Saratoga Provides Update on Strategic Review and Financial Situation
April 15 2011 - 3:40PM
Marketwired
Saratoga Electronic Solutions Inc. (the "Corporation") (TSX
VENTURE: SAR). The Corporation wishes to provide an update
regarding its strategic review and its financial situation.
Strategic Review
On October 8, 2010, the Corporation announced that its Board of
Directors had initiated a process to explore and consider possible
strategic alternatives for enhancing shareholder value and that,
for such purpose, it had formed a Special Committee of the Board
and retained the services of an outside financial advisor.
The Special Committee and its financial advisor have been
conducting a thorough review of the Corporation's operations and
its markets, including having reviewed the competitive landscape.
This process has included engaging in discussions with various
industry participants and financial organizations. The scope of the
parties with whom the Special Committee is continuing discussions
has now narrowed and the Special Committee is continuing to work
towards bringing this process to a successful resolution that
provides value to the Corporation's shareholders. However, there is
not any definitive timetable for the completion of this process,
nor can there be any assurance that this process will lead to a
successful conclusion. Further developments, if any, will be
announced by the Corporation at the appropriate time.
Financial Situation
The operations of the Corporation's subsidiary Saratoga ATM
Corporation Inc. ("Saratoga ATM") are financed by an external
lender, which provides Saratoga ATM with lines of credit (the
"Lines of Credit") in the aggregate amount of $2,000,000,
$1,250,000 of which is to fund the cash placed in Saratoga ATM's
network of automatic teller machines and $750,000 of which (the
"Operating Line") is to fund the Corporation's ongoing operations.
The Lines of Credit are secured by a hypothec on all of the movable
property and receivables of Saratoga ATM in the amount of
$1,000,000, and by a personal guarantee in the amount of $1,000,000
provided by the majority shareholder of the Corporation. The Lines
of Credit require that Saratoga ATM, on a stand-alone basis, meet
certain financial ratios pertaining to debt coverage and
debt-to-equity.
Saratoga ATM is currently offside on these ratios, thereby
raising the possibility that the Lines of Credit may no longer be
available to Saratoga ATM. However, the Corporation has arrived at
an informal understanding with the lender that the Operating Line
be paid down at the rate of $25,000 per month, the funding for
which shall be provided by the Corporation's principal shareholder.
To date, three such payments have been made. The Corporation has
also arrived at an informal understanding with the lender to the
effect that the Corporation's debt will be restructured in a manner
which is more suitable to its operations, which would include
granting the lender security over the Corporation's real estate
assets. The Corporation expects to implement this debt
restructuring during its first financial quarter ending on June 30,
2011.
The Corporation
The Corporation has two principal lines of business: automatic
teller machine ("ATMs") and prepaid products. Through its
subsidiary Saratoga ATM Corporation Inc., the Corporation places
and operates a network of ATMs in Eastern Canada. Through its
subsidiary Car-Tel Distributions Inc., the Corporation distributes
to consumers point-of-sale activated prepaid cellular telephone
PINs and long distance calling cards, and offers to retailers a
variety of electronic gift card solutions.
Forward-Looking Statements
This news release contains certain forward-looking statements
concerning our future operations, economic performance and
financial condition. These statements are based on certain
assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe
are appropriate in the circumstances. However, whether actual
results and developments will conform to our expectations and
predictions is subject to a number of risks, uncertainties and
assumptions, including those discussed in our Annual Information
Form and Management's Discussion and Analysis. Consequently, all of
the forward-looking statements in this news release are qualified
by these cautionary statements, and there can be no assurance as to
the Corporation's ability to enter into or consummate a transaction
as a result of the exploration and consideration of possible
strategic alternatives or as to the Corporation's ability to
enhance shareholder value through this process. Moreover, there can
be no assurance that the results or developments anticipated by us,
including as regards our financial resources, will be realized or,
even if substantially realized, that they will have the expected
consequences to or effects on us and our subsidiaries and their
business or operations. We undertake no obligation and do not
intend to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as may be required under applicable law.
Contacts: Saratoga Electronic Solutions Inc. Mr. Georges Durst
President and Chief Executive Officer 514-529-0663
Saratoga Electronic Solutions (TSXV:SAR)
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