Growthgen Equity Inc.

August 16, 2006 11:07 ET

Growthgen Equity Inc.: Press Release

TORONTO, ONTARIO--(CCNMatthews - Aug. 16, 2006) - Growthgen Equity Inc. (TSX VENTURE:GGQ.P) ("Growthgen"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), announced that it has entered into a non-binding letter of intent with Process Photonics Inc. ("PPI") dated August 11, 2006 pursuant to which Growthgen intends to acquire all of the issued and outstanding shares of PPI (the "Acquisition") in exchange for common shares of Growthgen. Growthgen will issue 12,500,000 million common shares in exchange for all of the issued and outstanding shares of PPI on the basis of approximately 1.5449 Growthgen common shares for each share of PPI. Growthgen will also issue 648,858 options in exchange for all of the options currently outstanding to purchase PPI shares, based on the same ratio by which the share exchange is calculated. Also in connection with the Acquisition, Growthgen will acquire an existing subordinated convertible secured debenture issued by PPI to the Quorum Investment Pool Limited Partnership ("QIP") in the principal amount of $1,500,000 in return for the issuance by Growthgen to QIP of a debenture on substantially the same terms as such existing debenture. Following closing of the Acquisition, this new debenture issued to QIP will be convertible into a approximately 6,001,937 common shares of Growthgen, subject to adjustments, at the option of QIP. The proposed transaction constitutes an arm's length transaction. Growthgen currently has 4,253,367 common shares issued and outstanding.

The Acquisition is intended to constitute a Qualifying Transaction, as defined in the Exchange's Policy 2.4, and is subject to the approval of the Exchange. The closing of the Qualifying Transaction is expected to occur on or before October 31, 2006 and Growthgen intends to list on the Exchange as a Tier 2 issuer upon completion of the Qualifying Transaction.

The Acquisition is conditional upon the completion of a further $1.5 million convertible debenture (the "Debenture") financing by Quorum Secured Equity Trust, a fund managed by Quorum Funding Corporation. Proceeds from the issuance of the Debenture will be used for working capital purposes. Additionally, the Acquisition is conditional on the concurrent completion of a private placement (the "Private Placement") of a minimum of 50,000 and a maximum of 200,000 common shares of Growthgen, at an issue price of $0.50 per share for gross proceeds of between $25,000 and $100,000. No fees or commissions will be paid in connection with the Private Placement, and the proceeds will be used for working capital purposes.

The Acquisition is also conditional upon, among other things, receiving all necessary regulatory and third party approvals and authorizations, the receipt of an independent valuation of PPI if required by the Exchange, approval by each of the board of directors of Growthgen and PPI, approval by the shareholders of PPI, the entering into of satisfactory employment agreements and life insurance policies for senior management, confirmation of no material adverse change having occurred for either entity prior to close, Growthgen not having any outstanding indebtedness to any party not incurred in its ordinary course of business, the completion of a definitive agreement setting forth the terms and conditions contained in the letter of intent, and the completion of due diligence satisfactory to each party.

PPI is a corporation formed under the laws of Canada and has its head office located at 349 Terry Fox Drive in Ottawa, Ontario. PPI was established on March 18, 2003 and its principal business is acting as an innovative supplier of custom and standard laser-based material processing systems for printed circuit boards, electronics assembly, and medical device industries. PPI also provides software and process consulting services. Based on its unaudited financial statements, PPI recorded sales of $1,414,858 and $621,134 with a net loss of $347,888 and net income of $48,205 for the years ended March 31, 2006 and 2005, respectively.

The major shareholders of PPI are Anton Kitai, Paul Labelle and Robert Parker and collectively they own or control approximately 82.1% of the currently outstanding voting stock of PPI. Donald Gibbs serves as Chairman and Chief Executive Officer, Mr. Kitai serves as President and Chief Technology Officer, Mr. Parker serves as Vice President of Engineering and Operations and Mr. Labelle serves as Vice President.

It is currently anticipated that, upon completion of the Acquisition, the following persons will constitute "Insiders" of the resulting issuer: Mr. Gibbs, Mr. Kitai, Mr. Parker, Mr. Labelle, Mr. Stephen Li (a current director of PPI) and a current director of Growthgen, as yet to be determined. Mr. Kitai and Mr. Parker reside in Ottawa, Mr. Labelle resides in Smith Falls, and Mr. Li resides in Toronto, Ontario. Mr. Gibbs resides in Marlton, New Jersey.

Completion of the transaction is subject to a number of conditions, including but not limited to acceptance by the Exchange and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until any 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 filing statement to be prepared in accordance 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 has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the content of this news release.

Growthgen will engage a sponsor in connection with the transaction if required in accordance with the requirements of the TSX Venture Exchange. Any agreement to sponsor should not be construed as an assurance with respect to the merits of the transaction or the likelihood of completion.

About Growthgen

Growthgen is a Capital Pool Company with its common shares listed on the Exchange. Its principal business is the identification and evaluation of assets, businesses, or interests with a view to completing a Qualifying Transaction. Growthgen has not commenced operations of any kind and has no assets other than cash.

This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Growthgen and PPI to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Examples of such statements include: (A) the intention to complete the Acquisition, the Private Placement, the Debenture and the Qualifying Transaction; (B) the description of Growthgen that assumes completion of the Transactions; and (D) the intention to grow the business and operations of Growthgen. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this Press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of Growthgen to obtain necessary financing; satisfy conditions under any definitive agreement; satisfy the requirements of the Exchange with respect to the Acquisition, the Private Placement and the Qualifying Transaction; the economy generally; consumer interest in Growthgen's and PPI's services and products; competition; and anticipated and unanticipated costs. While Growthgen anticipates that subsequent events and developments may cause its views to change, Growthgen specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing Growthgen's views as of any date subsequent to the date of this Press release. There are many factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect Growthgen or PPI.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Growthgen Equity Inc.
    Craig Leon
    (416) 368-4397
    Process Photonics Inc.
    Don Gibbs
    (613) 236-8359 extension 2013