Spectra7 Microsystems and Parade Technologies, Ltd. enter into Definitive Agreement for Sale of Substantially All of Spectra7's Assets

Rhea-AI Summary

Spectra7 Microsystems has entered into a definitive agreement with Parade Technologies for the sale of substantially all of its assets for US$9 million. The assets include intellectual property, products, designs, and inventory. The transaction will enable Parade to market Spectra7's active cable products and leverage its SiGe-technology for high-speed solutions.

The purchase price includes a US$1.8 million escrow amount and bridge loans totaling US$750,000. Spectra7 plans to distribute approximately US$5.1 million to shareholders in two special distributions: an initial payment of about CDN$0.018 per share and a second distribution of approximately CDN$0.01 per share after the escrow release.

The transaction requires approval from 66 2/3% of Spectra7 shareholders at a meeting scheduled for April 14, 2025. Shareholders holding 57.62% have already agreed to vote in favor. The deal is expected to close in Q2 2025.

Positive

• All-cash transaction valued at US$9M
• 57.62% of shareholders already committed to approve
• Significant employee retention planned
• Bridge financing of US$750K provided for operational continuity

Negative

• Company selling substantially all assets
• 2-year non-compete restriction post-closing
• US$2.5M termination fee if shareholders don't approve
• US$1.8M held in escrow for one year

SAN JOSE, Calif., March 7, 2025 /PRNewswire/ -- Spectra7 Microsystems Inc. (TSXV: SEV) (OTCQB: SPVNF) ("Spectra7"), a leader in high-performance analog semiconductors for powering the AI revolution in broadband connectivity markets, hyperscale data centers, and Spatial Computing, is pleased to announce that it has entered into a definitive agreement (the "Purchase Agreement") effective today with Parade Technologies, Ltd. (TPEx: 4966.TWO) ("Parade"), an arm's length party and a leading supplier of video display, touch controller, and high-speed interface ICs, under which Parade will acquire substantially all of the assets (the "Assets") of Spectra7 and its subsidiaries (the "Sale Transaction"). The Assets include intellectual property (IP), products, designs, inventory, and other specified items.

The Sale Transaction will enable Parade to both continue marketing Spectra7's existing advanced active cable product portfolio and to leverage Spectra7's technology in new high speed solutions. Parade anticipates that Spectra7's cutting-edge SiGe-technology, achieving data speeds of 112 Gbps and higher, will provide valuable support for Parade's efforts to expand into high-growth markets such as data centers, AI-powered computing, and next-generation consumer electronics. In addition, as part of the acquisition, it is currently anticipated that a significant number of Spectra7's employees will join Parade, ensuring continuity of technical expertise and customer support.

"We are thrilled by this outcome and excited to close this transaction. Spectra7's pioneering work and best-in-class Active Copper Cable products have a great partner in Parade, a powerhouse in the industry. Our customers, partners and industry will benefit tremendously." – Omar Javaid, CEO of Spectra7.

Purchase Price

The purchase price (the "Purchase Price") for the Assets is US$9,000,000 (approximately CDN$12,933,000¹) in cash. On closing (the "Closing") of the Sale Transaction, Parade shall make a cash payment to Spectra7 equal to the Purchase Price, less: (i) the Bridge Loans (as defined below), and (ii) US$1,800,000 (approximately CDN$2,586,600) (the "Escrow Amount"). The Escrow Amount shall be deposited into escrow with a third-party escrow agent to cover certain potential indemnity claims by Parade until the date that is one year after the closing of the Sale Transaction (the "Escrow Release Date"). There can be no certainty as to the quantum of the Escrow Amount to be released.

It is the intention of Spectra7 to distribute all of the net proceeds received from the Sale Transaction to its shareholders (the "Spectra7 Shareholders") in two special distributions (each, a "Special Distribution"). The first Special Distribution shall be equal to the proceeds received by Spectra7 at the Closing (as defined below) less: (i) transaction costs including legal fees, costs of the special meeting of Spectra7 Shareholders to be held to approve the Sale Transaction (the "Meeting"), escrow agent fees and fees payable to the TSX Venture Exchange (the "TSXV"), and applicable broker fees; (ii) accounts payable and any employee severance and bonus costs; (iii) funds used for Spectra7's ordinary course expenses prior to Closing; and (iv) funds used by Spectra7 to continue to exist as a public company until on or after the Escrow Release Date. The first Special Distribution is estimated to be approximately US$3,300,000 (approximately CDN$4,742,100), or approximately CDN$0.018 per share based on the share information below, and is expected to be made within seven days after Closing. Assuming no further Bridge Loans above US$750,000 are required and the Escrow Amount is released in full, the Second Distribution is estimated to be US$1,800,000 (approximately CDN$2,586,600) or approximately CDN$0.01 per share, and is expected to be made at the applicable time that funds are released from the Escrow Amount.

As of the date of this release, the number of common shares of Spectra7 outstanding (assuming the exercise in full of all of the 112,253,574 outstanding pre-funded warrants but excluding the exercise or conversion of any other outstanding securities of Spectra7 previously issued by Spectra7) is 255,008,208 common shares. Based on the above estimates and the common share amounts noted above, the total Special Distributions to the Spectra7 Shareholders is expected to be approximately US$5,100,000 (approximately CDN$7,328,700) or approximately CDN$0.028 per share. Each Special Distribution shall be made to the Spectra7 Shareholders of record as of the closing date of the Sale Transaction.

Bridge Financing

Concurrently with the execution of the Purchase Agreement by the parties, Parade has agreed to advance a loan to Spectra7 in the amount of US$450,000 (approximately CDN$646,650), with an additional loan in the amount of US$300,000 (approximately CDN$431,100) to be advanced on or about March 21, 2025 (collectively, the "Bridge Loans"), in order to assist Spectra7 to maintain its operations and carry on its business until Closing. The Bridge Loans (i) bear interest at the prevailing prime rate; (ii) are secured against certain assets of Spectra7 and its subsidiaries; and (iii) will be credited (including interest) at Closing against the Purchase Price. In the event that the Sale Transaction is not completed or the Purchase Agreement is terminated, the Bridge Loans become immediately payable by Spectra7 to Parade.

Shareholder Approval and Recommendation of the Board of Spectra7

The closing of the Sale Transaction is subject to various conditions, including the approval of the TSXV and approval of at least 66 2/3% of the votes cast by Spectra7 Shareholders at the Meeting pursuant to the Business Corporations Act (Ontario). The members of the Board, after consultation with management and legal and financial advisors, have approved the Sale Transaction and determined that the Sale Transaction is in the best interests of Spectra7 and recommend that Spectra7 Shareholders vote in favour of the Sale Transaction at the Meeting.

Spectra7 has entered into voting and support agreements with Spectra7 Shareholders holding an aggregate of 82,256,012 common shares representing approximately 57.62% of the issued and outstanding common shares of Spectra7, who have, among other things, agreed to vote their common shares of Spectra7 in favour of the Sale Transaction.

Additional details relating to the Sale Transaction, anticipated value and timing of the Special Distributions and the quantum of applicable transaction expenses will be set out in the management information circular of Spectra7 (the "Circular") to be mailed to Spectra7 Shareholders in connection with the Meeting.

The Meeting has been set for April 14, 2025. The Sale Transaction is expected to close in the second quarter of 2025.

The Purchase Agreement

Under the terms of the Purchase Agreement, Parade has agreed to acquire all of the Assets. The closing of the Sale Transaction is subject to a number of customary conditions, including with respect to the truth and accuracy of the parties' representations and warranties and compliance with their respective covenants. A termination fee of US$2,500,000 (approximately CDN$3,592,500) is payable by Spectra7 to Parade should the Sale Transaction not close in the event that Spectra7 fails to receive Spectra7 Shareholder approval for the Sale Transaction. Following Closing, Spectra7 has agreed not to engage in the business of development, design and sale of semiconductor products, including high speed analog devices (the "Business"), and not to solicit any customers or clients of the Business, or employees that were involved in the Business, for a period of two years following the Closing. The Purchase Agreement may be terminated by either Spectra7 or Parade if the Closing does not occur on or before June 30, 2025 (the "Outside Date"); provided the terminating party is not then in breach of its covenants, representations or warranties and such breach is the principal cause that the Closing has not occurred by the Outside Date.

Spectra7 has agreed to indemnify Parade for certain specified matters, including breaches of its representations, warranties and covenants in the Purchase Agreement, and certain other matters, subject to certain customary limitations. In the event an indemnification claim is made by Parade, they will have recourse to the Escrow Amount.

Craig-Hallum Capital Group LLC and The Benchmark Company LLC acted as  financial advisors to Spectra7 in connection with the Sale Transaction, and are together entitled to a transaction fee equal to US$1,000,000 (approximately CDN$1,437,000) on Closing.

Copies of the Purchase Agreement and the Circular will be filed with Canadian securities regulators and will be available at www.sedarplus.ca. Spectra7 Shareholders are urged to read the Circular and the other relevant materials when they become available, as such materials will contain important information regarding the Sale Transaction.

ABOUT SPECTRA7 MICROSYSTEMS INC.

Spectra7 is a leader in high-performance analog semiconductors for powering the AI revolution in broadband connectivity markets, hyperscale data centers, and Spatial Computing. Spectra7 is based in San Jose, California with a design center in Cork, Ireland and a technical support location in Dongguan, China ( https://www.spectra7.com/).

ABOUT PARADE TECHNOLOGIES, LTD.

Parade Technologies, Ltd. is a leading supplier of mixed-signal ICs for a variety of popular display and high-speed interface standards used in computers, consumer electronics and display panels. The fabless semiconductor company was founded in 2005 and publicly listed on Taipei Exchange ("TPEx") in 2011 (stock code: 4966). Parade's portfolio of IC products serves the growing demand for HDMI™, DisplayPort™, SATA, and USB ICs for display, storage and interface applications. In addition to being a technology innovator, Parade is an active participant and leader in industry standards-setting organizations.

Parade Technologies, Inc., a wholly owned US-based subsidiary of Parade Technologies, Ltd., is a member of VESA (Video Electronics Standard Association). Parade Technologies, Inc. has made key contributions to the development of VESA's DisplayPort™ digital video interface standard.

Parade leverages its close relationships with market leading Tier-1 OEMs to develop ICs that provide unique system capabilities. Many of the company's devices integrate proprietary technologies that offer superior system signal integrity, advanced system integration and enhanced power efficiency. As a result of the company's "standards-plus" design philosophy, Parade ICs have been designed into products offered by nearly every leading computer and display vendor worldwide. ( https://www.paradetech.com/ )

For further information please contact:

Darrow Associates
Matt Kreps
214-597-8200
ir@spectra7.com

Spectra7 Microsystems Inc.
Omar Javaid
Chief Executive Officer
ir@spectra7.com

Forward-Looking Statements

Statements in this press release contain forward-looking information. Such forward-looking information may be identified by words such as "anticipates", "plans", "proposes", "estimates", "intends", "expects", "believes", "may" and "will". The forward-looking statements included in this press release, including statements regarding the Sale Transaction, the receipt of necessary Spectra7 Shareholder and TSXV approvals and satisfaction of other closing conditions, the anticipated timing of the meeting of Spectra7 Shareholders to approve the Sale Transaction and timing of Closing, the release of the Escrow Amount and the ultimate quantum and timing of the distributions payable to Spectra7 Shareholders upon Closing and release of the Escrow Amount.

In respect of the forward-looking statements and information included in this press release, Spectra7 has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the timing of the Spectra7 Shareholder meeting, the ability of the parties to the Purchase Agreement to receive, in a timely manner and on satisfactory terms, necessary approvals to complete the Sale Transaction, the ability of such parties to satisfy, in a timely manner, the other conditions to the closing of the Sale Transaction, and assumptions related to the historical burn rate of Spectra7 and expenses becoming due prior to Closing. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond Spectra7's control. Such risks and uncertainties include but are not limited to: the risk that the Sale Transaction may not be completed on a timely basis, or at all; risks that the conditions to the consummation of the Sale Transaction may not be satisfied; the risk that the Sale Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to the completion of the Sale Transaction, Spectra7's business may experience significant disruptions, including loss of customers or employees, due to transaction-related uncertainty or other factors; the possible occurrence of an event, change or other circumstance that could result in termination of the Sale Transaction; risks that the Sale Transaction may have a negative impact on the market price and liquidity of the common shares of Spectra7; risks related to the diversion of management's attention from the Trust's ongoing business operations; risks relating to the failure to obtain necessary Spectra7 Shareholder and TSXV approvals; risks related to trade tariffs and retaliatory trade measures, specifically between the United States and Canada; foreign exchange risk; the risk that Spectra7's burn rate until Closing is much higher than anticipated, or that there are unanticipated expenses that become due during such time; and other risks inherent to completing a cross-border transaction of this nature. Further, failure to obtain the requisite approvals or the failure of the parties to otherwise satisfy the conditions to or complete the Sale Transaction, may result in the Sale Transaction not being completed on the proposed terms, or at all. In addition, if the Sale Transaction is not completed, and Spectra7's business continues in its current form, the announcement of the Sale Transaction and the dedication of substantial resources to the completion of the Sale Transaction could have a material adverse impact on Spectra7's share price, its current business relationships (including with future and prospective employees, customers and partners) and on the current and future operations, financial condition and prospects of Spectra7.

When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Readers are cautioned that the foregoing list of factors is not exhaustive. Details of additional risk factors relating to Spectra7 and its business, generally, are discussed under the heading "Business Risks and Uncertainties" in the Spectra7's Management's Discussion & Analysis for the year ended December 31, 2023, a copy of which is available on Spectra7's SEDAR+ profile at www.sedarplus.ca. These statements speak only as of the date of this press release. Except as otherwise required by applicable securities statutes or regulation, Spectra7 expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.

Neither the TSXV nor its regulation services provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

63663053.9

¹ The US$/CDN$ exchange rate used throughout this press release is CDN$1.437 to US$1.00 based upon the Bank of Canada exchange rate as at March 5, 2025.

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SOURCE Spectra7 Microsystems Inc.

FAQ

What is the total value of Spectra7's (SPVNF) asset sale to Parade Technologies?

The total purchase price is US$9 million (approximately CDN$12.93 million) in cash.

How much will Spectra7 (SPVNF) shareholders receive per share from the asset sale?

Shareholders are expected to receive total distributions of approximately CDN$0.028 per share, split between CDN$0.018 initially and CDN$0.01 after the escrow period.

When is the shareholder vote for Spectra7's (SPVNF) asset sale scheduled?

The shareholder meeting is scheduled for April 14, 2025, requiring 66 2/3% approval.

What happens if Spectra7 (SPVNF) shareholders don't approve the asset sale?

Spectra7 must pay a US$2.5 million termination fee to Parade if shareholders don't approve the transaction.