Stem 7 Capital Signs Definitive Agreement to Acquire 100% of Getcarbids Inc.
September 8, 2016- Vancouver, B.C.- Stem 7 Capital Inc. (TSXV.NEX:STS.H, Frankfurt: T9NB) (the “Company”) has signed a definitive agreement dated September 3, 2016 (the “Agreement”), with GetCarbids Inc. (“GetCarbids”), a private Nevada incorporated corporation, and its majority shareholder, Daniel Langley, of Seattle, Washington, to acquire 100 per cent of GetCarbids outstanding shares (the “Transaction”).
The Agreement formalizes the revised terms of the Transaction, which was previously announced by the Company in news release on May 24, 2016. The parties intend that the proposed transaction will constitute a reverse takeover of Stem 7 Capital as such term is defined under TSX Venture Exchange Policy 5.2 (changes of business and reverse takeovers), and will result in the graduation of the Company to the TSX Venture Exchange (the “TSXV”) from the NEX.
Terms of the Transaction
The Company will issue 26 million common shares, at a deemed value of $0.08 per share, to the shareholders of GetCarbids to acquire 100 per cent of the issued and outstanding shares of GetCarbids. On closing, these shares will be subject to a 36-month escrow resale restriction, as required under TSX Venture Exchange Policy 5.4 (Escrow, Vendor Consideration and Resale Restrictions (Section 5.2 (Surplus Securities)). A finder's fee comprising a total of 1.0 million common shares are payable, subject to regulatory approval, and these shares will be subject to a modified release of one-third on closing of the Transaction and one-third on each of the sixthmonth and 12-month anniversaries of closing the Transaction.
The Agreement contemplates that the Transaction will be completed in stages. Upon execution of the Agreement, the Company has agreed to complete an initial financing to raise a minimum of $1.5 million. The funds from this initial financing will be used by the Company to pay its outstanding payables, pay finder’s fees or commissions in respect of the financing, pay for the development of the GetCarbids platform (the “Platform”), for the costs of the Transaction, and for general working capital. During the period that the Company is proceeding with obtaining regulatory approval for the Transaction, the Company will lend funds to GetCarbids to complete the Platform development (see “Interim Loan” below). The Company may increase the size of the initial financing to a minimum of $2.0 million, to accelerate the graduation to Tier 2.
Upon completion of the development of the Platform, the Company intends to apply to the TSXV to list on Tier 2. Listing on Tier 2 of the TSXV is subject to meeting all of the TSXV’s listing requirements. There is no guarantee that the Company will satisfy those listing requirements. Concurrently with seeking listing on the TSXV, the Company expects, and the Agreement contemplates, that the Company may complete an additional financing, to advance the GetCarbids business post listing.
On closing, the proposed board of directors will consist of five shareholders of GetCarbids and two directors from Stem 7 Capital for a total of seven directors. See “Proposed Board of Directors and Officers Below”.
GetCarbids and its shareholders are at arm's length to the company. Upon completion of the transaction, the Company will be a technology/marketing company.
Initial Capital Structure
The current share structure of the Company consists of approximately 6,921,000 common shares, with 1.2 million warrants exercisable at 10 cents, expiring April 3, 2017, and there are no options outstanding. The following table sets out the proposed capital structure of the Company, upon completion of the acquisition and assuming completion of a 10 million unit initial financing:
Stem7 Current Outstanding 6,921,000 Stem7 Initial Financing 10,000,000(1)
Finder’s Fee 1,000,000(2)
Acquisition of GetCarBids 26,000,000(3)
Total Shares outstanding on closing 43,921,000
(1) Units at $0.15 per unit, each unit consisting of one common share and one half of one common share purchase warrant, each whole warrant exercisable at $0.25 per share for one year, to be extended contingent on listing on Tier 2.
(2) To be released in three equal releases over 12 months from date of issuance.
(3) Subject to surplus security escrow.
This will result in the Company having issued 50,121,000 shares fully diluted, with these shares split as to 26 million or 51.9% to the original GetCarbids shareholders, with the original shareholders of the Company as to 8,121,000 or 16.2%, and the new financing shareholders at 15 million shares or 29.9% (all figures fully diluted). Each of these shareholding groups would be diluted proportionately should the Company increase the size of the initial financing, or if the Company completes an additional financing concurrently with closing.
Fully diluted, the initial financing and exercising of warrants would generate approximately $2,870,000 (gross) (assuming only the minimum financing is completed).
Interim Loan
Pursuant to the Agreement, the Company has agreed to lend GetCarbids sufficient funds, on commercially acceptable terms, for the Platform development costs, including trademark, patent filing and other ancillary costs, as they arise, on a monthly basis, not exceeding US$70,000 per month and not exceeding in aggregate US$700,000, until the Transaction closes. Funds advanced will bear interest at 6% per annum. Advance of the funds is subject to the approval of the TSXV.
Initial Financing
The Company intends to complete a private placement of units to raise a minimum of $1,500,000 consisting of a minimum of 10 million units priced at 15 cents per unit. Each unit will consist of one share and one-half warrant, each full warrant will be exercisable at 25 cents for 12 months from closing of the financing. These funds will be used to pay existing Stem 7 trade payables, anticipated costs of the contemplated transaction, financing fees, GetCarbids Platform development costs and general working capital.
Proposed board of directors and officers
Upon closing of the Transaction, the parties anticipate that the directors and officers of the Company will be:
Daniel Langley, founder of GetCarbids. Mr. Langley has over 20 years of executive management experience in the auto industry. Having worked in management at various dealerships in the Pacific Northwest and having won high-customer-satisfaction ratings, he was awarded the manager of the year from Lexus. In 2006, he created the consulting firm, Auto Buyers Club, identifying and evaluating all aspects of dealer operations to identify problems and issues and create solutions, including building management frameworks, to produce long-term results. In 2011, he was brought in as the national director of operations for Touch of Black LLC, an automobile restoration service vendor, and during the next 3.5 years was directly responsible for increasing the number of dealers from 30 in Washington State to over 160 dealerships, including those in Oregon and Arizona. He is a proposed director, president and chief executive officer.
Charles Schrank, president and chief technology officer, Diamond Solutions Group (DSG). Privately held DSG has provided Internet-based, business intelligence and digital marketing solutions since 1995. DSG's global client base includes Fortune 500 companies, such as Microsoft, Toyota and Intel. DSG employs a team of project managers and graphic designers who continue to work with Microsoft on solutions involving Web management, surface technology, application design, development and testing, Web production, and project management. He is a proposed director and chief technology officer.
Kevin Iden, founder and president, Iden's Dealer Services. Started in 1989, Iden's Dealer Services (IDS) is the largest and leading provider of auto detailing, reconditioning and protection services in the Pacific Northwest. IDS currently has 22 locations with 180plus employees and is still expanding. He is a proposed independent director.
Jim Aitkins, founder of the Jacob Group, a marketing, public relations and sales consulting company. Since becoming self-employed, Mr. Aitkins has consulted to numerous companies in various industries over the last 16 years, which included life insurance training materials, franchise marketing, financial and estate planning marketing strategies, and food marketing. He is the proposed marketing director.
Michele Calhoun, founder and chief executive officer of Touch of Black. Started in 1996, it has become one of the largest, multistate exterior trim restoration companies with 164 dealerships, combined, in Washington, Oregon and Arizona. Ms. Calhoun has direct experience in marketing, finance, cross-departmental networking, and customer and corporate relationship-building strategies. She is a proposed director and chief operating officer.
In addition to the new directors joining the Company, Mr. Dave McMillan, currently chairman and chief executive officer of Stem 7 Capital, and Mr. Allan Fabbro, currently an independent director and chairman of the audit committee of Stem 7 Capital, will remain on the board of directors of the Company post-closing.
Conditions to Closing
Completion of the Transaction is subject to completion of required financing and receipt of approval from the TSX Venture Exchange. The Company anticipates that in connection with obtaining TSXV approval, it will provide a management information circular and/or the filing statement disclosing the terms of the Transaction and information regarding GetCarbids. As this transaction is a change of business and a change of control, a sponsor and shareholder approval may be required for TSXV approval. The Company intends to seek a waiver of the shareholder approval and sponsorship requirements, which the Company anticipates will be available under TSXV policies. The proposed financing must be completed prior to the Transaction closing, and funds advanced on a monthly basis to finance the GetCarbids Platform development.
About GetCarbids
The primary business of GetCarbids, to date, has been the market development of a reverseauction automobile-buying solution, targeting the U.S. multibillion-dollar, new and used automobile market. Initially started as a private venture in 2014, Mr. Langley incorporated GetCarbids in September, 2015, with the objective of signing on potential subscriber organizations to create a qualified car-buying customer base, initially in the Pacific Northwest, but eventually throughout the continental United States, with which to design and implement a Platform that would facilitate a reverse-auction buying solution.
An existing, comparable operation in the United Kingdom (Carwow Ltd.) has found that consumers are utilizing on-line comparison sites to familiarize themselves with product reviews and pricing information and to obtain the best deal. However, the ability to purchase on-line was lacking until the U.K. operation went commercial, resulting in significant savings to their subscribers. The U.K. dealerships have embraced the platform as it provides them with qualified leads resulting in increased sales volumes. In almost three years, since its inception in May, 2013, and to January, 2016, Carwow has generated approximately one million website users, resulting in approximately $800-million (U.S.) in new car sales.
With the motto, "Now everyone wins," GetCarbids has entered into agreements with Nike Inc., Boeing Corp. the Boeing Employees Credit Union and others, to provide its unique car-buying experience to its combined 2.5 million employees and members. In addition, GetCarbids has support from over 150 automobile dealerships anxious to participate in this program. With a substantial, qualified subscriber base, GetCarbids has recently contracted with a qualified software development company to complete the build-out of its proprietary operating Platform, targeting a fully operational start-up date of the first quarter 2017. This website Platform, designed to also be available as an app for smart phones, will allow the subscriber to select a desired car, receive bids from nearby dealerships, which will be automatically restricted to the best five bids, and then compare based on price, location and stock availability. The Platform will allow subscribers to communicate with the dealers while remaining anonymous until they decide to purchase the vehicle on-line.
The GetCarbids initial base revenue model is derived from annual subscriber and dealer fees, starting in year two, plus a dealer fee on each individual sales transaction, starting on commercialization.
Currently, GetCarbids is debt-free, with the continuing monthly Platform development expense budgeted at US$70,000 per month. No executive salaries or other employee fees are contemplated until the Platform has been commercialized, which is planned for the first quarter 2017.
Financial Advisor to Board of Directors
Douglas Durst, CPA, MBA, CGMA, will become a financial advisor to the Board upon completion of the Transaction. Mr. Durst has specialized in building and expanding high performance, disciplined organizations through the office of the chief financial officer, starting with business and finance strategies, capital management and people alignment, processes, and systems. Mr. Durst has significant CFO experience in private and public entities, including mergers and acquisitions, post-merger integration, venture financing, board relationships, risk mitigation, and financial analysis, along with internal controls and operations management. During his tenure as CFO/Chief Operating Officer and consulting partner roles, the companies involved were acquired by larger public and private entities. Having worked for Microsoft as director of business development and then Chase Innovations, which provides interim CFO/COO and consulting services to Microsoft in addition to Delphi and Schneider Trucking, Mr. Durst was seconded as interim CFO/COO to Microsoft (finance). Mr. Durst continues to consult with various companies, including Microsoft, EMP, Amazon, and the Bill and Melinda Gates Foundation.
Appointment of Chief Financial Officer
Mr. Wayne Moorhouse, CFA, has been appointed Chief Financial Officer of Stem 7 Capital effective immediately. Wayne Moorhouse, has considerable experience working with public companies. He has earned a wealth of experience growing and financing early stage companies across multiple industries including natural resources, technology and services. Mr. Moorhouse has specific experience in finance, company reporting, acquisitions and divestitures, initial listings, due diligence, operations and compliance. Currently he is a director of I-Minerals Inc, CFO and director of WPC Resources Inc. and CFO of Midnight Sun Mining Corp. In the past, Mr. Moorhouse has served as a director or officer of a number of TSX Venture and TSX companies including Genco Resources and Roxgold Inc.
“Completion of this transaction is subject to a number of conditions, including Exchange acceptance. This transaction cannot close until the required shareholder approval is obtained. There can be no assurances that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Management Circular and or Filing Statement to be prepared in connection with the Transaction, any information released or received with respect to the Change of Business or RTO may not be accurate or complete and should not be relied upon. Trading in the securities of Stem7 Capital should be considered highly speculative.”
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved or disapproved the contents of this press release.
For further information, please contact:
Dave McMillan Al Fabbro Chairman & Chief Executive Officer Director 1-778-773-4560 1-604-351-8850 [email protected] [email protected] On Behalf of the Board:
Dave McMillan Chairman & Chief Executive Officer
Neither the 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.
Statements in this news release regarding the Company’s business plans which are not historical facts are "forward-looking statements" that involve risks and uncertainties. Such forward looking statements include: descriptions of the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur; statements regarding the Company’s expected financing plans; statements regarding the completion of the Transaction, including the statements regarding regulatory approvals; statements regarding the development of the GetCarBids Platform; and statements regarding the proposed GetCarBids business. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Important factors - including the availability of funds, the results of financing efforts, the ability to obtain all required regulatory approvals, the ability to develop the GetCarBids Platform and the consumer popularity of the developed Platform, as well as general market conditions -- could cause actual results to differ materially from the Company's expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward- looking statements, whether as a result of new information, future events or otherwise.