Cell-Loc Location Technologies Inc. (TSX VENTURE:XCT) ("Cell-Loc")
is pleased to announce that it has entered into a share purchase
agreement (the "Acquisition Agreement") with among others,
Walkervale Holdings, Inc. ("Walkervale") and Ariovaldo Aprikian, a
director of Cell-Loc, to acquire all of the issued and outstanding
shares (the "Acquisition") of CLTI, a Cayman company, in
consideration for the issuance of an aggregate of 16,205,883 common
shares of Cell-Loc (each, a "Cell-Loc Share") at a deemed issue
price of $0.12 per Cell-Loc Share.
About CLTI
CLTI's business is acting as the registered owner of all of the
issued and outstanding shares of X3 Telecomunicacoes E Equipamentos
Ltda, ("X3") a Brazilian company which operates a location beacon
technology business, primarily in the tracking of lost or stolen
vehicles in Brazil. Currently, Cell-Loc licenses certain
intellectual property to X3 in connection with the operation of
X3's location beacon business in Brazil.
The following tables set forth certain selected management
prepared unaudited annual and interim financial and operational
information of X3.
Selected Financial Data
($000 CAD) Six Months Year Ended Year Ended Year Ended
Ended December 31, December 31, December 31,
June 30, 2011 2010 2009 2008
(unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------------
Gross Revenues 1,935 4,847 4,534 3,907
EBITDA (146) (406) (264) (1,675)
Net Income
(Loss) (143) (1,799) (956) (4,033)
Total Assets 3,781 3,685 4,468 4,488
Bank Debt(1) (449) (393) (46) (83)
Working Capital
(deficit) (2,409) (3,340) (1,926) (1,001)
Note:
(1) Excludes intercompany debt between X3 and CLTI.
The Acquisition
The Acquisition will be effected pursuant to the Acquisition
Agreement. The Acquisition Agreement contains covenants,
representations and warranties of and from each of Cell-Loc,
Walkervale and certain other minority shareholders of CLTI
(including Ariovaldo Aprikian) and various conditions precedent in
favor of each of the parties thereto.
Furthermore, in connection with the Acquisition, Cell-Loc has
agreed to conditionally backstop a personal guarantee (the
"Personal Guarantee") currently in place from Mr. Schocair in
favour of an arm's length lender to X3 in the amount of 1,500,000
Brazilian reais (approximately $867,000 Cdn) (the "Backstop"). The
current amount outstanding under the loan is approximately
1,000,000 Brazilian reais (approximately $580,000 Cdn). In the
event the Personal Guarantee is called by the lender, Cell-Loc
shall at its sole option, and in any event within 60 business days
of receipt of notice of such event may, at its sole option, choose
to: (a) pay to Mr. Schocair a cash amount equal to the dollar value
of the amount Schocair is required to pay to the lender pursuant to
the Personal Guarantee; (b) transfer, register and assign all
rights to such number of ordinary shares of CLTI ("CLTI Shares") as
is equal to the dollar value of the amount Mr. Schocair is required
to pay to the lender pursuant to the Personal Guarantee (provided
that in the event Cell-Loc elects to transfer to Mr. Shcocair CLTI
Shares and the dollar value of the amount Mr. Schocair is required
to pay to the lender pursuant to the Personal Guarantee as a result
of the default of X3 under the loan exceeds the value of all of the
CLTI Shares owned by Cell-Loc, Cell-Loc shall transfer, register
and assign all of the CLTI Shares owned by it to Mr. Schocair, in
full and absolute satisfaction of its obligations). In such event,
Cell-Loc will own less, and possibly substantially less, than 100%
of the equity of CLTI; or (c) subject to the receipt of all
regulatory approvals, including the approval of the TSX Venture
Exchange ("TSXV"), issue to, or at the direction of Mr. Schocair,
such number of Cell Loc Shares (less the maximum discount permitted
by the TSXV) as is equal to the dollar value of the amount Schocair
is required to pay to the lender pursuant to the Personal Guarantee
as a result of the default of X3 under the Loan. Provided that, in
all cases, the maximum amount Cell-Loc shall be required to pay or
provide to Mr. Schocair shall be limited to 1,500,000 Brazilian
reais (approximately $870,000 Cdn). Additionally, pursuant to the
terms of the Acquisition Agreement, the parties have agreed that on
or prior to the date that is 6 months from closing, Cell-Loc shall:
(i) use its reasonable efforts to assume the Personal Guarantee; or
(ii) take such other steps as are required such that Alvaro
Schocair ceases to have any obligations as guarantor for the above
mentioned loan.
Walkervale currently owns approximately 9.9% of the issued and
outstanding shares of Cell-Loc. Walkervale is indirectly owned and
controlled by Alvaro Schocair and Roberto Junqueira, each directors
of Cell-Loc. Combined with each of Mr. Schocair's and Mr.
Junqueira's holdings, Mr. Schocair, Mr. Junqueira and Walkervale
(collectively, the "Walkervale Group") have current ownership,
control and direction over 4,424,666 Cell-Loc Shares representing
approximately 12.3% of the issued and outstanding Cell-Loc Shares,
on a non-diluted basis. As the Acquisition of CLTI involves
insiders of Cell-Loc, the Acquisition will constitute a non-arm's
length acquisition under the policies of the TSXV and will be
subject to disinterested shareholder approval at an upcoming annual
and special meeting of Cell-Loc shareholders which is anticipated
to be held in November 2011 (the "Meeting"). Accordingly, none of
the Cell-Loc Shares owned or controlled by the Walkervale Group or
Ariovaldo Aprikian will be entitled to vote on the resolution
approving the Acquisition at the Meeting.
Reasons For The Acquisition
Cell-Loc believes that the Acquisition will result in a
streamlined and efficient business that is able to realize
significant benefits by integrating the businesses of each of
Cell-Loc and X3 into one corporate organization. As Cell-Loc
currently licenses certain intellectual property to X3, Cell-Loc
believes that the combination of each of the businesses is the
final step towards the re-integration of each of these enterprises
which is expected to provide Cell-Loc with additional revenue
streams, realize various synergies and allow the company to pursue
additional business opportunities.
The acquisition of CLTI is strategic to the growth of Cell-Loc.
The key drivers for Cell-Loc associated with this transaction
consist of the following:
-- X3 has an active Cellocate Network which covers over 1,500 square
kilometers in Sao Paulo, Brazil which provides Cell-Loc with immediate
access to a large and diverse customer base and potential business
opportunities. The purchase price for CLTI is attractive when compared
to the cost to deploy a similar Cellocate Network. It also provides
immediate access to an operating network whereas a new network would
require a minimum of 12 months to deploy.
-- X3 has management team and staff including technical support and a call
center. This provides Cell-loc with an operational structure and
expertise to focus on immediate business development.
-- X3 currently has more than 30,000 customers utilizing its vehicle
tracking and stolen vehicle recovery services. X3 has established a
strong presence in the Brazil market and customer growth is directly
correlated with increased recovery rate of stolen vehicles. X3 has
started manufacturing Beacon 7 to provide a lower cost, higher
performance Beacon for this market application. Beacon 7 has been
designed to enhance vehicle recovery performance which will allow X3 to
greatly expand its customer base and increase cash flow.
-- X3 and Cell-Loc have defined a new market application for Cell-Loc's
technology in the Telemetry/Smart Grid market and have received interest
from potential customers as an alternative to mesh networks for data
communication services. Cell-loc's proprietary technology is unique in
providing low cost data transmission. X3 is working with a major utility
in Brazil and is currently conducting tests to demonstrate the
performance capability of the technology and the Cellocate Network for
this new market development. If successful, Cell-Loc considers this as a
robust global market application which will be showcased in Brazil.
-- The transaction will also provide potential cost reductions through
back-office synergies and higher capacity for development activities
through the combination of technical teams.
The transaction is also key to Bravia Capital Investimentos
Ltda. ("Bravia") (an affiliate of Walkervale).
-- As a private equity fund, Bravia seeks to develop opportunities to a
stage when they are able to transform a private equity investment into a
public equity investment. This transaction allows Bravia to participate
as an equity owner in the worldwide development of Cell-Loc's
technology.
Multilateral Instrument 61-101
Cell-Loc has determined that the Acquisition does not constitute
a "business combination" for the purposes of Multilateral
Instrument 61-101 ("MI 61-101") as the interest of Cell-Loc
Shareholders in Cell-Loc Shares held by them is not being
terminated. However, the Acquisition does constitute a "Related
Party" transaction for the purposes of MI 61-101 due to the fact
that: (i) Cell-Loc is purchasing or acquiring an asset (the CLTI
Shares) from a Related Party (Walkervale and Mr. Aprikian) for
valuable consideration; and (ii) Cell-Loc will issue securities to
a Related Party (Walkervale and Mr. Aprikian). For the purposes of
MI 61-101, Ariovaldo Aprikian and the Walkervale Group are Related
Parties of Cell-Loc and the Acquisition must be approved by the
majority of the votes cast by shareholders, excluding those held
directly or indirectly by Mr. Schocair and the Walkervale
Group.
Furthermore, the Backstop of the Personal Guarantee constitutes
a "Related Party" transaction for Cell-Loc for the purposes of MI
61-101 due to the fact that Cell-Loc will assume or may otherwise
become subject to a liability of the related party (Mr. Schocair).
For the purposes of MI 61-101, Mr. Schocair, including his
associates and affiliates, is a Related Party of Cell-Loc. In
accordance therewith, the Acquisition Resolution will also
contemplate the approval of the Backstop.
As the Acquisition (including the Backstop) is a Related Party
transaction, pursuant to Section 5.6 of MI 61-101, Cell-Loc shall
not carry out the Acquisition (including the Backstop) unless it
has obtained minority approval for the transaction. For the
purposes of MI 61-101, minority approval is determined by excluding
the votes attached to Cell-Loc Shares that, to the knowledge of
Cell-Loc or any interested party or their respective directors or
senior officers, after reasonably inquiry, are beneficially owned
or over which control or direction is exercised by: (i) Cell-Loc;
(ii) an interested party in the transaction: (iii) a Related Party
of an interested party in the transaction; and (iv) a joint actor
of any of the foregoing persons. Specifically, the Walkervale
Group, including its associates and affiliates, beneficially owns
or controls 4,424,666 Cell-Loc Shares and Mr. Aprikian, including
his associates and affiliates, beneficially owns or controls no
Cell-Loc Shares. As such, a total of 4,424,666 Cell-Loc Shares,
representing approximately 12.4% of the issued and outstanding
Cell-Loc Shares, will be withheld from voting at the Meeting in
accordance with MI 61-101 and applicable TSXV policies.
Cell-Loc anticipates that it will seek, among other things, the
requisite shareholder approval for the Acquisition at its upcoming
annual and special meeting of shareholders currently which is
anticipated to be held in November 2011. Cell-Loc anticipates
mailing to shareholders an information circular-proxy statement in
due course and, provided the requisite shareholder and other
approvals one received, anticipates closing the Acquisition shortly
thereafter.
Valuation
Cell-Loc is exempt from the formal valuation requirement under
MI 61-101 in respect of the Acquisition (including the Backstop)
based on reliance on the exemption in MI 61-101 at Section 5.5(b)
thereof as no securities of Cell-Loc are listed or quoted on the
Toronto Stock Exchange, the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Stock Market, or a stock exchange
outside of Canada and the United States.
In addition, for the purposes of TSXV Policy 5.3, the TSXV
generally requires evidence of value for acquisitions from
Non-Arm's Length Parties which can be evidenced by way, of among
other things, proof of deferred expenditures or expenses in the
acquired business (excluding general and administrative expenses)
incurred within the five previous years which have contributed to
or can reasonably be expected to contribute to the future
operations of the Cell-Loc (or CLTI) and which are supported by an
audited statement of costs. A copy of an audited statement of costs
in respect of X3, which includes expenditures made under a current
license agreement between Cell-Loc and X3, other investments in the
business of X3 and the value attributed to the acquisition by
Walkervale of X3 in 2010 has been provided to the TSXV, and the
TSXV has accepted such statements as satisfactory evidence or
value.
About Cell-Loc Location Technologies Inc.
Cell-Loc is an intellectual property company that designs,
develops and deploys proprietary technology that enables wireless
location and data transmission services. Cell-Loc's core
competencies include digital hardware, and software design, signal
processing, firmware development and project management of wireless
datacom installations.
Cell-Loc's Cellocate Network is designed as a low-cost,
low-bandwidth, two-way data communications network for cost
sensitive applications. By operating in the 2.4 GHz unlicensed ISM
band, the Cellocate Network has inherently lower operating costs
that its cellular competitors. Therefore, once a critical mass of
subscribers has been achieved on a deployed Cellocate Network,
Cell-Loc can reduce end user costs on its Network by eliminating
cellular data charges and system access fees.
To receive Cell-Loc Location Technologies news, please subscribe
to Marketwire's free news service (www.marketwire.com).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Forward-Looking Statements
In the interest of providing shareholders and potential
investors with information regarding Cell-Loc including
management's assessment of the future plans and operations of
Cell-Loc, certain statements contained in this press release
constitute forward-looking statements or information (collectively
"forward-looking statements") within the meaning of applicable
securities legislation. Forward-looking statements are typically
identified by words such as "anticipate", "continue", "estimate",
"expect", "forecast", "may", "will", "project", "could", "plan",
"intend", "should", "believe", "outlook", "potential", "target" and
similar words suggesting future events or future performance. In
particular, this press release contains, without limitation,
forward-looking statements pertaining to the following:
expectations of management regarding the proposed Acquisition,
including the timing of completion of the Acquisition, the mailing
of an information circular in connection with seeking shareholder
approval of, among other things, the Acquisition, and certain
operational and business plans of Cell-Loc subsequent to completion
of the Acquisition.
With respect to forward-looking statements contained in this
press release, Cell-Loc has made assumptions regarding, among other
things: future capital expenditure levels; future exchange rates
and interest rates; ability to obtain equipment in a timely manner
to carry out research and development activities; the impact of
increasing competition; the ability to obtain financing on
acceptable terms. Although Cell-Loc believes that the expectations
reflected in the forward looking statements contained in this press
release, and the assumptions on which such forward-looking
statements are made, are reasonable, there can be no assurance that
such expectations will prove to be correct. Readers are cautioned
not to place undue reliance on forward-looking statements included
in this press release, as there can be no assurance that the plans,
intentions or expectations upon which the forward-looking
statements are based will occur. By their nature, forward-looking
statements involve numerous assumptions, known and unknown risks
and uncertainties that contribute to the possibility that the
predictions, forecasts, projections and other forward-looking
statements will not occur, which may cause Cell-Loc's actual
performance and financial results in future periods to differ
materially from any estimates or projections of future performance
or results expressed or implied by such forward-looking statements.
These risks and uncertainties include, among other things, the
following: that the Acquisition may not close when planned or at
all or on the terms and conditions set forth herein; the failure of
Cell-Loc to obtain the necessary shareholder, regulatory and other
third party approvals required in order to proceed with the
Acquisition; incorrect assessment of the value of the Acquisition;
failure to realize the anticipated benefits of the Acquisition;
general economic conditions in Canada, Brazil and abroad. Readers
are cautioned that this list of risk factors should not be
construed as exhaustive.
The forward-looking statements contained in this press release
speak only as of the date of this press release. Except as
expressly required by applicable securities laws, Cell-Loc does not
undertake any obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future
events or otherwise. The forward-looking statements contained in
this document are expressly qualified by this cautionary
statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Cell-Loc Location Technologies Inc. Keith Bohn Interim
CEO 403.569.5700
Cell-Loc Location Technologies Inc. (TSXV:XCT)
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