Call us : (250) 377-1182
facebook twitter linked-in
Deer Horn Capital ntg lux international frontier

ESE.V - ESTec Systems Corporation (Engineering & Electronics)

Hello there guest! Want to join in on the conversation? Login or register for a forums account by visiting this link.

By mrduediligence

Posted: Monday Oct 24 6:09:25PM 2016

ESTec receives 12-cent-a-share offer from numbered co.

2016-10-24 18:14 MT - News Release

Mr. Mark Bamford reports


ESTec Systems Corp. has entered into a letter of intent with 2000285 Alberta Ltd. (AcquisitionCo), an entity controlled indirectly by Anthony B. Nelson, a director, officer and shareholder of the company. The LOI sets out the non-binding intention of the parties to negotiate and enter into a definitive agreement pursuant to which AcquisitionCo would, through a series of transactions, acquire all of the issued and outstanding common shares in the capital of the company. Pursuant to the proposed transaction, shareholders of the company who are not also shareholders of AcquisitionCo (or an affiliated entity) at the time of closing of the transaction would receive 12 cents in cash for each common share held.

The transaction is anticipated to be structured as an amalgamation of AcquisitionCo and ESTec under the laws of the Province of Alberta. Provided all conditions and approvals are met, upon closing of the transaction, shareholders of ESTec immediately prior to the time of closing (other than shareholders of ESTec who are also shareholders of AcquisitionCo or its affiliates) would be entitled to receive one redeemable preferred share of the amalgamated entity for each common share held. Each redeemable preferred share would be immediately redeemed for 12 cents in cash. Shareholders of the amalgamated entity (or an affiliate thereof) following the cash distribution to minority shareholders upon closing of the transaction would consist of the Nelson family and other ESTec shareholders acting jointly and in concert with the Nelson family. It is anticipated that the interested shareholders will transfer substantially all of their common shares to AcquisitionCo (or an affiliate thereof) immediately prior to the closing of the transaction.

Under the LOI, the company and AcquisitionCo shall use their reasonable commercial efforts to negotiate a definitive agreement in respect of the transaction by Oct. 31, 2016.

Pursuant to Multilateral Instrument 61-101, the proposed transaction is a business combination, and the completion of the transaction will require simple majority approval of the company's minority shareholders. Of the 10,461,629 currently issued and outstanding common shares, interested shareholders own or control, directly or indirectly, approximately 7,726,758 common shares in aggregate, and the votes attached to such shares would be excluded for the purposes of obtaining minority shareholder approval under MI 61-101.

The board of directors of the company formed an independent special committee, consisting of David Wright and Barbara Fraser, in connection with the transaction. The special committee has retained Quantum Advisory Inc. to provide a fairness opinion with respect to whether the consideration offered under the transaction is fair from a financial point of view to the ESTec shareholders (other than AcquisitionCo or its affiliates). The special committee will review and recommend or reject that the board approve the transaction, after considering all aspects of the transaction and the outcome of the fairness opinion to be provided from the company's financial adviser. The board may proceed to approve the transaction at a later date and advise that shareholders vote in favour of the transaction after considering the recommendation of the special committee, all aspects of the transaction and the outcome of the fairness opinion to be provided from the company's financial adviser.

The acquisition price of 12 cents represents a 26-per-cent premium to the closing price of the common shares on Oct. 21, 2016, and a premium of approximately 32 per cent to the 30-day weighted-average price of the common shares on the TXV Venture Exchange up to and including Oct. 21, 2016. Following completion of the transaction, it is anticipated that the common shares will be delisted from the TSX Venture Exchange, and the company will apply to the applicable securities commissions to cease to be a reporting issuer.

The company and AcquisitionCo have agreed, on a binding basis, to a period of exclusivity commencing on the date hereof and ending on the earlier of the date the LOI is terminated or the date that a definitive agreement in connection with the transaction is executed, during which period the company will work exclusively and in good faith with AcquisitionCo in an effort to negotiate a definitive agreement and will not solicit or initiate discussions regarding any other business combination or sale of material assets. The company has also provided AcquisitionCo the right to match any unsolicited acquisition proposals.

The transaction is subject to a number of conditions, including the receipt of the required shareholder approvals and regulatory and TSX Venture Exchange approval. It is anticipated that an annual and special meeting of shareholders of the company will be held on or about Dec. 9, 2016, at which the transaction would be considered and that meeting materials in respect of such meeting will be mailed on or about Nov. 17, 2016. The transaction must be approved by 66-2/3rds per cent of all shareholders of ESTec, as well as a simple majority of the company's minority shareholders (as described herein). It is anticipated that closing of the transaction would occur within seven business days of shareholder approval and, in any event, not later than Dec. 30, 2016.

We seek Safe Harbor.

© 2016 Canjex Publishing Ltd. All rights reserved.



By mrduediligence

Posted: Monday Sep 19 7:07:28PM 2016

I made this comparison sheet after ESE acquired Encore Electronics in May 2011. As you can see, revenue from the Encore Electronics subsidiary has gone up almost 1000% in 5 years. We are still waiting for Q4 results, but I am confident that Encore Electronics sold around $4 million US dollars in 2016. However, this positive cash flow is offset by Allan R Engineering which I hope the company has reduced costs from or should consider closing down. If you look at Encore Electronics website, they deal with some major groups like the US Government, NASA, Ford, Toyota, and major corporations. Therefore, if their products are good for the most high end clients, then any company would want to use them. This means their growth potential could increase substantially and major deals could come at anytime. If oil prices ever do come back, then the Engineering department should also start producing positive cash flow. Another advantage of Encore Electronics over Allan R Engineering is that it's a US subsidiary, that means the conversion from US to Canadian dollars will only add extra cash to ESE's balance sheet.
2011 Year End
Allan R Engineering     -    $1,843,864 – Loss of $179,101
Encore Electronics     -    $422,616 – Loss of $215,547
Total Sales for 2011     -    $2,266,480 - Total loss of $394,648
2012 Year End
Allan R Engineering     -    $2,722,196 – Net Income $438,388
Encore Electronics      -    $2,391,052 – Loss of $257,351
Total Sales of 2012     -    $5,113,248 - Total net income of $181,037
2013 Year End
Allan R Engineering     -    $2,397,536 – Loss of $45,488
Encore Electronics      -    $3,178,949 – Net Income $397,902
Total Sales for 2013    -    $5,576,485 - Total net income of $352,414  
2014 Year End
Allan R Engineering     -    $2,017,208 – Loss of $499,565
Encore Electronics      -    $3,231,516 – Net Income $267,994
Total Sales for 2014     -    $5,248,724 - Total loss of $231,571
2015 Year End
Allan R Engineering     -    $2,159,901 – Loss of $121,360
Encore Electronics      -    $3,674,444 – Net Income $656,550
Total Sales for 2015    -    $5,834,345 - Total net income of $535,190
2016(9 Months)
Allan R Engineering     -    $905,361   – Loss of $272,683
Encore Electronics      -    $3,224,296 – Net Income $234,450
Sales for 9 Months      -    $4,129,657 - Total loss of $38,233
List of Encore Electonics Clients:

By mrduediligence

Posted: Friday Jun 24 2:53:03PM 2016

Found some great information on ESTec including a private company that's invested in them, background on the CEO and a chart showing that volume has picked up over the last few quarters and this is the first time in a decade it's started to build. below are the links.

Haanz Group and ARN(ESE's first subsidiary):

ESE CEO Article:

Stock volume chart:

Encore Electronics clients(ESE's second subsidiary):

By mrduediligence

Posted: Friday May 27 7:38:47PM 2016

ESTec Systems Corp 9 Month Results(Ending March 31st 2016)

Price: $0.105
Common Shares: 10,461,629
Insider Holdings: 85.4% as per the last information circular


Cash: $318,378
Receivables: $1,190,733
Inventory: $316,717
Tax Recoverable: $69,335
Prepaid Expenses: $77,942
Property & Equipment: $124,694
Intangible Assets: $296,049
Goodwill: $753,702
Total Assets: $3,147,550

Bank Debt: $265,000
Payables: $682,211
Customer Deposits: $34,335
Callable Debt: $85,203
Total Callable Debt: $963,970(Due July 2026 as per their MD&A)
Advances from parties: $465,460
Total Liabilities: $2,496,179

Below is a breakdown of sales in both the Engineering and Electronics departments over 9 months in 2016, 1 year in 2015, and 1 year in 2014. The goal is to show that although sales in Engineering are decreasing, the sales in Encore Electronics are increasing and should eventually make up for prior losses, especially if the company continues to cut costs from its engineering department. As the US economy improves, so will electronics sales since this asset is US based. Encore sells parts to major corporations such as Microsoft, GE, GM, Ford, NASA, etc:

2016 Sales after 9 months(This will obviously increase with Q4 results)
Engineering - $905,361 – Net Loss of $272,683
Electronics - $3,224,296 – Net income of $234,450
Total Assets This Quarter - $3,147,550
Total Liabilities This Quarter - $2,496,179

2015 Sales after 1 year
Engineering - $2,159,901 – Net Loss of $121,360
Electronics - $3,674,444 – Net Income of $656,550
Total Assets Year End - $2,911,449
Total Liabilities Year End - $2,273,047

2014 Sales after 1 year
Engineering - $2,017,208 – Net Loss of $499,565
Electronics - $3,231,516 – Net Income of $267,994
Total Assets Year End - $2,462,691
Total Liabilities Year End - $2,481,167

Over three years, Assets continue to increase and liabilities seem to bounce in between the $2.2 to $2.5 million range.

MD&A Highlights

Edmonton – 25 May 2016 The third quarter reflects the continuing impact of the decline in oil prices on our engineering operation. Revenues from Allan R. Nelson Engineering are down as compared to last year. Revenue from Encore remains stable and includes the effect of the exchange rate differential. We do not expect current economic conditions to change through the balance of the fiscal year. As a result Allan R. Nelson Engineering will continue to face challenges. During the third quarter Allan R. Nelson Engineering has adjusted its cost structure to offset its reduction in revenue. We will continue to monitor and adjust as required. The Encore Electronics business continues to perform to expectations. Management of Encore is actively working on diversifying their customer base to reduce economic dependence on a small number of customers.

The company has negative working capital. Over the next year the company expects to meet all cash requirements from cash flow. While the Company has a significant amount of its receivables invested in a small number of clients, these funds are largely attributable to insurance clients and they have reserves allocated to pay these receivables.

A demand non-revolving term facility has been negotiated to cover the cash requirements to purchase Encore Electronics Inc. Debt repayment is scheduled over 15 years to July 2026 to be repaid from the operating profits of Encore Electronics Inc.

During the first quarter the Company signed an amended demand loan agreement. (see note 3 and 11 of the financial statements). See also discussion on liquidity risk.

The bank revolving demand facility #1 is authorized to a total of $275,000 CAD with interest payable at prime plus 3.55%. At March 31, 2016 the prime rate is 2.7%. At March 31, 2016 $265,000 (June 2015, $65,000) was outstanding on this credit facility. A general security agreement and a guarantee and postponement of claim of $300,000 by ESTec have been pledged as collateral for the credit facility.

In the third quarter, the Allan R. Nelson Engineering subsidiary continued to feel the effects of low activity in the Oil & Gas industry. The Encore Electronics subsidiary continued to perform on a comparable basis relative to last year. Management has been reviewing the sales and marketing efforts to see if additional opportunities can be identified.

During the quarter no stock options were granted to employees and directors of the company. In the first quarter of the year 235,000 options expired.




Canadian Small Caps

Canadian Small Caps

CLICK HERE to view the presentations from the Spring 2016 Small-Cap Conferences.

We are pleased to publish the PowerPoint presentations from The Small-Cap Conferences that were held in Calgary on March 30, 2016 and in Vancouver on May 3, 2016.

We encourage investors to review the presentations and contact the companies with any further questions.

What's New