NXA Inc.
TSX VENTURE : NXI.H

May 20, 2015 18:30 ET

NXA Inc. Signs Letter of Intent With Ellipsiz Communications Taiwan Ltd. to Complete a Proposed Business Combination

TORONTO, ONTARIO--(Marketwired - May 20, 2015) -

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

NXA INC. ("NXA") (TSX VENTURE:NXI.H) is pleased to announce that it has entered into a non-binding letter of intent dated April 8, 2015 (the "LOI") with Ellipsiz Communications Taiwan Ltd. ("ECTW"), a privately owned company incorporated under the laws of Taiwan, which outlines the general terms and conditions pursuant to which NXA and ECTW would be willing to complete a transaction that will result in a reverse take-over of NXA by the shareholders of ECTW (the "Proposed Transaction"). The LOI was negotiated at arm's length and was effective as of April 8, 2015. The LOI is to be superseded by a definitive share exchange agreement (the "Definitive Agreement") which is expected to be signed by June 9, 2015.

Upon completion of the Proposed Transaction, it is proposed that NXA will become a Technology Issuer listed on Tier 2 of the TSX Venture Exchange (the "Exchange") and will be renamed to a name to be determined (the "Resulting Issuer"). The Resulting Issuer will carry on the business of ECTW as currently constituted.

Trading of the common shares of NXA has been halted and the common shares will remain halted in accordance with Exchange policies until all required documentation with respect to the Proposed Transaction has been received and the Exchange is otherwise satisfied that the halt should be lifted.

A press release with further particulars relating to the Proposed Transaction will follow in accordance with the policies of the Exchange.

About ECTW

ECTW is a communication solution provider with offices located in Taiwan.

ECTW was established in 2007 to provide support to clients formerly supported and served by Agilent Technologies, a former division of Hewlett-Packard and a global leader in telecommunications, and has since then expanded to serve a wide range of communication services providers ("Telcos") and enterprise organizations across Taiwan.

Today, ECTW focuses on setting up the operational support systems ("OSS"), being systems which control and monitor network activities, for many Telcos in Taiwan. ECTW tailors a unique OSS solution for each client depending on their particular needs, which involves setting up, customizing and integrating a combination of third party hardware and software solutions. The primary purpose of the OSS is to control the network activities within the Telcos' systems to ensure that the Telcos are able to provide high quality and uninterrupted services to their large subscriber bases. The OSS can also be designed to enable Telcos to collect valuable user data (which, for example, can be used to generate new revenue streams) and deliver better services to their subscribers (for example, to provide customized services and quick detection and recovery of down times in services).

In addition to setting up the OSS, ECTW provides managed services to Telcos, managing and maintaining the network once it has been set up. Depending on the client, the package of managed services can include maintaining and updating the OSS and hardware, interfacing with OSS providers to consider new OSS for the network, and managing issues that arise on the network.

The principal beneficial shareholders of ECTW are: Michael Koh (60%), resident of Hong Kong; Sam Tan (30%), resident of Singapore and Hans Chang (5%), resident of Taiwan.

Proposed Transaction

It is currently contemplated that, prior to the closing of the Proposed Transaction, a foreign company ("Holdco") will be incorporated to hold all of the issued and outstanding shares of ECTW. In connection with the Proposed Transaction, NXA will acquire all of the issued and outstanding shares of Holdco and will issue common shares of NXA as consideration to the shareholders of Holdco. Following the completion of the Proposed Transaction, ECTW will be a wholly-owned subsidiary of Holdco, which in turn will be a wholly-owned subsidiary of the Resulting Issuer. The structure of the Proposed Transaction is to be determined in accordance with tax, securities and corporate law advice in the various jurisdictions. It is expected that Holdco will complete a private placement of securities to investors (the "Investors") for aggregate proceeds of at least US$1,000,000 (the "Financing") prior to closing of the Proposed Transaction. There is no assurance that the Financing will be completed on the terms contemplated or at all. NXA will disclose additional information regarding the Financing as it becomes available in subsequent press releases.

The valuation attributed to ECTW is US$12,000,000 (inclusive of the Financing and assuming proceeds of US$1,000,000) and the valuation attributed to NXA is CDN$400,000. Upon closing of the Proposed Transaction, and assuming proceeds of US$1,000,000 pursuant to the Financing, it is expected that the (former) shareholders of ECTW will hold approximately 89.29% of the issued and outstanding common shares of the Resulting Issuer (the "Resulting Issuer Shares"), shareholders of NXA will hold approximately 2.60% of the Resulting Issuer Shares and the Investors will hold approximately 8.11% of the Resulting Issuer Shares. Immediately prior to the closing of the Proposed Transaction, NXA is expected to complete a consolidation of its common shares at a ratio to be determined.

Certain Conditions to Proposed Transaction

The completion of the Proposed Transaction is subject to a number of terms and conditions, including the parties entering into the Definitive Agreement (such Definitive Agreement to include representations, warranties, conditions and covenants typical for a transaction of this type), the completion of the Financing, the completion of satisfactory due diligence investigations, the approval of the shareholders and directors of each of NXA, ECTW and Holdco, as required, the approval of the Exchange and other relevant regulatory authorities and various other customary conditions that must be satisfied prior to closing, which is expected to take place by July 31, 2015.

Proposed Directors of the Resulting Issuer

Following the completion of the Proposed Transaction, subject to the approval of the Exchange, the board of directors of the Resulting Issuer is expected to consist of at least five members: Michael Koh (chairman); Sam Tan; Hans Chang; Elliott Jacobson; and Grant Sawiak. Additional directors are expected to be identified prior to completion of the Proposed Transaction. Upon completion of the Proposed Transaction, the current directors and officers of NXA will resign.

NXA intends to include additional information regarding the proposed directors and officers of the Resulting Issuer in a subsequent press release.

Sponsorship

Sponsorship of a reverse take-over is required by the Exchange unless exempt in accordance with Exchange policies. NXA is currently reviewing the requirements for sponsorship and may apply for an exemption from the sponsorship requirements pursuant to the policies of the Exchange, however, there is no assurance that an exemption is available or that NXA will ultimately obtain an exemption if one is available. NXA intends to include any additional information regarding sponsorship in a subsequent press release.

Completion of the Proposed Transaction is subject to a number of conditions, including Exchange acceptance and disinterested shareholder approval. The Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of NXA should be considered highly speculative.

The Exchange has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release. Neither the Exchange nor its Regulation Services Provider (as that term is defined in policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.

The statements used in this press release may contain forward-looking statements, and are based on the opinions and estimates of management, or on opinions and estimates provided to, and accepted by, management. These opinions and estimates are used by management, and speak only as of the date of this press release. Forward-looking statements in this press release include, but are not limited to, the terms and conditions and closing of the Proposed Transaction, the anticipated benefits from the Proposed Transaction, the business and operations of the Resulting Issuer after the Proposed Transaction and the completion of the Financing. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions, including with respect to the closing of the Proposed Transaction, the timing and receipt of all applicable regulatory approvals and third party consents, the anticipated benefits from the Proposed Transaction and the satisfaction of other conditions to the completion of the Proposed Transaction. Forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ, possibly significantly. Although NXA believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual events or results will be consistent with these forward-looking statements. Except as required by applicable law, NXA does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise. Readers are therefore cautioned not to place undue reliance on any forward-looking statements.

Contact Information

  • NXA Inc.
    Paul Van Damme
    Chief Financial Officer
    (416) 847-6905