Sparx Enters Into Definitive Agreement for Reorganization and Sale Of Operating Assets

(via TheNewswire)

Vancouver, BC, Canada, April 1, 2024 – TheNewswire – Sparx Technology Inc. (TSXV: SPRX) (“Sparx” or the “Company“) announces that, further to its news release dated January 8, 2024, it has entered into definitive share purchase agreement (the “SPA“) dated effective March 26, 2024, with Blok Sports, LLC (“Blok“), a privately-held, third-party corporate entity headquartered in Los Angeles, California. Pursuant to the SPA, Sparx will sell all of the issued and outstanding shares of its U.S. operating subsidiary, iPowow USA Inc. (‘iPowow“), to Blok (the “Sale Transaction“). The Company and Blok are arm’s length parties.

Blok is an early-stage, venture backed technology company founded in 2019 by Mitchell Chun, its current CEO, which has developed a suite of social sports betting, fan engagement, and AI-driven content and analytics solutions. Blok’s core offering is a regulated decentralized sports betting exchange developed using next-generation blockchain technology to ensure an unparalleled level of trust, fairness, and transparency for its users around the globe.

In furtherance of the Sale Transaction and prior to its completion, Sparx’s Canadian operating subsidiary, Sparx Technology Corp. (“Subco“), will transfer all of its operating assets and material contracts to iPowow. In addition, through the Sale Transaction, an aggregate of approximately $1.44 million of consolidated indebtedness of Sparx, will be extinguished. It is anticipated that following completion of the Sale Transaction, Sparx will have no operating assets and approximately $150,000 in remaining liabilities.

It is also anticipated that an aggregate of 26,814,154 currently outstanding common shares of Sparx will be cancelled on closing of the Sale Transaction, pursuant to the terms of a Surplus Escrow Agreement dated March 23, 2022 (the “Escrow Share Cancellation“).

As consideration for the Sale Transaction, Sparx is expected to receive common units of Blok (the “Blok Units“), representing approximately 4.5% of the Blok Units issued and outstanding on a post-transaction basis. In addition, Sparx is entitled to receive approximately 12% of up to an additional 3,200,000 Blok Units which may be issued by Blok, subject to iPowow achieving certain revenue milestones (the “Performance Payment Units“), from defined customers, over a period of 16 months following completion of the Sale Transaction.

Upon completion of the Sale Transaction, Sparx has agreed to deposit approximately 20% of its Blok Units into escrow for a period of one year, to support indemnity obligations concerning certain representations, warrants and covenants set out in the SPA. Certain other significant members of Blok have also deposited Blok Units into escrow under the same terms.

Completion of the Sale Transaction is subject to a number of conditions, including: (i) completion of a US$500,000 financing by Blok; (ii) the receipt by Sparx of an independent fairness opinion in respect of the aggregate consideration (including the debt assumptions) to be received by Sparx in the Sale Transaction; and (iii) all necessary regulatory, creditor and shareholders and member approvals.

Sparx CEO, Alan Thorgeirson commented, “We are excited about the opportunity to build the Sparx business under the Blok umbrella and believe this reorganization transaction will allow our stakeholders an opportunity to realize further value through a stake in the combined entity. We believe that the operating efficiencies and synergies to be achieved by the combination of the two companies will provide a stronger platform to attract additional financing and further grow the business. Through this transaction, Sparx, as a public company, will position itself to pursue alternative transactions to enhance shareholder value.”

In connection with the restructuring, the Company intends to complete a share consolidation on the basis of 13 pre-consolidated common shares for one (1) post-consolidated common share (the “Consolidation“), and also intends to complete a non-brokered private placement (the “Subscription Receipts Financing“) to raise $250,000 through the issuance of 5,000,000 subscription receipts at a price of $0.05 per subscription receipt (the “Subscription Receipts“).

The proceeds of the Subscription Receipts Financing will be held in escrow, subject to the satisfaction of the following conditions:

1. completion of the Consolidation;

2. completion by Sparx of a name change acceptable to the parties and regulatory authorities;

3. completion of the Sales Transaction;

4. completion of the Escrow Cancellation;

5. completion of the Management Change (as defined below);

6. the Company having less than $150,000 in remaining indebtedness;

7. the transfer by Sparx of ownership of Subco to a third party, for nominal consideration, which shall include an assumption of any excess indebtedness;

8. the Company obtaining shareholder approval to the change of control contemplated in the Subscription Receipts Financing; and

9. the Company obtaining final TSX Venture Exchange (the Exchange“) approval to all matters relating to the Sale Transaction and other restructuring steps discussed herein.

Upon satisfaction of the escrow conditions, each Subscription Receipt will automatically convert into one post Consolidation common share of the Company for no additional consideration. In the event that the escrow conditions are not met, each Subscription Receipt will be cancelled, and the subscription funds will be returned to the subscribers.

The Company will not pay any finders fees in connection with the Sale Transaction or the Subscription Receipts Financing.

Upon closing of the Sale Transaction, Escrow Share Cancellation, Consolidation and the conversion of the Subscription Receipts, it is expected that Sparx will have approximately 8,560,629 post Consolidated common shares issued and outstanding.

It is expected that The Emprise Special Opportunities Fund (2017) Limited Partnership (“LP2017”) will subscribe for 4,000,000 Subscription Receipts, which will result in LP2017 owning 4,071,231 (47.56%) post Consolidation common shares of the Company.

The Company intends to use the proceeds of the Subscription Receipts Financing for general working capital purposes. Closing of the Subscription Receipts Financing remains subject to the approval of the Exchange.

As part of the closing of the Sale Transaction, the Company intends to apply to the Exchange to have its listing transferred to the NEX Board, a separate trading board of the Exchange which provides a trading forum for companies that have fallen below the Exchange’s ongoing listing standards.

Upon completion of the Sale Transaction, the current board of directors and management team of the Company will resign, and Scott Ackerman (CEO, CFO and Corporate Secretary), Doug McFaul, and Peter Dickie will join as directors and officers of the Company (the “Management Changes“).

The Company also announces that its Annual General and Special Meeting (“AGSM“) will be held in Vancouver, BC on May 17, 2024 at 10:00 am (Vancouver time). In addition to the standard items of business at general meetings, shareholders will be asked to approve resolutions for the Company to proceed with the Sales Transaction, the Consolidation, and the change of control contemplated in connection with the Subscription Receipts Financing.

Full details on the AGSM will be contained in the Management Information Circular prepared for the meeting, which will be mailed to the Company’s shareholders and available for review under the Company’s profile at www.sedarplus.ca.

On behalf of the Board

Al Thorgeirson

CEO and President

For further information, please contact:

Al Thorgeirson

CEO and President

(403) 471-3503

[email protected]

Investor relations

[email protected]

ABOUT SPARX:

Sparx is an interactive media technology company whose principal activities are providing media companies and sports teams with technologies to engage audiences. The patented Sparx platform enables broadcasters, streamers, and video producers to engage viewers for longer, generate new revenue opportunities, and create lean-forward experiences for audiences eager to join the action. Millions of users can connect to the Sparx platform and interact simultaneously on their mobile phone, tablet, or computer anywhere in the world, in real time.

For more information about Sparx, visit the Company’s website at www.sparxtechnology.com

Neither 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.

Forward-Looking Statements

Statements included in this news release, including statements concerning the Company’s plans, intentions, and expectations, which are not historical in nature, are intended to be, and are hereby identified as, “forward?looking statements”. Forward-looking statements include, among other matters, the Sale Transaction. Forward?looking statements may be, but are not always, identified by words including “anticipates”, “believes”, “intends”, “estimates”, “expects” and similar expressions. The Company cautions readers that forward?looking statements, including without limitation those relating to the Company’s proposed completion of the Sale Transaction, and related matters, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward?looking statements. There can be no assurance that any forward-looking statement will prove to be accurate or that management’s assumptions underlying such statements, including assumptions concerning the Company, the Sale Transaction or future developments, circumstances or results will materialize. The forward-looking statements included in this news release are made as of the date of this news release and the Company does not undertake to update or revise any forward-looking information included herein, except in accordance with applicable securities laws.

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COMTEX_450193760/2895/2024-04-01T18:30:39