06/08/2008 - 10:20

QRSciences sells private arm for $12m

06/08/2008 - 10:20


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QRSciences Holdings Ltd has entered into a share exchange agreement with a United States company to sell its private arm that specialises in developing technology systems in a scrip and cash deal worth $A12 million.

QRSciences sells private arm for $12m

QRSciences Holdings Ltd has entered into a share exchange agreement with a United States company to sell its private arm that specialises in developing technology systems in a scrip and cash deal worth $A12 million.

Under the agreement, QRSciences Holdings will sell QRSciences Pty Ltd to Diversified Opportunities Incorporated for the issue of shares worth $US10 million and a $US1 million cash payment.

QRSciences Holdings, which originated from Perth and is now headquartered in Melbourne, holds 97.83 per cent of Diversifed.

The acquisition is subject to a number of conditions including a minimum capital raising by Diversified of $US2.5 million.

QRSciences specialises in the design, development and sale of advanced technology systems for security related applications including the detection of explosives and narcotics, metal detection and imaging.

Its clients include the US Department of Homeland Security, China Institute of Atomic Energy and the United Arab Emirates government.

Additionally, QRSciences Holdings has reported a 25.8 per cent increase in group revenue for fiscal 2008 to $18 million.


Below is the full announcement:

QRSciences Holdings Limited ("Holdings") is pleased to announce that it has entered into a definitive share exchange agreement with Diversified Opportunities Incorporated ("Diversified"), a US public company that trades on the over-the-counter bulletin board under the trading symbol, (DVOP.OB).

Under the terms of the agreement, Diversified will acquire the business of the Holdings wholly-owned subsidiary, QRSciences Pty Ltd, an Australian private corporation ("QRSciences") through an acquisition of all of its outstanding shares.

QRSciences is a subsidiary of Holdings which is a publicly listed company which trades on the Australian Stock Exchange and as an ADR on the US over-the-counter market (QRS:ASX; QRSNY.PK). QRSciences specializes in the design, development and sale of advanced technology systems, sub-systems, components and software for security related applications.

Applications for the technologies and products of QRSciences include the detection of explosives and narcotics, metal detection and imaging, surveillance and monitoring. QRSciences and its subsidiaries have a wide range of government and commercial customers including GE Security, Transportation Security Administration, U.S. Department of Homeland Security, U.S. Technical Support Working Group (TSWG), Australian Customers, China Institute of Atomic Energy (CIAE), United Arab Emirates Government, HM Customs UK and Rapiscan Systems.

QRSciences' assets include convertible notes and convertible Series A preferred stock of Spectrum San Diego Inc. ("Spectrum"), a private company based in San Diego , California . Conversion of the notes and Series A preferred stock would result in a fully diluted equity position for QRSciences of approximately 33.4% of Spectrum, after taking into account the pro formal conversion of outstanding vested stock options including those vested under the Spectrum employee stock option plan. QRSciences also holds an option valid through September 2009 to buy all of the remaining shares of Spectrum. Spectrum is a designer of specialized electronics and instrumentation with a specific focus on high-end niche products for the security industry. The Spectrum product range includes:

* SentryScope, a security camera employing break-through technology providing over 250 times the resolution of ordinary surveillance systems;

* CastScope, a scanner for detecting security threats in casts, bandages and artificial limbs being sold under contract with the Transportation and Security Administration; and
* CarScan, a project funded by the US Government that uses state of the art X-ray technology to locate weapons, explosives and contraband in vehicles. The technology offers a number of benefits including quality of image, cost, speed and convenience as passengers are not required to leave their vehicle for the scanning.

For more information on QRSciences please visit: http://www.qrsciences.com

Upon completion of the transaction, Diversified will be the sole shareholder in QRSciences and will have no other business interests. Mr Kevin Russeth is currently the sole Director of Diversified and will become the chief executive officer and president of Diversified at closing. He will also continue as a non-executive director of Holdings. The other directors of Diversified will be appointed in a timely manner and at least one will be an appointee of Holdings.

The Directors of Holdings believe the transaction is in the interests of shareholders because it will place the technology in closer proximity to its main customers and provide more visibility in the US capital markets.

Structure of the Transaction

In exchange for the shares in QRSciences, Diversified will (i) issue to Holdings that number of shares of common stock equal to US$10,000,000) and (ii) pay US$1,000,000 to Holdings.

The closing of the transaction is subject to a number of conditions including the approval of Holdings and a minimum capital raising by Diversified of US$2,500,000).

The issue shares of common stock to Holdings is expected to be at a similar price as the capital raising by Diversified.

Holdings is the controlling shareholder of Diversified and currently own 9,000,000 of the 9,199,192 outstanding shares, which constitutes 97.83% of Diversified outstanding common stock. In connection with the transaction, Holdings will be issued additional shares of Diversified common stock and Diversified will also conduct the US$2.5 million capital raising above.

Subsequent to completion of the transaction and issuing of the common stock to both Holdings and other investors, Holdings anticipates that it will continue to hold a controlling stake in the common stock of Diversified.

Holdings intend to distribute the Diversified shares to Holdings shareholders in the form of an in-specie distribution of Diversified shares which Holdings anticipates will be capable of trading on the over-the-counter bulletin board. The timing of this distribution in specie is yet to be determined.

Holdings has also entered into a Loan Agreement with the Diversified. The Loan Agreement provides that Diversified may borrow up to US$500,000 dollars from Holdings. The amount borrowed by Diversified under the Loan Agreement accrues interest at 8% and is due and payable on or before October 31, 2008.

At the completion of the sale of QRSciences, Holdings' focus will be the fast growing QRSciences Security business.

Holdings anticipates convening a shareholder meeting to consider the transaction no later than October 31, 2008. All conditions to the transaction (including the approval of Holding's shareholders) must be satisfied on or before 31 December 2008.


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