Mr. Jim Payne reports
DYNACERT INVESTS IN THE USA AND RECEIVES A PURCHASE ORDER FOR 3,000 HYDRAGEN UNITS
DynaCERT Inc. has granted to KarbonKleen Inc. (KK), DynaCERT's preferred service provider, the exclusive dealership rights in the trucking industry in the United States of America until Dec. 31, 2024. The exclusivity granted to KK is subject to certain quotas of a minimum of 150,000 HydraGEN technology units over a little more than three years. On May 9, 2020, KK has provided the company with a purchase order for 3,000 HydraGEN technology units as described below.
Concurrent with this transaction, KK has entered into a strategic partnership with Velociti Inc., whereby Velociti will provide installation services for KK throughout the United States and elsewhere where Velociti operates and also to provide HydraGEN technology units to Velociti's existing clients.
The pre-existing rights and dealer relationships that DynaCERT has in the U.S. continue unrestricted and DynaCERT can continue discussions to add some qualified dealers in the U.S. until the latter of Nov. 1, 2020, or the end of U.S. restrictions due to COVID-19. Such dealers will continue to operate unfettered by the transactions described herein and KarbonKleen's exclusivity. Pricing of DynaCERT's HydraGEN technology in the U.S. is subject to DynaCERT's proprietary USA pricing list published exclusively for its dealers from time to time and remains applicable to KK.
DynaCERT is also pleased to report that it has established a 100-per-cent-owned subsidiary called DynaCERT International Strategic Holdings Inc. (DISH) to be used to support sales efforts worldwide with investments in strategically unique and exceptional CleanTech innovators directly related to DynaCERT's business, including a subscription program of DynaCERT's HydraGEN technology to enhance end-user adoption.
In a series of related transactions with KK, DISH has agreed to provide KK with HydraGEN technology units until Dec. 31, 2021, in return for subscription revenue whereby KK continues to offer on a back-to-back basis a subscription program to outfit large Canadian and USA trucking fleets with HydraGEN technology. DISH will be delivering DynaCERT's new 3,000-unit purchase order from KK under the terms of this arrangement.
As its first investment, DISH has agreed to invest a total of $1,092,000 (U.S.) in KK in a transaction whereby the company will own, indirectly through DISH, 20 per cent of KK and a promissory note from KK due Dec. 31, 2021, bearing interest of 10 per cent per annum. The purpose of this investment by DISH is to accelerate its market penetration and sales in the U.S. market which both DynaCERT and KK have determined is a growing priority in North America.
DISH shall have representation on the board of directors of KK for as long as DISH retains its shares of KK and DISH retains pre-emptive rights on any future financings of KK. The shareholders of KK will also enter into a shareholders agreement which provides for the manner in which shares of the company may be voted. The company believes that the aggregate number of shares held, or controlled or directed, by such parties represents less than 10 per cent of the issued and outstanding shares of the company.
Brian Semkiw, KarbonKleen's chairman and chief executive officer, stated: "In the past few months, some of the largest fleets in North America have been piloting HydraGEN technology. These fleets have been experiencing the benefits of the reduced emissions, increased performance and fuel savings across all users, and we expect a vibrant expansion of the pilot programs to full fleet deployment with the subsiding of the coronavirus pandemic. This investment by DISH and our partnership with Velociti will enable us to meet the anticipated demand with the delivery and maintenance professionalism that large fleets demand."
Jean-Pierre Colin, executive vice-president of DynaCERT, stated: "Establishing a long-term, 'razor-blade' stream of recurring monthly cash flows from large fleets using DynaCERT's HydraGEN technology provides better certainty of share value. The strategy of setting up DynaCERT International Strategic Holdings Inc. or DISH as a finance arm of DynaCERT is beneficial to potential logistics companies and truck owners who can now finance, on a monthly basis, the rollout of their HydraGEN units on their entire fleets. DISH will be able to greatly reduce the upfront capital costs to end-users of our products. As a subsidiary to DynaCERT, as DynaCERT experiences future growth, DISH intends to finance sales growth in such a way that is non-dilutive to DynaCERT."
Jim Payne, DynaCERT's president and chief executive officer, stated: "KarbonKleen has proved their capability of connecting and selling to the largest fleets in North America. At our recent international sales meetings in February, 2020, DynaCERT invited Velociti to present their unique skills and penetrating reach in the trucking industry in the USA and we were very proud to introduce them to partner with KarbonKleen. Our three-party collaboration results in an unprecedented strategic growth business engine with favourable potential in our own backyard. I feel confident that DynaCERT has found the right solution to deliver both financing and service to our dealer's clients with such a professional team of high-calibre people. In addition to our ongoing work to verify future carbon credits, residual monthly cash flows from subscriptions benefits our shareholders."
The transactions described herein are subject to regulatory approval, including the approval of the TSX Venture Exchange. Closing is expected to be completed upon receipt of such approval.
About DynaCERT Inc.
DynaCERT manufactures and distributes carbon emission reduction technology for use with internal combustion engines. As part of the growing global hydrogen economy, the company's patented technology creates hydrogen and oxygen on-demand through a unique electrolysis system and supplies these gases through the air intake to enhance combustion, resulting in lower carbon emissions and greater fuel efficiency. Its technology is designed for use with many types and sizes of diesel engines used in on-road vehicles, reefer trailers, off-road construction, power generation, mining and forestry equipment, marine vessels, and railway locomotives.
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