Peak Positioning Technologies Inc.
TSX VENTURE : PKK

Peak Positioning Technologies Inc.

April 17, 2013 12:37 ET

Essence Completes Due Diligence Related to USD$ 6 Million Financing & Peak Agrees to Acquire LongKey

MONTREAL, QUEBEC--(Marketwired - April 17, 2013) - Peak Positioning Technologies Inc. ("Peak" or the "Company") (TSX VENTURE:PKK) today announced that Essence International Capital Limited ("Essence") has completed its due diligence process as part of the USD$ 6 million financing agreement between the parties first announced in a press release dated December 20, 2012. While Peak's Chinese partner, LongKey Hong Kong Limited ("LongKey"), winds up its distribution agreement negotiations with one of China's largest mobile operators, Essence and Peak will now collaborate, on a best-efforts basis in accordance with the terms of their agreement, to close the financing in the shortest possible delay.

Letter of Intent to Acquire LongKey

Peak also announced today that on April 12, 2013, it reached an agreement on the terms and conditions related to a Letter of Intent dated November 30, 2012 signed with the shareholders of LongKey, in which the parties agreed to later determine the terms by which Peak would acquire (the "Acquisition") all of the issued and outstanding ordinary class shares of LongKey (the "LongKey Shares"). These terms and conditions are summarized below.

The contemplated Acquisition is an arm's length transaction.

LongKey is a private holding company based in Hong Kong. It was incorporated as a Company Limited by Shares under the Hong Kong Business Registration Ordinance on July 11, 2007. LongKey's authorized share capital consists of 750,000,000 ordinary class shares, of which 300,000,000 are issued and outstanding. LongKey has a total of six shareholders whose names, percentage of share ownership and jurisdiction of residence are listed in the table below:

Shareholder Name % of Ownership Jurisdiction of Residence
Alex Wang 35.00 Fremont, California
Liang Qiu 18.00 Montreal, Quebec
Lin Lu 18.00 Wuxi, China
Daming Wang 16.00 Guangzhou, China
Lei Zhang 6.50 Central, Hong Kong
Kai Bao 6.50 Beijing, China
Total 100.00

LongKey is the sole shareholder and parent company of LongKey Software Technology Limited ("LongKey Soft"), which is a Wuxi, China based IT solution provider. LongKey Soft provides its business and government clientele with a wide range of IT solutions, and cloud-based business management and mobile applications based on its proprietary Unified Information Services Platform (UISP). LongKey Soft and Peak's wholly-owned subsidiary, Peak Positioning Corporation ("Peak Corp") have been collaborating on the development of mobile software products destined for sale and distribution in China since January 2011. Their efforts have led to the development of AiNi™, a mobile cloud platform incorporating a suite of mobile applications, which include among other features, data synchronization, remote device lock and a proprietary social media application. AiNi™ is expected to be rolled out on 3G smart devices distributed by one of China's largest mobile network operators once LongKey finalizes its distribution agreement with that operator.

As at December 31, 2011, LongKey's unaudited year-end financial statements showed current assets of USD$ 836,942 and total assets of USD$ 5,490,042 against current liabilities of USD$ 226,530 and total liabilities of USD$ 307,939. For the 12-month period ended December 31, 2011, LongKey had net income of USD$ 235,022 on revenues of USD$ 1,654,942. An audit has been requested for the period ended December 31, 2012 and the relevant financial data from the audited statements will be released at a later date.

The Acquisition

As consideration of the LongKey Shares, the Company intends to issue Peak common shares, initially representing an aggregate consideration of CAD$ 2,000,000, to the shareholders of LongKey in proportion to their LongKey holdings, at the price of CAD$ 0.10 per Peak common share at the time of the completion of the Acquisition. Additional Peak common shares, representing an aggregate maximum additional consideration of CAD$ 6,000,000, based on a minimum revenue achievement of USD$ 4,000,000 in 2014, where 6,666,667 Peak common shares would be issued for each tranche of USD$ 1,000,000 in revenue, for an aggregate maximum of 26,666,667 Peak common shares in 2014, and a minimum revenue achievement of USD$ 8,000,000 in 2015, where 2,500,000 Peak common shares would be issued for each tranche of USD$ 2,000,000 in revenue, for an aggregate maximum of 10,000,000 Peak common shares in 2015, may also be issued to the shareholders of LongKey in proportion to their LongKey holdings. These additional Peak common shares would be issued at a price of CAD$ 0.15 and CAD$ 0.20 per Peak common share in 2014 and 2015 respectively. It should be noted that the revenue achievement targets agreed to by the parties are notional values set only for the purposes of determining the allocation of additional consideration shares to LongKey, and should not be perceived as revenue projections for the years in question.

Each of the LongKey shareholders acts independently and therefore will not collectively constitute a voting bloc.

Directors and Officers

On March 24th 2013, Mr. Jean-Paul Pérusse officially resigned from Peak's Board of Directors for personal reasons. At the completion of the Acquisition, it is anticipated that another of the Company's remaining six directors will resign from his positions as director, and two new directors will be appointed by LongKey, bringing the total number of directors on the board to seven. It is also anticipated that, following the completion of the Acquisition, Mr. Charles-André Tessier, current chairman of Peak, will remain in that capacity; Mr. Johnson Joseph, current president and chief executive officer, will remain in that capacity; Mr. Laval Bolduc, current chief financial officer, will remain in that capacity; Mr. Varujan Tasci, current chief technology officer, will remain in that capacity; and Mr. Alex Wang, current president and chief executive officer of LongKey, will be appointed vice-chairman of the board of directors of Peak. Final composition of the Company's board of directors following the completion of the Acquisition will be subject to TSX Venture approval.

Concurrent and Interim Financing

The Acquisition will be subject to the completion by Peak of a concurrent brokered private placement of a minimum of CAD$ 2,500,000 and a maximum of CAD$ 6,000,000 through the issuance of a minimum of 25,000,000 common shares and a maximum of 60,000,000 common shares at the price of CAD$ 0.10per share (the "Concurrent Financing"). As noted above, Peak has retained the services of Essence to act as lead broker in conducting, on a best-effort basis, the Concurrent Financing. The proceeds of the Concurrent Financing will be used by Peak for working capital and the expansion of its products in China.

Since closing of the Concurrent Financing will not occur until the completion of the Acquisition, which itself may take several months to complete, Peak will endeavor to close an interim financing to help meet its ongoing obligations and cover the expected expenses related to the Acquisition while the Acquisition process unfolds. The terms and conditions of the interim financing will be disclosed once finalized.

Broker Compensation

For its role in the Concurrent Financing, Essence will receive a 5% cash commission on all amounts raised.

Finder's Fee

Peak will pay Newfield Partners LLC (the "Finder") a 1% cash finder's fee on all amounts raised by Essence relative to the Concurrent Financing. This finder's fee will be payable to the Finder at the closing of the Acquisition, subject to TSX Venture approval.

Other Conditions of the Acquisition

Completion of the Acquisition is subject to a number of conditions, including the parties completing their respective due diligence reviews, completion of the Concurrent Financing, and TSX Venture approval, which may, among other things, require disinterested shareholder approval and/or sponsorship. In such situation, the Acquisition cannot close until the required shareholder approval is obtained. There can be no assurance that the Acquisition 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 Acquisition, any information released or received with respect to the Acquisition may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

About Essence International Capital

Essence International Capital is a wholly-owned subsidiary of Essence Securities, which is a full-range financial services company headquartered in Shenzhen, China with 122 branches providing services to nearly 2 million investors. Services include securities brokerage, investment consulting, financial advisory services related to securities trade and investments, securities underwriting and sponsorship, IPOs, financial advisory for mergers & acquisitions, and others. Essence's investment banking department, with offices in Shenzhen, Shanghai and Beijing, provide capital financing services to business clients in various industries, including real estate and infrastructure, finance, technology, retail trade, and others. For more information: http://www.essence.com.cn.

About Peak Positioning Technologies Inc.

Peak Positioning Technologies Inc. (TSX VENTURE:PKK), is a Canadian software developer for smartphones and other mobile computing devices, conducting business primarily in China and North America. In association with its partner, LongKey-Hong Kong Ltd, the company has developed a suite of applications for mobile devices that includes: cloud-based calendar, e-mail and contacts synchronization, automated device configuration, and HomeWave™ mobility security. While LongKey markets the applications in China through its partnerships with major Chinese telecommunication companies and banks, Peak plans to similarly market the applications for its own account in North America. For more information: http://www.peakpositioning.com.

Forward-Looking Statements / Information

This news release may include certain forward-looking information, including statements relating to business and operating strategies, plans and prospects for revenue growth, using words including "anticipate", "believe", "could", "expect", "intend", "may", "plan", "potential", "project", "seek", "should", "will", "would" and similar expressions, which are intended to identify a number of these forward-looking statements. Forward-looking information reflects current views with respect to current events and is not a guarantee of future performance and is subject to risks, uncertainties and assumptions. The Company undertakes no obligation to publicly update or review any forward-looking information contained in this news release, except as may be required by applicable laws, rules and regulations. Readers are urged to consider these factors carefully in evaluating any forward-looking information.

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

Neither the TSX Venture Exchange, Inc. nor its Regulation Service Provider (as that term is defined under the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of the contents of this press release.

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