FOCUS METALS AND GRAFOID EXECUTE A USD$500,000
LOAN ARRANGEMENT
Ottawa, Ontario, March 19, 2012 – Focus Metals Inc. (“Focus Metals” or the “Corporation”) (FMS:TSX-V; FCSMF:OTCQX; FKC:FSE), announces today that it has completed a loan of USD$500,000 to Grafoid Inc. (“Grafoid”), a private corporation (registered; In Ontario) in which Focus owns a 40% interest, in connection with Grafoid’s business initiative for the transformation of graphite into graphene on a commercial scale, using primarily raw unprocessed graphite ore from the Corporation’s Lac Knife project. In connection therewith, Grafoid and Focus signed a loan agreement and the common shares of Grafoid held by Mr. Gary Economo (“Economo”), President and CEO of the Corporation, Mr. Jeff York (“York”), Chairman of the Board of Directors of the Corporation, and Dr. Gordon Chiu (“Chiu”), Chief Scientist of the Corporation, were pledged in favour of the Corporation (see below for details on the structur e of Grafoid).
Grafoid is engaged in the management of high growth, scalable graphene investments, patents and material applications, the development of a scalable graphene process which produces a unique kind of graphene directly from raw unprocessed graphite ore (primarily from the Corporation’s Lac Knife project). Graphoid alsoprovides technical advisory and consulting services on graphene and its chemistry to miners, suppliers, manufacturers and processors of these materials.
On December 23, 2011, Grafoid signed a term sheet (the “Term Sheet”) with a foreign private company (“PrivateCo”). Under the terms of the transaction, PrivateCo is to receive an initial instalment of USD$500,000 upon successfully negotiating an exclusive license agreement with a foreign university for the patent pending technology relating to exfoliation of graphite using raw graphite rock. The loan from Focus is to enable Grafoid to make such payment. In connection with the Focus loan, Chiu also pledged the voting shares he holds in PrivateCo (25%), with Grafoid now owning 50% of such voting shares and the balance of 25% being held by a professor of such university. Chiu is a named inventor of this agnostic patent pending process that was derived by applying the Corporation’s unique technology grade graphite flake.
On May 3, 2012, the Corporation will hold its annual and special meeting of shareholders (the “Meeting”) and will seek disinterested shareholder approval in connection with the organization of Grafoid and the transactions related thereto. The Corporation expects to mail to its shareholders the information circular prepared in connection with the Meeting on or about March 30, 2012.
As at the date hereof, Focus owns 40% of the common shares of Grafoid and Economo York, and Chiu, respectively own 20% of the common shares of Grafoid. Under the terms of the unanimous shareholder agreement of Grafoid (the “Shareholder Agreement”) between Focus Metals, Economo, York and Chiu, Focus Metals must pay to Grafoid an amount of CAD$1,500,000 in order to maintain its ownership position in Grafoid, such payment to be completed upon Focus Metals obtaining the required approval at the Meeting. The USD$500,000 loan is intended to allow Grafoid to make the first milestone payment to PrivateCo under the Term Sheet and shall form part of the $1,500,000 to be paid to Grafoid by the Corporation under the Shareholder Agreement.
On January 26, 2012, the independent directors of the Corporation approved the structure of Grafoid and the related transactions. On February 20, 2012, the Corporation obtained the conditional approval of the TSX Venture Exchange (the “TSXV Conditional Approval”) in connection thereto. In accordance with the TSXV Conditional Approval and the rules and the policies of the TSX Venture Exchange, the participation of Focus Metals in Grafoid under the Shareholder Agreement must be confirmed by the disinterested shareholders of the Corporation. The transaction is also subject to final regulatory approval.
If such approval is obtained, the loan agreement and the various share pledges will be terminated and the USD$500,000 loan will be considered to form part of the CAD$1,500,000 to be paid by Focus to Grafoid under the Shareholder Agreement. In the event that the Grafoid structure and related transactions are not approved by the disinterested shareholders of the Corporation at the Meeting, the loan agreement and share pledges will remain in effect.