TORONTO, ONTARIO--(Marketwired - March 4, 2016) - POCML 3 Inc. ("POCML 3") (TSX VENTURE:PWR) announced today that it has entered into a binding letter agreement (the "Letter Agreement") with Neo Lithium Corp. ("Neo Lithium") which outlines the general terms and conditions of a proposed transaction pursuant to which POCML 3 will enter into a business combination with Neo Lithium (the "Transaction"). The LOI was negotiated at arm's length and is effective as of March 4, 2016.

POCML 3 is a capital pool company listed on the TSX Venture Exchange (the "TSXV"). POCML 3 has not commenced commercial operations and has no assets other than cash. The Transaction, if completed, will constitute POCML 3's "Qualifying Transaction", as defined in TSXV policies.

Neo Lithium is a company governed by the laws of the Province of Ontario, and holds mineral and surface rights over a newly discovered and unique lithium salar and brine lake complex in Argentina, containing a rare lithium rich brine lake. The project has road access and no indigenous or other communities in the area. A Chilean port is 250 km away. The property encompasses approximately 300 km2 with the lithium salar and brine lake complex encompassing approximately 160 km2. Initial surface sampling shows high lithium grades - comparable to current producing mines, high potassium credits, and the lowest combined levels of contaminants of any known project (magnesium and sulphate). The technical team that discovered this unique complex is one of the most experienced in the modern era in lithium salars, having discovered and lead the technical work, including resource definition and full feasibility study, that established the Cauchari lithium salar as one of the largest and highest quality lithium salars in the world.

The transaction terms outlined in the LOI are binding on the parties and the LOI is expected to be superseded by a definitive agreement (the "Definitive Agreement") to be signed between the parties. The Transaction is subject to regulatory approval, including the approval of the TSXV, and standard closing conditions, including completion of due diligence investigations to the satisfaction of each of POCML 3 and Neo Lithium, as well as the conditions described below. The legal structure for the Transaction will be determined after the parties have considered all applicable tax, corporate and securities law, and accounting efficiencies, but is currently anticipated to be structured as an amalgamation of POCML 3 and Neo Lithium (the "Amalgamation").

Trading in the common shares of POCML 3 (the "POCML 3 Shares") will be halted as a result of this announcement and will remain halted until the resumption of trading is approved by the TSXV.

As of the date hereof, POCML 3 has 7,000,000 POCML 3 Shares outstanding and has issued options and broker warrants to acquire an aggregate of 860,000 POCML 3 Shares at an exercise price of C$0.15 per share. Prior to completion of the Transaction, POCML 3 proposes to effect a consolidation of the issued and outstanding POCML 3 Shares on the basis of 0.91 of one "new" POCML 3 Share (a "POCML Post-Consolidation Share") for every one "old" POCML 3 Share issued and outstanding (the "Consolidation"). At the time of closing of the Transaction, it is anticipated that Neo Lithium will have approximately 27,000,000 common shares (the "Neo Lithium Shares") and no convertible securities outstanding.

Concurrent Financing

In connection with the completion of the Transaction, Neo Lithium has also entered into an engagement letter (the "Engagement Letter") with PowerOne Capital Markets Limited ("PowerOne") to complete a private placement of a minimum of 12,000,000 subscription receipts of POCML 3 ("Subscription Receipts") at a price of $0.35 per Subscription Receipt to raise aggregate gross minimum proceeds of $4,200,000 (the "Financing"). Completion of the Financing is a condition of the completion of the Transaction.

Each Subscription Receipt will automatically convert on the satisfaction or waiver of all conditions precedent to the Transaction and certain other ancillary conditions (the "Release Conditions") into POCML Post-Consolidation Shares without any further consideration on the part of the purchaser immediately prior to effecting the Transaction.

The gross proceeds from the Financing will be held in escrow pending the satisfaction of the Release Conditions, whereupon the POCML Post-Consolidation Shares underlying the Subscription Receipts will be issued to the purchasers and the gross proceeds of the Financing will be paid to POCML 3. In the event the Transaction does not occur by a scheduled deadline to be determined, the gross proceeds of the Financing shall be returned to the purchasers pro rata without any deduction or interest and the Subscription Receipts shall be automatically cancelled.

Pursuant to the Engagement Letter, PowerOne shall be paid a cash commission ("Cash Commission") equal to seven percent (7%) of the gross proceeds raised in the Financing and shall be issued broker warrants ("Broker Warrants") equal in number to seven percent (7%) of the total number of Subscription Receipts sold pursuant to the Financing, each Broker Warrant entitling the holder to acquire one POCML Post-Consolidation Share at an exercise price of $0.35 for a period of one year from issuance. The Cash Commission and Broker Warrants shall be payable upon satisfaction of the Release Conditions.

It is intended that the proceeds raised pursuant to the Financing will be used for further exploration and technical work in respect of Neo Lithium's project and for general corporate purposes. The Financing is anticipated to close on or about March 31, 2016.

Details of the Proposed Transaction

Pursuant to the Transaction as presently proposed, the holders of the issued and outstanding Neo Lithium Shares and POCML Post-Consolidation Shares will receive one common share (a "Resulting Issuer Share") of the company resulting from the Amalgamation (the "Resulting Issuer") for each Neo Lithium Share and POCML Post-Consolidation Share held immediately prior to the Transaction (the "Exchange Ratio"). The deemed exchange price for the Resulting Issuer Shares to be issued in exchange for the Neo Lithium Shares shall be C$0.35 per Resulting Issuer Share, or such other price as permitted by applicable regulatory authorities, including the TSXV.

It is expected that following completion of the Transaction but prior to giving effect to the Private Placement (as defined below), the current holders of POCML 3 Shares will hold approximately 19.1% of the outstanding Resulting Issuer Shares and the holders of the Neo Lithium Shares will hold approximately 80.1% of the Resulting Issuer Shares (in each case, assuming the completion of the Consolidation and without giving effect to the exercise of any outstanding convertible securities of POCML 3).

Prior to the completion of the Transaction, POCML 3 shall call a meeting of its shareholders for the purpose of approving, among other matters, (i) the Consolidation; (ii) a change of name of POCML 3 to complement the business of the Resulting Issuer; (iii) election of the board of directors of POCML 3; and (iv) if required, the approval of the Transaction. Upon closing of the Transaction, the board of the Resulting Issuer shall be reconstituted to be comprised of five members nominated by Neo Lithium in a manner that complies with the requirements of the TSXV and applicable securities laws.

Other Conditions to Transaction

Completion of the Transaction is subject to a number of conditions, including, but not limited to, TSXV acceptance and, if applicable, majority of the minority 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.

Other conditions to completion of the Transaction include, but are not limited to:

  • Receipt of all requisite approvals from shareholders, regulatory authorities (including the TSXV) and third parties (including lenders or financial institutions, licensors and strategic partners) relating to the Transaction.
  • No material adverse change prior to completion of the Transaction.
  • The representations and warranties being true and correct in all material respects as of the closing of the Transaction.
  • Receipt of legal opinions in relation to the Transaction.
  • There being no debts or amounts owing to by certain insiders and other non-arm's length persons, other than for expenses incurred in the ordinary course.
  • No legal proceeding, regulatory action, inquiry or investigation as at the closing of the Transaction which may have a material adverse effect.
  • No prohibition at law against the Transaction.
  • Compliance with the terms of the Letter Agreement.
  • No material breach of the covenants contained in the Transaction documents.
  • Appointment of Neo Lithium nominees to management and the board of POCML 3.
  • Termination of existing management contracts of POCML 3 with no severance or other termination fees payable.
  • POCML 3 shall have working capital of approximately $575,000 as of the closing date of the Transaction (prior to the release of funds from escrow pursuant to the Financing (as defined below) and payment of expenses in respect of the Transaction).

In connection with the Transaction, each of POCML 3 and Neo Lithium will use its reasonable commercial efforts to cause all of its directors and officers and the holders of more than 10% of its issued and outstanding common to enter into lock up agreements pursuant to which they will agree (i) to vote all such common shares held by them in favour of the Transaction; (ii) not to solicit other transactions and to otherwise support the Transaction; and (iii) not to sell or dispose of any such common shares which they hold, each until the earlier of (i) the closing date of the Transaction; and (ii) the date upon which the Transaction terminates without being concluded in accordance with its terms.

In addition, the Letter Agreement provides for "drag along" protection to shareholders of POCML 3 and purchasers in the Financing in the event that Neo Lithium enters into an agreement in respect of an "alternative transaction" (as defined in the Letter Agreement) in certain circumstances.

Further Information

Further details about the proposed Transaction and the Resulting Issuer will be provided in a comprehensive press release when the parties enter into a Definitive Agreement and in the disclosure document to be prepared and filed in respect of the Transaction. Investors are cautioned that, except as disclosed in the disclosure document 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 a capital pool company 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 nor disapproved the contents of this press release.

Forward-Looking Information

This press release contains forward-looking information based on current expectations. Statements about the closing of the Transaction and Financing, expected terms of the Transaction and Financing, the number of securities that may be issued in connection with the Financing and the parties' ability to satisfy closing conditions and receive necessary approvals are all forward-looking information. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. Although such statements are based on management's reasonable assumptions, there can be no assurance that the Transaction or Financing will occur or that, if the Transaction and/or Financing does occur, it will be completed on the terms described above. POCML 3 assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law.

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 release.

Contact Information:

POCML 3 Inc.
David D'Onofrio
Chief Executive Officer, Chief Financial Officer,
Secretary and Director
(416) 643-3880