Delta Drone International Limited (the “Company”) (ASX: DLT) has entered into a binding agreement with a consortium of investors* led by NASDAQ-listed Medigus Ltd and facilitated by Israeli venture capital firm LIA Pure Capital Ltd (collectively the ” Buyers”) to sell
ParaZero Technologies Ltd (“ParaZero”), which operates the Company’s drone security business, for a total consideration of A$6 million in cash.
This transaction allows the company to focus on becoming one of the world’s leading drone service providers following its successful acquisition of the Delta Drone South Africa business in December 2020 and purchase of Arvista Pty Ltd. in Australia in September 2021. Post-sale, this will leave the company with a strengthened balance sheet and a significantly reduced cash requirement to fund the ongoing R&D investment that had been required by the ParaZero business, allowing the company to focus on aggressively growing its global drone services business.
Key terms of the sale include:
• Purchase price of A$6 million payable to the Company in cash, of which $5.1 million
received on completion and $0.9 million to be released from escrow after 12 months
(provided there is no warranty claim);
• The Company retains the rights of use related to the use of the technology and
products developed by ParaZero (see appendix for more information); and
• The Company will retain additional equity on the upside in the transaction value of the issue
of Warrants to invest again in ParaZero in the future under certain conditions
As the Company has sought and obtained confirmation from the ASX that Listing Rules 11.1.2,
11.1.3 and 11.2 do not apply to this transaction, there are no regulatory conditions that would prevent the completion of the transaction, which is expected to close in January 2022.
Commenting on the sale, Delta Drone International CEO Christopher Clark said:
“ParaZero and its dedicated team were the inspiration for the company’s listing on the ASX in 2018 and have been an important part of the company ever since. With the drone
On the service side of our rapidly growing business, we believe now is the time to focus on the drone service sector while retaining the ability to use ParaZero products and services on a commercial basis. The exposure to ParaZero that we have retained through the transaction will also allow shareholders of the Company to benefit from the future success of the ParaZero technology.
“For the Company, this sale allows us to invest in building our team and
accelerate the growth of all our drone services businesses, with the vision to become one of the world’s leading drone service providers.
“We would like to thank the entire ParaZero team for their efforts over the past few years as they realized their vision of developing cutting-edge technology for the safe use of drones in commercial applications.”
The sale is not subject to any regulatory conditions and is expected to be finalized once the remaining conditions have been met, which are expected to be finalized in the coming weeks.
The buyers have already paid their respective shares of the completion payment into an escrow account for greater certainty of financing pending completion.
The proceeds from the sale will significantly strengthen the Company’s balance sheet with
approximately $5.1 million in cash available at completion (less ParaZero’s net debt assumed by buyers and transaction costs, which together will amount to approximately $0.45 million) and 0, An additional $9 million which will be available 12 months after completion (subject to there being no future warranty claims). These funds will enable the Company to invest in building its team, particularly in its sales, marketing and service areas, so that it can offer its core drone services to more customers in the mining and agricultural industries, where it sees significant growth opportunities.
Specifically, the funds received will be retained by the Company and used to meet both its existing financial obligations and to pursue investment opportunities in new drone-based software and geospatial data technologies that are most directly related to its ongoing service offerings within the Australian and African markets. The Company also intends to pursue other acquisition opportunities that will allow it to complement its current services with new technical capabilities or expand to new geographic locations.
There will be no changes to the Board of Directors or senior management of the Company as a result of
the transaction. The Company intends to provide an update of its aggregate capital and
management planning in connection with the announcement of its fiscal year results in February 2022.
This announcement has been cleared for publication by the Board of Directors Delta Drone International Limited.