/NOT FOR DISTRIBUTION OR FOR DISSEMINATION IN THE UNITED STATES/
TORONTO, Nov. 22, 2018 /CNW/ - Cassowary Capital Corporation Limited (TSXV: BIRD.P) ("BIRD") is pleased to announce that it has entered into a non-binding letter of intent (the "LOI") with Lobo Genetics Inc. ("Lobo", and together with BIRD, the "Parties") dated November 20, 2018, pursuant to which the Parties will complete a transaction that will result in a reverse takeover of BIRD by Lobo (the "Acquisition").
BIRD is a Capital Pool Company as defined in the policies of the TSX Venture Exchange (the "Exchange"), and intends for the Acquisition to constitute its Qualifying Transaction (as such term is defined in the policies of the Exchange). The Resulting Issuer (as such term is defined in the policies of the Exchange) intends to list as a Tier 2 Technology Issuer, subject to meeting the Initial Listing Requirements of the Exchange following the Qualifying Transaction.
About Lobo Genetics Inc.
Lobo is a privately-held healthcare technology company that was incorporated under the Canada Business Corporations Act on June 11, 2018 and has been engaged in its business continuously since incorporation.
Lobo helps ensure a safer cannabis experience through genetics. Consumers and patients can gain rapid, actionable insights into their personal response to cannabis, based on their genetic profile. Lobo's portable Cube DNA platform (the "Cube") tests an individual's DNA for genetic markers related to cannabis metabolism, risk and impairment: (a) reduced ability to metabolize THC and CBD; (b) increased acute psychotomimetic effects and long-term risk of cannabis-induced psychosis; and (c) neurocognitive impairment including short-term memory loss. Test samples are collected using a simple, non-invasive cheek swab. The Cube requires minimal training and provides results in under an hour. At only 4 inches cubed, it can be deployed in clinics, pharmacies and retail outlets. With applications across the recreational, medical and clinical space, Lobo is bringing the science of cannabis genetic testing to everyone.
Lobo has obtained an exclusive, perpetual, worldwide licence, from Spartan Bioscience Inc. ("Spartan Bioscience"), an Ottawa-based biotechnology and life sciences company, to use the Cube, and related intellectual property controlled by Spartan Bioscience, for cannabis-related applications.
Financial information with respect to Lobo will be disclosed in a subsequent news release.
The Qualifying Transaction
It is currently anticipated that the Acquisition will be completed by way of a three-cornered amalgamation or other similar form of acquisition transaction as agreed to by the Parties, which will result in each Lobo share being exchanged for one post-consolidation Resulting Issuer share (the "Resulting Shares"). In connection with the Acquisition, each outstanding option, warrant and convertible security of Lobo will be exchanged for options, warrants or convertible securities of the Resulting Issuer, as applicable, on substantially the same economic terms and conditions as the existing options, warrants and convertible securities of Lobo.
As at the date hereof, BIRD has 14,000,100 common shares issued and outstanding, as well as 1,400,000 options and 400,000 broker options outstanding, each exercisable to acquire one BIRD common share at an exercise price of $0.10 (on a pre-consolidation basis). As at the date hereof, Lobo has 32,751,096 voting common shares issued and outstanding, as well as 5,695,000 options, each exercisable to acquire one Lobo voting common share at exercise prices ranging from $0.0001 to $1.25, and 2,000,000 performance warrants, each exercisable to acquire one Lobo voting common share at an exercise price of $0.01. Further details regarding the post-consolidation Resulting Shares and other securities to be issued in connection with the Acquisition and the anticipated pro forma capital structure of the Resulting Issuer following completion of the Offering and the Acquisition will be provided in a subsequent press release once that information is determinable.
The Resulting Issuer is expected to continue Lobo's current operations.
The LOI contemplates the negotiation and execution of a binding definitive agreement (the "Definitive Agreement"), which will be subject to a number of conditions precedent, including, but not limited to:
- Lobo having completed the Offering (as defined below);
- BIRD having completed a consolidation of its outstanding common shares to be effective immediately prior to completion of the Acquisition and based on the final terms of the Offering and as agreed to between the Parties;
- BIRD having changed its name to "Lobo Genetics Inc.", or such other name as agreed between the Parties immediately prior to completion of the Acquisition;
- completion of the Offering (as defined below);
- approval of the Acquisition by the boards of directors and shareholders of each of Lobo and BIRD, as applicable; and
- receipt of all required consents, waivers and approvals from the Exchange, any securities regulatory authority and any other necessary third parties.
It is expected that the Acquisition will be completed on a date to be agreed upon by the Parties, but which shall be no later than 10 business days following receipt of all required consents, waivers and approvals from the Exchange and any other securities regulatory authority having jurisdiction over the Parties.
Concurrent Private Placement Financing
Lobo is pleased to announce that it has entered into an engagement letter with Echelon Wealth Partners Inc. ("Echelon" as the "Lead Agent") pursuant to which the Lead Agent, on behalf of a syndicate of agents including Haywood Securities Inc., PI Financial Corp. and Beacon Securities Limited (together with the Lead Agent, the "Agents"), will undertake a brokered private placement of subscription receipts of Lobo (the "Subscription Receipts") to raise aggregate gross proceeds of up to $10,000,000 (the "Offering"). The issue price per Subscription Receipt shall be determined in the context of the market at the time of the Offering (the "Issue Price").
Upon closing of the Offering, the aggregate subscription proceeds of the Offering less: (i) fifty percent (50%) of the Cash Fee (as defined below); and (ii) the expenses of the Agents incurred in connection with the Offering incurred up to the Closing Date (the "Escrowed Proceeds"), shall be placed in escrow with a Canadian trust company (the "Escrow Agent") mutually acceptable to Echelon and Lobo.
Upon satisfaction or waiver of the Escrow Release Conditions (as defined below), the Escrow Agent will release the Escrowed Proceeds to Lobo, less the escrowed portion of the Cash Fee and any additional expenses of the Agents incurred after the Closing Date, which will be released to Echelon (on behalf of the Agents).
Each Subscription Receipt issued in connection with the Offering shall be deemed to be automatically exercised, without further action on the part of the holder thereof, into one unit of Lobo, comprised of (a) one Lobo voting common share (each, a "Lobo Share") and (b) a one-half of one warrant to purchase one Lobo voting common share (each whole warrant, a "Lobo Warrant") for a period of 24 months following the completion of the Offering, subject to accelerated vesting and upon satisfaction of certain conditions (the "Escrow Release Conditions"), including but not limited to:
- written confirmation from each of BIRD and Lobo that all conditions to the completion of the Acquisition have been satisfied or waived, other than the release of the Escrowed Proceeds and the closing of the Acquisition;
- the receipt of all shareholder and regulatory approvals required for the Acquisition;
- the Resulting Shares being conditionally approved for listing on the Exchange and the completion, satisfaction or waiver of all conditions precedent to such listing, other than the release of the Escrowed Proceeds; and
- Lobo and Echelon, on behalf of the Agents, delivering a release notice to the Escrow Agent confirming that the Escrow Release Conditions have been satisfied (the "Release Notice").
Upon the completion of the Acquisition, (a) the Lobo Shares shall be immediately exchanged for Resulting Shares; and (b) the Lobo Warrants will be exchanged for warrants to purchase Resulting Shares for a period of 24 months following the completion of the Acquisition.
In the event that the Escrow Agent does not receive the Release Notice prior to 5:00 p.m. (Toronto time) on the date that is 120 days after the closing date of the Offering (the "Escrow Deadline"), or if prior to such time, Lobo advises the Agents or announces to the public that it does not intend to or will be unable to satisfy the Escrow Release Conditions or that the Acquisition has been terminated or abandoned, the Escrow Agent will return to holders of the Subscription Receipts, within two business days of the Escrow Deadline or such earlier date, an amount equal to the aggregate Issue Price of the Subscription Receipts held by them, net of any applicable withholding tax. Lobo will be responsible for and liable to the holders of Subscription Receipts for any shortfall between the aggregate gross proceeds of the Offering and the Escrowed Proceeds.
In connection with the Offering, Lobo will pay to the Agents a Cash Fee equal to 7.0% (the "Cash Fee") of the gross proceeds of the Offering. Fifty percent (50%) of the Cash Fee shall be paid to the Agents on the closing date of the Offering. The remaining fifty percent (50%) of the Cash Fee shall be deposited into escrow with the Escrow Agent on the closing date of the Offering and released upon satisfaction of the Escrow Release Conditions and the release of the Escrowed Proceeds pursuant to the Release Notice and the terms of the subscription receipt agreement to be entered into in connection with the Offering, together with any interest earned thereon.
As additional consideration, the Agents will be granted compensation options of Lobo ("Compensation Options") equal to 7.0% of the number of Subscription Receipts issued under the Offering. Upon completion of the Acquisition, each Compensation Option will immediately be exchanged for a compensation option of the Resulting Issuer, each such compensation option entitling the Agents to acquire one Resulting Share (subject to any necessary adjustments), as applicable, at the Issue Price for a period of 24 months following the satisfaction of the Escrow Release Conditions.
The closing of the Offering is expected to occur on or about December 28, 2018, or as otherwise mutually agreed by Lobo and the Lead Agent.
The net proceeds from the Offering will be used for sales and marketing, research and development, and for general corporate purposes.
Arm's Length Transaction and Shareholder Approval
The proposed Qualifying Transaction will be an arm's length transaction under the policies of the Exchange, as a result of which BIRD will not be required to obtain shareholder approval for the Acquisition. However, BIRD shall be required to obtain shareholder approval in connection with the proposed share consolidation and name change.
Spartan Bioscience currently owns 17,800,000 voting common shares of Lobo, representing approximately 54.3% of the combined issued and outstanding voting common shares of Lobo (calculated on an undiluted basis) as at the date hereof.
BIRD intends to make an application to the Exchange for an exemption from the sponsorship requirements, but there is no assurance that such an exemption will be granted.
In connection with the Acquisition and pursuant to the requirements of the Exchange, BIRD will file a filing statement or a management information circular on its issuer profile on SEDAR (www.sedar.com), which will contain details regarding the Acquisition, the Offering, BIRD, Lobo and the Resulting Issuer.
Trading in BIRD Common Shares
Trading in the BIRD common shares has been halted in compliance with the policies of the Exchange. Trading in the BIRD common shares will remain halted pending the review of the Acquisition by the Exchange and satisfaction of the conditions of the Exchange for resumption of trading. It is likely that trading in the BIRD common shares will not resume prior to the closing of the Acquisition.
Directors and Management of the Resulting Issuer
The board of directors of the Resulting Issuer will be nominated by Lobo prior to the completion of the Qualifying Transaction, and will include at least two independent directors. The board of directors of the Resulting Issuer is anticipated to include John Lem, Jamie Spiegelman and up to four other directors who will be announced prior to completion of the Qualifying Transaction.
Management of the Resulting Issuer will include John Lem as Chief Executive Officer, Prakash Gowd as President, Avery Haw as Chief Financial Officer, Ajay Krishnan as Chief Technology Officer, General Counsel and Corporate Secretary, and Ahab Abdou as Vice President of Strategy.
John Lem – Chief Executive Officer and Director
John Lem is the co-founder and CEO of Lobo and brings 15 years experience in life sciences, medical devices and capital markets. Prior to Lobo, John was the co-founder and VP of Corporate Development of Spartan Bioscience. Previously, John worked at Waterfall Investments, a Toronto-based hedge fund, where he specialized in Canadian and US healthcare investments. Waterfall was acquired by Sentry Investments, a $19-billion asset management company. John holds a BASc in computer engineering from the Engineering Science program at the University of Toronto.
Prakash Gowd – President
Prakash Gowd is the co-founder and President of Lobo and brings 25 years of experience in life sciences, capital markets and the pharmaceutical industry. Prior to Lobo, Prakash was the Executive Director, Health and Biotech Equity Research at CIBC. Previously, Prakash was a corporate development consultant to life science companies, a highly ranked equity research analyst at Canaccord and National Bank Financial, and helped guide new product planning and commercial development at GlaxoSmithKline. He also served as Audit Chair and board director of a public drug development company. Prakash holds an MBA from McGill University, a BSc Pharmacy from the University of British Columbia, and a Chartered Director designation.
Avery Haw – Chief Financial Officer
Avery Haw is the CFO of Lobo and brings 15 years of experience in finance and capital markets. Prior to Lobo, Avery was the VP of Investor Relations at Brookfield Renewable Partners where he oversaw communications with the investment community regarding corporate strategy, financial performance and growth initiatives. Previously, Avery was an equity research analyst at TD Securities where he provided research coverage of power, pipeline and utility companies across North America. Avery holds an MBA from the Rotman School of Management and a BASc in computer engineering from the University of Toronto.
Ajay Krishnan – Chief Technology Officer, General Counsel and Corporate Secretary
Ajay Krishnan is the co-founder, CTO, General Counsel and Corporate Secretary of Lobo, and brings 15 years of experience in technology, law and private equity. Prior to Lobo, Ajay was at Restaurant Brands International (RBI), which oversees the system of 35,000+ restaurants operating globally as Tim Hortons, Burger King and Popeyes. At RBI, Ajay was involved in all aspects of the vertically-integrated supply chain business, and he negotiated a broad range of commercial and technology agreements. Prior to RBI, Ajay worked as a corporate and commercial lawyer in private practice, and as a technology consultant with Infusion Development (acquired by Avanade). Ajay holds a JD from the University of British Columbia and a BASc in computer engineering from the Engineering Science program at the University of Toronto.
Ahab Abdou – Vice President of Strategy
Ahab is the VP of Strategy of Lobo and brings 13 years of experience in capital markets and the cannabis industry. Prior to Lobo, Ahab was the VP of M&A and Capital Markets at iAnthus Capital, one of the largest US cannabis operators. At iAnthus, he was responsible for leading all strategic M&A and capital markets activities for the company. Ahab has been actively involved in the cannabis industry as an investor and consultant since 2014, and has in-depth knowledge of both the Canadian and US cannabis markets. Previously, Ahab was a member of a top-ranked equity research team at TD Securities, covering the telecom, cable & wireless industry. Ahab is a CFA charter holder and holds an Honours BCom in Commerce from the DeGroote School of Business at McMaster University.
Jamie Spiegelman, M.D., F.R.C.P. – Director
Dr. Jamie Spiegelman is a staff doctor at Humber River Regional Hospital in the Departments of Internal Medicine and Critical Care Medicine and is also a co-founder and director of Spartan Bioscience. Dr. Spiegelman has extensive lab experience, including research with Peter Oefner and Ronald W. Davis at Stanford University's Genome Technology Center. Dr. Spiegelman has a BSc in human biology and an MD from the University of Toronto. He completed his fellowship in Intensive Care Medicine at the University of Toronto.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the Acquisition cannot close until the required shareholder approval is obtained. There can be no assurance that the Acquisition will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Acquisition, any information released or received with respect to the Acquisition may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
The Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
Neither the Exchange nor its Regulation Services Provider (as that term is defined in policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.
This press release is not an offer of the securities for sale in the United States. The securities may not be offered or sold in the United States absent registration or an available exemption from the registration requirements of the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") and applicable U.S. state securities laws. Lobo will not make any public offering of the securities in the United States. The securities have not been and will not be registered under the U.S. Securities Act.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the structure, terms, conditions and proposed timing for completion of the Acquisition and the Offering; the ability of Lobo and BIRD to complete the Acquisition and the Offering; the intended use of the net proceeds of the Offering; the consolidation of the common shares of BIRD and the anticipated exchange ratio in connection with the Acquisition; the resumption in trading of the BIRD common shares; Lobo, BIRD and the Resulting Issuer's future business operations; the receipt of all necessary shareholder, Exchange, securities regulatory authority and other third party consents and approvals; the receipt by BIRD of an exemption from the sponsorship requirements of the Exchange; the anticipated terms of the Definitive Agreement and Escrow Release Conditions; and the anticipated composition of the board of directors and management of the Resulting Issuer. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive shareholder or regulatory approvals; and the results of continued development, marketing and sales. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. BIRD disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
SOURCE Cassowary Capital Corporation Limited
For further information: Ajay Krishnan, General Counsel, Lobo Genetics Inc., [email protected], 416 871 4250 x747; Stuart Olley, Chief Executive Officer and Director, Cassowary Capital Corporation Limited, [email protected], 403 618 4900