ECC Ventures 3 Corp. Enters Letter of Intent with Sparx Technology Inc. for Qualifying Transaction

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VANCOUVER, BC / ACCESSWIRE / August 3, 2021 / ECC Ventures 3 Corp. ("ECC3" or the "Company") (TSXV:ECCT.P) is pleased to announce that it has entered into a binding letter of intent (the "LOI") dated effective July 28, 2021, outlining the general terms and conditions with respect to a proposed acquisition (the "Acquisition") by ECC3 of all the issued and outstanding share capital of Sparx Technology Inc. ("Sparx").

The Acquisition of Sparx will constitute a reverse takeover and ECC3's Qualifying Transaction under Policy 2.4 of the TSX Venture Exchange (the "Exchange"). Assuming completion of the Acquisition, it is anticipated that ECC3 will graduate to Tier 2 of the Exchange as a technology issuer.

Sparx is a private company incorporated pursuant to the Canadian Business Corporations Act in May 2016.

Sparx is an industry leading interactive media technology company whose principal activities are providing the world's largest and most demanding media companies and sports teams with technologies to engage audiences on any screen, anytime, anywhere. The patented Sparx platform enables broadcasters, streamers, and video producers to engage viewers for longer, generate new revenue opportunities, and create lean-forward experiences for audiences eager to join in the action.

Millions of users can connect to the Sparx platform and interact simultaneously on their mobile phone, tablet, or computer anywhere in the world, in real time.

Recent sports client integrations include predictive gaming, trivia, and voting and polling on NESN Sports hockey and baseball broadcasts, the ESPN Megacast during the College Football National Championship Game, and beginning in August, ESPN's College Game Day telecasts. Other sports activations include the Vancouver Canucks "Predict the Play", Cleveland Cavaliers' "Cav's Pick ‘Em", and Fresno State Bulldogs' "The Dog House", plus both "in-app" and "in-venue" experiences with the Orlando Magic's "Magicvision".

Other broadcast clients include Disney/ABC, CNN, NBC Sports, and Turner Sports/Bleacher Report and 7 Australia.

The global pandemic has accelerated a shift toward virtual and hybrid events. Over the last year Sparx has developed its Stream Hub product specifically to give content providers and event producers an opportunity to capitalize on this movement by providing tools to gamify and enhance the consumer experience. This development has now pushed Sparx into new verticals including EdTech, corporate conferences and training, live streamed concerts, virtual charity events and university commencement ceremonies.

Later this summer, Sparx will launch its Video On Demand (VOD) product effectively giving any streaming service the ability to create "lean-in" experiences by gamifying current and classic programming that consumers can watch and play along with on their own time.

The Sparx platform is built to scale and uniquely positioned for expansion throughout international markets as evidenced by recent activations in Australia and South America.

In its fiscal year ended June 30, 2020 (unaudited), Sparx generated revenue of approximately $731,000 and incurred net loss of $2,341,000. As at June 30, 2020 (unaudited), Sparx had approximately $167,000 in total assets and liabilities of approximately $10,714,000. Included in the net loss was $1,690,000 in accrued interest, an expense that will be eliminated through the debt restructuring described below.

For more information regarding Sparx, please visit the Company's website at www.sparxtechnology.com.

Terms of the Acquisition

Sparx currently has 57,600,425 common shares (the "Sparx Shares") and approximately $10,633,822 in convertible securities and shareholder loans outstanding (the "Sparx Debt"). J.D. Craig Holdings Ltd., a company controlled by Drew Craig, and Cedar Creek Broadcasting LLC, a company controlled by Brian Brady, each own 14,942,987 (25.9%) Sparx Shares, and SMF Investments Ltd. ("SMF"), a company represented by Richard Hubbard owns 13,641,659 (23.7%) Sparx Shares. SMF is a widely held European-based technology investment fund that is represented by Mr. Hubbard, as fund manager, it for its Sparx investment.

Under the terms of the Acquisition, ECC3 will complete a forward share split on a 1 for 1.2 basis (the "Share Split"), and holders of Sparx Shares and Sparx Debt will be issued an aggregate of 52,000,000 post-Share Split common shares of ECC3 (the "Consideration Shares"), at a deemed price of $0.25 per share, in exchange for all Sparx Shares and the settlement of all Sparx Debt. In addition, $200,000 in liabilities of Sparx will be settled for securities on the same terms as the QT Financing. Certain of the Consideration Shares will be subject to escrow and resale restrictions pursuant to the policies of the Exchange.

The Company will also issue 1,558,000 post-Share Split common shares to Jane K. Milliken Binns in connection with the Acquisition, at a deemed price of $0.25 per share. The payment of the finder's fee remains subject to Exchange acceptance.

Following completion of the Acquisition, it is anticipated that there will be 61,138,000 post-Share Split common shares issued and outstanding in the Resulting Issuer (defined below) (excluding securities issued pursuant to the QT Financing defined and described below), of which shareholders and creditors of Sparx will own 52,800,000 (86.4%) and shareholders of ECC3 will own 6,780,000 (11.1%). Convertible securities currently outstanding in ECC3 will be subject to the Share Split, resulting in 240,000 agent's options being exercisable at $0.0833 per share until June 14, 2026, and 678,000 stock options being exercisable at $0.0833 until the date that is ninety days after closing of the Acquisition, subject to the provisions of the Company's stock option plan. It is also anticipated that ECC3 will change its name to Sparx Technology Inc. in connection with completion of the Acquisition.

Financing

As a condition to completing the Acquisition, the parties intend to complete a non-brokered private placement financing (the "QT Financing") of subscription receipts of Sparx (the "Subscription Receipts"), to raise a minimum of $2,400,000, through the issuance of 9,600,000 Subscription Receipts at a price of $0.25 per Subscription Receipt.

The proceeds of the QT Financing will be held in escrow, pending the Company receiving all applicable regulatory approvals, and completing all matters and conditions relating to the Acquisition, including the Share Split. Immediately prior to the completion of the Acquisition, on satisfaction of the escrow conditions, each Subscription Receipt will be automatically exercised, for no further consideration and with no further action on the part of the holder thereof, to acquire one unit (a "Sparx Unit") of Sparx. The Sparx Units issuable upon exercise of the Subscription Receipts will be exchanged for one post-split common share (a "Resulting Issuer Share") and one half of one common share purchase warrant (each full warrant a "Resulting Issuer Warrant") of the issuer resulting from the Acquisition (the "Resulting Issuer") in connection with the closing of the Acquisition. Each Resulting Issuer Warrant will be exercisable to acquire one Resulting Issuer Share at a price of $0.35 for a period of one year from closing of the Acquisition, provided that the expiry date of the warrants may be accelerated to 30 days, in the event that the Resulting Issuer Shares trade at $0.60 or greater for 10 consecutive trading days. In the event that the Acquisition is not completed, each Subscription Receipt will be cancelled, and the subscription funds will be returned to the subscribers. The Company may pay a commission in connection with the QT Financing. Once released from escrow, the Resulting Issuer will use the proceeds of the QT Financing for marketing initiatives, and for general working capital purposes. It is anticipated that finders fees of up to 8% in cash and 8% in broker warrants (having the same terms as the Resulting Issuer Warrants), will be payable in connection with the QT Financing.

All securities issued by the Resulting Issuer in connection with the QT Financing will be free trading upon completion of the Acquisition.

ECC3 has agreed to advance to Sparx secured loans in the aggregate amount of $150,000 (the "Bridge Loans"), which shall be used by Sparx for general working capital and operating purposes. An initial $75,000 will be advanced, on a secured basis, within fifteen (15) days of execution of the LOI, with an additional $75,000 to be advanced upon completion of the QT Financing and upon obtaining all necessary agreements from the creditors of Sparx that are required to settle debt as described in this news release. In the event that the LOI is terminated, the advanced amounts will be repayable within ninety (90) days, or if the Definitive Agreement (as defined below) has been entered into, within thirty (30) days of its termination. The Bridge Loans are subject to the parties entering into definitive loan agreements and the securing of all necessary Exchange approvals.

Board of Directors and Management Changes

On completion of the proposed Acquisition, the Company's Board of Directors and management team will be reconstituted to include four directors and management comprised of individuals from the current Sparx team, including the individuals listed below. Further details of the full management team will be provided in subsequent press releases.

Al Thorgeirson, President and CEO

Al Thorgeirson is a seasoned broadcast veteran and builder with nearly 40 years experience in television, radio, and digital broadcasting. Mr. Thorgeirson has worked on the launch of 6 over-the-air television stations, 3 specialty channels, and FM radio stations across Canada. Mr. Thorgeirson also helped develop and launch a voice writing division for Canada's largest closed captioning company. He has operated at the COO, Regional VP and Managing Director levels for Craig Media, CHUM Limited, Rogers Broadcasting and the CBC.

Drew Craig, Director

Drew Craig has been involved in the media and telecommunications industry for over 35 years. He started his career at Craig Media Inc., a third generation television and media business. He held several operational and executive roles at the company, ultimately serving as President and CEO. During his tenure at Craig Media, the company grew from a single TV station to Canada's largest privately held TV broadcast group. During that time Craig Media successfully launched three national specialty channels; MTV, MTV2 and TB Land in partnership with Viacom. Craig Media was sold in 2005 for $265 million. Since the sale of Craig Media, Drew has been an active investor, executive and board member of several media and telecom enterprises. Mr. Craig was a principal investor, Chairman and Co-CEO of Craig Wireless Systems, a company operating and deploying wireless broadband networks in Canada, the USA, Europe and New Zealand. He also served as Co-Chairman of Peace Arch Entertainment Group Inc., and as a director of Lions Gate Entertainment Corporation.

Drew Craig is currently a founder, principal investor and Executive Chair of Adtrackmedia. Adtrackmedia is a global digital-out-of-home enterprise operating proprietary, in-tunnel display systems in major subway tunnels on four continents.

Mark Binns, Director

Mark Binns is a seasoned entrepreneur and public markets CEO and Director with more than twenty five years of experience building B2B and B2C companies in the cryptocurrency, retail and telecom industries. With a focus on building customer-driven sales and marketing strategies, Mr. Binns has completed multiple successful exits and has taken start-ups from 2 people to $500M+ valuations. Mr. Binns also has a successful consulting career providing strategic advice on customer acquisition and revenue growth to Fortune 1000 technology companies including Blackberry, Cisco and Rogers Communications. Mr. Binns is currently the CEO and Director of BIGG Digital Assets, and a director of DeFi Ventures Inc.

Brian Brady, Director

Brian Brady is the Sole Member of Red Oak Holdings, LLC, an asset management and holding company. Mr. Brady recently stepped down as President and CEO of Northwest Broadcasting after he sold the company to Apollo Global Management. Collectively, Northwest Broadcasting owned and operated 20 television stations in 11 markets in the USA, and was ultimately merged with the radio and television broadcast assets of Cox Media. Mr. Brady remains a Director of Cox Media Group.

Currently, Mr. Brady serves on the board of Syncbak, a privately held technology company that provides geo-filtering and authentication for over-the-top (OTT) television viewing; IZEA Worldwide Inc., a publicly held company providing influencer marketing and custom content services; and Duration Media, LLC, a proprietary digital ad and impression company. He is also one of three senior advisors for Manhattan West Asset Management, an independent wealth management and high net worth financial advisory firm. Mr. Brady's former board roles include serving as Chairman of the FOX Affiliate Board, a representative body of independent stations affiliated with the Fox Television Network; the National Association of Broadcasting; and Saga Communication, a publicly traded radio and television company.

Richard Hubbard, Director

Richard Hubbard has more than thirty five years of relevant management, corporate finance and investment banking experience. As a venture capitalist, Mr. Hubbard has worked closely with the leverage buy-out group of Citibank and other venture capital firms. He has originated leveraged buy-outs, management buy-outs, seed stage, venture capital stage and private equity investments, including the acquisition, restructuring and successful sale of a traditional French luxury goods and fashion brand. Mr. Hubbard has also been an early stage investor in a variety of companies in various industry sectors including Gencell Biosystems, an Irish biotech firm that he co-founded in 2011 and subsequently sold to a giant healthcare company. He has also been a director of a number of small to mid-sized companies in Europe, North America, Africa and Asia.

The Acquisition is not a Non-Arm's Length Qualifying Transaction under the policies of the Exchange and therefore will not require approval of ECC3's shareholders. Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange unless an exemption from the sponsorship requirement is available. ECC3 intends to apply for a waiver from sponsorship requirements. However, there is no assurance that ECC3 will obtain this waiver.

Spencer Trentini, CFO and Corporate Secretary

Spencer Trentini is a CPA, CA hailing from Vancouver, British Columbia and currently works as an accounting and finance consultant. Before working in the consultancy profession, Mr. Trentini worked at Ernst & Young LLP in their Vancouver office. Mr. Trentini was part of the assurance department from 2012 to 2020 leaving at the rank of Senior Manager. Mr. Trentini has extensive experience in advising public companies and regulated entities on financial reporting matters, corporate finance and technical accounting. Mr. Trentini received his undergraduate degree from the University of British Columbia - Okanagan and earned his Chartered Accountant designation in 2014.

The Acquisition will be completed through a definitive agreement (the "Definitive Agreement") that is to be negotiated by the parties, which will contain customary representations and warranties for similar transactions. It is currently anticipated that the Acquisition will be completed by way of a three-cornered amalgamation, pursuant to which a subsidiary of ECC3 will merge with Sparx to form the Resulting Issuer.

In connection with the Acquisition and pursuant to the requirements of the Exchange, ECC3 will file on SEDAR (www.sedar.com) a filing statement which will contain details regarding the Acquisition, ECC3, Sparx and the Resulting Issuer.

Completion of the Acquisition is subject to a number of conditions, including Exchange acceptance, the execution of the Definitive Agreement, and completion of the QT Financing. Trading of ECC3's common shares will remain halted pending further filings with the Exchange.

For more information please contact the Company at 778-331-8505 or email: [email protected]

On Behalf of the Board of Directors of ECC Ventures 3 Corp.

Scott Ackerman
Director

Completion of the Acquisition is subject to a number of conditions, including, among others, Exchange acceptance and if applicable pursuant to TSXV Requirements, majority of the minority shareholder approval. Where applicable, the Acquisition cannot close until the required approvals are obtained. There can be no assurance that the Definitive Agreement will be executed or that the Acquisition will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the disclosure document to be prepared in connection with the Acquisition, any information released or received with respect to the Qualifying Transaction or the Acquisition may not be accurate or complete and should not be relied upon. Trading in the securities of ECC3 should be considered highly speculative.

The TSXV has in no way passed upon the merits of the proposed Acquisition and has neither approved nor disapproved the contents of this news 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.

Forward-Looking Statements

Statements included in this announcement, including statements concerning our and Sparx's plans, intentions and expectations, which are not historical in nature are intended to be, and are hereby identified as, "forward‐looking statements". Forward-looking statements include, among other matters, the terms and timing of the Acquisition (including the entering into of the Definitive Agreement) and the QT Financing, the growth plans of Sparx and statements concerning the Company following the Acquisition, including the composition of the Company's board of directors and management team. Forward‐looking statements may be, but are not always, identified by words including "anticipates", "believes", "intends", "estimates", "expects" and similar expressions. The Company cautions readers that forward‐looking statements, including without limitation those relating to the Company's and Sparx's future operations and business prospects, are subject to certain risks and uncertainties (including risks that the Acquisition does not proceed, or proceed on the expected terms, geopolitical risk, regulatory, Covid-19 and exchange rate risk) that could cause actual results to differ materially from those indicated in the forward‐looking statements. There can be no assurance that any forward-looking statement will prove to be accurate or that management's assumptions underlying such statements, including assumptions concerning the Acquisition or future developments, circumstances or results will materialize. The forward-looking statements included in this news release are made as of the date of this new release and the Company does not undertake to update or revise any forward-looking information included herein, except in accordance with applicable securities laws.

SOURCE: ECC Ventures 3 Corp.



View source version on accesswire.com:
https://www.accesswire.com/658294/ECC-Ventures-3-Corp-Enters-Letter-of-Intent-with-Sparx-Technology-Inc-for-Qualifying-Transaction

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