EUREKA CAPITAL CORP. ENTERS INTO DEFINITIVE AGREEMENT IN RESPECT OF PROPOSED QUALIFYING TRANSACTION
/NOT FOR DISTRIBUTION TO THE U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION
IN
In connection with the Amalgamation, it is intended that Eureka will be renamed as "
About Empire
Empire is a private company with approximately 240 shareholders, incorporated under the
Founded in 2009, Empire operates from a 3,000 square foot facility that has been designed with the capacity for up to 2,000 units of production per year and an ability to expand if required.
Empire is currently focused on the many millions of large diesel engines operating in the world and has plans to expand into natural gas-powered engines in the near future.
Terms of the Proposed Transaction
The Transaction will be carried out pursuant to the terms of the Definitive Agreement, a copy of which is, or shortly will be, filed on Eureka's SEDAR+ profile at www.sedarplus.ca. The below description of the terms of the Transaction and the Definitive Agreement is qualified in its entirety by reference to the full text of the Definitive Agreement.
Amalgamation
Pursuant to the terms of the Definitive Agreement, at the effective time of the Amalgamation, Empire will amalgamate with
Shareholder Approval
The Transaction is subject to shareholder approval of Empire, but not to Eureka shareholder approval, to be obtained through a duly called and convened meeting of Empire's shareholders or, in the alternative, by consent resolution. Eureka intends to hold an annual and special meeting of its shareholders (the "Eureka Meeting") on or about
- appointment, subject to the completion of the Transaction, of an auditor of Eureka and the authorization of the board of directors of Eureka to fix the remuneration thereof;
- approval of the option plan and restricted share unit plan to be adopted by the Resulting Issuer;
- continuance of Eureka under the Canada Business Corporations Act;
- election of the directors of Eureka to hold office from the effective time of the completion of the Transaction; and
- change in the name of Eureka from "
Eureka Capital Corp. " to "Empire Hydrogen Energy Systems Inc. " or such other name as the board of directors of Eureka deems appropriate (collectively, the foregoing approvals, the "Required Approvals").
Additional details regarding the annual and special meeting of the shareholders of Eureka will be available in a management information circular that is expected to be delivered to shareholders of Eureka. The Amalgamation will be approved by the sole shareholder of
Resulting Issuer Shares
In connection with the proposed Transaction, it is expected that approximately 26,886,348 Resulting Issuer Common Shares will be issued to the holders of Empire Shares (not including Empire Shares issuable upon the conversion of Subscription Receipts (as defined below)) at a deemed price of $0.2083 per share. Based on the number of Empire Shares outstanding as of the date hereof, and assuming the exchange of each Subscription Receipt into underlying securities, it is expected that there would be a maximum of approximately 39,466,348 Resulting Issuer Common Shares outstanding upon completion of the Transaction, on a non-diluted basis. On completion of the Transaction, the current shareholders of Eureka are expected to hold an aggregate of approximately 9,700,000 Resulting Issuer Common Shares, representing approximately 24.58% of the maximum number of Resulting Issuer Common Shares, the current shareholders of Empire would hold an aggregate of approximately 26,886,348 Resulting Issuer Common Shares, representing approximately 68.12% of the maximum number of Resulting Issuer Common Shares, and investors in the Private Placement (as defined below) would hold an aggregate of approximately 2,880,000 Resulting Issuer Common Shares, representing approximately 7.30% of the maximum number of Resulting Issuer Common Shares.
The completion of the Amalgamation is conditional on obtaining all necessary regulatory and shareholder approvals in connection with the matters described above and other conditions customary for a transaction of this type. Eureka and Empire anticipate closing the Transaction in
Summary Financial Information of Empire
Based on the audited annual financial statements for Empire as at and for the years ended
Assets |
|
2023 |
2022 |
Current assets: |
|
|
|
Cash and cash equivalents |
|
$ - |
|
Short term investments |
|
2,116 |
1,000,000 |
Receivables (note 4) |
|
28,108 |
75,691 |
SR&ED Receivable |
|
108,301 |
- |
Prepaid expenses |
|
13,460 |
10,611 |
Inventories (note 5) |
|
301,072 |
106,327 |
|
|
453,057 |
1,232,135 |
Non-current assets: |
|
|
|
Property, plant and equipment (note 6) |
|
14,031 |
54,259 |
Total assets |
|
$ 467,088 |
$ 1,286,394 |
Liabilities |
|
|
|
Current liabilities: |
|
|
|
Operating line of credit |
$ |
4,722 |
$ - |
Accounts payable and accrued liabilities |
|
202,560 |
172,036 |
Due to related parties (note 9) |
|
4,277 |
1,133 |
Customer deposits |
|
12,975 |
- |
Warranty provision (note 8) |
|
18,800 |
15,300 |
Current portion of lease liability (note 7) |
|
8,779 |
46,472 |
|
|
252,113 |
234,941 |
Non-current liabilities: |
|
|
|
Non-current lease liability (note 7) |
|
- |
8,779 |
Total liabilities |
|
252,113 |
243,720 |
Shareholders' equity |
|
|
|
Common shares (note 11) |
|
5,401,574 |
5,377,880 |
Other paid in capital (note 12 and note 13) |
|
1,460,792 |
1,389,585 |
Deficit |
|
(6,647,391) |
(5,724,791) |
|
|
214,975 |
1,042,674 |
Total liabilities and shareholders' equity |
|
$ 467,088 |
$ 1,286,394 |
Sales: |
|
|
Sale of prototype units |
$ 213,061 |
$ 231,157 |
|
213,061 |
231,157 |
Cost of sales |
238,885 |
280,402 |
Gross (loss) profit |
(25,824) |
(49,245) |
Expenses: |
|
|
Stock based compensation for consultants (note 12) |
71,207 |
118,191 |
Professional fees |
236,898 |
343,789 |
Commissions |
4,494 |
7,100 |
Employee compensation |
388,742 |
272,210 |
Depreciation expense |
24,679 |
20,386 |
Materials and supplies |
66,951 |
37,510 |
Advertising and promotion |
88,336 |
71,463 |
Office supplies and maintenance |
33,888 |
50,160 |
Interest expense on lease liability |
8,634 |
19,258 |
Travel |
48,359 |
36,340 |
Interest and bank charges |
5,128 |
8,144 |
Inventory provision |
30,174 |
- |
Bad debt |
10,963 |
71 |
|
1,018,453 |
984,622 |
Loss before taxes and recoveries |
(1,044,277) |
(1,033,867) |
SR&ED tax credit refund |
104,747 |
- |
Other income |
16,930 |
7,965 |
Other government assist |
- |
26,095 |
Net loss and comprehensive loss |
$ (922,600) |
$ (999,807) |
Weighted average number of common shares outstanding: |
|
|
Basic and diluted |
22,405,290 21,956,909 |
Basic and diluted loss per share |
(0.04) (0.05) |
Further financial information, including unaudited financial statements of Empire for the period ended
Private Placement of Subscription Receipts of Eureka
Prior to the completion of the Transaction, Eureka is expected to complete a non-brokered private placement (the "Private Placement") for aggregate gross proceeds of up to
The Subscription Receipts will be created and issued pursuant to the terms of a subscription receipt agreement (the "Subscription Receipt Agreement") to be entered into among Eureka,
Each Subscription Receipt will be automatically converted, without payment of additional consideration or further action by the holder thereof, into one Empire Share, subject to adjustment in certain events, immediately before the completion of the Transaction (each a "Subscription Receipt") upon the satisfaction or waiver of the Escrow Release Conditions (as to be defined in the Subscription Receipt Agreement) on or before a date to be mutually agreed upon by Empire and Eureka (the "Escrow Release Deadline"). Each Empire Share issued on conversion of each Subscription Receipt will be exchanged for 1.2 common shares of the Resulting Issuer upon closing of the Transaction at a deemed price of
If the Escrow Release Conditions are not satisfied at or before the Escrow Release Deadline, each of the then issued and outstanding Subscription Receipts will be cancelled and the Subscription Receipt Agent will return to each holder of Subscription Receipts an amount equal to the aggregate purchase price of the Subscription Receipts held by such holder plus an amount equal to the holder's pro rata share of any interest or other income earned on the escrowed funds (less applicable withholding tax, if any). To the extent that the escrowed funds are insufficient to refund such amounts to each holder of the Subscription Receipts of Empire, Empire shall be liable for and will contribute such amounts as are necessary to satisfy the shortfall.
Proceeds of the Private Placement
It is intended that the net proceeds from the Private Placement will be used for general working capital purposes following completion of the Qualifying Transaction.
Secured
In connection with the Transaction and pursuant to the Definitive Agreement Eureka will, subject to required regulatory approvals, advance an aggregate of
Sponsorship
Under the policies of the Exchange, the parties to the Transaction are required to engage a sponsor for the Transaction unless an exemption or waiver from this requirement can be obtained. Empire and Eureka plan to request a waiver of this requirement by the Exchange.
Resulting Issuer
Immediately following the completion of the Transaction, the Resulting Issuer is expected to change its name to "
Conditions to Completion of the Transaction
It is intended that the Transaction, when completed, will constitute Eureka's "Qualifying Transaction" in accordance with Policy 2.4 of the Exchange. Completion of the Transaction is subject to a number of conditions precedent, including, but not limited to, (i) acceptance by the Exchange and receipt of other applicable regulatory approvals; (ii) receipt of the Required Approvals at the Eureka Meeting, (iii) receipt of the requisite approval of the shareholders of Empire of the Amalgamation, and (iv) completion of the Private Placement. There can be no assurance that the Transaction will be completed as proposed or at all.
Proposed Management and Board of Directors of Resulting Issuer
Concurrent with the completion of the Transaction, it is expected that the directors and officers of the Resulting Issuer will be as follows:
Sven in an entrepreneur and business consultant with expertise in electronics and with over five decades of business direction and senior management experience in diverse fields. Sven has experience as the founder, chair and chief executive officer of several successful hi-tech start-ups, including: (i)
Capital Electronic Services was primarily active in designing, manufacturing and servicing marine radio equipment. It also designed, manufactured and serviced VHF equipment for municipal governments. When the company's annual sales exceeded
Dale has over 40 years of senior management and entrepreneurial experience in a wide variety of mid to large scale recreational, residential, commercial, and industrial projects. Comfortable in government offices, the boardroom, or in the field, Dale also has an extensive background in sales and marketing and has received international recognition throughout
Dale oversaw the design and development of several oceanfront tourist destinations in
Arm's Length Transaction
The Transaction was negotiated by parties who are dealing at arm's length with each other and therefore, the Transaction is not a Non-Arm's Length Qualifying Transaction in accordance with the policies of the Exchange.
Finder's Fees
No finder's fees or commissions are payable by Eureka or Empire in connection with the closing of the Transaction, other than potentially with respect of the Private Placement.
Filing Statement
In connection with the Transaction and pursuant to Exchange requirements, Eureka will file a filing statement under its profile on SEDAR+ at www.sedarplus.ca, which will contain details regarding the Transaction, the Amalgamation, the Private Placement, Eureka, Empire and the Resulting Issuer.
Shareholder approval is not required with respect to the Transaction under the rules of the Exchange. In the event any of the conditions set forth above are not completed or the Transaction does not proceed, Eureka will notify shareholders. Trading in the common shares of Eureka will remain halted and is not expected to resume trading until the Transaction is completed or until the Exchange receives the requisite documentation to resume trading.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction, nor shall there be any offer, sale, or solicitation of securities in any state in
ABOUT EUREKA
Eureka is a capital pool company that has not commenced commercial operations and has no assets other than cash. Except as specifically contemplated in the Exchange's CPC Policy, until the completion of its qualifying transaction, Eureka will not carry on business, other than the identification and evaluation of businesses or assets with a view to completing a proposed qualifying transaction.
ANY SECURITIES REFERRED TO HEREIN WILL NOT BE REGISTERED UNDER THE
NOT FOR DISTRIBUTION TO
Neither
The information contained or referred to in this press release relating to Empire has been furnished by Empire. Although Eureka has no knowledge that would indicate that any statement contained herein concerning Empire is untrue or incomplete, neither Eureka nor any of its respective directors or officers assumes any responsibility for the accuracy or completeness of such information.
Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance, receipt of requisite regulatory approvals, completion of the Private Placement and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approvals, and any ancillary matters thereto, are 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.
This forward-looking information in respect of Eureka and Empire reflects Empire's or Eureka's, as the case may be, current beliefs and is based on information currently available to Eureka and Empire, respectively, and on assumptions Eureka and Empire, as the case may be, believes are reasonable. These assumptions include, but are not limited to, management's assumptions about the Exchange approval for the Transaction, closing of the Private Placement, closing of the Amalgamation announced above and Empire's assumptions regarding its business objectives.
Forward-Looking Information Cautionary Statement
This news release includes forward-looking information ("forward-looking information") within the meaning of Canadian securities laws regarding Eureka,
Neither
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