Serpentine Technologies Signed a non-binding term sheet to Acquire Australia Based Precision Fabrication Business

Serpentine Technologies Limited (ASX:S3R) is an information technology company that is focused on identifying asset and business acquisitions, adding value for its shareholders. On 14 March 2019, Serpentine Technologies signed a non-binding term sheet to acquire 100% of Keyhole TIG Limited (K-TIG), which is an Australia based precision fabrication business.

K-TIG is a transformative industry disrupting welding technology, that tries to find to change the economics of fabrication. K-TIG’s technology is a high-speed technology and has properties to weld at 100 times faster than any traditional TIG welding. It can achieve full penetration in a single pass in materials up to 16mm in thickness and operates at double speed than the speed of plasma welding.

K-TIG functions throughout a wide range of applications, and it suits well to corrosion resistant materials which includes stainless steel, nickel alloys, titanium alloys and most exotic materials.

K-TIG was originally developed by the CSIRO and it had owned all rights, title and interest in and to the proprietary and patented technology. In 2014, it won an award of the Australian Industrial product of the year, as well as the DTC Defence Industry Member Award in 2015. Further, in 20 countries, covering multiple application and industries, K-TIG has concluded its pilot phase of commercialization deploying and commissioning its technology. With its thoroughly proven technology, along with the exhaustive deployment, commissioning, production experience along with its expertise during this time period, K-TIG has intention to pursue sales, licensing and JV revenue model as a part of its phase 2 of its commercialization strategy.

In this regard, K-TIG proposed to raise funds to be worth $1.06 million through a convertible note. Also, Serpentine will be providing K-TIG with a capital worth $5 million to support in the continued growth and market penetration of the K-TIG technology.

The company’s non-binding term sheet with K-TIG, and its major shareholders to acquire 100% of the issued capital of K-TIG depends on following terms and conditions:

• On a pre-consolidation basis, 4,571,428,571 ordinary shares of S3R issued at a deemed price of $0.0035 cents per share.
• It is proposed that other than the Consideration Shares, on a pre-consolidation basis, S3R will issue 1,714,285,714 deferred consideration shares which depends on the grant of an ASX waiver.
• Issuing of the Deferred Consideration Shares will be in tranches and will get converted on meeting certain milestones. In the first Tranche, 571,427,571 Deferred Consideration Shares will get converted to S3R shares, in case K-TIG achieves $30m of cumulative revenue within three years duration starting from January 2020. In the second tranche, another 571,427,571 Deferred Consideration Shares gets converted to S3R ordinary shares, when K-TIG achieves a cumulative revenue $60 million within four years from January 2020. In the third tranche, the next 571,427,571 Deferred Consideration Shares will convert to an equal number of the shares of S3R, when K-TIG achieves a cumulative EBITDA of $15 million within four years from January 2020.

Conditions Precedent

In order to complete the transaction, it is necessary that parties involved complete due diligence. The binding transaction documents gets executed, there is also a requirement of audited financial statements for 6-month period ended 31 December 2018, also, the receipt of required company’s shareholders, the completion of capital raising worth A$5,000,000 and the lastly that the company should have a conditional reinstatement conditions letter from ASX on satisfactory terms to the company.

As per the policy under ASX, the shares of S3R will remain suspended from trading till it has complied with Chapter 1 and 2 of the listing’s rule 11.1.3.

The shares traded last on 26 February 2019, where the price of the shares of S3R was A$0.004.

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