Nanotechnology

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>>> Nanotech Agrees to be Acquired by Meta Materials Inc. and Announces Third Quarter Fiscal 2021 Results


Yahoo Finance

Nanotech Security Corp.

August 5, 2021


https://finance.yahoo.com/news/nanotech-agrees-acquired-meta-materials-131200530.html


All Cash Transaction Values the Company at approximately $90.8 million


VANCOUVER, British Columbia, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Nanotech Security Corp. (TSXV: NTS) (OTCQX: NTSFF) (“Nanotech” or the “Company”), a leader in the development of secure and visually memorable nano-optic security features used in the government and banknote and brand protection markets, announces it has entered into a definitive arrangement agreement (the “Arrangement Agreement”) with Meta Materials Inc. (“META®”)(NASDAQ: MMAT), a developer of high-performance functional materials and nanocomposites, pursuant to which META will indirectly acquire Nanotech for $1.25 per common share in an all-cash transaction (the “Transaction”) valued at approximately $90.8 million on a fully diluted basis. META and Nanotech will host a webcast at 10:00 am EDT today to review the Transaction (details below). The Company also announces its financial results for the three and nine months ended June 30, 2021. Unless otherwise stated, all dollar amounts are expressed in Canadian dollars.

Overview of Transaction with META

Key Transaction Highlights

Nanotech shareholders to receive $1.25 per share in cash, representing an aggregate transaction value of approximately $90.8 million

The purchase price represents a 101% premium to the 30-day volume weighted price of $0.62 per Nanotech common share

Both a special committee comprised of independent directors of Nanotech (the “Special Committee”) and the full board of directors (the “Board”) unanimously recommend that Nanotech securityholders vote in favour of the Transaction

The Board has obtained a favourable fairness opinion from Echelon Capital Markets

The Transaction is subject to customary closing conditions, including approval by a special majority of Nanotech securityholders

D. Neil McDonnell, Chair of the Company’s Board and Special Committee, commented, “We are pleased to announce this Transaction with META, which offers our securityholders an attractive valuation and significant premium to the recent trading price of the Company’s shares. The Transaction is also expected to provide Nanotech with greater access to capital to accelerate its commercialization and growth strategies. After careful consideration, the Special Committee and the Company’s Board have both unanimously concluded that the Transaction is fair to Nanotech’s securityholders and is in the best interests of the Company and its employees.”

Transaction Details

The total cash consideration of $1.25 per share (the “Consideration”) represents a premium of 67% to the closing price of $0.75 for Nanotech’s shares on the TSX Venture Exchange on August 4, 2021 and a premium of 101% to the volume weighted average price of the 30 trading days ended August 4, 2021. The Transaction is to be carried out by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia), pursuant to which META will acquire all the outstanding common shares of Nanotech. The implementation of the Arrangement will be subject to, among other things, the approval of at least 66 2/3% of the votes cast by Nanotech securityholders present in person or represented by proxy at the special meeting of Nanotech securityholders, and the receipt of applicable orders from the Supreme Court of British Columbia. A management information circular relating to the special meeting of Nanotech securityholders and containing further details regarding the Arrangement will be mailed to Nanotech securityholders and made available on SEDAR under Nanotech’s profile at www.sedar.com. Until the circular is sent, shareholders are not required to take any action in respect of the Transaction.

The Arrangement Agreement provides for, among other things, customary non-solicitation covenants from Nanotech, but includes provisions that allow Nanotech to accept a superior proposal in certain circumstances subject to a five-business day “right to match period” in favour of META. The Arrangement Agreement also provides for the payment of a termination fee of $2.8 million by Nanotech in the event the Transaction is terminated in the event Nanotech proceeds with a superior proposal. The Transaction is not subject to a financing condition.

All directors and executive officers of Nanotech, holding approximately 19% of the issued and outstanding shares of Nanotech as of the date hereof, have entered into voting and support agreements in favour of META pursuant to which, among other things, they have agreed to vote their Nanotech securities in favour of the Transaction.

The Board recommends that securityholders vote in favour of the Transaction. Echelon Capital Markets, financial advisor to Nanotech, has provided a fairness opinion to the Board that, subject to certain qualifications set out in the opinion, the $1.25 to be received by Nanotech securityholders pursuant to the Transaction is fair from a financial point of view to Nanotech’s securityholders.

The foregoing summary is qualified in its entirety by the provisions of the Arrangement Agreement, a copy of which will be available on SEDAR under Nanotech’s profile at www.sedar.com within 10 days following the date of this press release.

The Arrangement is expected to close in early October with the special meeting of securityholders expected to be convened for late September. An announcement about the exact timing of the securityholders’ meeting will follow in the near future.

The Transaction was negotiated at arm’s length and no finder’s fee is or will be payable by Nanotech in connection with the Transaction.

Advisors

Echelon Capital Markets is acting as financial advisor to Nanotech. Borden Ladner Gervais LLP and Dorsey & Whitney LLP are acting as legal counsel to Nanotech.

Cormark Securities Inc. is acting as financial advisor to META and Hamilton Clark Sustainable Capital, Inc. provided a fairness opinion to the board of directors of META. Fasken Martineau DuMoulin LLP and Wilson Sonsini Goodrich & Rosati are acting as legal counsel to META.

Webcast Information

META’s CEO George Palikaras and CFO Ken Rice will host a webcast today at 10:00 am EDT along with Nanotech’s CEO Troy Bullock. To register, click here or copy this link into your browser: https://audience.mysequire.com/webinar-view?webinar_id=97702446-53e7-4f46-8a8b-2a4fd2ca1c04. A replay will be available following the webcast and may be accessed using the link above.

Financial Highlights for the Three and Nine Months Ended June 30, 2021

Revenue was $2.6 million and $6.1 million for the three and nine months ended June 30, 2021 respectively, representing increases of 34% and 27% compared to the same periods last year.

Gross margin of 76% for the three and nine months ended June 30, 2021 was lower than the 83% and 81% for the respective year-ago periods due to additional labour and other expenditures incurred to meet contract services deliverables in the current period.

Positive Adjusted EBITDA of $453,368 and breakeven Adjusted EBITDA for the three and nine months ended June 30, 2021 respectively, representing an improvement of 129% and 100% compared to the same periods last year.

Cash and short-term investments of $8.9 million, and no debt at quarter end.

“Nanotech had a strong third quarter of growth with revenues of $2.6 million and positive Adjusted EBITDA of $453,368. We received the maximum available purchase orders from our confidential central bank customer which, in combination with recurring LumaChrome orders, is expected to drive revenue growth of at least 15% for the year and modest positive Adjusted EBITDA,” said President and CEO Troy Bullock. “We remain confident of Nanotech’s prospects for advancing the development contract, further expansion of our manufacturing capabilities, and the potential opportunities beyond our two primary markets within the metamaterials sphere.”

Strategic Update

The Company remains focused on commercializing its technology for long-term revenue growth, with efforts centered around the following pillars:

Contract services – The Company’s development contract with a confidential G10 central bank remains a key strategic focus with significant resources committed to this project. Developing a visual security feature that can be integrated into this country’s banknotes would be a significant milestone in Nanotech’s growth.

The Company is restricted from providing substantive information about this project, but management is encouraged by both the progress of this development contract and ongoing discussions with the customer. The Company secured all available purchase orders for fiscal 2021 with annual revenues expected to be approximately 27% higher than the prior year. This represents the largest annual scope of work for this customer to date and demonstrates the customer’s continued confidence in Nanotech’s technology. Discussions are also well under way for a second phase, multi-year development contract that management expects to finalize in the fourth quarter of fiscal 2021, along with purchase orders for fiscal 2022.

Product development – Based on the positive market feedback of Nanotech’s latest nano-optic product offerings, management believes there are extensive opportunities to offer these new visual products with exceptional differentiation in both the banknote and brand protection markets. As a result, the Company plans to continue to increase its investment in additional development staff, product trials, and certifications to drive technology advancement and enhanced product development to generate future revenue.

In the second quarter of 2021 the Company launched its LiveOptik™ PROTECT security foil for the brand protection market. This new product continues to be tested by several channel partners for inclusion in their product catalogue. Management plans to have additional product launches before the end of the calendar year for both brand protection and banknote applications.


Strategic partnerships – Nanotech has developed strategic relationships with established OEM manufacturers to enable scalable delivery for our customers. These relationships reduce the Company’s manufacturing risk and extend the market reach of Nanotech’s product offering. Management is also developing the Company’s internal production capability to complement these OEM offerings, which is being optimized for the Company’s proprietary KolourOptik® technology platform. Nanotech is uniquely positioned as a leader in developing and mass-producing complex nanostructures, which could have applications beyond the Company’s initial key markets in brand protection and banknote authentication.


Expanded channels to market – Nanotech will continue to market its products and pursue revenue through both direct sales and strategic channel partners who promote and offer Nanotech’s products to their existing customers. Management expects to expand the Company’s network of channel partners as new products are launched throughout fiscal 2021.

Product revenue decreased to $289,381 for the three months ended June 30, 2021, compared to $450,809 during the same period last year. Nanotech delivered ten customer product orders in the quarter, compared to three in the same period last year. On a year-to-date basis, product revenue of $486,783 from nineteen orders was lower than product revenue of $817,206 from fifteen orders in the same period of 2020. These variances were partially due to the timing of certain recurring orders, which can vary from year to year.