ZECOTEK PHOTONICS INC. ANNOUNCES UPDATE ON RESTRUCTURING AND TERMINATION OF LETTER AGREEMENT TO ACQUIRE BIRDVIEW INSIGHT INC.

Not for distribution in the U.S. or to U.S. newswire services.

NEWS RELEASE

July 31, 2020 – Vancouver, British Columbia – Zecotek Photonics Inc. (TSX-V: ZMS) (“Zecotek” or the “Company”) wishes to provide the following update on its reorganization:

Termination of Reverse Takeover
BirdView Insight Inc. (“BVI”) and the Company have mutually agreed to terminate the letter agreement between the parties as previously described in the Zecotek’s December 19, 2019 news release on the basis that the parties have been unable to identify sufficient funds to complete the acquisition. Zecotek would like to wish BVI well as it pursues its corporate objectives.

Sale of Zecotek Photonics Singapore Pte Ltd.
Zecotek’s special committee has provided a favourable recommendation to the Company’s board of directors and the board has agreed to pursue an offer from Wang Holdings Corp. and its affiliates (“WHC”) to purchase all of the issued and outstanding shares of Zecotek’s wholly owned subsidiary, Zecotek Photonics Singapore Pte Ltd. (“ZPS”). WHC has offered to purchase the shares of ZPS (the “Transaction”) in consideration for WHC (a) agreeing to release the Company from its obligation to repay $5.983 million to WHC for advances previously provided and (b) paying an additional US$550,000 to the Company, which payment has been made. Zecotek intends to use the funds for payables and the costs of the reorganization. WHC is a British Columbia company owned and controlled by Ziming Wang. ZPS owns 90% of Zecotek Imaging Systems Singapore Pte. Ltd (“ZIS”) and Zecotek Display Systems Singapore Pte. Ltd. (“ZDS”).

The remaining 10% of ZIS and ZDS are held by Zecotek Holdings Singapore Pte. Ltd. (“ZHS”), a private company controlled by Dr. Faouzi Zerrouk, President and CEO of Zecotek. In making its decision to pursue the Transaction, the special committee and the Board of Directors
considered the Company’s financial position, the termination of the reverse takeover and concurrent financing associated with the letter agreement with BVI and the Covid 19 pandemic which has affected the production of crystals and detectors in China and Malaysia, with official lockdowns preventing technical personnel from carrying out their work. As a result of the foregoing, the Company has not been able to physically or financially support its operations.

If completed, the sale of ZPS will constitute a sale of all or substantially all of the undertaking of the Company as contemplated in section 301 of the B.C. Business Corporations Act and a reviewable disposition under Policy 5.3 of the TSX Venture Exchange. Zecotek and WHC have not yet entered into formal agreements regarding the Transaction.

The Transaction is subject to a number of conditions including:

  1. The completion of documentation between the parties regarding the Transaction;
  2. A special resolution of shareholders approving the Transaction at a duly called meeting;
  3. A fairness opinion addressed to the special committee confirming that the transaction is fair from a financial point of view to Zecotek’s shareholders; and
  4. The acceptance of the TSX Venture Exchange.

Financing of ZPS
Zecotek will no longer be proceeding with the grant of a contingent value right to its shareholders as contemplated in the December 19, 2019 news release. However, the Company understands that ZPS is proposing to carry out a private placement to fund its continuing operations following the sale of ZPS to WHC. Existing shareholders who are “accredited investors” or otherwise eligible to participate under applicable securities laws and who are interested in participating in any such financing should email IRZPS@zecotek.com.

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.
Trading Halt and listing on NEX 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, after which the Company’s shares are expected to be listed on the NEX board of the TSX Venture Exchange.

Write-Off of Inter-Company loans
In connection with the proposed sale of ZPS to WHC the Company will write-off the following intercompany loans:

  • Zecotek Photonics Inc. will write-off the amount of CAD $33,855,118 owed to it by Zecotek Photonics Singapore Pte Ltd.
  • Zecotek Photonics Singapore Pte Ltd. will write-off SGD $56,665,242 owed to it by Zecotek Imaging Systems Pte Ltd., Zecotek Optronics Systems Pte Ltd., Zecotek Display Systems Pte Ltd. and Zecotek Photonics Inc. and C$2,009,956 owed to it by Zecotek Crystals Inc.
  • Zecotek Imaging Systems Pte Ltd. will write-off SGD5,504,548 owed to it by Zecotek Shanghai Ltd, Zecotek Photonics Singapore Pte Ltd. and Zecotek Imaging China Limited.
  • Zecotek Optronics Systems Pte Ltd. will write-off the amount of SGD $5,460,715 due from Zecotek Photonics Singapore Pte Ltd.
  • Zecotek Display Systems Pte Ltd. will write-off the amount of SGD $4,461,492 due from Zecotek Photonics Singapore Pte Ltd.
  • Zecotek Shanghai Ltd. will write-off the amount of RMB $462,908 due from Zecotek Imaging Systems Pte Ltd.
  • Zecotek Imaging China Limited will write-off the amount of RMB $2,889,830 due from Zic Photonics China Limited and the amount of RMB $4,238,112 due from Zecotek Imaging Systems Pte Ltd.
  • Zecotek Crystals Inc. will write-off the amount of CAD $2,009,956 due from Zecotek Photonics Inc
  • Zic Photonics China Limited will write-off the amount of RMB $2,889,830 due from Zecotek Imaging China Limited.

Trading in the Company’s common shares will remain halted until the closing of the Transaction and, subject to acceptance of the TSX Venture Exchange will resume trading on the NEX.

On Behalf of the Board of Zecotek Photonics Inc.
Sergei Tsakunov
Chairman of the Special Committee and 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. There is no guarantee that the Transaction will close. The completion of the Transaction is subject to numerous conditions, known and unknown risks and uncertainties including, the completion of formal documentation, shareholder approval, acceptance of the Transaction by the 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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