07:49:20 EDT Mon 22 Jul 2019
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or Name

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Acasta Enterprises Inc
Symbol C : AEF
Shares Issued 64,994,278
Close 2019-02-08 C$ 0.91
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Acasta Enterprises appoints new auditor, CFO

2019-02-08 18:23 ET - News Release

Mr. Fred Leigh reports

Acasta Enterprises Inc. has provided the following corporate update.

Change of auditor

In connection with the initiative to reduce expenses, the corporation has requested and accepted the resignation of KPMG LLP and the appointment of UHY McGovern Hurley LLP as the corporation's auditor. The corporation thanks KPMG for its services provided to date. UHY is a mid-size firm of chartered professional accountants registered with the Investment Industry Regulatory Organization of Canada (IIROC), the Canadian Public Accountability Board (CPAB) and the U.S. Public Company Accounting Oversight Board (PCAOB). UHY audits approximately 130 reporting issuers and the board feels UHY is best positioned to meet the corporation's needs going forward. In accordance with National Instrument 51-102, the company has filed a change of auditor notice on SEDAR, together with letters from both KPMG and UHY, with each letter confirming agreement with the statements contained in the notice, as applicable. There were no reportable events as defined in NI 51-102 between KPMG and the corporation.

New chief financial officer

The corporation is also pleased to report the appointment of Paul Bozoki as CFO. Mr. Bozoki is a CPA, CA (Ontario) and a U.S. CPA (New Hampshire) with approximately 25 years of experience in finance, accounting and tax matters, including in excess of 10 years as serving as CFO of various public companies listed on the Toronto Stock Exchange and the TSX Venture Exchange. Mr. Bozoki holds an MBA from the Richard Ivey School of Business and a bachelor of commerce from Queen's University.

The corporation wishes to thank its past CFO, Michael Murphy, for his contributions and wish him continued success in the future.

Proposed conversion of high-yield secured debt to equity

The corporation also announced that, in accordance with the corporation's plan to urgently reduce its outstanding high-yield secured debt, WFI Inc. has agreed to convert the maximum amount of principal permitted by the applicable policies of the Toronto Stock Exchange into equity of the corporation. Under the terms of the conversion, WFI has agreed to convert an aggregate principal amount of $4,783,578 (or approximately $3,587,683 (U.S.)) of high-yield, secured indebtedness into Class B shares of the corporation. The corporation will issue to WFI 6,499,426 Class B shares pursuant to the conversion at a deemed price of 73.6 cents per share.

WFI is indirectly controlled by the co-chief executive officers of the corporation. After the issuance of the conversion shares to WFI, the co-CEOs will indirectly control 29,887,822 Class B shares or approximately 41.8 per cent of the 71,493,704 then outstanding Class B shares. The issuance of the conversion shares, representing 9.99 per cent of the outstanding Class B shares, will not materially affect control of the corporation. Subject to TSX approval, it is expected that the conversion will be completed on or after Feb. 18, 2019.

The conversion may be considered a related party transaction pursuant to Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions. After considering various alternatives and the receipt of independent legal advice, the independent directors of the corporation unanimously determined that the conversion: (i) was in the best interests of the corporation; (ii) was reasonable under the circumstances; and (iii) will improve the financial position of the corporation as it will reduce overall indebtedness as well as future high-yield interest expense. The conversion is exempt from the formal valuation and minority approval requirements, respectively, of MI 61-101, as neither the fair market value of the conversion, nor the fair market value of the conversion shares, exceeds 25 per cent of the corporation's market capitalization (as calculated pursuant to MI 61-101).

The corporation remains focused on streamlining operations, reducing expenses, and is examining a number of alternatives to recapitalize its balance sheet and enhance shareholder value.

Adoption of advance notice bylaw

The corporation announced that the board of directors had also recently approved the adoption of an advance notice bylaw, establishing a framework for advance notice of nominations of directors by shareholders of the corporation. Among other things, the advance notice bylaw fixes certain deadlines by which shareholders must submit a notice of director nominations to the corporation prior to any annual or special meeting of shareholders where directors are to be elected and sets forth the information that must be included in the notice.

The advance notice bylaw provides a clear process for shareholders to follow for director nominations and sets out a reasonable time frame for the submissions of nominees and the accompanying information. The advance notice bylaw will help to ensure that all shareholders receive adequate notice of the nominations to be considered at a meeting and can thereby exercise their voting rights in an informed manner. The advance notice bylaw is similar to the advance notice bylaws adopted by many other Canadian public companies.

In the case of an annual meeting of shareholders, notice to the corporation must be given not less than 30 or more than 65 days prior to the date of the annual meeting. In the event that the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice may be given not later than the close of business on the 10th day following such public announcement.

In the case of a special meeting of shareholders (which is not also an annual meeting), notice to the corporation must be given not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting was made.

The advance notice bylaw is effective immediately and will be placed before shareholders for approval, confirmation and ratification at the next annual and special meeting of shareholders. In the event that the advance notice bylaw is not so approved, confirmed and ratified, it shall terminate and be of no further force or effect.

A copy of the corporation's advance notice bylaw will be made available under the corporation's profile on SEDAR.

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