TORONTO, March 25, 2015 /CNW/ - Friday Capital Inc. ("Friday Capital" or the "Company") (TSXV: FYC.P) announced today that further to the Company's press release issued on December 17, 2014 with respect to its qualifying transaction (the "Qualifying Transaction"), it has finalized the principal terms of the Qualifying Transaction and entered into a definitive agreement with Hit Technologies Inc. ("Hit Tech") dated March 25, 2015. Hit Tech is also pleased to announce that on January 16, 2015, it closed approximately $4.9 million of its previously announced private placement (the "Private Placement").
Hit Tech issued 8,131,266 subscription receipts (the "Subscription Receipts") of Hit Tech at a subscription price of $0.60 per Subscription Receipt (the "Purchase Price") for total gross proceeds of approximately $4.9 million. Dundee Securities Ltd. acted as lead agent for such Private Placement, along with Mackie Research Capital Corporation (collectively, the "Agents"). At its discretion, Hit Tech may, but is not required to, raise additional funds under subsequent tranches of the Private Placement for total gross proceeds of up to $10 million under the Private Placement prior to completion of the Qualifying Transaction.
Each Subscription Receipt entitles the holder thereof to receive, without payment of additional consideration (i) in the event that the Qualifying Transaction is completed on or prior to June 16, 2015 (the "Deadline"), one Hit Tech standard A share (the "Hit Tech Shares") immediately prior to the closing of the Qualifying Transaction; or (ii) in the event that the Qualifying Transaction is not completed on or prior to the Deadline, (a) one Hit Tech Share; (b) an additional 10% of a Hit Tech Share; and (c) an additional 1% of a Hit Tech Share for each month following the Deadline in which the Qualifying Transaction has not been completed up to a maximum of an additional 6%, either (A) immediately prior to the closing of the Qualifying Transaction or (B) on the last business day of the month that is six months after the Deadline, whichever comes first.
Hit Tech paid the Agents a cash commission equal to 6% of the gross proceeds in connection with such Private Placement.
The net proceeds raised from the Private Placement will be used by Hit Tech for expenses relating to human resources and staffing, retailer and distributor marketing, event and sponsorship marketing, digital and sales marketing, and for general working purposes.
As of the date hereof, Friday Capital has 7,423,000 common shares (the "Friday Capital Shares") issued and outstanding and options to acquire an aggregate of 462,300 Friday Capital Shares outstanding, which options will be cancelled without the issuance of any additional Friday Capital Shares prior to the closing of the Qualifying Transaction. In addition, Friday Capital has 462,300 broker options outstanding, which options will be exercisable for 0.449 of a post-Consolidation (as defined herein) Friday Capital Share at a price of $0.60 per post-Consolidation Friday Capital Share. As of the date hereof, Hit Tech has 30,574,990 Hit Tech Shares issued and outstanding and 8,131,266 Subscription Receipts outstanding. In addition, options to acquire an aggregate of 1,449,500 Hit Tech Shares have been granted to certain officers, employees and consultants of Hit Tech at an exercise price equivalent to the Purchase Price. In addition, options to acquire an aggregate of 2,000,000 Hit Tech Shares have been granted to Brooks Bergreen, Chief Executive Officer of Hit Tech, at an exercise price of $0.25 per Hit Tech Share where a third of the options vest immediately upon grant, another third vest upon Hit Tech achieving gross revenues of $5 million in a given fiscal year and the last third vest upon Hit Tech achieving gross revenues of $20 million in a given fiscal year. On completion of the Qualifying Transaction, each outstanding Hit Tech option will become exercisable for one Friday Capital Share.
Pursuant to the terms outlined in the definitive agreement, the Company will acquire all of the issued and outstanding securities of Hit Tech by way of a three-cornered amalgamation whereby Hit Tech will amalgamate with a wholly-owned subsidiary of the Company. Prior to the closing of the Qualifying Transaction, the Company will consolidate (the "Consolidation") its issued and outstanding common shares on the basis of one post-Consolidated Friday Capital Share for each 2.2269 existing Friday Capital Shares so that the value of each Friday Capital Share is equal to the Purchase Price. Pursuant to the Qualifying Transaction, each shareholder of Hit Tech will receive one post-Consolidation Friday Capital Share for every Hit Tech Share outstanding. Assuming there are no additional funds raised under subsequent tranches of the Private Placement, the agent options are not exercised prior to closing and the Qualifying Transaction is completed prior to the Deadline, following closing of the Qualifying Transaction and Consolidation, the resulting issuer will have 42,039,589 post-Consolidation Friday Shares issued and outstanding, with the existing Friday Capital shares converting into 3,333,333 (7.9%) of the post-Consolidation Friday Shares, the existing Subscription Receipts being exchanged for 8,131,266 (19.3%) of the post-Consolidation Friday Shares and the existing Hit Tech Shares being exchanged into 30,574,990 (72.7%) of the post-Consolidation Friday Shares.
About Hit Technologies Inc.
Hit Tech, operating as "HITCASE", based in Vancouver, British Columbia and governed by the laws of the Province of British Columbia, is in the business of designing and manufacturing protective cases, mounting systems and professional lenses for Apple Inc.'s iPhones. Hit Tech has created a full iPhone 5 product line focused on enhancing iPhone customers' ruggedized needs in the global "extreme-use" iPhone market, and is in the process of developing a full iPhone 6 product line which is expected to be on the market in the first half of 2015.
Summary of Financial Information
The Company was provided with the audited annual financial statements of Hit Tech for the fiscal year ended June 30, 2014 and June 30, 2013, and the interim unaudited financial statements of Hit Tech for the six month period ended December 31, 2014.
The audited statement of financial position of Hit Tech at June 30, 2014 shows assets of $525,385 (2013: $550,288) against liabilities of $1,140,735 (2013: $625,134), a working capital deficit of $892,100 (2013: deficit of $250,954) and an accumulated deficit of $1,143,857 (2013: deficit of $274,881). For the year ended June 30, 2014, the Company incurred a loss of $868,976 (2013: loss of $342,857) and negative cash flows from operating activities of $635,208 (2013: $184,513).
The unaudited statement of financial position for Hit Tech at December 31, 2014 shows assets of $941,146 against liabilities of $1,952,132, a working capital deficit of $1,304,655 and an accumulated deficit of $2,259,785. For the six months ended December 31, 2014, the Company incurred a loss of $1,115,928 (2013: $413,241) and negative cash flows from operating activities of $1,043,951 (2013: $424,413).
Directors, Officers and Other Insiders of the Resulting Issuer
Upon completion of the Qualifying Transaction, and subject to the receipt of applicable regulatory and shareholder approvals, the board of directors of the Company shall be reconstituted to consist of five directors and will be comprised of Brooks Bergreen, Ian Wilkinson, Rob Chalmers, Rob Chase and Michael Liggett. In addition, Brooks Bergreen, the current Chief Executive Officer of Hit Tech, will become Chief Executive Officer of the Company. Following completion of the Qualifying Transaction, to the best knowledge of the directors and executive officers of Friday Capital and Hit Tech, there will be no persons or companies who will beneficially own, directly or indirectly, or exercise control or direction over, common shares in the capital of the resulting issuer carrying more than 10% of the voting rights attached to the common shares in the capital of the resulting issuer other than Brooks Bergreen, through a holding company, who will own approximately 6,784,654 shares of the resulting issuer, representing approximately 16.1% of the issued and outstanding shares of the resulting issuer on a non-diluted basis, and Ian Wilkinson, through a holding company, who will control approximately 8,999,999 shares of the resulting issuer, representing approximately 21.4% of the issued and outstanding shares of the resulting issuer on a non-diluted basis.
The following sets out the names and backgrounds of all persons who are expected to be considered insiders of the Company upon closing of the Qualifying Transaction:
Brooks Bergreen, Chief Executive Officer and Director
Brooks Bergreen is an adventurer and technology entrepreneur, and the founder of Hit Tech. He brings extensive experience building teams across diverse businesses including hardware and software design, e-commerce, marketing, film production and satellite communications. Previously, Mr. Bergreen designed, delivered and maintained satellite communications and defence projects in excess of $40 million in Afghanistan for the US Department of Defence, Canadian DND and other NATO countries, non-government organizations and media outlets. Mr. Bergreen is also the founder of 3World Media (www.3world.ca), a film production company, and creator of two award-winning documentaries.
Ian Wilkinson, Director
Ian Wilkinson has served as the President and Chief Executive Officer of Hothead Games Inc. since March 2009. Mr. Wilkinson currently sets strategy for Hothead Games Inc. and has full profit and loss responsibility. He oversees Hothead Games Inc.'s investor relations, finance, business development, marketing and production functions. Previously, Mr. Wilkinson co-founded Radical Entertainment Inc. in September 1991 where he served as President and Chief Executive Officer from 1991 until 2006. During that time, Mr. Wilkinson built the company into one of the largest and most successful independent game development companies in the world. Mr. Wilkinson sold Radical to Vivendi Games (now Activision Blizzard) in 2006.
Mr. Wilkinson is the former Chairman of New Media BC, past winner of Ernst and Young Entrepreneur of the Year (Media and Entertainment), former Advisory Board Member for the BC Institute of Technology and a former Advisor to the BC Advanced Systems Institute. Mr. Wilkinson earned an Honours Business Administration Degree from Western University.
Rob Chalmers, Director
Robert Chalmers brings over 17 years of investment banking experience to Hit Tech. Mr. Chalmers' professional experience includes equity and debt capital structuring and mergers and acquisitions. Mr. Chalmers currently operates a family office based in Toronto, Ontario and is focused primarily on principle investing in both private and public companies.
Rob Chase, Chairman and Director
Robert Chase served as the Chief Operating Officer at Absolute Software Corporation from June 2010 to June 2014 and as Chief Financial Officer of Absolute from June 2000 to June 2010. Absolute Software Corporation develops and markets a leading Software-as-a-Service solution for computing device management and data security for both the consumer and enterprise market segments. In this role, Mr. Chase was responsible for guiding Absolute Software Corporation's global business strategy and development. From February 2013 to July 2014, Mr. Chase served on the board of directors and as chairman of the audit committee for PNI Digital Media, Inc. ("PNI"). PNI provides an omni-channel photo printing and e-commerce Platform-as-a-Service that supports the on-line photo and gift business for world's largest retailers. Mr. Chase was instrumental in helping management return the company to growth and to regain shareholder support. Mr. Chase holds a Bachelor of Business Administration from Simon Fraser University and a Chartered Accountant designation
Michael Liggett, Director
Michael Liggett has over 17 years of financial experience in public companies, completing over $300 million in equity and debt financing and approximately $200 million in merger and acquisition transactions. Previously, Mr. Liggett acted as Chief Financial Officer of Eacom Timber Corporation, a start-up softwood lumber company listed on the TSXV. Prior to Eacom Timber Corporation, Mr. Liggett acted as the Chief Financial Officer of Inflazyme Pharmaceuticals Ltd., an early stage company focused on research and development for new drugs in inflammation. At Inflazyme Pharmaceuticals Ltd., Mr. Liggett structured the largest life sciences strategic partnership in Canada at that time and completed over $100 million in private placements and secondary offerings and listed the company on the Toronto Stock Exchange.
Mr. Liggett is a Chartered Professional Accountant and worked for PriceWaterhouseCoopers LLP prior to joining Inflazyme Pharmaceuticals Ltd.
The proposed Qualifying Transaction is not a "Non-Arm's Length Qualifying Transaction" within the meaning of TSX Venture Exchange (the "Exchange") Policy 2.4, and as such, shareholder approval is not required to approve the proposed Qualifying Transaction. No Insider, promoter or Control Person (as such terms are defined in the policies of the Exchange) of the Company has any interest in Hit Tech prior to giving effect to the Qualifying Transaction.
Notwithstanding the foregoing, the Exchange may impose conditions for its approval of the Qualifying Transaction, which may require shareholder approval. Prior to the completion of the Qualifying Transaction, the Company will call a meeting of its shareholders for the purpose of approving, among other matters: (i) a change of name of Friday Capital; (ii) the Consolidation; (iii) the election of individuals to the board of directors of Friday Capital; and (iv) such other matters that may be reasonably required in order to give effect to the Qualifying Transaction.
Sponsorship of the Qualifying Transaction is required by the Exchange, unless exempt in accordance with Exchange policies. The Company will apply for an exemption from the sponsorship requirements pursuant to Exchange policies. However, there is no assurance that the Exchange will grant this exemption.
Completion of the Qualifying Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and, if applicable, pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the Qualifying Transaction cannot close until the required approval is obtained. There can be no assurance that the Qualifying Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the disclosure document to be prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
The Exchange has in no way passed upon the merits of the proposed Qualifying Transaction and has neither approved nor disapproved the contents of this press release.
This press release contains forward-looking information based on current expectations. Statements about the closing of the Qualifying Transaction, the number of securities of Friday Capital that may be issued in connection with the Qualifying Transaction, the Private Placement, shareholder approval and the parties' ability to satisfy closing conditions and receive necessary approvals, among others, are all forward-looking information. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. Although such statements are based on management's reasonable assumptions, there can be no assurance that the Qualifying Transaction will occur or that, if the Qualifying Transaction does occur, it will be completed on the terms described above. Friday Capital assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law.
Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Friday Capital Inc.
For further information: Friday Capital Inc. Michael Robert Davidson, Chief Executive Officer and Chief Financial Officer, (647) 970-2829; Hit Technologies Inc., Brooks Bergreen, Chief Executive Officer, (888) 423-4124 Ext. 520