February 18, 2000 - ZTEST To Increase Ownership To Approximately 74% In Wireless Technology
ZTEST Electronics Inc., ZTST - CDN, ("ZTEST") wishes to announce that it has closed the first tranche of a financing pursuant to a financing agreement with Nexsys Commtech International Inc. ("Nexsys") and C.I. Covington Fund Inc. ("Covington") whereby both ZTEST and Covington have the ability to increase their respective ownership positions in this two way wireless communications network provider.
Nexsys is in the business of providing two way wireless communication systems, which collect and transmit electronic data by way of radio transmission to predefined destinations equipped with the appropriate receiving devices. These systems, which are marketed to utility companies, or other service providers, can handle signals from more than 40 in home wireless devices, such as security, fire alarm and health monitoring devices. In addition to these value added offerings, the Nexsys system will also collect and transmit the electric, gas, and water consumption data readings from the associated meters as often as desired, which is becoming increasingly important in the deregulating environment confronting utilities throughout the world.
The Nexsys wireless network, as previously reported in a September 10, 1999 Press Release, successfully completed the requirements specified in a pilot installation in Fort Wayne, Indiana. Other cities testing the Nexsys wireless system include Waterloo and Cornwall, Ontario. ZTEST, under a contract from Nexsys, is currently modifying the pilot prototypes into a more compact unit size, in preparation for manufacturing the Nexsys Home Gateway product.
Pursuant to the terms of the financing agreement with Nexsys, ZTEST has agreed to advance a minimum of $3,400,000 and a maximum of $4,500,000 and Covington has agreed to advance $600,000 to provide Nexsys with working capital. The advances will take place in four (4) tranches with the last tanche to be advanced on or before May 15, 2000.
The advances will be secured by way of four (4) series of convertible debentures (the "Debentures"). The Debentures will each have a term of five (5) years and will bear interest at the rate of 6.5% per annum calculated semi-annually not in advance. If interest remains unpaid for five (5) business days, it will be added to the principal amount of the Debentures. The Debentures will be secured against all of the assets of Nexsys but will rank behind the existing promissory notes and loans made by the Canadian Imperial Bank of Commerce, ZTEST and Covington to Nexsys. The Debentures will be convertible into common shares of Nexsys at the rate of one (1) common share for each $0.20 of principal amount converted. In addition, for each $1.00 advanced ZTEST and Covington will receive two and one-half "A Warrants", up to a maximum of $12,750,000 A Warrants, with each A Warrant entitling the holder to purchase one additional common share of Nexsys at a price of $0.20 per share for a period of seven (7) months from the date of issue and two and one-half "B Warrants", up to maximum of 12,750,000 B Warrants, with each B Warrant entitling the holder to purchase one additional common share of Nexsys at a price of $0.25 per common share for a period of forty (40) months from the date of issue.
The first series of Debentures closed on February 18, 2000 pursuant to which ZTEST advanced $1,500,000. ZTEST had already advanced approximately $1,242,000 of this amount to Nexsys by way of an unsecured promissory note bearing interest at the rate of 12% per annum and due on February 16, 2000.
The shareholders of Nexsys approved this Financing Agreement at a meeting of the shareholders of Nexsys held on February 14, 2000 and the Ontario Securities Commission has formally waived the valuation requirements under Ontario Securities Commission Policy 9.1.
In consideration for a previous financing by ZTEST and Covington to Nexsys in the principal amount of $1,000,000 by way of promissory notes, ZTEST received 2,250,000 nominal cost common shares of Nexsys and Covington received 750,000 nominal cost common shares of Nexsys. Following the completion of the financing, on a fully diluted basis, if ZTEST advances the maximum principal amount referred to above, then ZTEST by converting all of its debentures into Nexsys common shares and exercising all of its warrants could hold up to approximately 74% of the voting shares of Nexsys, an increase from its current ownership position of 44.42% of the voting shares of Nexsys.
ZTEST offers Strategic Partner services in electronic design, development and manufacturing to emerging high tech companies in return for long-term manufacturing contracts, fees for services and equity positions.
For further information, please contact Mr. James E. Lalonde, Manager, Corporate Development, at (905) 569-3344 or visit our website at http://www.ztest.com.
The current outstanding capital of ZTEST is 18,402,816 common shares.