TORONTO, ONTARIO--(Marketwired - July 12, 2013) - Matrix Asset Management Inc. ("Matrix") (TSX:MTA) is pleased to announce that the previously announced sale of the operating assets (excluding working capital) of its subsidiary, SEAMARK Asset Management Ltd. (renamed GrowthWorks Enterprises Ltd.) ("GWE"), has completed (the "Seamark Sale").
The operating assets of GWE were purchased by a newly formed company ("New Seamark") owned by Robert McKim, the former Chief Investment Officer and a former director of GWE, and Marquest Asset Management Inc. ("Marquest"). Mr. McKim indirectly owns 67% of the outstanding shares of New Seamark and Marquest owns the remaining 33%. Mr. McKim has never served on the board of directors of Matrix or as an officer of Matrix, however he was an officer and director of GWE up until the closing. Apart from Mr. McKim, no other insider or related party of Matrix participated in the Seamark Sale or will receive consideration from Matrix or any affiliate of Matrix as a result of the Seamark Sale.
As previously disclosed in Matrix's press releases of June 4, 2013, June 28, 2013 and July 8, 2013, the Seamark Sale had a transaction value of approximately $1.62 million, consisting of: (i) $900,000 advanced by Mr. McKim to Matrix effective May 31, 2013, (ii) $200,000 advanced by Marquest to Matrix effective June 4, 2013, (iii) $200,000 advanced by Mr. McKim to GWE effective June 4, 2013, (iv) $100,000 advanced by Mr. McKim to Matrix effective June 4, 2013 (such advances being referred to herein as the "Advances"), and (v) the forgiveness of $218,739 of indebtedness owed by GWE to a company related to Mr. McKim. The Advances were evidenced by promissory notes executed by GWE and Matrix in favour of Mr. McKim and Marquest. On the closing of the Seamark Sale, Matrix and GWE were released from their respective obligations under the promissory notes, with the principal amount of the promissory notes applied on account of the purchase price paid by New Seamark for the GWE assets. Matrix and GWE settled the interest owing in respect of the Advances from the date the Advances were made to the date of closing. Interest in the amount of $9,500 was paid in respect of the promissory notes issued to Mr. McKim and interest in the amount of $1,918 was paid in respect of the promissory note issued to Marquest.
Update on Registration Status
GWE is registered as a portfolio manager and investment fund manager under Canadian securities laws. As previously disclosed by Matrix, levels of working capital maintained by GWE and GrowthWorks Capital Ltd. ("GWC"), also a subsidiary of Matrix and a registered portfolio manager and investment fund manager, have fallen below the minimum level prescribed under securities laws. It is a condition of registration that these subsidiaries comply with such regulatory working capital requirements. Management of Matrix believes that with the closing of the Seamark Sale, GWE has restored its working capital to a compliant level. GWC's working capital remains below the minimum level prescribed under securities laws. Discussions with securities regulators about levels of working capital at GWE and GWC are ongoing. There can be no assurance that either or both of GWE and GWC will re-establish and maintain compliance with working capital requirements to the satisfaction of regulatory authorities. Failing to do so may result in these subsidiaries ceasing to hold the registrations necessary to provide fund and portfolio management services, which would have a material adverse effect on Matrix's business, operating results, financial condition and prospects.
In connection with the closing of the Seamark Sale and in light of the working capital deficiencies at GWE and GWC and the outcome of securities regulators' recent compliance audit of GWC, securities regulators imposed certain conditions on the registration of GWE, including conditions whereby GWE must provide weekly and monthly reporting of its working capital to securities regulators and must limit its clients to the Matrix investment funds, management of which is expected to transfer to GWE on or about July 16, 2013 and subsequently to Marquest, subject to receipt of necessary regulatory, shareholder and unit holder approvals and other conditions. This limitation restricts GWE's ability to take on new portfolio management engagements, which may have a material adverse effect on Matrix's business, operating results, financial condition and prospects. The limitation would also currently prevent Matrix from consolidating registrant activities within GWE, which had been proposed in order to achieve operating efficiencies and enhance Matrix's ability to maintain compliance with regulatory working capital requirements. There can be no assurance as to the outcome of ongoing discussions with securities regulators with respect to GWE's and GWC's working capital levels and registration status or as to the impact on Matrix's business, operating results, financial condition and prospects should any regulatory actions be taken or further conditions on GWE's or GWC's registrations be imposed.
Forward looking statements: Certain statements in this press release are forward-looking statements, including statements about GWE's and GWC's working capital levels and registration status and related discussions with securities regulators and about the transfer of management of the Matrix investment funds to GWE and then to Marquest. Forward-looking statements are based on beliefs and assumptions at the time the statements are made, including beliefs and assumptions about the ability of GWE and GWC to comply with regulatory working capital requirements to the satisfaction of securities regulators, the outcomes of ongoing discussions with regulatory authorities regarding such requirements and the likelihood that conditions associated with the transfer of management of the Matrix investment funds to GWE and then to Marquest will be satisfied and that the transfers will complete. While management considers these beliefs and assumptions to be reasonable based on information currently available to it, they are subject to numerous risks and uncertainties and no assurance can be given that such beliefs and assumptions will prove to be correct. Accordingly, actual results may differ significantly from those expressed or implied by forward-looking statements due to many factors including, but not limited to, risks associated with GWE's and GWC's working capital positions and ability to comply with working capital and other regulatory requirements to the satisfaction of securities regulators, Matrix's ability to continue to operate as a going concern and regulatory, market and other risks associated with the transfer of management of the Matrix investment funds to GWE and then to Marquest. Many of these risks are beyond the control of Matrix. Other than as specifically required by law, Matrix undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results or otherwise.