Here we go again, I hear the trumpets blow again....
Zecotek to acquire Equinex North in RTO
2020-10-14 20:28 ET - News Release
Mr. Sergei Tsakunov reports
ZECOTEK PHOTONICS INC. ANNOUNCES LETTER AGREEMENT TO ACQUIRE EQUINEX NORTH AMERICA CORPORATION
Further to its news release dated July 31, 2020, Zecotek Photonics Inc. continues to work to complete its restructuring, with the initial step being the disposition of all of the issued and outstanding shares of its wholly owned subsidiary, Zecotek Photonics Singapore Pte. Ltd. (ZPS). A shareholder meeting to seek approval of the disposition will occur on Oct. 16, 2020. Shareholders are encouraged to vote in favour of the disposition by completing the form of proxy or voting instruction form which accompanied the notice of meeting and information circular respecting the meeting.
Acquisition of Equinex North America Corp.
Zecotek also announces that it has entered into an arm's length, non-binding letter agreement dated October 9, 2020 (the "Letter Agreement") with Equinex North America Corporation ("EquineX"), a private developer of software for use in the Equine industry with operations based in Toronto, Ontario. Pursuant to the Letter Agreement, Zecotek proposes to acquire 100% of the currently outstanding shares of EquineX in consideration for post-consolidation shares of the Company (the "Transaction").
Transaction Summary
Pursuant to the letter agreement, it is proposed that Zecotek will acquire 100% of the currently outstanding shares of EquineX by issuing approximately 15,333,333 post-consolidation shares of the Company to current shareholders of EquineX (the "Consideration Shares"). Up to 3,333,333 additional Consideration Shares may be issued to persons or entities who become shareholders of EquineX pursuant to the Financing (as defined and discussed in further detail below) prior to the closing of the Transaction. The Transaction is expected to constitute a reverse takeover ("RTO") of Zecotek by EquineX pursuant to the policies of the TSX Venture Exchange ("TSX-V"), but the Company may delist its common shares from the TSXV and pursue a listing on the Canadian Securities Exchange ("CSE") if it is determined that this will be in the best interests of shareholders of the combined company.
It is currently anticipated that the Transaction will be structured as a share exchange between Zecotek and the shareholders of EquineX, but it may be structured as a plan of arrangement, amalgamation, merger, or other similar form of transaction, whereby the shareholders of EquineX will become shareholders of the combined entity. Upon closing of the Transaction, and assuming the Financing is fully subscribed, it is expected that former shareholders of EquineX (including those who participated in the Financing) will hold approximately 69.7% of the shares of the Company and existing shareholders of the Company will hold approximately 30.3% of the shares of the Company. Subscribers in the Financing described below are expected to hold 12.4% of the shares of the Company (this amount being included in the 69.7% of shares to be held by current shareholders of EquineX as noted above).
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.
EquineX 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 EquineX 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 Letter Agreement will be replaced by a formal definitive agreement respecting the Transaction prior to closing of the Transaction.
Disposition of Zecotek Photonics Singapore Pte Ltd.
As noted above and described in detail in the Company's news release dated July 31, 2020, the Company is currently seeking shareholder approval for the Disposition at the Meeting on October 16, 2020. The Disposition involves the sale of all of the issued and outstanding shares of Zecotek's wholly owned subsidiary, Zecotek Photonics Singapore Pte Ltd., to Wang Holding Corp. ("WHC") 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. Closing of the Transaction is subject to completion of the Disposition.
Financing
In connection with the Transaction, EquineX proposes to complete a private placement offering of subscription receipts for gross proceeds of $1,000,000 (the "Financing"). The subscription receipts will be convertible into shares of EquineX immediately prior to the closing of the Transaction. EquineX will issue that number of subscription receipts which, upon conversion of the subscription receipts into shares of EquineX, will entitle holders of the subscription receipts to receive 3,333,333 post-Consolidation shares of the Company pursuant to the Transaction. If the Financing is completed in this manner, Zecotek will be required to issue an additional 3,333,333 Consideration Shares to the purchasers of the subscription receipts on closing of the Transaction on a pro rata basis.
Directors and Officers
On closing of the Transaction, the board of directors will be reconstituted with the appointment of nominees and the resignation of existing directors as selected by EquineX. Management of the new company will also consist of officers chosen by EquineX. Details respecting the directors and officers of the Company to be appointed on closing of the Transaction will be disclosed in a subsequent news release and/or in (a) Zecotek's RTO Information Circular to be filed on SEDAR if the Transaction proceeds as an RTO under the policies of the TSX-V, or (b) Zecotek's CSE Listing Statement if the Company delists from the TSX-V and applies to list its common shares on the CSE.
Support Agreements
Pursuant to the letter agreement, EquineX agreed to obtain standstill, lock-up and support agreements in favor of the Transaction from certain principal EquineX shareholders.
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
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 Financing, receipt of TSX-V approval for the Transaction if it proceeds as an RTO under TSX-V policies, receipt of CSE approval for the listing of the Company's common shares if the Company proceeds with a CSE listing, satisfactory due diligence by Zecotek and EquineX, compliance with applicable securities laws, the receipt of all requisite shareholder approvals, completion of the Consolidation and the completion of the Disposition. Further details relating to the Transaction will be announced when a formal definitive agreement is executed or will otherwise be available in the RTO Information Circular or CSE Listing Statement prepared in connection with the Transaction, as applicable.
About EquineX
Co-Founded by CEO, Derek Ivany and Chairman Paul Simmonds, Equinex is an equine technology company that is meeting the needs of the equine industry through the development of easy-to-use tools and apps, designed specifically for horse owners, trainers and veterinarians.
EquineX's comprehensive platform captures, consolidates and records each horse's current and ongoing records, including its registration, identification, ownership, expenses and its interactions with equine service providers.
There are more than 9,000,000 horses in North America and 60,000,000 worldwide in an industry that is a prime candidate for disruption.
The racehorse segment represents 15% of the total market, with all racehorses being required to be microchipped as of 2021.
EquineX is currently in the final stages of developing its digital wallet and fractional ownership program, specifically for racehorse owners, trainers and service providers.
Equinex is a subscription based platform and through its platform plans to transform the industry while ensuring the health, safety and wellbeing of horses.
The Company will provide additional information regarding the business of EquineX in the RTO Information Circular or CSE Listing Statement prepared in connection with the Transaction, as applicable.
Completion of the transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange or CSE acceptance as applicable, completion of the Financing, completion of the Disposition, completion of satisfactory due diligence and shareholder approval where applicable. 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 RTO Information Circular or CSE Listing Statement 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.
We seek Safe Harbor.
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