- Divestiture will result in net cash savings of approximately $1.0 million per year
- Transaction has no impact on Company’s Satellite-AIS data service performance
CAMBRIDGE, ON, March 31, 2020 /CNW/ – exactEarth Ltd. (TSX:XCT) (“exactEarth”), a leading provider of Satellite-AIS data services for ship tracking and maritime situational awareness solutions, announces that it has entered into an agreement to divest four satellites from its first-generation constellation and its ground station assets to Myriota Canada Inc. (“Myriota Canada”), a wholly-owned subsidiary of Myriota PTY Ltd. (“Myriota”). All financial figures are in Canadian dollars unless otherwise stated.
“This transaction, which is subject to Canadian regulatory approval, will achieve several strategic objectives,” said Peter Mabson, President and CEO of exactEarth. “First, it lowers our cost base and reduces our annual cash outlay by a meaningful amount, which will strengthen our financial position and move us more rapidly toward our goal of being cash flow positive. Second, it positions our business and overall financial profile more in-line with that of a pure-play data services business, one with stronger margins and significant recurring revenue. Third, we will maintain access to the AIS data from the satellites to support our service and by extension we will continue to maintain a working relationship with Myriota, a company that exactEarth has invested in and one that we have built a strong business relationship with over the past several years.”
Under the terms of the agreement, Myriota Canada will acquire the satellites EV1, EV6, EV9 and EV11, exactEarth’s ground station assets and certain related operating contracts. Four of exactEarth’s full-time personnel will cease employment with exactEarth and will become employees of Myriota Canada. In consideration for the assets, exactEarth will receive payment of $600,000, comprised of $150,000 cash and $450,000 in preferred shares of Myriota, and Myriota Canada will provide exactEarth with Satellite-AIS data originating from these four satellites as well as the other satellites in exactEarth’s first-generation constellation for their remaining operating lifetimes. exactEarth will retain ownership of the EV2 and EV8 hosted AIS satellite payloads from its first-generation constellation as well as the data license with the Government of Canada related to the M3M advanced AIS satellite.
On a net basis, this divestiture is expected to generate cash savings of approximately $1.0 million annually for exactEarth. These savings result from the expected reduction of exactEarth’s annual expenses by approximately $2.45 million which includes approximately $350,000 of depreciation expense. The agreement will also see the termination of a revenue arrangement between the two companies under which Myriota accounted for approximately $1.1 million of exactEarth’s revenue in Fiscal 2019.
The closing of the sale of assets to Myriota Canada is subject to Canadian Government regulatory approvals involving the acquisition and/or divestiture of satellite assets and other customary closing conditions. It is anticipated that the transaction will close in the third quarter of fiscal 2020.