BasicGov Announces Sale Of Assets, Loan Facility & Name Change
17 August 2010 - 11:38AM
Marketwired
BasicGov Systems, Inc. (TSX VENTURE: BSG) ("BasicGov" or the
"Company") announces that it has agreed to sell all of its assets
other than cash to 0887901 B.C. Ltd. (the "Purchaser"), a
wholly-owned subsidiary of Pender Growth Fund (VCC) Inc.
("Pender"). Pursuant to the terms of a Business Assets Purchase and
Sale Agreement (the "Sale Agreement") dated August 16, 2010 among
the Company, 0887901 B.C. Ltd. and Pender, the Company will sell
all of its assets, other than cash, to 0887901 B.C. Ltd. for
consideration of approximately $900,000, subject to adjustments for
changes in specific working capital balances between July 1, 2010
and the Closing Date (the "Sale Transaction"). This consideration
exceeds the value of the Company's BasicGov Software-as-a-Service
("SaaS") business estimated by a business valuator to be between
$810,000 and $850,000 as of July 15, 2010.
Consideration for the Company's SaaS business assets is a
combination of cash and the assumption of certain liabilities of
the Company. The actual amount of cash payable and the value of the
assumed liabilities will be calculated as of the completion of the
transaction so that adjustments can be made for additional sales of
subscriptions of the Company's BasicGov service and increases or
decreases in liabilities to be assumed between the date of the
Sales Agreement and the date the sale is completed. Subject to the
amount of cash consideration not exceeding $780,000, the amount of
cash payable is intended to ensure that the Company has $100,000 in
working capital after the Closing Date and the share redemption and
repayment of advances under the loan facility described below. The
Company will use this working capital to fund its expenses as a
publicly listed shell company and to seek a new business that has
the potential to attract greater support from the public
market.
The Company has also entered into a loan agreement with Pender
whereby Pender will loan the Company up to $250,000 at an interest
rate of 10% per annum compounded annually. The loan and all
outstanding interest are repayable 18 months after the first
advance is made to the Company. The loan and all outstanding
interest are also repayable in the event of sale of all or
substantially all of the assets, such as the Sale Transaction, or
in the event of change of control. The Company drew its first
advance under the loan of $100,000 on August 5, 2010 and the
current balance outstanding is $100,000. Pender owns 77% of the
outstanding common shares and 100% of the outstanding Series 1
preferred shares of the Company.
As the Company, the Purchaser and Pender have a number of common
directors, the Board of Directors of the Company determined that it
was appropriate to establish a Special Committee of independent
directors of the Company to evaluate the terms of the Sale
Transaction from the point of view of the best interests of the
Company and its shareholders. The Special Committee retained an
independent financial advisor to provide a report on the value of
the Company's business with an opinion as to the fairness of the
Sale Transaction from a financial point of view. In light of the
advice of the financial advisor, and the fact that the Sale
Transaction will require approval of the Company's shareholders by
a majority of disinterested shareholders, among other factors, the
Special Committee and the Board of Directors determined to approve
and execute the Agreement.
The completion of the Sale Transaction triggers redemption
rights under the Company's outstanding 250,000 Series 1 Preference
Shares that are held by Pender, which shares will be redeemed by
the Company concurrent with completion of the Sale Transaction. The
Company will also repay all working capital loans made by Pender to
the Company concurrent with completion of the Sale Transaction.
Payment for the redemption and loan repayment will be made with the
cash proceeds of the Sale Transaction.
Since the Company's name is one of the assets to be acquired by
0887901 B.C. Ltd. under the Sale Transaction, Shareholders will
also be asked to consider and approve a special resolution changing
its name upon the closing of the Sale Transaction to "Pedro
Resources Ltd." or such other name as may be acceptable to the TSX
Venture Exchange.
To be effective, the Sale Transaction must be approved by a
special resolution passed by at least 66 2/3% of the votes cast by
shareholders at the Annual and Special Meeting of the shareholders.
Since the Purchaser is a related party of the Company, being
wholly-owned by the Company's controlling shareholder, Pender, the
Sale Transaction constitutes a "related party transaction".
Accordingly, the Sale Transaction must also be approved by a simple
majority of the votes cast by shareholders excluding the votes
attached to the common shares that are beneficially owned,
controlled or directed by shareholders that are interested parties.
Pender and certain directors of the Company are interested parties
and, as such, their shares will be excluded from this vote.
Detailed information about the Sale Transaction will be
contained in a management information circular relating to the
Annual and Special Meeting to be mailed to the Company's
shareholders.
The Sale Transaction is subject to certain conditions and
approval of the TSX Venture Exchange. If conditions are met and
approval obtained, the Company estimates that the Sale Transaction
will close in late September.
About BasicGov Systems, Inc.
BasicGov Systems, Inc. ("BasicGov") (formerly CloudBench
Applications Inc.) (TSX VENTURE: BSG) develops, sells and supports
web-based software for cities, counties, state governments and
government agencies to streamline planning, permitting and
inspections, code enforcement, licensing and citizen access.
BasicGov is a reliable, secure solution delivered for an affordable
price and the only web-based software for local governments built
on the Salesforce.com's Force.com platform, the backbone of cloud
computing solutions used by more than 70,000 organizations
worldwide. Unlike enterprise software that is expensive to acquire
and difficult to implement, BasicGov does not require capital
investment and is easy to set up. www.basicgov.com.
Forward-Looking Statements
This news release contains forward-looking statements. Actual
events or results may differ materially from those described in the
forward-looking statements due to a number of risks and
uncertainties, including changes in market and competition,
technological and competitive developments, cooperation and
performance of strategic partners, potential downturns in economic
conditions generally and the outcome of the negotiations with
Harris as to the amount of the Holdbacks. Forward-looking
statements are based upon management's estimates, beliefs and
opinions. The Company assumes no obligation to update
forward-looking statements, other than as required by applicable
law.
On behalf of the Board of Directors
BASICGOV SYSTEMS, INC.
David Roberts, Director
For more information about BasicGov Systems, Inc. and BasicGov
visit www.basicgov.com.
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.
Contacts: BasicGov Systems, Inc. Ian Power CFO +1 (604) 729-5142
info@basicgov.com www.basicgov.com
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