of minority
shareholders' ability to have a say.
Does the above seem fair to GrowMax Shareholders? It
appears management and the Current Board are acting in the best
interests of themselves instead of ALL shareholders of
GrowMax.
Below is additional alarming information that brings into
question the merits of the PrimaSea Acquisition, and the judgment
of the Current Board and Management.
The PrimaSea Acquisition Will Destroy Value for GrowMax
Shareholders. Fertimar is the wholly owned subsidiary
of PrimaSea, and its business plan for 2018 and 2019 fiscal years
call for an expenditure of R$12.34
million. This means that GrowMax's $32.5M treasury will be used to fund
loss-making operations over the next 2 years at minimum. The
management information circular fails to articulate how Fertimar
will miraculously cease losing money while simultaneously
increasing production 5-fold. On December 31, 2017, Fertimar reclassified almost
R$2.93 million of non-current debt to
current, as Fertimar was not in compliance with certain covenants.
If the PrimaSea Acquisition is approved, GrowMax will inherit
PrimaSea's substantial debt and the Corporation's treasury will
be raided to pay down all the debt PrimaSea has accrued.
NEGATIVE Working Capital and NEGATIVE Operating
Income. Fertimar currently has a negative working capital
of R$7,276,917 and R$14.66 million in debt. The PrimaSea Acquisition
values Fertimar at $0.77 per common
share, three times the price of the last debt conversion in 2017
which is the last known price of Fertimar shares.
The GrowMax Board Does Not Have Shareholders' Best
Interests In Mind. The Current Board and management
have positioned themselves to personally benefit, regardless of the
outcome with their inflated salaries, new equity incentive plans
and outrageous termination clauses.
GrowMax's Questionable Financial Advice and Approval
Process. The Current Board has placed great emphasis on the
financial advice from Bordeaux Capital in its decision to proceed
with the PrimaSea Acquisition. However, they failed to disclose
that the founder of Bordeaux Capital had extensive and deep
relationships with certain GrowMax directors during his tenure at
Mackie Research Corporation. Additionally, GrowMax's timeline of
events provides evidence that Bordeaux Capital was influenced by
financial motivations to ensure the acquisition went ahead.
- June 2, 2014 - Principal
of Bordeaux Capital raises funds for GrowMax while at another
investment house.
- Sep 13th, 2017
- Bordeaux Capital engaged to provide M&A advisory
services.
- July 19th, 2018
- The agreement was amended for Bordeaux to provide financial advisory
services, and "will be paid a fee based upon the successful
closing of the Acquisition."
- July 23rd, 2018
- Bordeaux Capital was engaged by the Board to "prepare and
provide its opinion as to the fairness from a financial point of
view, of the exchange basis for the Acquisition."
As a result, Bordeaux Capital will be paid fees estimated to be
approximately $424,000 upon the
successful closing of the PrimaSea Acquisition, in addition to the
$40,000 received for 18 days of
spreadsheet work providing the Bordeaux Opinion. As the courts in
Canada have noted opinions based
on success fees are intrinsically flawed and of limited weight.
VOTE FOR AN INDEPENDENT BOARD WITH A PROVEN TRACK
RECORD
The Concerned Shareholders believe passionately that a bright
future for GrowMax can be achieved under the qualified, independent
and motivated leadership of the Concerned Shareholder Nominees who
are better aligned with the Shareholders' interests. The Concerned
Shareholder Nominees consist of the following professionals who
have a proven track record of creating value:
1. Kulwant Malhi
- Mr. Malhi has been instrumental in creating value in founding
and raising significant funding for public companies.
- Cannabix Technologies Inc (CNSX:BLO) - Raised in excess of
$8M since 2015 and oversaw the
increase of its share price from $0.15 per share in 2016 to $1.71 per share at market close on September 7, 2018. The company has a current
market capitalization of $162
million.
- Patriot One Technologies Inc (CVE:PAT) - Raised in excess of
$40M since 2016 and oversaw the
increase of its market capitalization from $1.62 million to $197
million.
- Micron Waste Technologies Inc (CNSX:MWM) - Raised in excess of
$6M since 2017 and oversaw the
increase to its market capitalization from $7.8 million to $35
million.
2. Alfred Wong
- Mr. Wong has been instrumental in the development of Micron
Waste Technologies and creating a partnership with multi-billion
dollar market capitalization company Aurora Cannabis Inc
(TSE:ACB).
- Mr. Wong is the Principal at Alfred and Company whereby he
consulted with early stage start-up companies on the development of
business plans, management recruitment, transaction negotiation,
mergers & acquisitions, and business development.
- Mr. Wong has won numerous recognitions for his work in
entrepreneurship and social innovation.
3. Michael Sadhra
- Mr. Sadhra brings a wealth of financial experience through his
background as a tax specialist and his duties as Chief Financial
officer on numerous Canadian Public companies.
- He is a self-employed Tax Consultant since January 2007. From September 1999 to December
2006, he was employed at KPMG LLP Chartered Accountants and
served as Senior Tax Manager from October
2003 to December 2006 and he
specialized in corporate Canadian and international taxation for
mining companies. Mr. Sadhra holds a Bachelor of Commerce from the
University of British Columbia in 1991
and is a Chartered Professional Accountant.
4. Pratap Reddy
- Mr. Reddy is a strategic consultant to the management and board
of directors of Canadian Zeolite Corp. He is also the Chief
Executive Officer of Ichaana Indo-Can Zeolite Private Limited, an
Indian company focused on introducing various products of natural
zeolite to the Indian agriculture and farming sectors.
- Mr. Reddy has been working in the resource industry as a
geologist for over 20 years and has extensive knowledge in the
global agriculture and farming sectors. He is currently involved in
various potash projects in developing vertical market integration
with partners in India,
Canada and the United States.
Detailed backgrounds of each director nominee can be found
under "Election of Directors of GrowMax".
The Concerned Shareholder Nominees Provides an Alternative
Plan that Preserves Shareholder Value
- Curtail expenses and restructure compensation to be in-line
with shareholder interests.
- Decrease director salaries saving millions of dollars per
year.
- Divest mining assets with limited exploration potential.
- Conduct a careful and thorough review of all prior agreements
to determine if any contracts were negotiated in bad faith and if
necessary, and take action to recover losses.
- Pursue acquisitions in high growth areas with significant
investor interest and liquidity.
We know there are many of you who feel the same way that we do.
The large support that we continue to receive daily only reinforces
the crucial need for all shareholders to take a stand now and vote.
Vote using only your YELLOW Proxy as set out in the Concerned
Shareholders' Proxy Circular, including:
X
|
AGAINST the PrimaSea
Acquisition.
|
√
|
FOR fixing the
number of directors at four.
|
√
|
FOR the
election of the Concerned Shareholder Nominees.
|
X
|
AGAINST the 6
to 1 consolidation of GrowMax common shares.
|
If you have already voted using management's proxy but support
our efforts for necessary change, you may vote again by using the
YELLOW Proxy enclosed. The later dated proxy will count. Voting is
easy. You may cast your vote online at www.proxyvote.com, by
telephone at our North American Toll-Free number 1-877-452-7184, or
call our Collect number at 416-304-0211. Full instructions can be
found on the YELLOW Proxy.
We would like to thank shareholders who have voiced their
support for us. Notwithstanding the tremendous support the
Concerned Shareholders have received, we encourage and invite all
Shareholders to vote for our nominees to ensure real change is
implemented.
Yours sincerely,
/s/ "Kulwant Malhi"
Kulwant Malhi, Director and Chairman
of BullRun Capital Inc.
Vote Today
Vote Well in Advance of the Proxy Voting
Deadline at 8 a.m. Calgary Time on
Friday, September 21, 2018.
Shareholders are urged to vote online or by telephone by
following the instructions found on the YELLOW Proxy to ensure
votes are received in a timely manner. IF YOU HAVE ALREADY VOTED
USING MANAGEMENT'S PROXY, YOU CAN STILL SUPPORT THE CONCERNED
SHAREHOLDERS BY USING THE YELLOW PROXY. THE LATER DATED PROXY WILL
SUPERSEDE.
SOURCE BullRun Capital Inc.