Quisitive Technology Solutions, Inc. ('Quisitive' or the 'Company') (TSXV: QUIS), a premier Microsoft solutions provider, today announced it has agreed to a transaction to acquire all of the issued and outstanding shares (the 'Purchased Shares') of Menlo Technologies, Inc. and its subsidiaries (collectively, 'MENLO'), a leading provider of Microsoft technology, corporate consulting, and business software and systems based in Menlo Park, California (the 'Transaction').
The details of the Transaction are set forth in a definitive share purchase agreement between the Company, a wholly-owned subsidiary of the Company, and the shareholders (the 'Vendors') of MENLO, that was negotiated at arm's length. Completion of the Transaction is subject to a number of standard conditions, including receipt of all regulatory approvals and the acceptance of the TSX Venture Exchange ('TSXV'). The Transaction is expected to close on or about January 1, 2020.
Like Quisitive, Menlo Technologies is a global Microsoft technology services company specializing in cloud development, data analytics, mobile technology and enterprise business application services. Menlo offers managed on shore and offshore development services from its Silicon Valley headquarters and offshore development center in Hyderabad, India. Over the trailing twelve months ended September 30, 2019 Menlo generated unaudited revenues of approximately US$17.5 million and unaudited adjusted EBITDA of approximately US$2.4 million. 'We are thrilled to join forces with the Quisitive family,' said Gary Prioste, Menlo CEO. 'The Quisitive brand has significant strength, that when paired with our competencies will allow us to scale beyond our geographies and accelerate our ability to reach and engage with larger enterprise customers.' Thru application modernization and business application consulting, Menlo supports hundreds of clients globally. Their cloud application expertise supports their Microsoft Dynamics ERP practice and with an office in Washington, DC, have deep knowledge of government compliance. Their offices on the West Coast are recognized as an industry leader in cloud development and Azure migrations. 'The integration of the Menlo competencies into the Quisitive portfolio will activate substantial enterprise growth in our North American market,' said Quisitive CEO Mike Reinhart. 'Menlo has a strong reputation as a Microsoft gold partner in the cloud development space and brings forth a new capability in their on shore and offshore development model that will provide access to a net new customer set and expand our service portfolio for our customers. The Menlo acquisition is a strong complement to our June 2019 CRG acquisition, accelerating our collective vision to build the premier Microsoft solutions provider in North America for Microsoft Dynamics business solutions and cloud innovations. The combination of CRG and Menlo's Microsoft Dynamics businesses position Quisitive as a leader in the Microsoft Dynamics partner community. '
The consideration for the Purchased Shares will consist of the following: (i) US$ $3,774,190 in cash, payable to the Vendors (the 'Cash Payment'); (ii) the issuance to the Vendors of 19,784,981 common shares in the capital of Quisitive (the 'Quisitive Shares'); (iii) the issuance to the Vendors of convertible debentures with an aggregate face value of US$5,000,000 (the 'Notes') accruing at a rate of interest of 10.0% per annum compounded on an annual basis and payable annually, having a term of up to 36 months from the closing date of the Transaction (the 'Maturity Date'). The holders of the Notes may, at their option, elect to convert the principal outstanding and all accrued and unpaid interest owing thereunder into Quisitive Shares at a deemed price of C$0.20 per Quisitive Share at any time on or prior to the Maturity Date, and the Company, at its sole discretion, will have the option to automatically convert the Notes if the volume weighted average trading price of the Quisitive Shares on the TSXV is greater than or equal to C$0.40 for 20 consecutive trading days. The Vendors may also be entitled to additional contingent consideration in the form of a performance earn-out if MENLO achieves certain financial thresholds during the three (3) year period following the closing of the Transaction. The amount of the earn-out is a base maximum of US$3,500,000, plus an additional incentive amount of US$1,000,000 based on exceeding growth targets during the first two years. The earn-out is payable 50% in cash and 50% in Quisitive Shares. The funds representing the Cash Payment, acquisition fees, and working capital for the Company will be obtained pursuant to a 12-month US$7,500,000 demand loan (the 'Loan') from an investment company with interest accruing based on a Bank of Montreal Prime plus 8.05% per annum, calculated and payable monthly, with the principal amount to be repaid on demand or within 12 months from the date of initial advance of funds. The Loan will be a direct obligation of Menlo Technologies Acquisition, Inc. (the 'Borrower') guaranteed by certain subsidiaries of the Borrower, and will be secured by: (i) a first ranking general security interest granted by the Borrower and each of the guarantors over all of their respective present and future personal property and (ii) a pledge of the Purchased Shares. The Borrower will incur fees payable in cash upon closing of the Transaction equal to 3.75% of the Loan amount and 1.6% of the sum of the Cash Payment and the Notes.
Quisitive is a premier Microsoft solutions provider that helps enterprise organizations move, operate and innovate in the Microsoft cloud: Microsoft Azure, Microsoft Dynamics and Microsoft O365 as well as provide proprietary Software as a Service ('SaaS') solutions such as CRG emPerform, LedgerPay and business solutions from other technology partners that complement the Microsoft platform. With a legacy of deep technical and business expertise, Quisitive is empowering the enterprise to navigate the ever-changing technology climate their business relies upon. Quisitive helps customers harness the power of the Microsoft cloud and innovative technologies such as, artificial intelligence, machine learning, the Internet of Things (IoT) and blockchain through customized solutions.
Quisitive is the 2019 Microsoft United States Partner of the Year. Quisitive earned this top honor among a global field of top Microsoft partners for demonstrating excellence in innovation and implementation of customer solutions based on Microsoft technology. Quisitive is uniquely comprised of experienced Microsoft partner leaders and technologists who share a deep understanding of market needs and the appropriate application of Microsoft cloud technology. The company's expertise and focus are on helping industries such as financial services, manufacturing, oil and gas, and retail, drive innovation using Microsoft cloud-based technologies.
Based in Los Altos, California, Menlo Technologies delivers software development solutions on multiple platforms designed to help clients compete in an increasingly demanding global market. Menlo is a premier provider of outsourced web, mobile, and cloud development solutions and business applications. Lead by seasoned technology executives, their experience as both buyers and providers of technology solutions provides an edge in anticipating client needs. Their Hybrid Delivery approach utilizes a combination of onshore and offshore resources to maximize cost and efficiency. Their clients include: Toshiba, Dell, Renesas and NEC.