SPRX - Sparx Enters Into Definitive Agreement for Reorganization and Sale Of Operating Assets
(TheNewswire)
Vancouver, BC, Canada, April 1,2024 – TheNewswire – Sparx Technology Inc . (TSXV: SPRX) (“ Sparx ” or the “ Company ”) announcesthat, further to its news release dated January 8, 2024, it hasentered into definitive share purchase agreement (the “ SPA ”) datedeffective March 26 , 2024,with Blok Sports, LLC (“ Blok ”), a privately-held, third-partycorporate entity headquartered in Los Angeles, California. Pursuantto the SPA, Sparx will sell all of the issued and outstanding sharesof its U.S. operating subsidiary, iPowow USA Inc. (‘ iPowow ”), to Blok(the “ SaleTransaction ”). The Company and Blok arearm’s length parties.
Blok is an early-stage, venture backed technologycompany founded in 2019 by Mitchell Chun, its current CEO, which hasdeveloped a suite of social sports betting, fan engagement, andAI-driven content and analytics solutions. Blok’s core offering isa regulated decentralized sports betting exchange developed usingnext-generation blockchain technology to ensure an unparalleled levelof trust, fairness, and transparency for its users around the globe.
In furtherance of the Sale Transaction and prior to itscompletion, Sparx’s Canadian operating subsidiary, Sparx TechnologyCorp. (“ Subco ”), will transfer all of its operating assets and materialcontracts to iPowow. In addition, through the Sale Transaction, anaggregate of approximately $1.44 million of consolidated indebtednessof Sparx, will be extinguished. It is anticipated that followingcompletion of the Sale Transaction, Sparx will have no operatingassets and approximately $150,000 in remaining liabilities.
It is also anticipated that an aggregate of 26,814,154currently outstanding common shares of Sparx will be cancelled onclosing of the Sale Transaction, pursuant to the terms of a SurplusEscrow Agreement dated March 23, 2022 (the “ Escrow Share Cancellation ”).
As consideration for the Sale Transaction, Sparx isexpected to receive common units of Blok (the “ Blok Units ”), representing approximately 4.5 % of the Blok Unitsissued and outstanding on a post-transaction basis. In addition,Sparx is entitled to receive approximately 12% of up to an additional 3,200,000 Blok Units which may be issued byBlok, subject to iPowow achieving certainrevenue milestones (the “ Performance Payment Units ”), from definedcustomers, over a period of 16 months following completion of the SaleTransaction.
Upon completion of the Sale Transaction, Sparx hasagreed to deposit approximately 20% of its BlokUnits into escrow for a period of one year, to support indemnityobligations concerning certain representations, warrants andcovenants set out in the SPA. Certain othersignificant members of Blok have also deposited Blok Units into escrowunder the same terms.
Completion of the Sale Transaction is subject to anumber of conditions, including: (i) completion of a US$500,000financing by Blok; (ii) the receipt by Sparx of an independentfairness opinion in respect of the aggregate consideration (includingthe debt assumptions) to be received by Sparx in the Sale Transaction;and (iii) all necessary regulatory, creditor and shareholders andmember approvals.
Sparx CEO, Alan Thorgeirson commented, “We areexcited about the opportunity to build the Sparx business under theBlok umbrella and believe this reorganization transaction will allowour stakeholders an opportunity to realize further value through astake in the combined entity. We believe that the operatingefficiencies and synergies to be achieved by the combination of thetwo companies will provide a stronger platform to attract additionalfinancing and further grow the business. Through this transaction,Sparx, as a public company, will position itself to pursue alternativetransactions to enhance shareholder value.”
In connection with the restructuring, the Companyintends to complete a share consolidation on the basis of 13pre-consolidated common shares for one (1) post-consolidated commonshare (the “ Consolidation ”),and also intends to complete a non-brokered private placement (the“ Subscription ReceiptsFinancing ”) to raise $250,000 through theissuance of 5,000,000 subscription receipts at a price of $0.05 persubscription receipt (the “ Subscription Receipts ”).
The proceeds of the Subscription Receipts Financingwill be held in escrow, subject to the satisfaction of the followingconditions:
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completion of the Consolidation;
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completion by Sparx of a name change acceptable to theparties and regulatory authorities;
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completion of the Sales Transaction;
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completion of the Escrow Cancellation;
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completion of the Management Change (as definedbelow);
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the Company having less than $150,000 in remainingindebtedness;
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the transfer by Sparx of ownership of Subco to a thirdparty, for nominal consideration, which shall include an assumption ofany excess indebtedness;
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the Company obtaining shareholder approval to thechange of control contemplated in the Subscription Receipts Financing;and
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the Company obtaining final TSX Venture Exchange (the Exchange ”) approval to all matters relating to the Sale Transactionand other restructuring steps discussed herein.
Upon satisfaction of the escrow conditions, eachSubscription Receipt will automatically convert into one postConsolidation common share of the Company for no additionalconsideration. In the event that the escrow conditions are not met,each Subscription Receipt will be cancelled, and the subscriptionfunds will be returned to the subscribers.
The Company will not pay any finders fees in connectionwith the Sale Transaction or the Subscription Receipts Financing.
Upon closing of the Sale Transaction, Escrow ShareCancellation, Consolidation and the conversion of the SubscriptionReceipts, it is expected that Sparx will have approximately 8,560,629 post Consolidated common shares issuedand outstanding.
It is expected that The Emprise Special OpportunitiesFund (2017) Limited Partnership (“LP2017”) will subscribe for4,000,000 Subscription Receipts, which will result in LP2017 owning4,071,231 (47.56%) post Consolidation common shares of theCompany.
The Company intends to use the proceeds of theSubscription Receipts Financing for general working capital purposes.Closing of the Subscription Receipts Financing remains subject to theapproval of the Exchange.
As part of the closing of the Sale Transaction, theCompany intends to apply to the Exchange to have its listingtransferred to the NEX Board, a separate trading board of the Exchangewhich provides a trading forum for companies that have fallen belowthe Exchange’s ongoing listing standards.
Upon completion of the Sale Transaction, the currentboard of directors and management team of the Company will resign, andScott Ackerman (CEO, CFO and Corporate Secretary), Doug McFaul, andPeter Dickie will join as directors and officers of the Company (the“ ManagementChanges ”).
The Company also announces that its Annual General andSpecial Meeting (“ AGSM ”) will be held in Vancouver, BC on May17, 2024 at 10:00 am (Vancouver time). In addition to the standarditems of business at general meetings, shareholders will be asked toapprove resolutions for the Company to proceed with the SalesTransaction, the Consolidation, and the change of control contemplatedin connection with the Subscription Receipts Financing.
Full details on the AGSM will be contained in theManagement Information Circular prepared for the meeting, which willbe mailed to the Company’s shareholders and available for reviewunder the Company’s profile at www.sedarplus.ca .
On behalf of the Board
Al Thorgeirson
CEO and President
For further information, pleasecontact:
Al Thorgeirson
CEO and President
(403) 471-3503
Investor relations
ABOUT SPARX:
Sparx is an interactive media technology company whoseprincipal activities are providing media companies and sports teamswith technologies to engage audiences. The patented Sparx platformenables broadcasters, streamers, and video producers to engage viewersfor longer, generate new revenue opportunities, and createlean-forward experiences for audiences eager to join the action.Millions of users can connect to the Sparx platform and interactsimultaneously on their mobile phone, tablet, or computer anywhere inthe world, in real time.
For more information about Sparx,visit the Company’s website at www.sparxtechnology.com
Neither TSX Venture Exchange nor itsRegulation Services Provider (as that term is defined in the policiesof the TSX Venture Exchange) accepts responsibility for the adequacyor accuracy of this release.
Forward-LookingStatements
Statements included in this newsrelease, including statements concerning the Company’s plans,intentions, and expectations, which are not historical in nature, areintended to be, and are hereby identified as, “forward?lookingstatements”. Forward-looking statements include, among othermatters, the Sale Transaction. Forward?looking statements may be,but are not always, identified by words including “anticipates”,“believes”, “intends”, “estimates”, “expects” andsimilar expressions. The Company cautions readers thatforward?looking statements, including without limitation thoserelating to the Company’s proposed completion of the SaleTransaction, and related matters, are subject to certain risks anduncertainties that could cause actual results to differ materiallyfrom those indicated in the forward?looking statements. There can beno assurance that any forward-looking statement will prove to beaccurate or that management's assumptions underlying such statements,including assumptionsconcerning the Company, the Sale Transaction or future developments,circumstances or results will materialize. The forward-lookingstatements included in this news release are made as of the date ofthis news release and the Company does not undertake to update orrevise any forward-looking information included herein, except inaccordance with applicable securities laws.
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