/EINPresswire.com/ -- VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 03/15/16 -- Karsten Energy Corp. (TSX VENTURE: KAY) ("Karsten" or the "Company") is pleased to announce that it has entered into a binding letter of intent with Heart Force Medical Inc. ("HFM") dated March 15, 2016 (the "LOI") in respect of a transaction pursuant to which Karsten would acquire all of the issued and outstanding securities of HFM in exchange for securities of Karsten (the "Proposed Transaction").

About Heart Force

HFM is a private company incorporated in British Columbia that is in the final stages of commercializing its first product, a non-invasive system that assesses the electro-mechanical function of the heart. The system presently consists of a base station and a sensor that is placed on the skin at the lower end of the sternum to non-invasively sense the seismic forces generated by the beating heart.

The system captures and presents a seismocardiograph waveform (the "SCG") that can be used to measure certain timing events of the cardiac cycle as well as the relative force of cardiac contraction. This information is useful for a variety of medical and fitness applications including: assessing patients for the early signs of cardiac disease in asymptomatic patients; monitoring changes in heart performance; health and fitness evaluation and potentially to assess the effectiveness of treatments for cardiac ailments.

HFM has spent approximately eight years and over $11 million developing and clinically testing its technology and methodologies. HFM has won an award for innovation, received Canadian government recognition in the form of grants, received Health Canada approval for the sale of its first product offering and received FDA 510K clearance in the United States on a predecessor device. The current product offering improves on the previous device that required manual data analysis by incorporating automatic waveform annotation, analysis and display as part of an integrated system. Future development plans include software protocols that will allow the sensor to communicate with mobile devices.

The table below sets forth certain selected financial information for HFM for its last two completed fiscal years expressed in Canadian dollars. HFM expensed all research and development expenses, net of tax credits received, as incurred.

Balance Sheet             As at December 31, 2015    As at December 31, 2014
                          (unaudited)                (audited)

Total Assets              $ 260,177(1)             $ 555,291
Total Liabilities         $ 1,621,915(2)           $ 991,362(3)
Income Statement          For the year ended       For the year ended
                          December 31, 2015        December 31, 2014
                          (unaudited)              (audited)
Revenue                   $ -                      $ -
Operating and Development
 Expenses                 $ 925,893                $ 1,043,856
Net Loss                  $ (925,677)              $ (1,135,310)
Notes: 1. Does not include a receivable in respect of SRED tax credits,
       which has yet to be calculated
       2. Includes Convertible Notes of $1,487,705
       3. Included Convertible Notes of $604,978

HFM's authorized share capital consists of an unlimited number of Class A common shares ("Class A Shares") and an unlimited number of Class B common shares ("Class B Shares"), of which 37,320,539 Class A Shares, and no Class B Shares, are currently issued and outstanding. In connection with this announcement, HFM intends to close a portion of the Bridge Financing (described below) by issuing 7,500,000 Class A Shares (the "First Tranche Shares") for an aggregate purchase price of $500,000.

In addition, HFM currently has an aggregate of $1,625,000 in non-interest bearing, unsecured convertible promissory notes outstanding ("HFM Notes"), all of which are convertible by the holder into Class B Shares on the basis of three (3) Class B Shares for each $0.10 of outstanding principal. The HFM Notes will, pursuant to their terms, automatically convert into Class B Shares (if not previously converted by the holder) immediately prior to the closing of the Proposed Transaction. The Class A Shares and Class B shares have the same rights and restrictions, subject to various hold periods that will apply to the Karsten Shares issued in exchange for the Class A Shares and the Class B Shares under the Proposed Transaction.

HFM currently has over 200 shareholders and over 20 noteholders. The current securityholder of HFM who will receive the largest number of common shares in the capital of Karsten ("Karsten Shares") in the Proposed Transaction is Beat Naegeli, a businessman and Swiss national. Based on his holdings in HFM as of the date of this news release, including the First Tranche Shares, Mr. Naegeli would receive approximately 4.5 million common shares of Karsten in the Proposed Transaction, representing approximately 8% of the issued and outstanding shares of the Resulting Issuer. HFM has granted to Mr. Naegeli an option to acquire the balance of the securities of HFM issuable under the Bridge Financing and Closing Financing (described below).

Transaction Terms

As the Company is currently in the business of mineral exploration, the Proposed Transaction will constitute a "Change of Business" of Karsten as such term is defined in the policies of the TSX Venture Exchange (the "Exchange").

Pursuant to the terms of the LOI, Karsten will acquire, through a statutory plan of arrangement, all of the issued and outstanding Class A Shares in exchange for Karsten Shares on the basis of one Karsten Share for each three (3) Class A Shares. In addition, Karsten will acquire all of the issued and outstanding Class B Shares (including those issued upon conversion of the HFM Notes and those issued under the Bridge Financing and Closing Financing referred to below) on the basis of one Karsten Share for each three (3) Class B Shares. As a result, HFM will become a wholly-owned subsidiary of Karsten and the shareholders and noteholders of HFM will become shareholders of Karsten.

Pursuant to the terms of the LOI, HFM has agreed to complete or obtain subscription funds for, on or before June 30, 2016 (the "Bridge Deadline"), a financing (the "Bridge Financing") of 30 million Class A Shares for an aggregate purchase price of $2 million and 15 million Class B Shares for an aggregate purchase price of $2 million.

In addition, the parties have agreed to complete a financing consisting of 10 million Class B Shares of HFM for an aggregate purchase price of $2 million concurrently with the closing of the Proposed Transaction (the "Closing Financing").

The Bridge Financing and the Closing Financing are subject to payment of a finder's fee in the amount of 8.5% of the gross proceeds raised from investors introduced to HFM by the finder, DeXchange Financial Corp. (the "Finder"). The Finder may pay all or part of the finder's fee to arm's-length third parties to assist the Finder in connection with the Bridge Financing and Closing Financing.

The LOI provides that the parties will negotiate and enter into a definitive agreement (the "Definitive Agreement") that incorporates the terms of the LOI together with the representations, warranties, covenants, conditions, indemnifications and agreements customary for transactions such as the Proposed Transaction.

The Proposed Transaction is subject to fulfillment or waiver of certain closing conditions, including:

--  satisfactory completion of Karsten's due diligence in respect of HFM;
--  receipt by HFM of the subscription funds for the Bridge Financing by the
    Bridge Deadline;
--  completion of the Bridge Financing and the Closing Financing;
--  HFM and Karsten obtaining all required court, Exchange, regulatory,
    shareholder and third party approvals and consents;
--  negotiation and execution of the Definitive Agreement;
--  receipt of a favourable fairness opinion in respect of the Proposed
    Transaction; and
--  Karsten terminating its existing option on the Mackenzie Mountain Iron-
    Copper Property.

Karsten plans to apply to the Exchange for a waiver from the requirement to engage a Sponsor in connection with the Proposed Transaction. The Company expects that the Proposed Transaction will require shareholder approval, which it plans to seek by way of written consent of its shareholders.

The LOI imposes customary non-solicitation obligations on HFM and includes a customary fiduciary out provision.

In connection with the Proposed Transaction, Karsten may complete a private placement of up to 1,000,000 units at $0.10 each for gross proceeds of $100,000. Each unit would consist of one common share of Karsten and one transferrable share purchase warrant entitling the holder to purchase one additional common share of Karsten at $0.10 for a period of five years. The funds would provide additional working capital and to pay anticipated costs of the Proposed Transaction.

Non-Arm's Length Transaction

Certain directors and officers of Karsten are connected to HFM. William McCartney, a director of Karsten, is also a director of HFM and beneficially owns approximately 3.9% of the issued and outstanding Class A Shares of HFM. Murray Oliver, the President, CEO and a director of Karsten, beneficially owns (together with his associates and affiliates) approximately 3.1% of the issued and outstanding Class A Shares of HFM, as well as HFM Notes in the aggregate principal amount of $10,000. Kay Jessel, a director of Karsten, is the principal of DeXchange Financial Corp., which is presently acting as a finder in HFM's Bridge Financing and Closing Financing. In addition, an associate of Mr. Jessel owns HFM Notes in the principal amount of $75,000. Karsten's CFO, Jennie Choboter, is also the CFO of HFM and beneficially owns shares representing less than 1% of the issued and outstanding Class A Shares of HFM and HFM Notes in the principal amount of $5,000.

The Resulting Issuer

Upon completion of the Proposed Transaction, Karsten (the "Resulting Issuer") expects to be listed as a Tier 2 Technology or Life Sciences Issuer and to change its name to "HFM Technologies Inc." or such other name that is acceptable to the parties, the Exchange and applicable regulatory authorities. The Resulting Issuer will pursue the commercialization of HFM's heart-monitoring system.

Upon completion of the Proposed Transaction (including completion of the Bridge Financing and Closing Financing), Karsten is expected to have up to 58,023,513 issued and outstanding common shares of which the existing securityholders of Karsten and HFM are expected to own, respectively, approximately 19% and 54% of the Resulting Issuer, with the remaining shares of the Resulting Issuer owned by the subscriber(s) in the Bridge Financing and Closing Financing.

Existing Karsten options held by persons no longer involved with the Resulting Issuer will expire 12 months following closing of the Proposed Transaction. The Resulting Issuer will grant additional stock options to directors and management, in accordance with the rules and policies of the Exchange, after the closing of the Proposed Transaction at prevailing market prices.

On closing of the Proposed Transaction, the Resulting Issuer's board will be comprised of five directors. HFM will have the right to select two of the directors and Karsten will have the right to select two of the directors. The fifth director will be mutually agreed upon by the parties. Further details on the composition of the new Board and management will be announced or disclosed in additional disclosure documents once finalized.

Trading of the common shares of Karsten has been halted in connection with the dissemination of this news release and shall remain halted until such time Karsten meets the requirements of the Exchange to resume trading.

Completion of the Proposed Transaction is subject to a number of conditions, including Exchange acceptance and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Karsten should be considered highly speculative.

The Exchange has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press 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.

This press release contains forward-looking statements. Forward-looking statements are statements that are not historical facts. The forward-looking statements in this press release are subject to various risks, uncertainties and other factors that could cause the Resulting Issuer's actual results or achievements to differ materially from those expressed in or implied by forward-looking statements. These risks, uncertainties and other factors include, without limitation, the ability of HFM to complete the Bridge Financing and Closing Financing, HFM and Karsten obtaining all required court, Exchange, regulatory, shareholder and third party approvals and consents, the ability of HFM and Karsten to negotiate and execute the Definitive Agreement, the uncertainty as to the Resulting Issuer's ability to achieve the goals and satisfy the assumptions of management, general economic factors and other factors that may be beyond the control of the parties. Forward-looking statements are based on the beliefs, opinions and expectations of the management of Karsten at the time they are made, and Karsten does not assume any obligation to update its forward-looking statements if those beliefs, opinions or expectations, or other circumstances, should change.

Contacts:
Karsten Energy Corp.
Murray Oliver
President and Chief Executive Officer
604-687-0888
mjo@pemcorp.com