Item 1.01. Entry into a Material Definitive Agreement
On March 12, 2017, subject to regulatory approval and other financial considerations, the Board of Directors of Crimson Forest Entertainment Group, Inc., a Nevada corporation (“ Crimson ”), and the Board of Directors of Hannover House, Inc., a Wyoming corporation (“ HHSE ”), signed a Memorandum of Understanding to indicate the mutual intent to merge the operations of the two companies through a stock-for-stock swap. Based on reasonable valuations for both Crimson and HHSE, including current assets, new projects and goodwill, after approval of the merger the existing shareholders and managers of HHSE will collectively own approximately 57.1% of the combined stock, and the existing shareholders and managers of Crimson will collectively own approximately 42.9% of the combined stock. HHSE assets, including goodwill were valued at $17,029,250 and Crimson assets, including goodwill were valued at $12,870,750.
Per the terms of the Memorandum of Understanding, Crimson shall be required to promptly file all required quarterly and annual reports to restore its current trading status as a fully reporting equity. Upon the completion of these corporate compliance matters, Crimson and HHSE shall initiate the stock-for-stock swap and redemption. Based on the terms of the merger, HHSE shareholders will receive Crimson shares at a premium-to-market valuation. The effective date when the two companies expect to be operating on a defacto basis as a merged entity is May 1, 2017. Crimson and HHSE anticipate that regulatory approval of the merger shall occur shortly thereafter, and that full reporting compliance shall occur on or about May 15, 2017, after which time, HHSE shares shall be exchanged for Crimson shares at a market-to-value premium to be determined at the date of the redemption based on market pricing.
Following the merger, Crimson shall proceed with new financing for the combined entity, including presale funding for several high-profile feature films and general operating and releasing capital. Principal Officers, Directors and Managers for the combined company shall be Jonathan Lim (Chairman), Eric Parkinson (C.E.O.), Fred Shefte (President) and Tom Sims (Vice President).
In addition to seeking regulatory approval for the merger, Crimson has also applied with FINRA for approval of a new stock-trading ticker symbol, to differentiate the new (post-merger) company and operations from the prior activities of Crimson as primarily a production-oriented company.
