Blue Sky Energy Inc

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Blue Sky and Irati Energy Enter Into Amalgamation Agreement to Complete Reverse Take-Over

TORONTO, ONTARIO--(Marketwired - Nov. 9, 2017) - Blue Sky Energy Inc. (TSX VENTURE:BSI) ("Blue Sky") and Irati Energy Corp. ("Irati") are pleased to announce that they have entered into a definitive amalgamation agreement dated November 9, 2017 (the "Agreement") pursuant to which Blue Sky will acquire of all of the issued and outstanding securities of Irati ("Irati Shares") in exchange for securities of Blue Sky (the "Transaction"). The Transaction will be carried out by way of a three-cornered amalgamation. As a result of the Transaction, Blue Sky will continue on with the business of Irati under the name "Blue Sky Energy Inc."

Irati Energy Corp.

Irati is a private company incorporated under the Business Corporations Act (Ontario) (the "OBCA") that controls 100% of over 3,100 km2 of oil shale lands over two large blocks - North Block and South Block referred to as the P3B Oil Shale Project located in Santa Catarina state in southern Brazil (the "P3B Project"). Irati currently has no revenues.

Irati intends to develop P3B Project into viable mining and retort operations processing oil shale into shale oil. Petrobras, the Brazilian national oil company, has been producing shale oil at their PetroSix mine and facility located 40 kms from Irati's northern block, since 1991. Irati's technical team built and operated the PetroSix facility.

Petrobras conducted a systematic and extensive exploration across an area the Irati properties. In all, Petrobras completed 1,045 drill holes within the Irati project areas. Irati initiated further drilling in 2012 to validate the past drilling efforts of Petrobras. 1,718 drill holes were used to define the oil shale deposits in the Irati Formation, focusing on the northern block.

Transaction Summary

The Transaction is structured as a three-cornered amalgamation, pursuant to which 2597534 Ontario Inc. ("Blue Sky Subco"), a wholly-owned subsidiary of Blue Sky, and Irati will amalgamate (the "Amalgamation") to form a newly amalgamated company ("Amalco"), and upon the Amalgamation, former shareholders of Irati ("Irati Shareholders") will receive one New Blue Sky Share (as defined below) for each one Irati Share held and Amalco will become a wholly-owned subsidiary of Blue Sky.

Upon completion of the Amalgamation, Blue Sky will be the parent and the sole shareholder of Amalco and thus will indirectly carry on the business of Irati under the name "Blue Sky Energy Inc." Further, it is proposed that the management and Board of Directors of Blue Sky be changed to consist of persons that have experience in the new business to be undertaken by the combined company. Biographical information regarding proposed management and directors of the combined company is provided below under the heading "Management Team and Board of Directors".

As of the date hereof, Irati's authorized capital consists of an unlimited number of common shares, of which 68,311,661 are issued and outstanding. Irati also has warrants exercisable to acquire 4,914,285 common shares at a price of $0.45 per share (the "Irati Warrants"), stock options exercisable for 3,950,000 common shares at a price of $0.25 per share (the "Irati Options") and 6,300,000 deferred share units ("Irati DSUs") outstanding.

In connection with the Transaction, each Irati Option will be exchanged for a Blue Sky option (a "Blue Sky Replacement Option") on the same terms and conditions as the prior Irati Option other than such option will now be exercisable to receive one New Blue Sky Share. In addition, each convertible security of Irati other than stock options and Irati DSUs (including the Irati Warrants) will remain outstanding and will be convertible into or exercisable for, as applicable, the equivalent number of New Blue Sky Shares on the same terms. The Irati DSUs will be terminated prior to closing of the Transaction.

In connection with the Transaction, Blue Sky will be seeking shareholder approval of the reverse take-over pursuant to the policies of the TSX Venture Exchange ("TSXV"), the election of the new directors and the shares for debt transaction pursuant to the policies of the TSXV to convert Blue Sky's debts and payables to Blue Sky Shares. Irati will also be seeking shareholder approval with respect to the Amalgamation. The Transaction has been unanimously approved by the Boards of Directors of Irati and Blue Sky and both Boards of Directors recommend that their respective shareholders vote in favor of the Transaction and related matters.

The Transaction is subject to a number of conditions, including receipt of shareholder and regulatory approval, including approval of the TSXV.

The Transaction represents a Reverse Take-Over for Blue Sky under the policies of the TSXV. There are no Non-Arm's Length Parties (as defined in the TSXV Policies) to the Transaction.

Management Team and Board of Directors

Upon completion of the Transaction, it is anticipated that the management of the combined company will be the current management of Irati, as set out below:

  • Joe Carrabba - President and Chief Executive Officer. Mr. Carrabba is the former Chairman, President and Chief Executive Officer of Cliffs Natural Resources Inc., where he served in executive capacities from 2005 to 2013. Prior to joining Cliffs Natural Resources Inc., Mr. Carrabba gained broad experience in the mining industry throughout Canada, the United States, Asia, Australia and Europe. He served for over 20 years in a variety of leadership capacities at Rio Tinto, a global mining company, including as President and Chief Operating Officer of Rio Tinto's Diavik Diamond Mines, Inc. in the Northwest Territories. Mr. Carrabba holds a Bachelor of Arts from Capital University in Ohio and a Master of Business Administration from Frostburg State University in Maryland.
  • Ryan Ptolemy - Chief Financial Officer. Mr. Ptolemy is a CPA, CGA and CFA charter holder and obtained a B.A. from Western University. He serves as CFO to a number of public and private companies in the mining sector, particularly exploration and development stage companies in South America. Mr. Ptolemy formerly served as CFO for an independent investment dealer in Toronto where he was responsible for financial reporting, auditing, budgeting and internal controls.
  • Neil Said - Corporate Secretary. Mr. Neil Said is a corporate securities lawyer who works as a legal consultant to various TSX and TSX Venture listed companies in the mining, oil & gas and technology industries. He previously worked as a securities lawyer at a large Toronto corporate law firm, where he worked on a variety of corporate and commercial transactions. Mr. Said obtained a Juris Doctor from the Faculty of Law at the University of Toronto and he received a Bachelor of Business Administration (Honours) with a minor in Economics from Wilfrid Laurier University.

In connection with the Transaction, Blue Sky proposes to increase the Board of Directors of Blue Sky from four to five directors and to elect, conditional upon completion of the Transaction, six new directors, namely:

  • Carlo LiVolsi - Non-Executive Chairman. Mr. LiVolsi is an accomplished entrepreneur and a successful financial investor. He has parlayed his sales experience to varied global business enterprises and built a highly successful private consumer products distribution company. As CEO of multiple global companies, Mr. LiVolsi plans to leverage his strong relationships within the global business community to build the resulting company into a world class asset.
  • Joe Carrabba - See details above.
  • Stan Bharti - Mr. Bharti has over 25 years of experience in operations, public markets and finance. Over the last ten years, Mr. Bharti has been involved in acquiring, restructuring and financing various business ventures, mostly in the resource sector. He is a Professional Mining Engineer and holds a Masters Degree in Engineering from Moscow, Russia and University of London, England. His principal occupation is his role as Executive Chairman of Forbes & Manhattan, Inc. In addition, Mr. Bharti is a director of several public and private companies.
  • David Argyle - Mr. Argyle has more than 30 years of experience in identifying, developing, financing and managing fertilizer, mining and energy projects in South America, Asia, Africa and Australia. He is a key member of the Executive Committee of Forbes & Manhattan, a global private merchant bank, and is Chairman of its Agricultural Group. David earned an MBA from the University of Michigan and holds a Bachelor of Commerce from the University of Western Australia.
  • Charles Wachsberg - Mr. Wachsberg is the founder and Co-CEO of Apollo Health and Beauty Care, Canada's largest producer of private label health and Beauty aid products. Apollo is the distinguished multi-year recipient of one of Canada's 50 Best Managed Companies award, owing to Mr. Wachsberg's governance and leadership manner.

Benefits to Shareholders

The Blue Sky Board of Directors and the Irati Board of Directors believe that the Transaction will have the following benefits for the Blue Sky shareholders and the Irati shareholders, respectively:

  • the combined company will hold the Project in Brazil;
  • the combined company will have a strong Board of Directors that has experience in capital markets and project advancement and a quality management and exploration team with complementary skills to ensure systematic progress on the Project;
  • the combined company is expected to have increased share trading liquidity and will have a greater market capitalization that is attractive to a wider range of investors than that offered by Blue Sky prior to the Transaction; and
  • following completion of the Transaction and the Offering, it is expected that the combined company will have a sufficient cash position to advance the exploration and development of the Project.

Commenting on the Transaction, Blue Sky's President and Chief Executive Officer, Ahmed Said stated, "We are very pleased to announce this transaction. This is an exciting project with a great management team, and we look forward to the value that this transaction will bring to Blue Sky shareholders."

Joe Carrabba, President and Chief Executive Officer of Irati, said, "We are looking forward to finalizing the transaction with Blue Sky and believe that Irati has the potential to deliver significant returns to shareholders through the development of our P3B oil shale project in southern Brazil. Our Brazilian technical team includes some of the key players who were instrumental in building and operating the nearby PetroSix facility owned by PetroBras, which has been operating for over 25 years. We control over 3,100 km2 of oil shale land in the Irati formation which we believe has the potential to be a multi-generational production asset. Our focus in the coming year will be to advance the development our North Block holdings by completing an Environmental Impact Assessment and topographical studies."

Irati Financing

Irati intends to complete a non-brokered private placement (the "Offering") of an aggregate of 4,000,000 common shares (the "Offered Shares") at a price of $0.50 per Offered Share for gross proceeds to Irati of $2,000,000. Irati is in discussions with certain finders to pay a cash commission equal to 6% of the proceeds received by Irati in connection with the sale of Offered Shares to subscribers sourced and referred to Irati by the such finder.

The Offering is expected to close on or about January 30, 2018 and in any event prior to the closing of the Transaction.

Assuming gross proceeds of $2,000,000 from the Offering and the conversion of the Blue Sky Debts for shares at a price of $0.50 per New Blue Sky Share, on closing of the Transaction, Blue Sky will have approximately 104,828,104 New Blue Sky Shares issued and outstanding, on an undiluted basis, with approximately 72,311,661 New Blue Sky Shares to be held by former Irati Shareholders and approximately 32,516,443 New Blue Sky Shares to be held by former Blue Sky shareholders, which represents ownership of the combined company of approximately 69% by former Irati Shareholders and approximately 31% by former Blue Sky shareholders on an undiluted basis.

Timing of the Transaction

Full details of the Transaction will be included in the joint management information circular of Blue Sky and Irati which is expected to be mailed to their respective shareholders in December 2017 or early January 2018. It is anticipated that both shareholder meetings and closing of the Transaction will take place in the first quarter of 2018. The common shares of Blue Sky will remain halted pending further filings with the TSXV.

Sale of Blue Sky Subsidiary

Blue Sky also announces that it has entered into an agreement to sell all of the outstanding shares of its wholly owned subsidiary, Agua Grande Exploracao E Producao De Petroleo Ltda. ("Agua Grande"), to a private third party company (the "Purchaser"). Agua Grande held a 30% working interest in oil block REC-T-166 in the Reconcavo Basin in Brazil (the "Block"). Agua Grande was in default under the terms of the farmout and joint operating agreement with its partners on the Block. The Purchaser has agreed to acquire all of the outstanding shares of Agua Grande in consideration for nominal cash compensation and also for assuming all of the outstanding obligations of Agua Grande.

Blue Sky also announces the termination of its previously announced private placement financing for gross proceeds of up to $5,000,000.

Cautionary Note Regarding Forward-Looking Information

This press release contains statements which constitute "forward-looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of Blue Sky and Irati with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and include information regarding: (i) expectations regarding whether the proposed Transaction will be consummated, including whether conditions to the consummation of the Transaction will be satisfied, or the timing for completing the Transaction, (ii) expectations for the effects of the Transaction or the ability of the combined company to successfully achieve business objectives, (iii) the potential benefits of the Transaction, (iv) the timing for completing the Subscription Receipt Offering, and (v) expectations for other economic, business, and/or competitive factors.

Investors are cautioned that forward-looking information is not based on historical facts but instead reflect Blue Sky's and Irati's respective management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although Blue Sky and Irati believe that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the combined company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the ability to consummate the Transaction; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other conditions to the consummation of the Transaction on the proposed terms and schedule; the potential impact of the announcement or consummation of the Transaction on relationships, including with regulatory bodies, employees, suppliers, customers and competitors; the re-rating potential following the consummation of the Transaction; changes in general economic, business and political conditions, including changes in the financial markets; changes in applicable laws; compliance with extensive government regulation; and the diversion of management time on the Transaction. This forward-looking information may be affected by risks and uncertainties in the business of Blue Sky and Irati and market conditions.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although Blue Sky and Irati have attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Blue Sky and Irati do not intend, and do not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

Completion of the Transaction is subject to a number of conditions, including but not limited to TSXV acceptance and, if applicable, disinterested 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 of Blue Sky and Irati 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 Blue Sky should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has not approved or disapproved of the contents of this news release.

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 release.

Irati Energy Corp.
Joe Carrabba
Chief Executive Officer

Blue Sky Energy Inc.
Neil Said
Vice President

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