SigmaTron International, Inc. (NASDAQ: SGMA),
(“SigmaTron”) an electronic manufacturing services
company, and Wagz Inc.
(“Wagz”), a privately held
Pet Technology(“Pet Tech”) company, today announced that they have
executed a Letter of Intent (“LOI”) relating to a proposed business
combination. Subject to the terms and conditions set forth in
the LOI, SigmaTron would issue approximately 2,270,000 new shares
of SigmaTron stock that would result in the Stockholders of Wagz
owning approximately one-third of the combined company. The
expectation is that the deal will be closed by the end of August
2020 and it remains subject to achievement of certain milestones
and satisfaction of conditions by both parties prior to closing
such as finalizing a material definitive agreement and SigmaTron’s
raising of additional capital that it projects will be needed for
the expanded operations in the amount of at least $7.5M.
BUSINESS COMBINATION:
The Pet Tech market has grown tremendously over the past 10
years. According to business insider the global pet care
market is expected to grow to $281B by 2023 with Pet Tech, its
fastest growing segment, expected to reach $24B by 2024 (Business
Insider Article). According to Forbes, pet ownership
has grown from 56% of US households to 68%, largely driven by tech
savvy millennials who welcome and utilize modern technology to
improve the health and well-being of their pets (Forbes Article).
Wagz has been an innovator in the pet technology market,
modernizing pet containment with satellite based geofence pet
containment technology that is humane and does not rely on
shock. Wagz developed technology that transforms a pet
owner’s cell phone into an invisible leash and Wagz’s products
integrate Alexa and artificial intelligence to monitor and enhance
overall pet health.
SigmaTron and Wagz have developed a relationship over the last
two years working together to manufacture part of Wagz’s product
portfolio. Earlier this year, Wagz was awarded a significant
contract to design and produce a new, innovative and revolutionary
smart dog collar for a major mobile carrier. In addition, in
a three-way announcement with Sprint, Telstra and Wagz at the 2020
Consumer Electronics show, Wagz announced it was incorporating the
Sprint Curiosity IoT platform and will be launching its smart dog
collar in Australia later this year (Sprint Press Release).
Significant interest in Wagz products has been expressed from
mobile carriers globally, and it became clear that having a tighter
integration with its supply chain, the ability to respond to
growing demand, scalability and high-quality standards made the
decision easy for Wagz to approach SigmaTron regarding a potential
partnership.
SigmaTron, for its part, recognized that the Pet Tech sector
fits well with its highly scalable global assembly and
manufacturing capabilities. We believe incorporating a high margin
recurring revenue model that is the basis for the Wagz business
model will add to revenue predictability and also enhance
profitability over time as the combined company rolls out the
planned products. The Wagz Smart Collar is very similar to a mobile
phone in terms of its business model including a monthly recurring
fee to track location, health and wellness data. Additional
incremental revenue streams from in-app purchases and data
analytics will be a compelling addition to SigmaTron’s core
business. Because of this, management believes additional
stockholder value will be unlocked as the combined company expands
with a fully integrated solution.
Commenting on the proposed transaction, Gary R. Fairhead,
SigmaTron’s President and Chief Executive Officer, said, “Over the
last two years we have become immersed in the Pet Tech market with
Wagz as our customer. We have been impressed with the growth of the
Pet sector and data shows it is practically recession proof.
Recent reports indicate that pet ownership during Covid-19
has increased, accelerating what was already a very strong market.
Having worked closely with the management team at Wagz and gaining
a great deal of respect for their capabilities, we felt that there
was a significant opportunity to partner with them and enter that
market. Wagz would benefit from our ability to provide world
class manufacturing services through our global footprint and
supply chain, and SigmaTron would benefit from new high margin
recurring revenue, thereby bringing mutual value to the combination
and driving stockholder value.”
Terry Anderton, Founder and CEO of Wagz, added “Wagz, with its
recent selection by one of the largest mobile carriers to provide
them the Wagz Smart Collar to sell, and on the heels of the
announcement at CES with product expansion into Australia, faced
significant challenges in building out sufficient inventory and
developing a highly optimized supply chain. We currently
expect the design of the collar to be finished by the end of
June. SigmaTron was a logical partner, and we are excited
about the opportunities this combination brings to both
companies. It also provides the opportunity for the Wagz
investors to obtain a publicly traded stock for their investment in
Wagz that we believe has significant
upside.”
He continued, “Wagz will be a stand-alone operation of
SigmaTron. As we build our brand and product line, we believe
that the IoT nature of our Ecosystem of Pet Tech products will
bring significant opportunities to the combined company. We
will be able to leverage SigmaTron’s size and manufacturing
expertise to continue to launch revolutionary products into the Pet
Tech market.”In closing, Fairhead added, “While SigmaTron plans to
continue in its traditional electronic manufacturing services
market and to grow its position in that market, I am also excited
about the addition of a separate product line for an emerging
technology marketplace.”
The McLean Group serves as financial advisor and Barnes and
Thornburg LLP serves as legal advisor to Wagz. Howard &
Howard Attorneys LLP serves as Corporate Counsel to SigmaTron.
ABOUT SIGMATRON:
Headquartered in Elk Grove Village, IL, SigmaTron is an
electronic manufacturing services company that provides printed
circuit board assemblies and completely assembled electronic
products. SigmaTron operates manufacturing facilities in Elk
Grove Village, Illinois; Acuna, Chihuahua, and Tijuana Mexico;
Union City, California; Suzhou, China, and Ho Chi Minh City,
Vietnam. SigmaTron maintains engineering and materials
sourcing offices in Elgin, Illinois and Taipei, Taiwan.
SigmaTron serves markets ranging from industrial products to
consumer products and Fortune 500 customers to start-ups. To
learn more about SigmaTron, please visit
https://sigmatronintl.com.
ABOUT WAGZ:
Headquartered in Portsmouth, NH, Wagz has innovated and
modernized the pet sector enhancing the lives of pets and their pet
parents through tech enabled products that improve the health,
safety and wellbeing of our furry friends. Wagz has assembled a
highly skilled team of Pet Nerds that are not only passionate about
pets but also some of the best IoT, AI, Alexa, GPS, Mobile
Telephony, hardware and software engineers on the planet. The Pet
Nerds of Wagz have created the first and most advanced ecosystem of
connected pet products and an app that not only manages Wagz
devices but is the portal to our community of pet parents, service
providers and online store. Wagz is truly transforming the pet
industry with new and innovative solutions to common problems
shared by most pet owners. To learn more about Wagz, please visit
https://www.wagz.com or watch
https://www.youtube.com/watch?v=U_n7evGWjJM
Note: This press release contains
forward-looking statements. Words such as “continue,”
“anticipate,” “will,” “expect,” “believe,” “plan,” and similar
expressions identify forward-looking statements. These
forward-looking statements are based on the current expectations of
both SigmaTron and Wagz (“Companies”). Because these
forward-looking statements involve risks and uncertainties, the
Companies’ plans, actions and actual results could differ
materially. Such statements should be evaluated in the
context of the direct and indirect risks and uncertainties inherent
in the Companies’ businesses including, but not necessarily limited
to, the risks inherent in any merger and business combination of
two companies, the Companies’ continued dependence on certain
significant customers; the continued market acceptance of products
and services offered by the Companies’ and their customers; pricing
pressures from the Companies’ customers, suppliers and the market;
the activities of competitors, some of which may have greater
financial or other resources than the Companies; the variability of
the Companies’ operating results; the results of long-lived assets
impairment testing; the collection of aged account receivables; the
variability of the Companies’ customers’ requirements; the
availability and cost of necessary components and materials; the
ability of the Companies’and its customers to keep current with
technological changes within its industries; regulatory compliance,
including conflict minerals; the continued availability and
sufficiency of the Companies’ credit arrangements; the ability to
meet the Companies’ financial covenant; changes in U.S., Mexican,
Chinese, Vietnamese or Taiwanese regulations affecting the
Companies’ business; the turmoil in the global economy and
financial markets; the spread of COVID-19 (commonly known as
“Coronavirus”) which has threatened the Companies’ financial
stability by causing a decrease in consumer spending, caused a
disruption to the Companies’ global supply chain; the stability of
the U.S., Mexican, Chinese, Vietnamese and Taiwanese economic,
labor and political systems and conditions; currency exchange
fluctuations; and the ability of the Companies to manage their
growth. These and other factors which may affect the combined
Companies’ future business and results of operations are identified
throughout SigmaTron’s Annual Report on Form 10-K, and as risk
factors, may be detailed from time to time in SigmaTron’s
filings with the Securities and Exchange Commission.
These statements speak as of the date of such filings, and the
Companies undertake no obligation to update such statements in
light of future events or otherwise unless otherwise required by
law.
For Further Information Contact:SigmaTron International,
Inc.Linda K. Frauendorfer1-800-700-9095
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