Quarterly report pursuant to Section 13 or 15(d)

Subsequent Events

Subsequent Events
3 Months Ended
Nov. 30, 2021
Subsequent Events [Abstract]  


Events after the reporting date not otherwise separately disclosed in these consolidated financial statements are:


Unsolicited takeover bid by Viston United swiss AG


On October 27, 2021, 2869889 Ontario Inc., an indirect, wholly-owned subsidiary of Viston United Swiss AG commenced a conditional, unsolicited takeover bid (the “Offer”) to acquire all of the issued and outstanding Common Shares of the Company. Viston filed a Tender Offer Statement with the SEC relating to the Offer on Schedule TO under section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on October 25, 2021, and an amendment to the Tender Offer Statement on October 27, 2021. As set forth in the Solicitation/Recommendation Statement on Schedule 14D-9 under section 14(d)(4) of the Exchange Act filed with the SEC on November 9, 2021, shareholders were advised that the Board of Directors was not yet in a position to make a recommendation to shareholders to accept or reject the Offer, and that the Company has retained Haywood Securities Inc. as financial advisor to the Company and the Board of Directors.


As set forth in the amendment to the Solicitation/Recommendation Statement on Schedule 14D-9, as filed with the SEC on January 4, 2022, on December 29, 2021 after thorough consideration of all aspects of the Viston Offer, the advice provided by Haywood and consulting with its other advisors, the Board unanimously determined to recommend that Shareholders accept the Viston Offer and tender their Common Shares, for reasons that include the following:


Results of Strategic Review


Based on the results of the strategic review presented by Haywood, the Board believes that the ‎immediate cash value offered to Shareholders under the Viston Offer is more favorable to Shareholders ‎than the potential value that might otherwise result from other alternatives reasonably available to ‎Petroteq, including remaining as a stand-alone entity and pursuing Petroteq’s existing strategy, in each case ‎taking into consideration the potential rewards, risks, timelines and uncertainties associated with those ‎other alternatives.


Premium Over Market Price


The consideration of ‎C$0.74 ‎in cash per Common Share (the “Cash Consideration”) under the Viston Offer represents a premium of ‎approximately 279% over the closing price of the Common Shares on the TSXV on August 6, 2021, being the last trading day that the Common Shares were traded on the T‎SXV.


Unlikelihood of Superior Proposal


The Board, with ‎the assistance of Haywood, has taken active steps to assess and solicit strategic ‎alternatives and has attempted to secure a proposal that would be superior to the Viston Offer. However, no superior ‎alternative to the Viston Offer has emerged and Petroteq does not expect a superior alternative to emerge ‎in the near term.


Common Shares Remain Relatively Illiquid


Trading in the Common Shares on the TSXV remains suspended, and there is no certainty as to when ‎‎the TSXV will resume trading in the Common Shares.


Certainty of Outcome


The Viston Offer provides 100% cash consideration for the Common Shares and offers Shareholders certainty ‎‎of value and immediate liquidity‎.‎


Possible Decline in Market Price


If the Viston Offer is not successful and another alternative offer with superior financial terms does not emerge, the market price of the Common Shares in the public markets may decline significantly.


Reduces Inherent Business Risk


Based on the strategic review conducted with Haywood, the Viston Offer appears to provide Shareholders ‎with the value inherent in Petroteq’s portfolio of projects, assuming they are fully realized, without the ‎long-term risks associated with the development and execution of those projects. Given the relatively early ‎stage of Petroteq’s projects, it will be several years before the projects in Petroteq’s portfolio reach ‎commercial production, if at all‎.


Significant Growth Funding Required


Petroteq’s projects have significant funding requirements to prove and scale its technology. Petroteq currently has limited cash to fund its necessary capital projects and near-term debt maturities, which will be a further drain on cash. Equity financing sufficient to repay debt and fund the progress of Petroteq’s business plan, if available, may be significantly dilutive to Shareholders.


Ability to Respond to Superior Proposals


Petroteq has not entered into a support or similar agreement with Viston in respect to the Viston Offer. The Board has reserved the ability to seek out or respond to proposals that may deliver greater value to Shareholders than the Viston Offer. There is nothing to prevent a third party from proposing or making a superior proposal or preclude Petroteq from changing its recommendation.


Exercise of warrants


In terms of warrant exercise notices received from various investors, warrants exercisable for 39,254,502 common shares were exercised between January 6, 2022 and January 18, 2022, for gross proceeds of $3,929,012 at exercise prices ranging from $0.0562 to $0.12 per share. A portion of the proceeds on the warrants issued was used to repay principal on convertible debt due of $753,500 and $46,075 of interest thereon and a further $180,000 of consulting fees, for net proceeds of $2,949,437.


Other than disclosed above, the Company has evaluated subsequent events through the date the financial statements were issued, other than disclosed above, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.