Active Growth Capital Inc.
TSX VENTURE : ACK

Active Growth Capital Inc.

August 04, 2016 18:17 ET

Active Growth Capital Enters Into Definitive Agreement for Proposed Change of Business and Closes Bridge Financing

VAL D'OR, QUEBEC--(Marketwired - Aug. 4, 2016) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES.

Active Growth Capital Inc. (TSX VENTURE:ACK) ("ACK" or the "Corporation") is pleased to announce it has entered into an IP assignment and royalty agreement dated August 3, 2016 (the "Definitive Agreement") to provide for the completion of the acquisition of the Technology (as hereinafter defined) (the "Transaction"). The Transaction was initially announced by ACK in a press release dated July 21, 2016, indicating ACK had entered into a binding letter of intent with respect to the Transaction.

Upon completion of the Transaction, ACK will become a technology issuer and focus on developing and commercializing the Technology. ACK will change its name to "Quantum Number Corporation" or such other name as the parties may reasonably agree upon.

The acquisition, once completed, will constitute a "Change of Business" for ACK under Policy 5.2 of the Corporate Finance Manual of the TSX Venture Exchange. ACK and the Vendors (as hereinafter defined) are at arm's length, and accordingly, the Transaction is not considered a "Non-Arm's Length Transaction".

THE TRANSACTION

Pursuant to the Definitive Agreement, ACK will acquire all the rights and interests in the quantum random number generator technology (International application No. PCT/CA2015/050408) (the "Technology") from Société de commercialisation des produits de la recherche appliquée SOCPRA-Sciences et Génie S.E.C. ("SOCPRA"), Dr. Bertrand Reulet, Michel Delisle, Sébastien Plouffe et Pierre C. Miron (collectively the "Vendors") in consideration of: (i) the issuance of an aggregate of 6,000,000 common shares of ACK (each an "ACK Share") to the Vendors; (ii) a cash payment of $15,371.20 to SOCPRA, at the closing of the Transaction.

ACK will also grant to SOCPRA of a royalty of 5 % on all future sales of commercial applications incorporating the Technology, which ACK will have the option to buy back in consideration of $1,500,000, payable in cash or by the issuance of 10,000,000 ACK Share at the option of SOCPRA, within the first three (3) years following the closing of the Transaction.

Should ACK fail to find a commercial application for the Technology within three (3) year of the closing of the Transaction, 50% of the Technology shall be transferred back to SOCPRA and a 50%/50% joint venture shall be formed to cover all future costs relating to obtaining and maintaining as well as developing the rights forming part of the Technology.

The parties have agreed to pay, subject to the approval of the TSXV, a finder's fee of 10% of the value of the Transaction to Éric Leboeuf, a non-arm's length party specifically commissioned by ACK and instrumental to the Transaction, by the issuance of 600,000 ACK Shares in connection with the Transaction.

Closing the Transaction is subject to several conditions, including, but not limited to:

  • receipt of all regulatory, TSXV, shareholder, director and other third party approvals as required under applicable laws or regulatory policies;
  • entry into any regulatory required escrow agreements by ACK shareholders;
  • completion of the proposed Concurrent Financing; and
  • a new slate of directors be appointed as agreed by the parties.

Sponsorship of a "Change of Business" is required by the TSXV unless exempt in accordance with TSXV policies. ACK intends to apply for an exemption from the sponsorship requirements. There is no assurance that ACK will ultimately obtain an exemption from sponsorship.

THE FINANCING

ACK has closed a $112,500 bridge private placement financing consisting in the issuance of 2,255,000 units, each unit comprised of one (1) ACK Share and one (1) transferable ACK Share purchase warrant entitling the holder to acquire one (1) ACK Share at a price of $0.10 until February 3, 2018 (the "Bridge Financing"). The proceeds of the Bridge Financing will be used to cover the Transaction costs and for working capital.

As part of the Bridge Financing, Éric Leboeuf, an insider of the Corporation, and Maxime Lemieux, a director of the Corporation (collectively, the "Related Parties"), subscribed to 600,000 Units. The participation of the Related Parties in the Bridge Financing is considered a "related party transaction" under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Corporation is relying on Sections 5.5(a) and 5.7(1)(a) of MI 61-101, respectively, for exemptions from the formal valuation and minority approval requirements under MI 61-101, as the fair market value of the Units issued to the Related Parties pursuant thereto did not exceed 25% of the Corporation's market capitalization.

Concurrent with the Transaction the parties have agreed to raise a minimum of $725,000 and a maximum of $1,000,000 through the issuance of ACK units (the "Concurrent Financing"), at the subscription price of $0.05 per unit. Each unit shall consist of: (i) one (1) ACK Share, and (ii) one (1) transferable ACK Share purchase warrants with each such warrant entitling the holder thereof to acquire one (1) ACK Share at a price of $0.10 per share until the date that is 12 months from the closing of the financing.

The parties may pay finder's fees to arm's length parties for proceeds raised under the Concurrent Financing. These fees may be payable, at the discretion of the parties, in cash and/or in compensation warrant. The Concurrent Financing net proceeds will be used to advance the business of the Corporation, and for general working capital purposes.

NEW BOARD OF DIRECTOR AND MANAGEMENT

Upon completion of the Transaction, it is expected that the board of directors and management of ACK will consist of the persons identified below:

  • Pierre Cardinal - President and Chief Executive Officer;
  • Pierre C. Miron - Director, Chief Financial Officer and Secretary;
  • Luc Paquet -Director;
  • Marc Labrecque - Director; and
  • Maxime Lemieux - Director.

REINSTATEMENT TO TRADING

ACK's shares will remain halted pending receipt by the TSXV of certain required materials from ACK and until ACK engages a sponsor or receives a waiver from sponsorship.

FURTHER INFORMATION

All information in this news release, regarding ACK, SOCPRA and the Technology, was supplied by the parties respectively, for inclusion herein. Each party and its directors and officers have relied on the other party for any information concerning the other party.

Completion of the Transaction is subject to a number of conditions including, but not limited to: completion of satisfactory due diligence; completion of the Concurrent Financing; receipt of requisite regulatory approvals; acceptance of the Transaction by the TSXV; receipt of all requisite approvals from the shareholders of each of ACK for the Transaction and ancillary matters relating thereto; and the completion of all other actions necessary to consummate the Transaction.

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 filing 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 securities of ACK should be considered highly speculative. The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release.

The TSXV has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

Cautionary and Forward-Looking Statements

Certain information in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of ACK, including but not limited to, the uncertainty of the Transaction proceeding, the impact of general economic conditions, industry conditions, dependence upon regulatory and shareholder approvals, the execution of definitive documentation and the uncertainty of obtaining additional financing. Readers are cautioned that the assumptions used in preparing such information, although considered reasonable at the time of preparation, may prove imprecise and undue reliance should not be placed on forward-looking statements. Forward-looking statements in this press release are expressly qualified by this cautionary statement.

The forward-looking statements in this press release are made as of the date of this press release, and the Corporatuon undertakes no obligations to update publicly or to revise any of the included forward-looking statements, whether because of new information, future events or otherwise, except as expressly required by applicable securities law.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

Contact Information

  • Marc Labrecque
    President and Chief Executive Officer of ACK
    (819) 825-0001