Powerstar International Inc.
TSX VENTURE : PWS.P

November 28, 2006 13:01 ET

Powerstar International Announces Proposed Qualifying Transaction with Solutrea Inc.

CALGARY, ALBERTA--(CCNMatthews - Nov. 28, 2006) -

NOT FOR DISSEMINATION IN THE UNITED STATES

Powerstar International Inc. ("Powerstar") (TSX VENTURE:PWS.P) is pleased to announce that it has entered into a letter agreement dated September 8, 2006, as amended by a further letter agreement dated October 26, 2006 (collectively, the "Preliminary Agreement") with Solutrea Inc. ("Solutrea") respecting a proposed business combination between the two corporations. The proposed transaction, which has been negotiated at arm's length, is to be effected by way of an exempt take-over bid whereby Powerstar will acquire all, subject to, among other things, receipt of all regulatory approvals, of Solutrea's issued and outstanding common shares in exchange for common shares of Powerstar. Upon the successful completion of the Qualifying Transaction, Powerstar will be a provider of integrated digital communications networks. The transaction will constitute a reverse take-over of Powerstar by Solutrea and is intended to constitute Powerstar's Qualifying Transaction as defined in TSX Venture Exchange ("Exchange") policies. Since the transaction has been negotiated at arm's length, Powerstar does not anticipate that majority of the minority shareholder approval will be required pursuant to Exchange Requirements. No concurrent financing is currently contemplated by Powerstar and Solutrea.

The common shares of Solutrea would be acquired on the basis of approximately 169,999 common shares of Powerstar in exchange for each one common share of Solutrea for a total of 19,552,744 Powerstar common shares at a deemed value of $0.20 per Powerstar common share. Upon completion of the Qualifying Transaction former Solutrea shareholders would hold approximately 63% and existing Powerstar shareholders would hold approximately 37% of the issued and outstanding Powerstar shares (before taking into account of any options, warrants or other rights to acquire common shares of either company.)

Solutrea was incorporated on April 24, 2006 as a private Delaware corporation for the purpose of promoting integrated digital communications networks such as satellite services, business television, digital signage, WiFi and PC games. It was founded by Dr. Hatim Zaghloul, the co-inventor of the wideband orthogonal division multiplexing technology, WOFDM (a technology at the core or most modern high speed wireless data communications standards including WiFi and WiMAX), and David Lauterbach, an executive in the satellite based business television industry. Solutrea aims to become a leading independent broadband data telecommunications services provider. Solutrea plans to build its customer base by providing satellite connections to difficult to reach locations, and high speed wireless technologies such as WiFi and WiMAX to local locations in order to distribute data.

Business

Since its incorporation under the laws of the State of Delaware, Solutrea has focused on the business TV market. Through a network of installers Solutrea has provided services to many customers including the United States Army Air Force Exchange, major pharmaceutical companies, a major computer manufacturer and a major chip manufacturer. On August 18, 2006, Solutrea acquired all of the assets of Hometown Wireless, Inc., a wireless Internet service provider in the Frederick, Maryland area generating US$26,000 of revenue per year, at a purchase of US$60,000 paid for through the issuance of Solutrea common shares. On September 27, 2006, Solutrea acquired all of the outstanding shares of ieHouse Inc., a wireless Internet service provider in the Frederick, Maryland generating US$16,000 in annual revenues, at a purchase price of US$30,000 paid for through the issuance of Solutrea common shares. Solutrea has also installed one WiFi hot spot in Calgary and is planning digital signage offerings in Calgary, Frederick, and Toronto.

As of October 2006, Solutrea has six full-time employees as well as contracts with another 3 consultants. Solutrea has arrangements with a global network of installers that can install satellite connections, WiFi routers, computers and digital signage software and equipment. This gives the small number of employees that Solutrea plans to retain a global presence and the ability to service and maintain any installation. Solutrea also in partnering with a provider of digital signage and equipment, which allows Solutrea to maintain a low recurring human resources cost.

Solutrea conducts business in Canada through its wholly-owned subsidiary, Solutrea Canada Inc., located in Calgary, Alberta.

Solutrea has invested a total of approximately US$100,000 in Solutrea Ltd. ("Solutrea UK"), a United Kingdom company started by the founders of Solutrea together with David Howgill, a verteran in the satellite industry, for the purposes of conducting business in the United Kingdom. Mr. Howgill is the sole director and registered shareholder of Solutrea UK. Solutrea UK has yet to conduct business of a material nature, but is actively seeking to acquire businesses in the stated business areas of Solutrea. Solutrea has the right, exercisable at its sole discretion, to acquire ownership of Solutrea UK in consideration of the aggregate of the foregoing investment therein and any further investments Solutrea choses to make in Solutrea UK. Solutrea currently has no plans to make any additional investments in Solutrea UK.

Sales and Marketing Plan

Solutrea plans to use the connections of its sales force and board of directors to sell satellite connections to companies in the Americas and Europe, through direct sales and agents. Solutrea's niche market will be in combining satellite plus WiFi/WiMAX to bring a cost effective solution to end-users.

Business Television

Solutrea has aligned itself with a number of agencies that provide corporate communications (on the media side). Solutrea is currently a finalist and anticipates being awarded a contract to supply full-time radio services and occasional use business television services to United States Army Air Force Exchange Services locations around the world.

Digital Signage

Solutrea plans to offer digital signage services to establishments such as restaurants, spas and salons, religious organizations, retail outlets, clinics and malls. Solutrea plans to promote these services in the areas where it currently has sales personnel, namely, Frederick, Maryland, Miami, Florida, Calgary, Alberta and Toronto, Ontario. Solutrea currently has an agreement to set a digital sign in a restaurant in Frederick, Maryland.

WiFi/WiMAX

As hereinbefore described, Solutrea recently acquired the assets of Hometown Wireless, Inc. and the outstanding shares of ieHouse Inc., both of Frederick, Maryland. Both companies provide wireless Internet services based on the IEEE802.11g standard. Combined, these companies currently generate annual revenues of approximately US$42,000. Solutrea plans to acquire additional wireless Internet service providers in North America and Europe.

WiFi is another new market segment for Solutrea. Solutrea currently has a hot spot in a barber shop in Calgary and is contracted to set one up in a restaurant in Frederick, Maryland.

PC Games

Solutrea intends to offer PC games to establishments as a pay-per-use service. Solutrea plans to offer game tablets in restaurants and waiting areas of clinics and spas and salons, and to develop games that can be played interactively wirelessly using Solutrea's hot spots.

Financial Information

Solutrea has only recently commenced operations and has no reported financial results. On the basis of management prepared unaudited financial statements as at and for the five month period ended August 31, 2006, Solutrea had total assets of US$246,730.76, accounts receivable of US$137,729.00 and accounts payable of $21,685.90, revenues of US$210,888.85 and income before tax of US$10,044.86.

Solutrea has thirteen shareholders. The principal shareholders of Solutrea, their jurisdictions of residence and the fully diluted percentage of Solutrea shares held by them, are as follows:




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% of Solutrea shares
owned or controlled on a
Beneficial Interest Holder Residence fully diluted basis
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Mohamed Charanek Calgary, Alberta 33.02
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David Lauterbach Frederick, Maryland 20.75
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Hatim Zaghloul Calgary, Alberta 20.31
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Proposed Directors and Management of Resulting Entity

Upon completion of the transaction, it is proposed that the current directors of Powerstar (with the exception of David E. Prasow, Q.C.) will resign and the following individuals will be added to Powerstar's board of directors:

Dr. Hatim Zaghloul is the Chairman of Solutrea. Dr. Zaghloul co-founded Wi-LAN Inc. (TSX: WIN) and Cell-Loc Inc. (TSV:LTI). Dr. Zaghloul co-invented wideband orthogonal frequency division multiplexing (WOFDM) and multicode direct sequence spread spectrum (MCDSSS). WOFDM is now the foundation of most high speed wireless communications standards including WiFi, and WiMAX. MCDSSS is the distinguishing part of CDMAOne, CDMA2000 and WCDMA (FDD). Dr. Zaghloul is the first inductee to the Broadband Wireless Hall of Fame. Dr. Zaghloul is currently the Chairman of the Board of Wi-LAN Inc., and the CEO and Chairman of Innovative Products for Life Inc. and Ittihad Capital Inc. Dr. Zaghloul will become the Chairman of Powerstar.

David Lauterbach is co-founder and CEO/CTO of Solutrea, overseeing operations and development worldwide. Mr. Lauterbach's expertise and vision for the integration of digital communications networks for the business and retail environment provides the backbone of Solutrea's market strategy and success. Mr. Lauterbach previously served as the Director of Technical Operations at Loral Skynet. Mr. Lauterbach led the team that created some of the first satellite IP video multicast networks, led all BTV engineering and continues to lead pioneering efforts in these areas. At Global Access, Mr. Lauterbach's engineering teams were responsible for the development of the first system that was able to broadcast MPEG II video over standard T1 telephone lines, significantly reducing the cost of broadcast production. Prior to this, Mr. Lauterbach was part of the founding management team of the Business Television Group at EchoStar Communications, a key member of the engineering team that did much of the pioneering work on the DVB MPEG II platform and was part of the engineering/design team that built EchoStar's core Cheyenne Uplink center. Mr. Lauterbach has played key roles in various organizations and charities, including serving on the advisory board to Denver Technical University. Mr. Lauterbach received his Bachelor of Science degree from the University of South Florida. Mr. Lauterbach will become the Chief Executive Officer of Powerstar.

Lawrence Podrasky is currently the Chief Financial Officer of Flair Petroleum Corporation and previously was CFO for Axiom Mining Ltd., both publicly listed companies. Mr. Podrasky previously held various management roles in the financial services sector including Executive Vice President for Bankers Trust responsible for major corporate clients in Asia Pacific, First Vice President for Credit Lyonnais in charge of global project finance at head office, and Accounting, Budget and Lease Pricing Manager for U.S. Leasing. Mr. Podrasky holds an MBA in Finance & Accounting from Cornell University. Mr. Podrasky will become the Chief Financial Officer of Powerstar.

Dr. Robert Schulz is a Professor of Strategic Management with the Haskayne School of Business at the University of Calgary, where he has taught since 1973. His practical approach has resulted in 20 awards for outstanding teaching, including "top 10" in Canada among 39,000 professors. Dr. Schulz was the first recipient of the Order of the University of Calgary for his service to others. Among his four degrees are an engineering degree from Notre Dame and a PhD in Business from Ohio State. Dr. Schulz has served on many public and private boards, including many years with Wi-LAN Inc. As a consultant, Dr. Schulz has facilitated the strategic planning for numerous public and private companies and animated more than 1,300 workshops and presentations. Dr. Schulz is the co-author of the book, Corporate Integrity: A Toolkit for Managing Beyond Compliance (Wiley, 2005).

Ronald Johnston has over 25 years in the investment industry. He was Vice President and Registered Representative of C.M. Oliver & Company Limited from 1994 to 1999 (and its successor Canaccord Capital Corporation) and held the same positions with Leede Financial Markets Inc. from 1999 to 2002 (formerly Rogers & Partners Securities Inc.). He was a director of CanBaikal Resources Inc. from 2001 to 2002 and was Vice-President, Corporate Development, of Rally Energy Corp., a junior oil and gas company in Calgary, from 2002 to 2004 where he identified and negotiated both domestic and international business opportunities. Since 2004 Mr. Johnston has been a director and Chief Executive Officer of Expander Energy Inc., a Calgary private alternative energy company. Mr. Johnston has sat on the board of directors of several public companies and currently serves on the board of Call Genie Inc. (TSXV: GNE). Mr. Johnston received his Bachelor of Commerce (Hons.) degree from the University of Manitoba in 1975.

David E. Prasow, Q.C., a director and current Secretary of the Corporation, has been President of David E. Prasow Professional Corporation from 1977 to the present and is currently a corporate and commercial lawyer practicing in Calgary, Alberta with an association of independent law practices under the name Spier Harben. Mr. Prasow has over 29 years practice experience in the fields of corporate, commercial and business law. Mr. Prasow received his Bachelor of Arts degree from the University of Calgary in 1971 and his LIB from the University of Alberta in 1974.

Upon completion of the transaction, Mohamed Charanek (a principal shareholder of Solutrea) will become an Insider of Powerstar as a result of owning approximately 19.48% of the outstanding voting shares of Powerstar. Mr. Charanek attended Mount Royal College and the University of Calgary and in 1988 went into private business by founding Road Sport Auto Inc., a business engaged in trading pre-owned vehicles. Mr. Charanek sold this business in 1999 and started Trucksport Inc., a wholesale automobile business. Mr. Charanek is involved in many community activities in Calgary and is the President of the Muslim Community Foundation of Calgary, an organization maintaining the largest Islamic Center in Calgary.

Finder's Fee

In consideration of efforts rendered by Mr. Johnston with respect to the negotiation and finalization of the Preliminary Agreement, Powerstar has agreed to pay Mr. Johnston a finder's fee of 300,000 Powerstar common shares upon successful completion of the proposed Qualifying Transaction.

Terms and Conditions of the Proposed Transaction

The completion of the proposed Qualifying Transaction is subject to satisfaction or waiver of a number of conditions precedent, including, receipt of all requisite regulatory approvals, including the approval of the Exchange, execution of agreements by the holders of all of the Solutrea shares to tender their shares to Powerstar in accordance with the provisions of the Preliminary Agreement and pursuant to exempt takeover provisions under applicable securities laws.

Powerstar and Solutrea engaged Evans & Evans, Inc., Vancouver, British Columbia, to prepare a valuation report in respect of Solutrea (the "Valuation Report"). The Valuation Report concludes that the fair market value of 100% of the issued and outstanding common shares of Solutrea as at the valuation date of September 30, 2006 is in the range of C$710,000 to C$800,000.

As a result of the conclusions reached in the Valuation Report, Powerstar and Solutrea have agreed in the Preliminary Agreement that of the 19,552,744 Powerstar common shares contemplated to be issued to the holders of Solutrea common shares, 5,500,000 Powerstar common shares (the "Performance Shares") shall be held in escrow upon the following performance terms:

(a) at any time within two (2) years from the date of the Final Exchange Bulletin, the Resulting Issuer (as such terms are defined in the Exchange policies) will have completed:

(i) an equity offering of its shares raising gross proceeds of not less than CDN$3 million at not less than $0.25 per share; or

(ii) one or more acquisitions having a cumulative value of not less than CDN$2 million on the basis that any shares of the Resulting Issuer issued in respect of such acquisition(s) shall be issued at not less than $0.25 per share;

(b) in the event subparagraph (a) is not fulfilled within two (2) years of the Final Exchange Bulletin, the Performance Shares shall be cancelled.

In addition to the foregoing performance escrow terms, all of the 19,552,744 Powerstar common shares contemplated to be issued to the holders of Solutrea common shares will be subject to Exchange escrow requirements.

Trading in the common shares of Powerstar was halted on September 11, 2006 at Powerstar's request in accordance with Exchange policy and will remain halted until such time as permission to resume trading has been obtained from the Exchange and submission of required documentation to the Exchange has been made in connection with the proposed Qualifying Transaction. Powerstar is a reporting issuer in Alberta, British Columbia and Ontario.

Powerstar intends to engage a sponsor with respect to the proposed Qualifying Transaction.

Completion of the Qualifying Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. 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 Filing Statement to be prepared in connection with the 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 a capital pool company 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.

ON BEHALF OF THE BOARD OF DIRECTORS

G. Steven Price, President

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy of this release

Contact Information

  • Powerstar International Inc.
    G. Steven Price
    President
    (403) 461-6664
    (403) 264-9600 (FAX)
    Email: steve.price@shaw.ca