Wellteq Digital Health Inc. (CSE:WTEQ, OTCQB:WTEQF) said it has entered into a definitive agreement with Advanced Human Imaging Ltd (AHI), whereby AHI will acquire all of the outstanding shares of Wellteq under a plan of arrangement.
Under the arrangement, Wellteq said its shareholders will receive one ordinary share of AHI for every six Wellteq shares, or 0.1667 AHI shares for every 1 Wellteq share.
In connection with the agreement, AHI has also agreed to advance up to A$1,200,000 to Wellteq. The loan, in tranches not exceeding A$200,000, will be due and payable six months after the date of the first advance, and in any event, no later than January 31, 2023, and will bear an interest rate of 10% per annum.
Australia-incorporated AHI has developed and patented a proprietary dimensioning technology that enables users to privately and accurately check, track, and assess their dimensions and body composition using only a smartphone. The company has expanded its capabilities with the inclusion of Transdermal Optical Imaging (TOI), allowing the capture of vital signs.
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The combination of AHI's proprietary suite delivers a unique risk assessment tool empowering users to check, track and action better health outcomes. AHI has developed this capability by leveraging on the computational power of a smartphone to power its Computer Vision, Machine Learning, and patented algorithms, to process images on secure, enterprise-level infrastructure, delivering an end-to-end experience that is unrivalled in the industry. The AHI technology simplifies the collection of vital measurements and removes potential human error in traditional methods.
Arrangement terms
Wellteq said it plans to seek its shareholders’ approval for the arrangement at a meeting to be held in November 2022. Closing of the transaction is expected shortly after, subject to the satisfaction of all conditions set out in the agreement including:
- The transaction being approved by a special resolution passed by 66 2/3% of the votes cast by Wellteq shareholders represented at the meeting;
- If required under applicable laws, approval by a majority of the minority shareholders of Wellteq;
- The arrangement being approved by the British Columbia Supreme Court;
- Applicable regulatory approvals, including those of the Australian Stock Exchange, NASDAQ and the Canadian Stock Exchange (CSE); and
- Other closing conditions customary in transactions of a similar nature.
The agreement also contains certain customary deal protection provisions, including a non-solicitation provision in favour of AHI, subject to customary "fiduciary out" provisions that allow Wellteq to consider and accept a superior proposal, subject to AHI’s right to match, as well as a break fee of between A$350,000 and A$500,000 payable by Wellteq to AHI under certain circumstances, and a break fee of A$350,000 payable by AHI to Wellteq in certain limited circumstances.
Upon closing of the transaction, Wellteq will seek to delist its shares from the CSE and cease to be a reporting issuer in all jurisdictions in Canada.
Appointments and recommendations
Upon conclusion of the transaction, Wellteq will propose the nomination of its CEO and director Scott Montgomery and chair of the Wellteq board Peter Vaughan to the board of directors of AHI. Montgomery is also currently the proposed CEO of AHI.
Wellteq said its board of directors has unanimously approved and resolved to recommend that its shareholders vote in favour of the transaction following consultation with its legal and financial advisors.
As well, the directors and senior officers of Wellteq have entered into agreements to vote in favour of the plan.
Options, warrants and RSUs
Wellteq said as part of the arrangement, outstanding options issued under its Stock Option Plan will be cancelled at the effective time of the arrangement, while its outstanding warrants and agent compensation options will remain outstanding, and will be exercisable for the corresponding amount of AHI shares (i.e. one AHI share for every six Wellteq shares).
Meanwhile, Wellteq's restricted stock units (RSUs) are expected to automatically vest immediately prior to the arrangement becoming effective, resulting in 880,000 Wellteq shares being issued to holders of the RSUs. These Wellteq shares will then be acquired by AHI, and the holders will receive the corresponding amount of AHI shares in consideration for their Wellteq shares (i.e. one AHI share for every six Wellteq shares).
Wellteq is a global digital health provider empowering people to be healthier and happier by coaching lasting behaviour change through a digital health platform to employers and insurance corporate customers, who in turn offer it to their employees and policyholders, respectively.
Contact the author at jon.hopkins@proactiveinvestors.com