Vancouver, British Columbia--(Newsfile Corp. - December 19, 2019) - Zecotek Photonics Inc. (TSXV: ZMS) ("Zecotek" or the "Company") announces that, further to its news release dated December 6, 2019, the Company has filed its audited annual financial statements for the year ended July 31, 2019 and related Management Discussion and Analysis for the same period. The Company's securities were subject to a cease trade order ("CTO") imposed by the British Columbia Securities Commission (the "BCSC") on December 4, 2019 as a result of the Company's failure to file its audited annual financial statements for the year ended July 31, 2019. Trading in the Company's securities was also suspended by the TSX Venture Exchange ("TSX-V") and halted by IROC as a result of the CTO. The BCSC has revoked the CTO and the Company intends to apply to have its securities reinstated for trading by the TSX-V. The Company has, however, requested that a trading halt remain in place after revocation of the CTO until such time as the Company completes the proposed Transaction described in detail below.
Reverse Takeover and Concurrent Financing
Zecotek also announces that it has entered into a non-arm's length binding letter agreement dated December 19, 2019 (the "Letter Agreement") with Birdview Insight Inc. ("BirdView"), a private developer of project management software with operations based in Vancouver, British Columbia. Pursuant to the Letter Agreement, Zecotek has agreed to acquire 100% of the outstanding shares of BirdView in consideration for 38 million post-consolidation shares of the Company (the "Transaction"). The Transaction is expected to constitute a reverse takeover under the rules and policies of the TSX-V.
Pursuant to the letter agreement, it is proposed that Zecotek will acquire 100% of the outstanding shares of BirdView by issuing approximately 38 million post-consolidation shares of the Company to shareholders of BirdView. The Transaction is expected to constitute a reverse takeover of Zecotek by BirdView pursuant to the policies of the TSX-V. The Transaction will be structured as a business combination, plan of arrangement, amalgamation, merger, or other similar form of transaction, whereby the shareholders of BirdView will become shareholders of the combined entity. Upon closing of the Transaction (including the financings described below), it is expected that former shareholders of BirdView will hold approximately 72% of the shares of the Company and existing shareholders of the Company will hold approximately 7.8% of the shares of the Company. Subscribers in the Bridge Financing described below are expected to hold 5% of the shares of the Company and subscribers in the concurrent financing described below are expected to hold the remaining 15.2% of the shares of the Company.
Zecotek will undertake a forty (40) for one (1) consolidation (the "Consolidation") of its common shares prior to closing of the Transaction in order to facilitate the ownership percentages noted above. As part of the securities exchange which will result in the creation of the new combined entity, Zecotek proposes to issue to existing shareholders one share purchase warrant for every post-Consolidation share owned by such shareholder. Each warrant will entitle the holder to acquire one post-Consolidation common share of Zecotek at a price of $0.60 for a period of two years following closing of the Transaction.
BirdView does not have any existing options, warrants or other convertible securities so no provision has been made in the Letter Agreement for the exchange of BirdView convertible securities for convertible securities of the Company. Stock options will be allocated to directors, officers, employees and consultants of the combined entity and granted to such persons/entities on closing of the Transaction. The parties also agreed to use reasonable commercial efforts to replace the letter agreement with a formal definitive agreement. However if the parties do not enter into a subsequent formal agreement, the letter agreement will remain in place and be binding upon the parties. Upon completion of the Transaction, the Company will be a Tier 2 technology issuer.
Disposition of Zecotek Imaging Systems and Zecotek Display Systems
As a condition of the Transaction, Zecotek must divest itself of its two operating subsidiaries. In order to meet that condition, either concurrently with or prior to the closing of the Transaction, Zecotek proposes to sell (the "Dispositions") all of the issued and outstanding shares of its 90% owned subsidiaries, Zecotek Imaging Systems Singapore Pte. Ltd ("ZIS") and Zecotek Display Systems Singapore Pte. Ltd. ("ZDS") to Zecotek Holdings Singapore Pte. Ltd. ("ZHS"). ZHS is a private company controlled by Dr. Faouzi Zerrouk, President and CEO of Zecotek. As a result, the Dispositions will constitute a related party transaction and will be subject to the requirements of MI 61-101 as described in further detail below.
Zecotek proposes to sell all of its shares in ZIS and ZDS in exchange for contingent value rights ("CVRs") to be granted on a pro rata basis to shareholders of Zecotek in proportion to their shareholdings of Zecotek on a record date to be determined by Zecotek.
The CVR's would permit shareholders of Zecotek, as of a pre-determined record date for a special meeting that will be called to approve the Dispositions, to receive the certain payments upon the occurrence of an M&A transaction undertaken by ZIS or ZDS or their shareholders. The aggregate payment under the CVR (before any required tax withholdings) would be equal to 15% of the total consideration received by ZIS or ZDS or their respective shareholders in connection with an M&A transaction undertaken within three years from closing of the sale of ZIS and ZDS.
Zecotek and ZHS have not yet entered into formal agreements regarding the Disposition.
Acquisition of New Technologies by ZIS and ZDS
In connection with and subject to the Dispositions being approved, ZIS and ZDS will acquire new technology from ZHS. The acquisition of these new technologies is designed to improve the performance, industrial and commercial relevance of ZIS and ZDS in order to provide a more realistic roadmap to commercialization and exit strategy.
The existing product line of ZIS includes LFS scintillation crystals (and the LFS Production Facility in Shanghai), solid-date MAPD photodetectors, and ASIC chip technology. ZDS includes all technologies related to the proprietary 3D display.
These technology acquisitions are designed to enhance the value of the CVR to Zecotek shareholders.
The intent is to complete the Dispositions prior to closing the Transaction and for each of ZIS and ZDS to acquire the technologies post-closing of the Transaction and the Dispositions. No terms have been agreed to at this time.
In connection with the Transaction, Zecotek proposes to complete a concurrent private placement offering for gross proceeds of a minimum of CDN$4,000,000, on terms to be agreed by Zecotek and BirdView. Zecotek may pay finder's fees or commissions in connection with the financing. It is currently anticipated that the financing will be a financing of subscription receipts at a price of $0.50 per subscription receipt. Each subscription receipt will, on Closing, without further action on the part of the subscribers, automatically convert into one unit of Zecotek, with each unit being comprised of one post-Consolidation common share of Zecotek and one non-transferrable share purchase warrant. Each warrant will entitle the holder to acquire one additional post-Consolidation common share of Zecotek at a price of $0.75 for a period of two years from Closing.
Directors and Officers
On closing of the Transaction, it is anticipated that the board of directors will be comprised of 6 directors, with 2 members nominated by Zecotek and 4 members nominated by BirdView. Management of the new company will consist of officers chosen by BirdView. Details respecting the directors and officers of the Company to be apoointed on closing of the Transaction will be disclosed in a subsequent news release and/or in Zecotek's information circular to be filed on SEDAR.
Pursuant to the letter agreement , BirdView agreed to obtain standstill, lock-up and support agreements in favor of the Transaction from BirdView shareholders holding 90% of the outstanding shares of BirdView.
Upon completion of the Transaction, Zecotek intends to change its name. Details of the name change will follow in a subsequent news release.
Pursuant to TSX-V policies, sponsorship is required for a reverse takeover transaction unless an exemption or waiver is available. The Company intends to apply for a waiver from the sponsorship requirement. There is no assurance that a waiver from the sponsorship requirement will be obtained.
In accordance with TSX-V policies, the common shares of Zecotek are currently halted from trading and will remain so until certain documentation required by the TSX-V for the Transaction can be provided to the TSX-V. The Company has, however, requested that a trading halt remain in place until such time as the Company completes the proposed Transaction.
Conditions to Closing the Transaction
Completion of the Transaction is subject to a number of conditions, including, but not limited to, completion of the minimum financing, receipt of TSX-V approval, satisfactory due diligence by Zecotek, compliance with applicable securities laws, the receipt of all requisite shareholder approvals, completion of the Consolidation, the completion of the Dispositions and compliance with MI 61-101 (as described below). Further details relating to the Transaction will be announced if a formal definitive agreement is executed or will otherwise be available in the information circular prepared in connection with the Transaction.
Multilateral Instrument 61-101
Dr. Faouzi Zerrouk, President, CEO and a director of Zecotek owns approximately 25% of the outstanding shares of BirdView. Mr. Zerrouk also controls ZHS. As a result of his position as a director and officer of Zecotek and his ownership interest in BirdView and ZHS, the Transaction and the Dispositions will both constitute related party transactions pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI-61-101"). The Transaction and the Dispositions will be exempt from the formal valuation requirement of MI 61-101 pursuant to Subsection 5.5(b) of MI 61-101, as no securities of the Company are listed on a specified market for purposes of MI 61-101. The Transaction and the Dispositions will be subject to the minority shareholder approval requirement of MI 61-101.
In order to finance its operations pending completion of the Transaction, Zecotek will undertake a bridge financing on a non-brokered private placement basis of units of Zecotek at a price of $0.375 per unit (the "Bridge Financing") for total proceeds of up to $1,000,000. Each unit will consist of one post-Consolidation common share of Zecotek and one share purchase warrant. Each warrant will entitle the holder to purchase one additional post-Consolidation common share of Zecotek at a price of $0.40 for a period of two (2) years from the closing of the Bridge Financing. The Bridge Financing is subject to a minimum aggregate subscription of $600,000. Completion of the Bridge Financing will occur after and be subject to the completion of the Consolidation.
Zecotek may pay finder's fees on the Bridge Financing in cash and in finder's warrants.
The shares and warrants issued in connection with the Bridge Financing will be subject to a four month hold period from the date of the issuance. The Bridge Financing is subject to TSXV acceptance. It is intended that the maximum proceeds of $1,000,000 will be used to pay for the costs associated with completing the Transaction and the Dispositions, general and administrative expenses and for general working capital.
About BirdView Insight
BirdView has developed and owns the award winning project management platform known as BVDash. The platform combines the best features of the leading project management and communication tools into one platform and creates a multipurpose system for users. BVDash users can coordinate workflow, budget management, quality and risk management, communication management and document management all in one platform. In the past, companies have had to use several different systems to perform these functions, which are now available in a one stop shop solution.
BirdView was formed in 2017 and the first rollout of BVDash to the public was in August of this year. The rollout was accompanied by a small initial advertising campaign to introduce the free, professional, business and enterprise packages that are available. The BVDash business uses a subscription based model to generate revenues. The Founders of BVDash are Jose L (Leo) Silva, BirdView's President and CEO, and Luis Izquierdo, Vice President. Mr. Silva, Mr. Izquierdo and ZHS are the controlling shareholders of BirdView.
Mr. Silva has over 25 years of experience developing and implementing enterprise project management systems. He worked as a Project Director, Project Controls Manager, Scheduling Manager and Project Controls Specialist for top ENR (Engineering News Record) firms and several Government Agencies including Aramco, AECOM, University of Washington, HNTB, Sound Transit, Utah Transit Authority, Arizona Department of Transportation, and Alcatel Canada.
Leo is a licensed Professional Engineer in British Columbia and in the State of Washington, he has a Master's degree in Project Management from University of Wisconsin, an Advanced Project Management certificate from Stanford University, and a Certificate in Project Management from University of California, Berkeley. He is a Project Management Professional (PMP), Certified Cost Professional (CCP) - AACE Int. and Certified Risk Management Professional (PMI-RMP).
Mr. Izquierdo has 20 years of experience building high-quality IT products and services. He is an entrepreneur with extensive experience developing and launching SaaS products and services. He leads BVDash product UX design, system design, and implementation. He worked in managerial positions at AB Trav och Gallop, ICA, Pingdom, Mediavalet, and Sierra Systems.
Luis worked as a product owner of an IT platform in Scandinavia with annual revenues over €1.3 billion. He led cross-functional teams of SaaS Web Performance for more than 800,000 customers worldwide. He also led the development of a cloud-based Asset Management System that received Windows Azure ISV Partner of the Year Award from Microsoft.
Luis has outstanding consulting, leadership, strategy design, customer success and business relationship development skills at the executive and upper management level with a bachelor's degree in Software Engineering, Master's degree in Computer Science from University of Victoria, Canada, Project Management Certificate from UC Berkeley, Advanced Project Management Certificate from Stanford University, and PMP certification from PMI.
The Company will provide additional information regarding the business of BirdView in its information circular to be prepared in connection with the Transaction and filed on SEDAR.
On Behalf of the Board of Zecotek Photonics Inc.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Completion of the transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance and if applicable, disinterested shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular or information circular to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Zecotek should be considered highly speculative. The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release.
This news release does not constitute an offer of securities for sale in the United States The securities referenced in this press release have not and will not be registered under the U.S. Securities Act of 1933, and may not be offered or sold in the United States or to a U.S. Person unless so registered, or an exemption from registration is relied upon.
This news release contains a number of forward looking statements regarding the Transaction, the Disposition and the CVR's. There is no guarantee that the Transaction and/or the Dispositions will complete, that additional technologies will be acquired by ZIS and ZDS following the Dispositions or that the CVR's will be created or issued. The completion of the Transaction, the Disposition, the acquisition of additional technology by ZIS and ZDS following the Dispositions and the creation and issuance of the CVR's is subject to numerous known and unknown risks and uncertainties including, due diligence, completion of the Financing, entering into agreements with ZHS regarding the Dispositions and subsequent acquisitions of technology by ZIS and ZDS, completion of the Bridge Financing, TSX Venture Exchange and shareholder approval. The Company will provide updates on these forward looking statements as required by applicable securities laws and the policies of the TSX Venture Exchange.
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