Venzee Technologies Inc. Enters Into Software Right-of-Use Agreement With Digital Commerce Payments Inc.

Rhea-AI Summary

Venzee Technologies (TSXV: VENZ) has entered into a software right-of-use agreement with Digital Commerce Payments (DCP), an existing consultant, to acquire exclusive usage rights to DCP's e-commerce shelf software for CDN$4,250,000. This will be paid either in cash or common shares upon the transaction's closing. The deal aims to enhance Venzee's product offerings, integrating DCP's software to expand functionality and efficiency. This integration is expected to broaden Venzee's market reach, offering automated retail channel connections and enhanced inventory management. The transaction involves issuing 19,318,182 shares at CDN$0.22 per share, subject to TSXV and shareholder approvals. Post-transaction, DCP and its affiliates are projected to own 41.62% of Venzee shares. Conditions for closing include regulatory and shareholder approvals. The transaction has been deemed fair from a financial standpoint by RwE Growth Partners.

Positive

• Venzee acquires exclusive rights to a strategic software asset, enhancing its e-commerce offerings.
• The DCP Software integration is expected to automate retail channel connections and improve inventory management.
• Potential for increased revenue and profit margins through expanded functionality and market reach.
• Transaction includes multi-lingual capabilities, allowing for international market expansion.
• Fairness Opinion by RwE Growth Partners supports the transaction's financial fairness.

Negative

• Transaction involves issuance of 19,318,182 shares, potentially leading to shareholder dilution.
• DCP and affiliates will gain control of 41.62% of Venzee shares, raising concerns about concentrated ownership.
• Venzee has substantial debt obligations, including CDN$660,000 in promissory notes and unpaid consulting fees.
• Venzee's software had identified weaknesses, underscoring current operational challenges.
• Transaction is subject to approval from TSXV and shareholders, causing potential delays.

Vancouver, British Columbia--(Newsfile Corp. - May 17, 2024) - Venzee Technologies Inc. (TSXV: VENZ) ("Venzee"), is pleased to announce that it has entered into a software right-of-use agreement (the "Agreement") with Digital Commerce Payments Inc. ("DCP"), an existing consultant of Venzee, dated May 16, 2024.

Subject to the terms and conditions of the Agreement, Venzee will acquire the exclusive right to use certain e-commerce shelf capability software (the "DCP Software") developed by DCP for consideration of CDN$4,250,000 (the "Purchase Price"), payable in cash or common shares ("Shares") in the capital of Venzee (the "Consideration") on the closing date (the "Transaction").

Venzee and DCP management are excited to announce the entering into of the Agreement under which Venzee will acquire the DCP Software, as this strategic partnership is expected to materially expand Venzee's current product and service offerings for new and existing customers in order to increase revenue and profit margins. The DCP Software will enhance the scope and management functionality, and broaden the capabilities of Venzee's existing e-commerce software (the "Venzee Software"), while expanding the total addressable market, as the Venzee Software serves only as a data connector, whereas the DCP Software acts a data connector and inventory management solution. More specifically, the DCP Software, once integrated into Venzee's existing business, is expected to automate the connection of multiple retail channels within a customer organization's ERP system. The DCP Software can be used in multiple geographic locations and has multi-lingual capabilities. The DCP Software also includes features enabling digital shelf capability, including AI-enabled product description recommendations, and such features can return order information from e-commerce platforms to enable customers to achieve a more dynamic experience in understanding the best markets to sell products. This is functionality not currently available under the existing Venzee Software.

It is currently expected that the Purchase Price will be satisfied in Shares at a deemed issue price of CDN$0.22 per Share pursuant to the policies of the TSX Venture Exchange (the "TSXV"), resulting in the issuance of an aggregate consideration of 19,318,182 Shares (the "Consideration Shares"). Closing of the Transaction is subject to certain conditions, including receipt of the approval of the TSXV and certain shareholder approvals as more specifically set out below.

Pateno Payments Inc., an affiliate and joint actor of DCP, currently holds CDN$290,000 aggregate principal amount of convertible debentures ("Convertible Debentures") of Venzee that are convertible into an aggregate of 409,955 units ("Debenture Units") of Venzee comprised of one Share (each, a "Debenture Share") and one Share purchase warrant (each, a "Debenture Warrant"), with each Debenture Warrant exercisable into a Share for a period of five years from the date of issuance of the Convertible Debentures at a price of $0.80 per Share. As a result of the issuance of Consideration Shares, assuming the conversion of the Convertible Debentures and exercise of the Debenture Warrants and taking account of the current ownership of Shares held by Mr. Jeffrey J. Smith ("Mr. Smith" and, together with Pateno Payments Inc., the "Joint Actors"), a principal and joint actor of DCP and a director of Venzee, DCP and its Joint Actors are expected to hold approximately 41.62% of the issued and outstanding Shares on a partially diluted basis following the completion of the Transaction.

Additional details relating to the Transaction and anticipated value of the DCP Software will be set out in the management information circular of Venzee (the "Circular") to be mailed to Venzee shareholders in connection with the contemplated annual and special meeting (the "Meeting") of shareholders, at which shareholders will be asked to consider and, if thought advisable, approve the Transaction.

Background to the Transaction

On March 23, 2023, Venzee entered into a consulting services agreement with DCP (the "Consulting Agreement") pursuant to which DCP was engaged to provide consulting and advisory services to Venzee and currently owes DCP an aggregate of CDN$210,000 of unpaid consulting fees (the "Unpaid Consulting Fees") under such agreement. Since the entering into of the Consulting Agreement, DCP has also advanced CDN$450,000 Venzee by way of the Notes (as defined below) in order to fund Venzee's ongoing operations. During the provision of consulting and advisory services by DCP under the Consulting Agreement, Venzee and DCP identified certain weaknesses concerning Venzee's business and concerns with respect to the functionality of the existing Venzee Software. In order to address and rectify these deficiencies, DCP staff and contractors developed the DCP Software, which has attained levels of functionality in testing that the Venzee Software has been unable to achieve to date, as described above.

The independent members of Venzee's board of directors (the "Board") engaged RwE Growth Partners Inc. ("RwE") to prepare and deliver to the Board and the special committee of the Board an opinion as to the fairness, from a financial point of view, of the Transaction and the Consideration (the "Fairness Opinion"). The Fairness Opinion was based on a variety of factors, including Venzee's debt obligations, Venzee's existing operations, and its view as to the value of the Agreement with the intended commercialization integration into Venzee's intellectual property. As part of the fairness Opinion, RwE calculated the fair value of the Agreement at USD$3,280,000. The Fairness Opinion provides that, as of the date of the Transaction, and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Transaction and the Consideration are fair, from a financial point of view, to the Venzee shareholders.

Interest of Non-Arm's Length Parties

Share Ownership

Mr. Smith, the Chief Executive Officer and chairman of the board of directors of DCP and current director of Venzee who resides in the Province of Alberta, currently owns 1,115,954 Shares, representing 3.61% of the issued and outstanding Shares.

Convertible Debentures

Pateno currently exercises control or direction over CDN$290,000 principal amount in Convertible Debentures bearing interest at a rate of 5% per annum, which are convertible into 409,955 Debenture Units.

Indebtedness

Venzee is currently indebted to DCP under three promissory notes (collectively, the "Notes") in the aggregate principal amount of CDN$660,000. The details of the Notes are as follows: (i) in September 2023, Venzee issued DCP a CDN$100,000 principal amount promissory note bearing interest at a rate of 8% per annum and payable three years from the date of issuance in exchange for short-term financing for such amount from DCP for working capital purposes; (ii) in November 2023, Venzee issued DCP a CDN$150,000 principal amount promissory note bearing interest at a rate of 8% per annum and payable three years from the date of issuance in exchange for additional short-term financing for such amount from DCP for working capital purposes; and (iii) in February 2024, Venzee issued DCP a partially secured grid promissory note bearing interest at a rate of 12% per annum and payable three years from the date of issuance representing the Unpaid Consulting Fees (which have accrued to CDN$210,000 as of the date hereof) and two additional $100,000 advances for short-term financing from DCP to Venzee for working capital purposes made in January and April 2024. As of the date hereof, the aggregate principal amount of the grid promissory note is $410,000.

Total Beneficial Ownership

As of the date hereof, DCP and the Joint Actors collectively own, or exercise control or direction over, 1,115,954 Shares on a non-diluted basis, representing approximately 3.61% of the issued and outstanding Shares, or 1,935,943 Shares on a partially-diluted basis, representing approximately 6.10% of the total issued and outstanding Shares, assuming full conversion of the Convertible Debentures held by Pateno and exercise of the Debenture Warrants issuable upon conversion of the Convertible Debentures.

As a result of the completion of the Transaction, it is expected that DCP and its Joint Actors will hold approximately 41.62% of the issued and outstanding Shares on a partially diluted basis, assuming the conversion of the Convertible Debentures held by Pateno and exercise of the Debenture Warrants issuable upon conversion of the Convertible Debentures.

Directors, Officers, and Insiders Following the Completion of the Transaction

The Transaction will result in DCP becoming a control person and insider of Venzee. Mr. Smith will remain a director following the completion of the Transaction. No new officers or directors of Venzee will be appointed in connection with the Transaction.

Conditions to Transaction and Recommendation of the Board and Independent Directors

The Transaction is subject to various conditions, including, but not limited to, the receipt of all requisite shareholder and regulatory approvals relating to the Transaction, including, without limitation, TSXV approval.

RwE acted as financial advisor to the Board and prepared the Fairness Opinion. The Fairness Opinion provided that, as of the date of such opinion, based upon and subject to the assumptions, limitations and qualifications set out therein, the Consideration payable by Venzee for under the Agreement is fair, from a financial point of view. The members of the Board, after consultation with management and their legal and financial advisors, including RwE, and following receipt of a unanimous recommendation of the independent members of the Board, for reasons to be more fully described in the management information circular to be mailed to shareholders in connection with the Transaction and filed on www.sedarplus.ca, have unanimously approved the Transaction and determined that the Transaction is in the best interests of Venzee and recommend that Venzee shareholders vote in favour of the Transaction.

The Transaction will be considered a "related-party transaction" within the meaning of TSXV Policy 5.9 - Protection of Minority Security Holders in Special Transactions and Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Transaction will also be considered a "Change of Control" within the meaning of TSXV Policy 1.1 - Interpretation. Accordingly, Venzee shall seek disinterested shareholder approval for the Transaction pursuant to TSXV Policy 5.3 and shall seek minority shareholder approval for the Transaction pursuant to Section 5.6 - Acquisitions and Dispositions of Non-Cash Assets ("Policy 5.3") of MI 61-101 and TSXV Policy 5.9 - Protection of Minority Security Holders in Special Transactions, which approvals shall each exclude the voting of any Shares held by DCP and its Joint Actors. Venzee shall rely on the exemption in Section 5.5(b) of MI 61-101 with respect to not obtaining a formal valuation for the DCP Software.

As a result of the Transaction constituting a "Change of Control" and "Fundamental Acquisition" under Policy 5.3, the Shares will be temporarily halted from trading in accordance with the Policies of the TSXV.

Additional information relating to the Transaction and the conditions to closing shall be set out in the Circular.

About Venzee

Venzee unlocks shareholder value by carrying out its mission to create intelligent technology that removes friction from the global supply chain. Its Mesh Connector™ product disrupts and displaces inefficient manual processes in favor of integrated, machine-driven solutions. To learn more about the Venzee platform, visit https://venzee.com.

About DCP

In a world where innovation and disruption are key to success, DCP is leading the charge with cutting-edge digital payment solutions. From seamless integrations to fully customizable options, DCP helps its customers put fast, reliable solutions at the heart of their businesses. DCP was incorporated under the laws of the Province of Alberta and is not a "reporting issuer" under applicable securities legislation in any jurisdiction and its securities are not listed for trading on any stock exchange. To learn more about DCP, visit https://dc-payments.ca/.

Further Information

All information contained in this news release with respect to Venzee and DCP was supplied by the parties respectively, for inclusion herein, without independent review by the other party, and each party and its directors and officers have relied on the other party for any information concerning the other party.

For further information regarding the Transaction, please contact:

Peter Montross
Chief Executive Officer
Venzee Technologies, Inc.
peter.montross@venzee.com
503-320-8046

Jeffrey J. Smith
Chief Executive Officer
Digital Commerce Payments Inc.
jeff@dcbank.ca

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable, disinterested shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Venzee should be considered highly speculative.

The TSXV has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release. Neither the TSXV nor its Regulation Service Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Information

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information in this press release includes, but is not limited to statements with respect to: (i) the number of Shares to be held by DCP on a partially-diluted basis following the completion of the Transaction; (ii) statements relating to the anticipated benefits and performance of the DCP Software once integrated in Venzee's business; and (iii) the TSXV and shareholders' approval of the Transaction.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Venzee to be materially different from those expressed or implied by such forward-looking information, including but not limited to: (i) Venzee's ability to successfully integrate the DCP Software into the existing Venzee Software and its existing operations, overall, which may impact Venzee's ability to achieve its expected financial projections and targets ("Financial Projections"); (ii) Venzee's ability to fund the ongoing costs associated with the integration of the DCP Software in its existing operations, which may negatively impact Venzee's ability to achieve the Financial Projections; (iii) global financial conditions, and the related impact of geopolitical and social uncertainties, and fluctuating conditions in respect of the market for e-commerce software solutions, which may impact Venzee's ability to achieve the Financial Projections; (iv) the number of Convertible Debentures that may be converted into Debenture Units in connection with the Transaction, which may impact the number of Shares held by DCP following the completion of the Transaction on a partially-diluted basis; and (v) Venzee's ability to obtain the necessary approvals from the TSXV for the Transaction.

Certain assumptions were made in preparing the forward-looking information concerning: (i) the performance of the DCP Software at the desired efficiency once integrated with the Venzee Software, and its ability to address existing performance deficiencies in the Venzee Software; (ii) the sufficiency of capital resources available for the integration of the DCP Software and Venzee's operations overall; (iii) ongoing consumer demand for e-commerce software solutions; and (iv) Venzee's ability to maintain its status as a going concern. Additional information about assumptions and risks and uncertainties is contained under "Risk Factors and Uncertainties" in Venzee's management's discussion and analysis for the financial year ended March 31, 2022 and for the three and nine months ended December 31, 2023, which are available under Venzee's SEDAR+ profile at www.sedarplus.ca, and in other filings that Venzee has made and may make with applicable securities authorities in the future.

Although Venzee has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information contained in this news release is expressly qualified in its entirety by this cautionary statement. Venzee does not undertake to update any forward-looking information, except as required by applicable securities laws.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/209720

FAQ

What is the Venzee (VENZF) software right-of-use agreement with Digital Commerce Payments?

Venzee has entered an agreement to acquire the exclusive right to use DCP's e-commerce shelf software for CDN$4,250,000, enhancing its product offerings and market reach.

How much will Venzee (VENZF) pay for the DCP software?

Venzee will pay CDN$4,250,000 for the DCP Software, either in cash or common shares.

What are the benefits of Venzee (VENZF) acquiring DCP software?

The acquisition is expected to enhance Venzee's e-commerce offerings, automate retail channel connections, and improve inventory management, potentially increasing revenue and profit margins.

What is the shareholder impact of the Venzee (VENZF) and DCP transaction?

The transaction will involve issuing 19,318,182 shares, leading to potential shareholder dilution and DCP holding about 41.62% of Venzee shares.

What approvals are required for the Venzee (VENZF) and DCP transaction?

The transaction requires TSXV and shareholder approvals, including disinterested and minority shareholder approvals due to its related-party nature.