Zecotek Photonics Inc ZMSPF

Debt settlement at 23 cents per share

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     As per page 11 of the MD&A document posted on Sedar on December 6, 2019:


On January 5, 2018, the Company issued 5,799,527 common shares of the Company at a price of $0.23 per share to settle an aggregate of $2,974,620 of debt owed to certain creditors to the Company, including directors, employees and third-party consultants, in consideration for the issuance of common shares of the Company. Insiders received a total of 1,938,526 common shares on completion of the debt settlement of $1,033,880. The disinterested directors of the Company approved the debt settlements with the respective insiders and their associates and affiliates.


Q    Why would Directors and employees of the company agree to this unless the shares would be worth more than 23 cents each at some point in the future? Does this not imply that whatever they are cooking up here (which honestly I find confusing as hell) would be expected to value the current shares at somewhere above 23 cents each before the ridiculous 40:1 consolidation?

The news release from yesterday mentioned 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.

Q: Do the CVRs represent potential value for current Zecotek shareholders?