For immediate release: December 19, 2019
Zecotek Announces Restructuring of Business and Letter Agreement to Acquire Birdview Insight Inc.
Vancouver, British Columbia, December 19, 2019 - Zecotek Photonics Inc. (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 ()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 ()Transaction”). The
Transaction is expected to constitute a reverse takeover under the rules and
policies of the TSX-V.
Transaction Summary
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.
Financing
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.
Support Agreements
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.
Name Change
Upon completion of the Transaction, Zecotek intends to
change its name. Details of the name change will follow in a subsequent news
release.
Sponsorship
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.
Trading Halt
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.
Bridge Financing
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.
Sergei Tsakunov
Director
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.
Not for distribution in the U.S. or to U.S. newswire
services.