Specialist drilling company Coretrack has announced a number of changes to the company to create savings of $1 million and plans for a $2.67 million capital raising.
Specialist drilling company Coretrack has announced a number of changes to the company to create savings of $1 million and plans for a $2.67 million capital raising.
In a statement to the Australian Securities Exchange, Coretrack said it will be consolidating its three premises, which separately house corporate offices, the drill rig factory and the core level recorder factory, under one roof.
Coretrack also announced a variation to its IP Licence.
The IP Licence was negotiated when Coretrack acquired Globe Drill earlier this year and required that Coretrack manufactured at least two geo-thermal drill rigs per year, following the successful commissioning of the first drill rig using the IP.
The company has announced that the IP licence has been varied so that it is no longer required to immediately commence manufacturing of another rig.
As a result of the changes Coretrack executive director Warren Strange has picked up another 4.5 million shares and 4 million options in the company.
Coretrack Chairman Mr Matt Birney said "The changes to the IP agreement and the consolidation of the three premises under one roof are very positive moves for the Company that will allow us to fully focus on getting the first rig into the field and working, whilst at the same time saving up to $1 million a year in reduced staffing and rental costs."
"As soon as we have secured long term contracts for the first drill rig, we fully intend to recommence the manufacturing process again but for now we are able to completely focus on generating profits from our first rig without the financial pressures of a large manufacturing payroll and multiple premises," he said.
Coretrack said the capital raising will be used to fund further tests of the GT3000 drill rig.
The non-renounceable one-for-eight entitlement issue will be priced at 15 cents per share.
Cygnet Capital will underwrite the capital raising.
The shares will be issued with one free new option for each new share issued, exercisable at 25 cents on or before November 30, 2012.
The company also announced it will be consolidating its Perth offices.
Coretrack chairman Matt Birney said the decision will save the company up to $1 million a year in reduced staffing and rental costs.
See full company statement below:
The Board of Coretrack Limited ("Coretrack" or "the Company") is pleased to announce a proposed pro-rata, non-renounceable entitlement issue of one (1) new Share for every eight (8) Shares held or entitled to be held by eligible shareholders and other eligible participants (the holders of the Company's Convertible Notes, as announced on 14 September 2010) at an issue price of $0.15 per Share, together with one (1) free new Option for each new Share issued, exercisable at $0.25 on or before 30 November 2012, to raise approximately $2.67 million, based on the Company's undiluted share capital ("Entitlement Issue").
The Entitlement Issue will result in the issue of up to 17,833,555 Shares and 17,833,555 Options and raise up to approximately $2.67 million, before costs, which will be used as general working capital for the Company post drilling of its first test well using the GT3000 geo-thermal drill rig, and to assist in securing commercial contracts.
Coretrack intends to lodge a Prospectus for the Entitlement Issue with the Australian Securities and Investments Commission (ASIC) and announce to the Australian Securities Exchange on or around 13 October 2010. The Company intends to apply to the ASX for quotation of the new Shares and Options.
Cygnet Capital Pty Ltd has agreed to underwrite that portion of the Entitlement Issue applicable to Shareholders (to a maximum of approximately $2.35 million). The terms of the Underwriting Agreement will be disclosed in the Prospectus. Further, following Shareholder approval or refreshment of the Company's 15% placement capacity, Cygnet will use its best endeavours to place any shortfall Shares and Options not taken up by Convertible Note holders under the Entitlement Issue to sophisticated investor clients.
The Company's existing Option holders will be notified on 11 October 2010 of the Entitlement Issue and the need to exercise their Options if they wish to participate in the Entitlement Issue.
In accordance with the Listing Rules of the Australian Securities Exchange, the Company has considered the number of shareholders with registered addresses outside of Australia and New Zealand and the size of the shareholdings held by those shareholders. Taking this into consideration, as well as the costs of complying with the legal requirements and the requirements of the regulatory authorities relating to shareholders with registered addresses outside of Australia and New Zealand, the Company has formed the view that it is unreasonable to extend the Entitlement Issue to those shareholders.
An Appendix 3B applying for quotation of the Entitlement Issue Shares and Options will follow.
VARIATION TO IP LICENCE
As announced on 19 January 2010, Coretrack executed a binding Share Sale Agreement ("SSA") to acquire Globe Drill Pty Ltd ("Globe Drill") ("Transaction"). Pursuant to the SSA, executed between the Company, Globe Drill, Strange Investments (WA) Pty Ltd <The Strange Family Trust> ("SIPL") and the remaining Globe Drill shareholders, and Mr Warren Strange as covenantor and guarantor, Coretrack acquired 100% of the issued share capital of Globe Drill. Globe Drill has a licence to use intellectual property rights (relating to the GT series of geo-thermal drill rigs) which are owned by SIPL. As part of the Transaction, SIPL entered into a new licence agreement with Coretrack and Globe Drill in respect of these intellectual property rights ("IP Licence").
The existing IP Licence grants to Coretrack an exclusive licence to use the IP for the manufacture and operation of its geo-thermal drill rigs. It also requires the Company to manufacture at least two geo-thermal drill rigs per year, following the successful commissioning of the first drill rig using the IP, which occurred this month.
Following the decision by the Board to focus in the short term on securing long term commercial contracts for the first geo-thermal drill rig before commencing the manufacturing of another rig, the Company is very pleased to announce that it has varied the IP Licence agreement ("Variation") with SIPL on the material terms set out in Annexure A. The principal change to the IP Licence is that the Company will no longer be required to immediately commence manufacturing another rig. The Variation now requires the Company to commence the manufacture of the second geo-thermal drill rig in approximately 18 months time.
In consideration for SIPL agreeing to the Variation, subject to shareholder approval, Coretrack will issue to SIPL 4,500,000 shares ("Consideration Shares") and 4,000,000 options ("Consideration Options"), exercisable at 25 cents on or before the date that is 3 years from the date of issue, subject to the vesting conditions that 1,000,000 options will vest upon each execution of a binding, bona fide commercial drilling contract relating to the use, hire or otherwise of Globe Drill geo-thermal rigs, with a total contract value of at least $2,000,000.
GENERAL UPDATE
The Board has also made the decision to consolidate its three premises (Core Level Recorder factory, Drill Rig factory and corporate offices) under one roof and the Company has now made an offer on suitable premises in Perth.
Coretrack Chairman Mr Matt Birney said "The changes to the IP agreement and the consolidation of the three premises under one roof are very positive moves for the Company that will allow us to fully focus on getting the first rig into the field and working, whilst at the same time saving up to $1 million a year in reduced staffing and rental costs."
"As soon as we have secured long term contracts for the first drill rig, we fully intend to recommence the manufacturing process again but for now we are able to completely focus on generating profits from our first rig without the financial pressures of a large manufacturing payroll and multiple premises."
"In effect what we have done is to streamline to Company by shedding some costs and we are now focused on the generation of profits." said Mr Birney.
