March 19, 1997 - ZTEST Electronics Inc. Announces Private Placement
MISSISSAUGA, ONTARIO--ZTEST Electronics Inc. (the "Company") wishes to announce that it has agreed to make a private placement investment into UNIQRYPT Technologies Inc. ("UNIQRYPT") in the amount of $616,000 in consideration for the issuance by UNIQRYPT to the Company of 700,000 units of UNIQRYPT, with each unit being comprised of one (1) common share priced at $0.88 per share and one (1) warrant to purchase a further common share at $0.95 for eighteen (18) months. The purchase price per share of this private placement agreed to between the Company and UNIQRYPT is consistent with recent arm's-length financings completed by UNIQRYPT. Mr. Wojciech (Ted) Drzazga, President and a Director of the Company, is also a director of UNIQRYPT and controls directly and indirectly 10 percent or more of the outstanding voting shares of each of the Company and UNIQRYPT making the proposed transaction a related party transaction. However, the value of the transaction, set at $616,000, represents less than 25 percent of the current market capitalization of the Company and is therefore exempted from the valuation and the majority of minority shareholder approval requirements of Ontario Securities Commission Policy 9.1 dealing with related party transactions.
UNIQRYPT has also granted the Company an option to acquire up to a further 1,500,000 units of UNIQRYPT priced at $0.95 per unit in tranches of at least $200,000 commencing July 15, 1997 for a period of six (6) months ending December 15, 1997. Each unit will be comprised of one (1) common share priced at $0.95 and one (1) warrant to purchase a further common share at $1.00 for eighteen (18) months from the purchase date of the units acquired by the Company. This is an option only and if the Company elects not to exercise its option in respect of the purchase of any units by the date specified, the option available as at that date will expire and the Company will have the right to make further investments subsequent thereto up to and including December 15, 1997.
The $616,000 investment had previously been loaned to UNIQRYPT by the Company as part of the strategic alliance between the two companies whereby the Company has been providing the design services and initial prototype manufacturing for UNIQRYPT's new Fax Security line of products. As well, the Company has the exclusive manufacturing contract to produce this product for UNIQRYPT. The Company has elected to further strengthen this strategic alliance by making this direct investment into UNIQRYPT. This $616,000 investment will provide the Company with an initial 6.5 percent equity interest in UNIQRYPT, and if the Company elects to exercise all future options and warrants granted to it by UNIQRYPT, this equity ownership could increase to approximately 27.6 percent of the issued and outstanding shares of UNIQRYPT on a fully diluted basis.
The Company is currently finishing the design work for the basic model of the Fax Security System specified by UNIQRYPT, which is now in the beta testing stage. UNIQRYPT is moving ahead with the product launch of this product, as well as increasing their current marketing and sales effort to sell licenses throughout North America for their stream cipher encryption methodology. UNIQRYPT, by way of this private placement, options and warrants, has granted to the Company the right to provide some or all of the investment capital necessary for these increased sales and marketing efforts.