SYMBOL – KAPA.P
VANCOUVER, Dec. 5, 2018 /CNW/ - Kapa Capital Inc.
("Kapa" or the "Company") is pleased to announce that
it has entered into a binding agreement (the "Agreement")
dated November 29, 2018 with PSI
International, Inc. ("PSI"), a US private company
incorporated under the laws of the state of Virginia. Kapa and PSI propose to complete an
arrangement, amalgamation, share exchange or similar transaction
and continue the business of PSI (the "Transaction"). The
Transaction is expected to constitute Kapa's Qualifying Transaction
under the Capital Pool Companies policy (the "CPC Policy")
of the TSX Venture Exchange (the "Exchange"). Kapa, after
completion of the Qualifying Transaction, is referred to in this
news release as the "Resulting Issuer".
For over 40 years, PSI has been a provider of information
technology and data analytics and management solutions to federal,
state and local government agencies. PSI's key clients include
United States' Department of
Defense, Department of Homeland Security, National Aeronautics and
Space Administration, and Food and Drug Administration and other
local and state agencies such as New York
State, NYPD, MTA and WMATA. PSI is headquartered in
Fairfax, Virginia. In 2017, PSI
had revenue of approximately US$44
million and positive earnings before taxes, which amount is
reflected in the audited consolidated financial statements of PSI
for the year ended December 31, 2017.
All of PSI's revenues are long-term multi-year contracts with
United States's federal, state and
local government agencies.
Further information about PSI, including financial information
and the proposed management and board of directors of the Resulting
Issuer, will be provided in a subsequent news release. Prior to
and/or concurrent with the completion of the Transaction, PSI may
complete one or more private placements of subscription receipts or
other form of security, in consultation with Kapa, for gross
proceeds of approximately CAD$10
million, or such other amount as may be determined by PSI
(the "PSI Private Placement")
Upon completion of the Transaction, the parties anticipate that
the Resulting Issuer will be listed as a Tier 2 Technology Issuer
on the Exchange.
The Transaction is arm's length and is therefore not a Non-Arm's
Length Qualifying Transaction under the CPC Policy. Accordingly,
the CPC Policy does not require Kapa to obtain shareholder approval
of the Transaction.
"This represents an important milestone for PSI," said
Richard Seol, Chairman and President
of PSI. "This agreement with Kapa positions PSI to execute on our
growth strategy, broaden our customer base, and expand our
geographic footprint. Our client's success continues to drive our
business, and this transaction enhances our ability to provide our
customer's with valuable and actionable data solutions."
Harry Katevatis, President, CEO
and director of Kapa stated "Kapa is excited to combine with PSI
and has been impressed with its review of PSI's business and
revenue growth, as well as its experienced management team. In
addition, PSI has an impressive pipeline of new business
opportunities. We look forward to working together towards building
shareholder value and executing PSI's business plan".
The Agreement contemplates that Kapa, PSI and PSI's stockholders
will complete a business combination by way of an amalgamation,
share exchange, arrangement or other similar form of transaction
whereby the holders of common stock of PSI will exchange such
common stock in consideration for common shares of Kapa.
Outstanding convertible securities in PSI will also be exchanged
for equivalent convertible securities of Kapa on the basis of an
exchange ratio to be definitively agreed upon by the parties.
Immediately before the closing of the Transaction, Kapa will (a)
consolidate the issued and outstanding common shares and
convertible securities of Kapa on the basis of an exchange ratio to
be agreed upon by the parties (the "Consolidation"), and (b)
change its name to a new name suitable to the business of PSI. The
share exchange is expected to take place on a 1-for-1 basis, after
completion of the Consolidation and the change of name. As of the
date hereof PSI has 24,000,000 common shares outstanding, and
accordingly Kapa expects to issue 24,000,000 post-Consolidation
common shares in consideration of all the shares of PSI
now-outstanding (the "Base Value"). In addition to
the Base Value, Kapa expects to issue such number of Kapa shares as
is equal to the shares of PSI issued under the PSI Private
Placement (the "Placement Shares") to the holders of
Placement Shares in consideration of 100% of the Placement Shares.
Any convertible securities of PSI issued pursuant to the PSI
Private Placement will be similarly exchanged. The exact ratio of
the Consolidation will be determined by Kapa following completion
of the PSI Private Placement, and will be calculated to imply a
value of $0.30 per Kapa common share
(pre-Consolidation) immediately prior to completion of the
Transaction.
Certain of the Resulting Issuer shares issued to the principals
of PSI who will become management of the Resulting Issuer will be
subject to escrow in accordance with TSXV policies.
Conditions of Closing
Completion of the Transaction will be subject to certain
conditions, including but not limited to: (a) the parties' entry
into a definitive agreement in furtherance to the Agreement; (b)
completion of the PSI Private Placement; (c) receipt of all
necessary regulatory approval and the approval of the shareholders
of Kapa and PSI; (d) receipt of all necessary third party consents;
(e) approval of the Transaction by the Exchange as Kapa's
Qualifying Transaction; and (f) Kapa satisfying the Initial Listing
Requirements set by the Exchange for a Tier 2 Technology
Issuer.
Sponsorship
Kapa intends to apply to the Exchange for a waiver of the
Exchange's sponsorship requirements. There is no assurance
that this waiver will be granted; however, Kapa anticipates that,
considering the advanced stage of PSI's business and the size of
the PSI Private Placement, there are reasonable expectations that
the Exchange will grant the waiver.
Management and Board of Directors
Upon completion of the Qualifying Transaction, it is expected
that all members of the Kapa board and certain of Kapa's senior
officers will resign and the board of directors and management team
of the Resulting Issuer will be reconstituted with nominees put
forth by PSI. Kapa will provide further details regarding the
proposed insiders of the Resulting Issuer in due course.
Trading in Kapa's shares has been halted, and the halt is
expected to remain in place until the Transaction is completed.
ON BEHALF OF THE BOARD
Kapa Capital Inc.
Charalambos (Harry) Katevatis
President, Chief Executive Officer and Director
Statements in this press release regarding Kapa
which are not historical facts are "forward-looking statements"
that involve risks and uncertainties, such as the completion of the
proposed Qualifying Transaction. Such information can
generally be identified by the use of forwarding-looking wording
such as "may", "expect", "estimate", "anticipate", "intend",
"believe" and "continue" or the negative thereof or similar
variations. Since forward-looking statements address future events
and conditions, by their very nature, they involve inherent risks
and uncertainties such as the risk that the closing may not occur
for any reason. Forwarding-looking statements in this news
release include the statements that: (i) the parties
anticipate that the Resulting Issuer will be listed as a Tier 2
Technology Issuer and (ii) discuss the proposed gross proceeds of
the PSI Private Placement.
Actual results in each case could differ materially from
those currently anticipated in such statements due to factors such
as: (i) the decision to not close the Qualifying Transaction or PSI
Private Placement for any reason, including adverse due diligence
results and Exchange refusal of the Qualifying Transaction; (ii)
adverse market conditions; and (iii) the need for additional
financing. Except as required by law, the Company does not
intend to update any changes to such statements.
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 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.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE PSI International, Inc.
