CPE News (12.23.2021) – MJ Innovation Capital Corp. (TSX-V: MSMJ.P) and SPARQ Systems Inc. have announced the closing of a brokered private placement of 20,000,000 Subscription Receipts at a price of $0.50 per Subscription Receipt for gross proceeds of $10,000,000. Echelon Wealth Partners Inc. acted as agent and sole bookrunner for the offering.
The offering was completed in connection with a series of transactions that will result in a reverse takeover of MJ by the shareholders of SPARQ. The Transaction will constitute MJ’s “Qualifying Transaction (QT)”.
Founded at Queen’s University in 2009 by Dr. Praveen Jain, Canada Research Chair in Power Electronics and Professor of Electrical and Computer Engineering, SPARQ designs and manufactures next generation single-phase microinverters for residential and commercial solar electric applications. SPARQ has developed a proprietary photovoltaic (PV) solution called the Quad; the Quad inverter optimizes four PV modules with a single microinverter, simplifying design and installation, and lowering cost for solar power installations when compared to existing market offerings.
Upon completion of the QT and assuming the completion of the MJ consolidation and the SPARQ consolidation, the Resulting Issuer, to be named as “SPARQ Corp.”, will have 82,444,752 common shares issued and outstanding, consisting of: 60,000,000 common shares issued at a deemed price of $0.50 per share to existing holders of SPARQ shares; 20,000,000 common shares issued at a deemed price of $0.50 per share to holders of SPARQ common shares issued upon the conversion of the QT Subscription Receipts; and 2,444,752 common shares currently held by shareholders of MJ.
The resulting issuer will have securities convertible into an aggregate of 27,785,500 Common Shares, consisting of options to purchase up to 244,000 common shares that were previously issued pursuant to the Stock Option Plan, as adjusted to reflect the MJ Consolidation; options to purchase up to 5,025,000 Common Shares to the directors and officers
of the Resulting Issuer; Resulting Issuer Warrants representing the right to acquire up to an aggregate of 20,000,000 Common Shares; and resulting Issuer QT Equity Compensation Options representing the right to acquire up to an aggregate of 2,516,500 Common Shares (including exercise of the Resulting Issuer Warrants forming part of the Resulting Issuer QT Equity Compensation Options).
At the offering price, SPARQ Systems would be valued at $30 million. The Resulting Issuer would be valued at $55.12 million on a fully diluted basis.
The British Virgin Islands (BVI) domiciled Highchart Investments Limited, Greg Steers and Dr. Jain would be the principal shareholders (10%+) of the Resulting Issuers.
photo credit: SPARQ Systems
News Release
SPARQ Systems Inc. and MJ Innovation Capital Corp. Announce Closing of $10,000,000 Private Placement
Toronto, Ontario–(Newsfile Corp. – December 22, 2021) – MJ Innovation Capital Corp. (TSXV: MSMJ.P) (“MJ”) and SPARQ Systems Inc. (“SPARQ”) are pleased to announce the closing of the previously announced brokered private placement (the “Offering”) of subscription receipts (the “Subscription Receipts”) of SPARQ. Pursuant to the Offering, SPARQ issued an aggregate of 20,000,000 Subscription Receipts at a price of $0.50 per Subscription Receipt (the “Issue Price”) for gross proceeds of $10,000,000. Echelon Capital Markets (the “Agent”) acted as agent and sole bookrunner for the Offering.
Summary of the Offering
The Offering was completed in connection with a series of transactions that will result in a reverse takeover of MJ by the shareholders of SPARQ (the “Transaction”). The Transaction will constitute MJ’s “Qualifying Transaction” as such term is defined in Policy 2.4 of the Corporate Finance Manual of the TSX Venture Exchange (the “TSXV”). Further details of the Transaction were previously announced on June 10, 2021 and September 15, 2021. References herein to the “Resulting Issuer” refer to MJ following the completion of the Transaction.
An aggregate of 20,000,000 Subscription Receipts were issued in connection with the Offering. Each Subscription Receipt, shall entitle the holder thereof to receive, upon the satisfaction or waiver (to the extent such waiver is permitted) of certain escrow release conditions (the “Escrow Release Conditions”) prior to the Escrow Release Deadline (as defined below), including all conditions precedent to the Transaction being satisfied, and without payment of additional consideration therefor, one unit of SPARQ (each, a “SPARQ Unit”). Each SPARQ Unit shall consist of one (1) common share in the capital of SPARQ (each, a “SPARQ Share”) and one (1) common share purchase warrant (each, a “SPARQ Warrant”) with each such SPARQ Warrant entitling the holder thereof to acquire one (1) additional SPARQ Share at a price of $0.75 per share for a period of 24 months from the date the Escrow Release Conditions are satisfied. On completion of the Transaction, each SPARQ Share and SPARQ Warrant underlying the Subscription Receipts will be converted into one (1) common share in the capital of the Resulting Issuer (each, a “Resulting Issuer Share”) and one (1) common share purchase warrant (each, a “Resulting Issuer Warrant”), all in accordance with the terms of the definitive agreement dated June 10, 2021 (as amended on September 14, 2021 and November 26, 2021) between SPARQ and MJ. Upon completion of the Transaction, the Resulting Issuer Shares will trade under the symbol SPRQ. An application has been made to the TSXV to list the Resulting Issuer Warrants.
In connection with the Offering, the Agent is entitled to receive a cash fee (the “Agent’s Commission”) in the amount equal to (i) 3.5% of the aggregate gross proceeds of the Offering from purchasers on the president’s list, including an additional 3.5% of the aggregate gross proceeds of the Offering from purchasers on the president’s list whose subscriptions are settled through members of the selling group; and (ii) 7.0% of the aggregate gross proceeds of the Offering in respect of all other purchasers and compensation options (the “Compensation Options”) to purchase an aggregate of number of SPARQ Units equal to (i) 3.5% of the aggregate number of Subscription Receipts sold to purchasers on the president’s list, including an additional 3.5% of the number of Subscription Receipts sold purchasers on the president’s list whose subscriptions are settled through members of the selling group; and (ii) 7.0% of the aggregate number of Subscription Receipts sold to all other purchasers. Each Compensation Option will be exercisable to acquire one SPARQ Unit at the Issue Price for a period of 24 months from the date the Escrow Release Conditions are satisfied. Upon completion of the Transaction, each holder of Compensation Options will receive Resulting Issuer Shares and Resulting Issuer Warrants in lieu of SPARQ Shares and SPARQ Warrants upon exercise of the Compensation Options, including the payment therefor. Resulting Issuer Warrants will expire 24 months following the date the Escrow Release Conditions are satisfied. On the closing of the Offering, the Agent received payment of 50% of the Agent’s Commission and was issued all of the Compensation Options. The remaining 50% of the Agent’s Commission will be paid to the Agent upon satisfaction or waiver (to the extent such waiver is permitted) of the Escrow Release Conditions.
The gross proceeds of the Offering (less an amount equal to 50% of the Agent’s Commission, and all of the reasonable costs and expenses of the Agent in connection with the Offering) have been deposited in escrow with the subscription receipt agent until the satisfaction or waiver (to the extent such waiver is permitted) of the Escrow Release Conditions, including all conditions precedent to the Transaction.
In the event that the Escrow Release Conditions have not been satisfied or waived (to the extent such waiver is permitted) by April 20, 2022, or such other date as SPARQ and the Agent may determine pursuant to the subscription receipt agreement (the “Escrow Release Deadline”), or SPARQ advises the Agent or announces to the public that it does not intend to satisfy the Escrow Release Conditions, or that the Transaction has been terminated in accordance with the terms of the definitive agreement between the MJ and SPARQ, the aggregate issue price of the Subscription Receipts together with any earned interest shall be returned to the applicable holders of the Subscription Receipts (net of any applicable withholding taxes), and such Subscription Receipts shall be automatically cancelled and be of no further force and effect.
All Subscription Receipts issued in connection with the Offering are subject to a statutory hold period in accordance with Canadian securities laws. Following completion of the Transaction, the Resulting Issuer Shares and Resulting Issuer Warrants received upon the exchange of the SPARQ Shares and SPARQ Warrants underlying the Subscription Receipts will not be subject to a statutory hold period in Canada.
The proceeds of the Offering are anticipated to be used principally for product development, increasing manufacturing capacity, and general working capital purposes.
ABOUT SPARQ
SPARQ was incorporated on June 16, 2009 pursuant to the provisions of Business Corporations Act (Ontario). SPARQ’s head office is located at 945 Princess Street, Kingston, Ontario, K7L 0E9. SPARQ originated from the advanced research conducted at ePOWER, the Centre for Energy and Power Electronics Research at Queen’s University in Kingston, Ontario, Canada. SPARQ was founded at Queen’s University in 2009 by Canada Research Chair in Power Electronics, Dr. Praveen Jain, Fellow of the Institute of Electrical and Electronics Engineers and the Royal Society of Canada.
SPARQ designs and manufactures next generation single-phase microinverters for residential and commercial solar electric applications. SPARQ has developed a proprietary photovoltaic (“PV”) solution called the Quad; the Quad inverter optimizes four PV modules with a single microinverter, simplifying design and installation, and lowering cost for solar power installations when compared to existing market offerings.
SPARQ’s operations are located in Ontario.
ABOUT MJ INNOVATION CAPITAL CORP.
MJ is a capital pool company created pursuant to the policies of the TSXV. It does not own any assets, other than cash or cash equivalents and its rights under the definitive agreement dated June 10, 2021 with SPARQ. The principal business of MJ is to identify and evaluate opportunities for the acquisition of an interest in assets or businesses and, once identified and evaluated, to negotiate an acquisition or participation subject to acceptance by the TSXV so as to complete a qualifying transaction in accordance with the policies of the TSXV.
For more information, please contact:
MJ Innovation Capital Corp.
Bryan Van Engelen
Chief Executive Officer, Chief Financial Officer and Director
Telephone: 226.750.9914
SPARQ Systems Inc.
Dr. Praveen Jain
Chief Executive Officer
Email: pjain@sparqsys.com
Tel: 343.477.1158
Not for distribution to United States newswire services or for release publication, distribution or dissemination directly, or indirectly, in whole or in part, in or into the United States.