Picasso Inc.
TSX VENTURE : PSO.P

September 10, 2008 16:49 ET

Picasso Inc.: Letter of Intent to Acquire Securities of Blackline GPS Inc. and Blackline GPS Employee Retention Corp. as Qualifying Transaction; Appointment of Additional Director

CALGARY, ALBERTA--(Marketwire - Sept. 10, 2008) - Picasso Inc. (the "Corporation" or "Picasso") (TSX VENTURE:PSO.P), a capital pool company, is pleased to announce that it has entered into a letter of intent (the "LOI") dated September 4, 2008 with Blackline GPS Inc. ("Blackline") and Blackline GPS Employee Retention Corp. ("EmployeeCo"), both of which are private Alberta corporations. In the LOI, the parties have agreed to negotiate a definitive agreement relating to a proposed reverse takeover (the "Transaction"), pursuant to which Picasso will acquire: (i) all of the issued and outstanding securities of Blackline (the "Blackline Securities") from all of the securityholders of Blackline (the "Blackline Securityholders"), except for such Blackline Securities owned by EmployeeCo; and (ii) all of the issued and outstanding securities of EmployeeCo (the "EmployeeCo Securities") from all of the securityholders of EmployeeCo (the "EmployeeCo Securityholders"). The Transaction will constitute Picasso's "Qualifying Transaction" under the applicable policies of the TSX Venture Exchange (the "TSXV"). Further, as none of the current directors or officers of Picasso control Blackline, the Transaction will not constitute a "Non-Arm's Length Qualifying Transaction" as defined under the applicable policies of the TSXV (although Clark Swanson, the President and Chief Executive Officer of Picasso, and Cody Slater, director of Picasso, are both directors of Blackline and each of the current Picasso directors hold certain convertible debentures of Blackline). Pursuant to the LOI, the parties have agreed to the essential terms of the Transaction.

If the Transaction is completed, Picasso will issue an aggregate of 38,500,000 common shares having a deemed value of $0.20 per share to the Blackline Securityholders and the EmployeeCo Securityholders, which implies a combined entity value for Blackline and EmployeeCo of approximately $7,700,000. In addition, Picasso will issue 10,000,000 common share purchase warrants (the "Picasso Warrants") to certain of the Blackline Securityholders, with each such Picasso Warrant entitling the holder thereof to acquire one Picasso common share at a price of $0.30 per share for a period of 24 months from the date of issuance. As such, if the Transaction is completed, Picasso will have 49,760,000 common shares issued and outstanding (on a non-diluted basis). For the purposes of this press release, the combined entity of Picasso, Blackline and EmployeeCo is herein referred to as the "Resulting Issuer".

About Blackline

Blackline, based in Calgary, Alberta, develops and markets new applications for location (GPS) and communication (GSM) technology. Blackline is a leader in GPS tracking and geo-social interaction with a portfolio of products, services and application solutions owned and branded by Blackline.

Leveraging location based technologies, Blackline provides consumers with up to date status on a range of physical devices for the purpose of location tracking and social interaction. Blackline's services delivery platform is designed to easily develop and deploy new applications that address who, what, where, when, why, and how of geo-tagged events for "Share Your Where" ™ services. Rogers, T-Mobile, and AT&T are among the companies that facilitate the delivery of Blackline services over GSM networks.

BlackLine products and services are also distributed through a variety of retail channels which include Future Shop, London Drugs, Radio Shack, and JC Whitney. The company offers compact and family friendly hardware devices to enable knowledge sharing on the whereabouts of friends or loved ones. Features include tracking on demand, proximity alerts, event notifications, motion alerts, and signal and battery strength indicators, among others. The interface to these devices can be found on the web or integrated with BlackLine's social interaction service for mobile phones on the BlackBerry platform. Delivered in concert with Research in Motion, the social interactive network, called Blip ™, can be found on the Built for BlackBerry website under Travel and Mapping applications.

Blackline's family of products also include solutions for the commercial and industrial sector. A range of services include employee location management, field worker safety, and fleet management.

BlackLine's head office is located at #101, 1215 13th Street S.E., Calgary, Alberta,T2G 3J4.

About EmployeeCo

EmployeeCo is a private corporation whose only assets are 1,000,000 voting shares of Blackline. EmployeeCo was created to provide Blackline employees with a tax effective equity interest in Blackline. The Blackline employees own certain preferred shares of EmployeeCo which are linked to the underlying value of the Blackline Securities.

EmployeeCo's head office is located at #101, 1215 13th Street S.E., Calgary, Alberta,T2G 3J4.

Summary of the Transaction

It is anticipated that the Transaction will be structured as a share exchange, pursuant to which Picasso will acquire all of the issued and outstanding Blackline Securities and EmployeeCo Securities in exchange for an aggregate of 38,500,000 common shares of Picasso and 10,000,000 Picasso Warrants. Accordingly, upon completion of the Transaction, Blackline and EmployeeCo will be wholly-owned subsidiaries of Picasso and the former shareholders of Blackline and EmployeeCo will be shareholders of Picasso.

Blackline currently has an aggregate of 1,500,000 class A voting common shares ("Class A Shares") issued and outstanding; 1,500,000 class B voting common shares ("Class B Shares") issued and outstanding; and an aggregate of 981,421 class E non-voting common shares ("Class E Shares") issued and outstanding. In addition, Blackline has issued secured convertible debentures for an aggregate principal amount of $2,000,000 (the "Convertible Debentures"). The Blackline Convertible Debentures entitle the holders thereof to acquire one class C voting common share ("Class C Shares") of Blackline at a conversion price equal to $0.80 per share. It is a condition precedent to the completion of the Transaction that all of the Convertible Debentures be converted into an aggregate of 2,500,000 Class C Shares.

EmployeeCo currently has two (2) voting common shares and 1,000,000 non-voting preferred shares issued and outstanding. Messrs. Rousseau and Cook each hold one (1) common share and the Blackline employees hold all of the preferred shares.

Pursuant to the Transaction, the 1,000,000 Class A Shares held by Mr. Rousseau will be exchanged for 5,000,000 Picasso Shares (exchange ratio of 1:5); the 1,000,000 Class B Shares held by Mr. Cook will be exchanged for 5,000,000 Picasso Shares (exchange ratio of 1:5); the 2,500,000 Class C Shares to be held by the former holders of Convertible Debentures will be exchanged for 20,000,000 Picasso units (exchange ratio of 1:8); and the 981,421 Class E Shares will be exchanged for 3,500,000 Picasso Shares (exchange ratio of 1:3.5662574). In addition, Picasso will indirectly acquire the remaining 500,000 Class A Shares and 500,000 Class B Shares by acquiring the 1,000,000 preferred shares of EmployeeCo issued and outstanding in exchange for 5,000,000 Picasso Shares (exchange ratio of 1:5). Upon completion of the Transaction, the two (2) voting common shares of EmployeeCo will be cancelled in exchange for nominal consideration. As such, upon completion of the Transaction, Picasso will have acquired all of the Blackline Securities and all of the EmployeeCo Securities in exchange for 38,500,000 Picasso common shares and 10,000,000 Picasso Warrants. For greater certainty, the 20,000,000 Picasso units to be issued in exchange for the Class C Shares are comprised of one Picasso common share and one half of one Picasso Warrant.

The Transaction is not considered to be a "Non-Arm's Length Qualifying Transaction" (as defined by the TSXV), as none of the current directors or officers of Picasso control Blackline. However, Clark Swanson, Cody Slater, Gary Swanson and Richard King Jr. (all of which are directors of Picasso) hold directly or indirectly Convertible Debentures in the principal amount of $150,000, $350,000, $175,000 and $100,000, respectively. As a condition precedent to the completion of the Transaction, the Convertible Debentures held by the Picasso insiders in the aggregate principal amount of $775,000 will be exchanged for 968,750 Class C Shares (representing 15% of the issued and outstanding Blackline Securities immediately prior to completion of the Transaction). Further, those 968,750 Class C Shares will then be exchanged for 7,750,000 Picasso Units as part of the Transaction. Mr. Clark Swanson and Mr. Cody Slater were appointed to the Blackline board of directors as representatives of the holders of the Convertible Debentures.

Upon completion of the Transaction, Picasso will grant an aggregate of 3,850,000 stock options to purchase common shares in Picasso, having an exercise price of $0.20 per share, to various directors, officers and employees of the Resulting Issuer.

Financial Information Concerning Blackline

The following information is derived from Blackline's management-prepared unaudited financial statements as at and for the nine months ended July 31, 2008 and for the twelve month period ended October 31, 2007. Such information is subject to all other information contained in the relevant financial statements.



Nine Months Ended Twelve Months Ended
July.31, 2008 Oct. 31, 2007
(unaudited)(1) (unaudited)(1)
------------------- ---------------------
Revenues 847,576 568,335
Expenses, including cost of sales 2,022,496 935,838
Loss for the period (1,268,339) (367,503)
Loss per share (basic and diluted) (0.03) (0.01)
Total Assets 986,511 396,108
Current Assets 852,050 375,219
Current Liabilities 2,163,473 428,883
Long-term debt, excluding current
portion
- -
Share Capital 877,909 877,909
Deficit (1,684,546) (910,684)

Note:
(1) All of the funds are set out in Canadian Dollars.


Management

The board of directors of Picasso currently consists of Clark Swanson, Gary Swanson, Cody Slater and Richard King Jr. In addition, the Corporation is pleased to announce that it has also appointed Michael F. Hayduk, Q.C as a director of the Corporation concurrent with the signing of the LOI. It is anticipated that Richard King Jr. will resign from the Picasso board upon completion of the Transaction. Further, it is anticipated that Clark Swanson, Gary Swanson, Cody Slater, and Michael Hayduk will remain on the board following the Transaction and that Kirk Wankel, the proposed Chief Financial Officer for the Resulting Issuer, will also be appointed to the Picasso board of directors.

Following the Transaction, it is anticipated that Patrick Rousseau will resign as the President and Chief Executive Officer of Blackline and will be replaced by Clark Swanson who will also serve as the President and Chief Executive Officer for the Resulting Issuer. Furthermore, it is expected that Patrick Rousseau, the current President and Chief Executive Officer of Blackline, will become the Chief Visionary Officer of the Resulting Issuer and that Brendan Cook, the current Vice-President of Blackline, will become the Chief Technology Officer of the Resulting Issuer. It is also expected that Gary Swanson will resign as the Chief Financial Officer of Picasso and will be replaced by Kirk Wankel who will serve as a full-time Chief Financial Officer for the Resulting Issuer.

The current directors and officers of Blackline are Patrick Rousseau (President, Chief Executive Officer and Director), Brendan Cook (Vice-President and Director), Clark Swanson (Director) and Cody Slater (Director). As a group, the directors and senior officers of Blackline own or control (directly or indirectly) 2,625,000 Blackline voting shares (assuming the Convertible Debentures held by Clark Swanson and Cody Slater in the aggregate amount of $500,000 are converted to 625,000 Class C Shares) representing approximately 40.5% of Blackline's outstanding securities. Blackline currently has approximately 53 shareholders. Upon completion of the Transaction, it is anticipated that the board of directors of Blackline will be changed so that the board of directors of Blackline is the same as the board of directors for Picasso. Eventually, it is expected that the shareholders of Picasso will be asked to approve a name change for Picasso to "Blackline GPS Inc.".

Blackline has two controlling shareholders, being Patrick Rousseau and Brendan Cook. Messrs. Rousseau and Cook, each hold 1,000,000 Blackline voting shares representing approximately 15.4% of Blackline's outstanding securities each, or 30.8% in total (assuming all of the Convertible Debentures are converted into Class C Shares).

The current directors and officers of EmployeeCo are Patrick Rousseau (President, Chief Executive Officer and Director), Brendan Cook (Vice-President and Director), Clark Swanson (Director) and Cody Slater (Director). As a group, the directors of EmployeeCo own or control (directly or indirectly) the only 2 issued and outstanding EmployeeCo voting shares. As EmployeeCo also has an aggregate of 1,000,000 non-voting preferred shares issued and outstanding (all of which are held by the Blackline employees), the directors of EmployeeCo own or control less than 0.0002% of EmployeeCo's outstanding securities. EmployeeCo currently has approximately 18 shareholders, all of which are employees of Blackline. Upon completion of the Transaction, it is anticipated that the board of directors of EmployeeCo will be changed so that the board of directors of EmployeeCo is the same as the board of directors for Picasso.

The municipalities of residence and biographies of the Resulting Issuer's directors and key officers are as follows:

Cody Slater - Chairman and Director (Calgary, Alberta)

Mr. Slater, 45, has served as Director for Picasso, Inc. since October, 2006. Mr. Slater, 45, is also the founder of BW Technologies Ltd. a company previously listed on the Toronto Stock Exchange. Mr. Slater remained the President and CEO of BW Technologies Ltd. through 2006 when the company was acquired by Honeywell.

Clark Swanson - President, Chief Executive Officer and Director (Calgary, Alberta)

Mr. Swanson, 38, previously held an executive position for SourceCode Technology Holdings, Inc., a global software firm headquartered in Redmond, Washington. In addition to his role with SourceCode Technology Holdings, Inc., Mr. Swanson maintained an active role in the investment community, identifying newly emerging high growth businesses and capitalization of select firms. Mr. Swanson has also served as Executive Vice President of Universal Studios based, White Eagle Productions, and Director of Immedient Corporation headquartered in Mountain View, California.

Mr. Swanson holds a degree in Economics from Pepperdine University and also graduated from the Graziadio School of Business & Management with an MBA, emphasis in Finance.

Kirk Wankel - Chief Financial Officer and Director (Calgary, Alberta)

Mr. Wankel, 34, currently holds an executive position as Chief Financial Officer of Blackline. He has also served as Chief Financial Officer for Fair Sky Resources, Inc. and Vice President of Finance for BW Technologies, Ltd., both of which were formerly listed on the Toronto Stock Exchange prior to their acquisition.

Mr. Wankel holds a Bachelor of Commerce from the University of Calgary and is a member of the Institute of Chartered Accountants of Alberta.

Barry Moore - Vice President of Research and Development - (Calgary, Alberta)

Mr. Moore, 43, currently holds an executive position as Vice President of Product Development of BlackLine. He has also served as Vice President of Product Development for BW Technologies, Ltd., formerly listed on the Toronto Stock Exchange prior to its acquisition.

Mr. Moore holds a diploma in Industrial Design from Fanshawe College in London Ontario.

Neil Campbell - Vice President of Sales (Calgary, Alberta)

Neil Campbell, 52, currently is Vice President of Sales for Blackline and has held such position since January, 2008. Mr. Campbell has a B. Comm. business degree from the University of Alberta with a major in marketing. He spent 8 years in commercial finance with the Toronto Dominion Bank. He served with BW Technologies Ltd., a public company listed on the Toronto Stock Exchange for 18 years, this included the last 12 years as the Director of International Sales prior to BW Technologies Ltd. being acquired.

Michael Hayduk - Director (Calgary, Alberta)

Michael Hayduk, 55, has been a consulting lawyer with Smith Mack Lamarsh since January 2007. Mr. Hayduk has been a practising lawyer since 1978. His practise has focused on commercial, corporate and securites law since 1981 when he joined the Alberta Securities Commission and from 1987 to 2006 when he practised at Miller Thomson LLP. Mr. Hayduk is also a director of Valentine Ventures Corp., a capital pool corporation listed on the TSXV.

Gary Swanson - Director (Calgary, Alberta)

Dr. Swanson, M.D., D.A.B.R., F.R.C.P., 71, is Director and Chief Financial Officer for Picasso and has held such position since October, 2006. He is also Chief of Medical Staff at Cold Lake Medical Center since being Chairman of Radiology Consultants Associated ("RCA"). He has earned Fellowships at The Royal College of Physicians & Surgeons and Diplomat American Board of Radiology.

Dr. Swanson was founder, chairman and a director of Goldcap, Inc. a publicly traded mining company (acquired by Argosy Minerals Inc.); director of Bison Petroleum Ltd. a publicly traded oil and gas company listed on the Toronto Stock Exchange; director and chairman of the Audit Committee for Imaging Dynamics Company Ltd., a Toronto Stock Exchange listed company focused on manufacturing and marketing digital radiography systems.

Patrick Rousseau - Chief Visionary Officer (Calgary, Alberta)

Mr. Rousseau graduated in 1995 from Ste-Foy College, majoring in Industrial Design and Administration. Mr. Rousseau joined CSI Wireless Inc. in 2000 and was responsible for managing the company's creative direction for product design. He managed the company's Industrial Design and Mechanical Engineering team and oversaw the commercialization of over 15 products.

In 2004, Mr. Rousseau partnered with Brendan Cook founding BlackLine GPS, Inc. where he has worked as President since its inception.

Brendan Cook - Chief Technology Officer (Calgary, Alberta)

In 1996, Mr. Cook was awarded a B.Sc. in Geomatics Engineering from the University of Calgary. Prior to founding Blackline GPS, Inc. in 2004, Mr. Cook worked for Calgary-based CSI Wireless Inc. (now Hemisphere GPS Inc.) as its Product and Marketing Manager and developed business relationships with various international organizations.

At CSI Wireless Inc., Mr. Cook managed the company's precision product portfolio and was responsible for the market analysis, generating market direction, defining new products, and assisted with managing the company's product development program.

Conditions

The proposed qualifying transaction is subject to a number of conditions including the following:

(a) approval by the boards of directors of Picasso, Blackline and EmployeeCo;

(b) approval by all of the Blackline Securityholders and the EmployeeCo Securityholders;

(c) satisfactory due diligence by both Picasso and Blackline;

(d) conversion of all outstanding Blackline debt to equity, including the conversion of all of the Convertible Debentures to Class C Shares;

(e) no material adverse change shall have occurred in the assets or share capital of Blackline or EmployeeCo;

(f) negotiation and execution of a definitive agreement; and

(g) regulatory approval.

Sponsorship

Picasso has not yet retained a sponsor in connection with the Transaction. Picasso will retain a sponsor to conduct due diligence on the Transaction and to deliver a sponsor report to the TSXV. Picasso will issue a further press release disclosing the name of the sponsor once a sponsor has been retained.

Trading in the common shares of the Corporation will remain halted until a sponsor has been retained and certain required documents have been provided to the TSXV.

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 offered securities mentioned in this press release will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except in certain transactions exempt from the registration requirements of the U.S. Securities Act.

This new release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

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

  • Picasso Inc.
    Clark Swanson
    President, Chief Executive Officer and Director
    (403) 870-3059