Emblem Capital Inc.
TSX VENTURE : EMB.P

December 06, 2006 11:24 ET

Emblem Capital Inc. Announces Proposed Qualifying Transaction With umedik Inc.

TORONTO, ONTARIO--(CCNMatthews - Dec. 6, 2006) - Further to its press release dated June 14, 2006, Emblem Capital Inc. ("Emblem") (TSX VENTURE:EMB.P) is pleased to update its shareholders on the proposed acquisition of all of the issued and outstanding securities (the "Acquisition") in the capital of umedik Inc. ("umedik").

About umedik

umedik is a healthcare diagnostic technology company engaged in the business of providing laboratories testing human patient serum with a novel and patented diagnostic platform and a broad diagnostic test menu that uses quantitative microarrays that enable multiple test results with significantly less labour than current diagnostic instrumentation.

umedik was founded in 1999 on the principle that more sensitive, timely and less costly disease diagnostics based on protein and antibody detection might be of interest to healthcare providers, but only if one could solve the inherent problems with current blood testing based on how proteins and antibodies recognize each other, a technology commonly referred to as ELISA immunoassays. Dr. Lea, umedik's founder, recognized that diagnostic testing based on ELISAs hadn't changed since it's inception in 1959 and was routinely susceptible to issues of inaccuracy, lack of sensitivity, lengthy time to result, cumbersome to execute and labour intensive in the clinical setting. He also recognized that microarray technology that was instrumental throughout the 1990's with DNA and used to map the human genome may provide the basis of an applicable technology and answers to improving ELISA's inherent weaknesses. However, he was aware that protein and antibody microarrays present a very different set of challenges from the DNA microarrays used for the human genome project.

Current laboratory diagnostic analyzers use the paradigm of one diagnostic test providing one result. Increasingly, health care providers seek multiple determinants in order to make a correct disease diagnosis. In 2004, the average number of tests ordered during an exam for a human medical condition was 6.2 (which has increased from 4.9 in the past 10 years). umedik's technology, Quanti Matrix™ is designed to meet this growing trend and provide multiple test determinations within one diagnostic test. The resulting reduction in number of tests that a laboratory must perform directly translates into reduced testing complexity, fewer materials consumed, increased time to results and ultimately reduced technician labour resulting in savings in the healthcare system.

The Quanti Matrix™ proprietary microarray technology has brought the performance of reference-lab analyzers into a bench-top sized device. The platform incorporates the same reagent biochemistry used in existing and regulatory approved manual and automated ELISA (enzyme-linked immunosorbant assay - it is a widely used immunochemical method for detecting antigens or antibodies) diagnostic tests, thereby reducing the expected time to acquire regulatory approval for each test. The technology to translate existing 'one test - one determination' onto the Quanti Matrix™ one test - multiple results is patented, repeatable and re-applicable across a significant spectrum of human diagnostic tests currently being delivered today by human diagnostic laboratories.

umedik was continued under the Canada Business Corporations Act by articles of continuance dated December 1, 1999. Its registered office is 36 Meteor Drive, Toronto, Ontario M9W 1A4.

umedik currently has the following securities issued and outstanding:

- 8,831,391 common shares;

- 630,000 preference shares (the "Preference Shares") which are convertible into 630,000 common shares;

- 646,107 common share purchase warrants (the "Debenture Warrants") (see below);

- 165,078 broker warrants (the " Broker Warrants") (see below);

- 417,885 warrants (the "Warrants") (see below); and

- 970,000 options (the "umedik Options") (see below).

In April 2006, umedik issued an aggregate of $4,146,600 10% convertible debentures (the "umedik Debentures") which were converted into an aggregate of 2,073,300 common shares on June 14, 2006 at a deemed price of $2.00 per common share. In addition to the issuance of the umedik Debentures, umedik issued the Debenture Warrants. Each Debenture Warrant entitles the holder thereof to acquire one common share in the capital of umedik at an exercise price of $1.00 per share for a period of 24 months from the date umedik becomes listed on either of the TSX or the TSX Venture Exchange or another transaction resulting in a public listing (the "Liquidity Event").

Pursuant to an agency agreement dated March 29, 2006, entered into between umedik and Kingsdale Capital Corporation ("Kingsdale"), umedik issued the Broker Warrants to Kingsdale. The Broker Warrants entitles Kingsdale to acquire one common share in the capital of umedik at an exercise price of $2.00 per share for a period of 24 months after the Liquidity Event.

The Warrants are exercisable at prices ranging from $0.01 to $4.17 per common share and have expiry dates ranging from 6 months to 36 months from the Liquidity Event. The umedik Options are exercisable at prices ranging from $0.22 to $2.80 and have expiry dates ranging from December 16, 2008 to June 29, 2011.

The principal shareholders of umedik are Dr. Peter Lea, who owns 1,000,000 common shares and resides in Toronto, Ontario, Colin Dykstra, who owns 1,150,000 common shares and resides in Toronto, Ontario, Saied Nadjafi, who owns 1,150,000 common shares and resides in Toronto, Ontario and Claude Ricks, who owns 1,150,000 common shares and resides in Barrie, Ontario. These individuals own in the an aggregate 4,450,000 common shares or 50.38% of the issued and outstanding common shares of umedik. The remaining 4,381,391 common shares or 49.62% of the issued and outstanding common shares of umedik are owned by an aggregate of 211 shareholders.

The directors of umedik are Dr. Peter Lea, Colin Dykstra, Saied Nadjafi and Claude Ricks. The officers of umedik are Dr. Peter Lea, Chief Science Officer, Saied Nadjafi, Chief Executive Officer, Claude Ricks, President and Chief Operating Officer, and Andrew Morris, Chief Financial Officer.

On the basis of the unaudited financial statements as at and for the six month period ended June 14, 2006, umedik had total assets of $4,564,527, liabilities of $423,934, working capital of $2,784,897, revenues of $120,790 and net losses of $900,469. On the basis of the audited financial statements as at and for the year ending December 14, 2005, umedik had total assets of $1,832,076, liabilities of $656,330, working capital of $62,226, revenues of $168,349 and net losses of $1,784,961.

The Acquisition

On May 25, 2006 umedik and Emblem entered into an arm's length agreement (the "Agreement") whereby Emblem agreed to acquire all of the issued and outstanding common shares in the capital of umedik by way of amalgamation. umedik shareholders (the "Vendors") will be asked to approve the amalgamation of umedik and a wholly owned subsidiary of Emblem ("Subco") pursuant to the terms of an amalgamation agreement (the "Amalgamation Agreement"). Pursuant to the terms of the Amalgamation Agreement Emblem and the Vendors will each receive one (1) share in the capital of the amalgamated company (the "Amalco Shares") for every one (1) share that they own in the capital of Subco and umedik, as the case may be.

Pursuant to the Amalgamation Agreement, Emblem will acquire all of the Amalco Shares owned by the Vendors by issuing 1.6667 post consolidation common shares in the capital of the Emblem, which will be renamed "SQI Diagnostics Inc.", for every one (1) Amalco Share. Emblem will also acquire all of the umedik common shares issuable upon the conversion of the Preference Shares if and when such Preference Shares are converted into umedik common shares on the same ratio of 1.6667 post consolidation common shares for every one umedik common share. In addition, Emblem will seek shareholder approval to consolidate its issued and outstanding common shares on a six (6) for one (1) basis being one (1) post consolidation common share for every six (6) common shares currently issued and outstanding in the capital of Emblem. If the consolidation is approved, Emblem's issued and outstanding common shares will be reduced from 7,999,999 to 1,333,333.

Assuming the conversion of the Preference Shares and the approval for the consolidation, Emblem will issue an aggregate of 15,769,300 post consolidation common shares to the umedik shareholders.

Emblem will issue replacement warrants and options to the umedik warrant and option holders in exchange for all of the issued and outstanding Debenture Warrants, Broker Warrants, umedik Options and Warrants on the basis of 1.6667 warrants and options, as the case may be, in the capital of Emblem for every one (1) warrant and option in the capital of umedik. Each Emblem warrant and option will be exercisable into one (1) common share in the capital of Emblem. As a result, Emblem will issue an aggregate of 1,076,867 replacement Debenture Warrants, 275,136 replacement Broker Warrants; 696,489 replacement Warrants and 1,616,699 replacement umedik Options.

Emblem option holders will receive one (1) replacement stock option for every six (6) stock options of Emblem owned by such option holder which will result in the issuance of 133,333 replacement stock options to the Emblem option holders.

Completion of the acquisition is subject to the Vendors approving the Amalgamation Agreement and the shareholders of Emblem approving the Amalgamation and the proposed consolidation. Shareholder meetings for the Vendors and the Emblem shareholders will be called in order to obtain such approvals.

Assuming the completion of the amalgamation and the consolidation of the Emblem common shares, and assuming that the Preference Shares are not converted, Emblem will have an aggregate of:

- 16,053,012 post consolidation common shares issued and outstanding,

- 1,076,867 debenture warrants,

- 275,136 broker warrants;

- 708,989 warrants; and

- 1,750,032 stock options

On a fully diluted basis Emblem will have an aggregate of 20,914,057 post consolidation common shares issued and outstanding.

Of the 16,053,012 Emblem post consolidation common shares issued and outstanding following the completion of the amalgamation, the current shareholders of Emblem will own 1,333,333 post consolidation common shares (8.31%) while the Vendors will own 14,719,279 post consolidation common shares (91.69%).

Mr. Eric Schneider, a director of Emblem, owns an aggregate of 129,500 common shares in the capital of umedik. Assuming the completion of the Acquisition, Mr. Schneider will receive an aggregate of 215,838 post-consolidation common shares in exchange for his umedik shares.

The Acquisition is expected to constitute a "Qualifying Transaction" for Emblem as defined in the Exchange Policy 2.4. The transaction is subject to shareholder approval from Emblem as well as regulatory approval. Completion of the Acquisition is subject to the satisfactory completion of a due diligence review by umedik and Emblem.

After giving effect to the Acquisition, it is expected that the Board of Directors of Emblem will be comprised of Dr. Peter Lea, Saied Nadjafi, Claude Ricks, Eric Schneider and David Williams.

Dr. Peter Lea - Currently and for the past five (5) years, Dr. Lea has been a director and Chief Science Officer of umedik. From 1994 to 1998 Dr. Lea was engaged by several private companies as a science officer where he patented and developed several diagnostic technologies. From 1970 to 1993, Dr. Lea held the positions of Director, Associate Laboratory Director, Investigator, Research Associate Professor (Biophysics), Centers of Excellence: Canadian Genetic Diseases Network, Research Institute, Hospital for Sick Children, Faculty of Medicine, at the University of Toronto. He is also the External Reviewer for the National Physics/Biology Program, The Netherlands and; Medical Research Council of Canada.

Saied Nadjafi - Currently and since 2003, Mr. Nadjafi is a director and Chief Executive Officer of umedik. From 1997 to 2001, Mr. Nadjafi was Chief Executive Officer of Norigen Group Inc. Previously Mr. Nadjafi was an independent businessman who was involved in the technology sector as co-founder and CEO of a number of high-tech companies.

Claude Ricks - Currently and since 2003, Mr. Ricks is a director and President and Chief Operating Officer of umedik. Prior to joining umedik, Mr. Ricks held senior management positions with Solect Technologies Inc. and Oasis Technologies.

Eric Schneider - Currently and since 2000, Mr. Schneider is a partner with the law firm Miller Thomson LLP and its predecessors.

David Williams - Currently and for the past five (5) years, Mr. Williams is President of Roxborough Holdings Limited, a Toronto based investment company.

Complete biographical information for each director will be included in the CPC Information Circular that will be filed on SEDAR in conjunction with the Qualifying Transaction. Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance.

Kingsdale Capital Markets Inc., subject to completion of satisfactory due diligence, has agreed to act as sponsor in connection with the transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

Completion of the 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 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 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 the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Emblem Capital Inc.
    Mr. Eric Schneider
    (519) 593-3200