Tickers: XTSX:EECC.P
Tags: #Finance, #Mining
Vancouver, British Columbia - TheNewswire - July 23, 2019 - Efficacious Elk Capital Corp. ("EECC" or the "Company") (TSXV:EECC.P), a capital pool company, is pleased to announce that it has entered into a Letter of Intent dated July 15, 2019 (the "LOI") for the acquisition (the "Proposed Transaction") of Frontier Wellness Management Inc. ("Frontier"), a private company incorporated pursuant to the laws of British Columbia. Upon completion of the Proposed Transaction, the business of Frontier will become the business of EECC.
EECC is a capital pool company and the Proposed Transaction is intended to constitute the Company's qualifying transaction ("Qualifying Transaction") under Policy 2.4 of the TSX Venture Exchange (the "Exchange"). The Proposed Transaction does not constitute a Non-Arm's Length Qualifying Transaction (as defined in Policy 2.4 of the Exchange) and accordingly will not require the approval of EECC's shareholders.
All amounts referred herein are in Canadian dollars unless otherwise indicated.
About Frontier
Frontier is engaged in the business of acquiring and operating companies engaged in retail medicinal cannabis and cannabis derivatives in Spain.
Frontier was incorporated by articles of incorporation dated February 19, 2019 under the Business Corporations Act (British Columbia). The registered and records office of Frontier is located at 910-800 West Pender Street
Vancouver, BC, V6C 2V6. Approximately 22% of the outstanding common shares of Frontier are held by John D. MacPhail, who resides in British Columbia.
Frontier has entered into a Memorandum of Understanding with Maeva S.L. ("Maeva"), a Spanish corporation, Rucal S.L. ("Rucal"), a Spanish corporation and the wholly-owned subsidiary of Maeva, and Joan de Haro Arjona, Oscar Barros Garcia, Carlos Florencio Bello Herrero and Josep Anton Sanchez (collectively the "Maeva Shareholders"), Spanish residents each of whom holds 25% of the outstanding securities of Maeva. Pursuant to the terms of the Memorandum of Understanding, Maeva and Frontier will enter into a definitive agreement with respect to the acquisition of Rucal whereby Frontier will acquire all of the outstanding shares of Rucal from Maeva in exchange for 24,000,000 common shares of Frontier. Frontier will also make a EUR1,000,000 equity investment into Rucal and will advance an additional EUR2,000,000 of working capital to Rucal (the "Rucal Acquisition").
Rucal, operating as Medcan, owns and operates the first and only retail medical clinic in Barcelona Spain specializing in educating patients on the therapeutic use of cannabis and the sale of CBD products. Further, Medcan has an agreement with a Barcelona based laboratory to develop a suite of hemp-based CBD products and has entered into an agreement with a Spanish based distribution company to introduce that product line to the Spanish pharmacy market. Medcan also provides educational seminars to individuals, associations and medical professionals regarding cannabis and its use as a means of improving wellness.
Rucal has secured a licensed location for a cannabis club where members will have access to medical cannabis products including those containing THC. Construction for this location is underway and is expected to be completed by September with full operations by October. Rucal is also in negotiations to secure a second licensed location offering members similar products and services. This site is also under construction with similar targeted completion and operation dates.
Frontier expects the acquisition of Rucal to close prior to or concurrently with the Qualifying Transaction.
As of its fiscal year end of June 30, 2019, Frontier's unaudited financial statements show that it has $1.530 million of current assets that are part of its $1.538 million total assets. Frontier has current liabilities of $0.05 million and total liabilities of $0.05 million. Frontier had no revenue and general expenses totaling $0.18 million in the financial year ended June 30, 2019. All amounts disclosed in this paragraph are unaudited.
At the date of this news release there is no available detailed financial information in respect of Rucal however an audit of Rucal will be completed and provided to EECC as part of the due diligence process.
Terms of the Proposed Transaction
Pursuant to the terms of the LOI, EECC and Frontier will complete a business combination whereby EECC will acquire all the common shares of Frontier and the business of Frontier will become the business of the resulting issuer ("Resulting Issuer"). The shareholders of Frontier will receive one common share of EECC for every common share of Frontier currently held (the "Transaction Shares"). The Transaction Shares will be issued to the shareholders of Frontier pursuant to exemptions from the registration and prospectus requirements of applicable securities laws. The Transaction Shares may be subject to resale restrictions as required under the applicable securities legislation or, if required, the policies of the Exchange and may also be subject to escrow restrictions pursuant to the policies of the Exchange.
In connection with the Proposed Transaction, the Resulting Issuer will change its name to a name acceptable to Frontier, subject to approval by the applicable regulatory authorities (the "Name Change").
It is expected that upon completion of the Proposed Transaction, the Resulting Issuer will be listed as a Tier 2 Industrial or Technology or Life Sciences Issuer on the Exchange.
In addition, the parties have agreed that a $100,000 break fee will be payable to EECC by Frontier provided Frontier terminates the LOI under certain conditions.
Proposed Private Placement and Concurrent Financing
Prior to the Closing of the Proposed Transaction, Frontier will complete an equity financing or financings (the "Private Placement") for minimum aggregate gross proceeds of $3,000,000 at prices commensurate with market conditions, of which approximately $1,700,000 has already been raised by Frontier, with the most recent round of financing being completed at a price of $0.25 per share and further rounds contemplated to be at not less than $0.25 per share.
Concurrent with the Closing of the Proposed Transaction, either Frontier, or EECC, or a combination of Frontier and EECC will complete a further equity financing or financings (the "Concurrent Financing") for minimum gross proceeds of $3,000,000 at a price currently intended to be $0.30 per share, but in any event not less than $0.25 per share. All securities issued by EECC pursuant to the Concurrent Private Placement will be subject to a hold period of four months and one day.
The proceeds of the Private Placement and Concurrent Financing will be used to fund the costs associated with completing the Rucal Acquisition, the Proposed Transaction, and for general working capital of the Resulting Issuer, as applicable.
EECC may pay a commission commensurate with industry norms and in accordance with the policies of the Exchange in connection with the Concurrent Financing. It is not known at this time whether any investment dealer or other registrant will be engaged to assist with fund raising activities in connection with the Concurrent Financing or Private Placement.
Share Consolidation of EECC
Prior to the completion of the Proposed Transaction, EECC will complete a share consolidation on a 1.7 to 1 basis (one and seven tenths of a pre-consolidated share for one post-consolidated share) (the "Share Consolidation"). The Share Consolidation is subject to the approval of the shareholders of EECC.
Capitalization of the Resulting Issuer
There are currently 22,701,650 issued and outstanding common shares of Frontier. As a result of the Rucal Acquisition Frontier will issue a further 24,000,000 common shares to the shareholders of Rucal. This will result in EECC issuing an aggregate of 46,701,650 post-Share Consolidation common shares to the shareholders of Frontier, exclusive of any shares issued in exchange for shares issued in the Private Placement or Concurrent Financing. These numbers will be adjusted accordingly to account for any common shares issued by Frontier in connection with the Private Placement or Concurrent Financing.
There are currently 6,100,005 EECC common shares issued and outstanding, as well as 610,000 stock options currently exercisable at $0.10 and expiring ten years from the date of issuance, and 400,000 warrants of EECC currently exercisable at $0.10 and expiring two years from the date of issuance. Following the Share Consolidation there will be 3,588,238 EECC post-Share Consolidation common shares issued and outstanding, as well as 358,823 post-Share Consolidation stock options exercisable at $0.17 and 235,294 post-Share Consolidation warrants of EECC exercisable at $0.17.
Upon completion of the Proposed Transaction: (i) all EECC common shares to be issued to the holders of Frontier's common shares may be subject to resale restrictions under securities laws and the policies of the Exchange, as applicable, and (ii) all common shares held by Principals (as such term is defined in the policies of the Exchange) of EECC and the Resulting Issuer will be held in escrow in accordance with the policies of the Exchange.
Sponsorship
Sponsorship of a Qualifying Transaction is required by the TSXV unless exempt in accordance with the TSXV policies. EECC intends to apply to the TSXV for a waiver of the TSXV's sponsorship requirements; however, there is no assurance that EECC will ultimately obtain an exemption or waiver from sponsorship.
Conditions Precedent
The parties' obligations to complete the Proposed Transaction are subject to the satisfaction of customary conditions precedent including:
(a)all necessary approvals of the Exchange and all other regulatory authorities and third parties to the Proposed Transaction, including the Concurrent Financing, being obtained;
(b)the approval or consent by shareholders of Frontier of the Proposed Transaction, which has been obtained to the extent applicable;
(c)Frontier completing the Rucal Acquisition;
(d)EECC completing the Name Change and Share Consolidation on the terms set forth above;
(e)the Private Placement and Concurrent Financing having been completed;
(f)the parties have been satisfied with the results of their respective due diligence reviews in connection with the Proposed Transaction; and
(g)the Exchange conditionally accepting the common shares of the Resulting Issuer for listing, subject to the Resulting Issuer fulfilling the listing requirements of the Exchange.
Directors, Officers and Insiders of Resulting Issuer
On completion of the Proposed Transaction, the directors, officers and insiders of the resulting issuer are anticipated to be the following individuals:
John D. MacPhail - C.E.O., Chairman and Director
John MacPhail was most recently Chief Executive Officer ("CEO") of I-5 Holdings Ltd. a Canadian company focused on the US retail cannabis market. I-5 was acquired by Captor Capital Corp. after raising CAD$83 million and becoming a public company. Mr. MacPhail is also the Chairman of Wealthcraft Capital, a US company focused on pain management treatment through cannabis. Mr. MacPhail is the executive chairman of Frontier Wellness Rx. and Green Stripe Naturals. Before entering the cannabis market Mr. MacPhail worked as an investment banker for approximately 30 years, including working as the CEO of Union Securities, a firmed based out of Vancouver, BC.
Edward T. L. Cheung - Director
Mr. Cheung has over 20 years experience in Equity and Derivatives Sales-Trading at investments banks in London, Singapore, Seoul and Hong Kong. During his career he has held positions at JP Morgan, Lehman Brothers, Credit Suisse, RBS and most recently at State Street Bank & Trust. Since moving to Asia in 1998 Mr. Cheung has been advising and trading Asia Pacific equities, derivatives and exotic products for institutions, asset managers, hedge funds, central banks and sovereign wealth funds. He has been involved in the distribution of some of the biggest IPOs in Asia including ICBC (Industrial & Commercial Bank of China), China CITIC Bank and AIA Group. Mr. Cheung currently holds the position of Chief Development Officer at Pebble Labs Inc., a private biotech company developing innovative solutions to pest control in plants, aquaculture, and insects.
Mr. Cheung was awarded a Bachelor of Science degree from the University College London in Economics in 1993 and a Master of Arts. in Property Valuation & Law from City University Cass Business School, London in 1995.
Joan de Haro Arjona - Director
Joan De Haro is the founder and CEO of Medcan, an MBA and lecturer in International Economy at ESADE Business School. Mr. Haro is also the founder of Kalapa Clinic, the first medical cannabis clinic in Europe, which exited in 2015 to bring Medcan to retail. He worked as an international distribution network executive, which included a 15 year career promoting Spanish made products in the Russian markets for such brands as Roca, Pamesa and Aparici before entering the cannabis market.
Eugene A. Hodgson - Director
Mr. Hodgson brings 30 years of private and public sector experience to his position. He began his public sector career in the Northwest Territories where he acted as Senior Policy Advisor on resource-based projects. In the early 1980's he served as Executive Assistant to the Minister of the Environment, Lands, Parks and Housing in the British Columbia Government. He has held a number of senior positions in both the public sector, for the NWT and BC Governments and private industry, at International Jetfoil Ltd., First Fund Capital, Intrawest, Sea Breeze Power, Timmins Gold Corp., and Corpfinance International Limited as Vice President of the Western Region involving providing advice on finance, public and government policy and corporate affairs.
He has served on the Board of Directors of various corporations including Grandfield Pacific Corporation, First Class Systems Inc., Arimex Resources Inc., Equitable Real Estate Investment Corp., Amwest Properties Inc., Sea Breeze Power Corp., Alda Pharmaceuticals Corp, Silvermex Resources Inc., Timmins Gold Corp. (TSX & NYSE), Pacific Cascade Minerals Inc., Maxtech Ventures Inc., and Red Fund Capital Corp. (formerly Parana Copper Corporation) and is the former Chair of the Board of Governors of Vancouver Community College.
He is currently President of Fabled Copper and Gold Corp., an early stage exploration mining company and Chief Financial Officer Trait Biosciences Inc., a cannabis focused biotechnology company conducting groundbreaking research in cannabinoid cultivation and product development.
Rodney W. Reum - Director
Rodney Reum, B.Comm., CPA, CGA, has over 35 years of experience in business, accounting and finance in both the public and private sectors. Mr. Reum received his Bachelor of Commerce from the University of Alberta and obtained a professional accounting designation (CGA) shortly thereafter. Mr. Reum was a Director, President and Chief Executive Officer of several publicly listed companies on the Canadian, US, and German Exchanges and is currently a director of several publicly listed companies. Mr. Reum also consults to both public and private companies in the area of finance, corporate governance and securities compliance.
Robert Wilson - Director
Mr. Wilson has a 30-year career in investment management and investment banking, with a particular focus on M&A, corporate governance and corporate management. During his career, Mr. Wilson has held senior positions in investment banking at BMO Nesbitt Burns, First Marathon Securities, Yorkton Securities and Research Capital. Mr. Wilson has also managed investment portfolios at a major Canadian venture capital firm as well as at a subordinated debt fund that he co-founded in 2014. Most recently, Mr. Wilson held senior positions at two publicly-listed cannabis companies, where he was responsible for corporate finance and M&A. Over his career, Mr. Wilson has held board seats and senior executive positions at six public companies listed on the Canadian Securities Exchange, Toronto Stock Exchange and Exchange.
Ed Duda - C.F.O.
Mr. Duda is a Chartered Professional Accountant with over 30 years of senior industry experience with public and private companies. He holds a Bachelor of Business Administration degree and numerous Canadian Securities Institute accreditations. Mr. Duda is managing director of Delmac Pacific Management Inc., a private organization that provides consulting and advisory services to the financial services, mining, technology and medical industries. Mr. Duda recently served as Chief Financial Officer and Corporate Secretary of Northern Vertex Mining Corp. and Element Lifestyle Retirement Inc. He has also held senior positions with Haywood Securities Inc., Blackmont Capital Inc. (formerly First Associates Investments Inc. and Yorkton Securities Inc.), Union Securities Ltd. and Omni Vita Custom Wealth Management Inc.
Carlos Florencio Bello Herrero - C.O.O.
Carlos Bello is a global marketing, sales and customer operations executive with over 25 years professional, results-oriented and business management experience. Mr. Bello is a 20 year veteran of Hewlett-Packard, wherein he developed and introduced a newly branded product platform to market, managed the $200 million business inkjet hardware category across EMEA and managed the graphic arts experience center hosting upwards of 12,000 customers and partners annually. He brings a strong foundation in brand management, fast moving consumer goods, product marketing, business analytics and a sensitivity for customer experience. Mr. Bello also holds a MBA.
David W. Smalley - Corporate Secretary
Mr. Smalley is the principal of David Smalley Law Corporation where he practices corporate and securities law. He was called to the bar of the Law Society of British Columbia in 1989. Mr. Smalley earned a Bachelor of Laws degree from the University of British Columbia and a Bachelor of Arts degree from the University of Victoria. He has been an officer and director of numerous public companies over the last 20 years as well as serving as chair of numerous audit and governance committees.
Trading Halt
The shares of EECC will remain halted until completion of the Qualifying Transaction.
General
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 transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction 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 transaction, any information released or received with respect to the transaction 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 TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
All information contained in this news release with respect to EECC and Frontier was supplied by the parties, respectively, for inclusion herein, and EECC and its directors and officers have relied on Frontier for any information concerning Frontier, Maeva or Rucal.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this press release.
For further information please contact:
Eugene A. Hodgson, President and C.E.O.
Efficacious Elk Capital Corp.
Phone: (604) 805-6600
Forward Looking Statements
This news release contains forward-looking statements relating to the timing and completion of the Proposed Transaction, the future operations of the Company and other statements that are not historical facts. Forward-looking statements are often identified by terms such as "will", "may", "should", "anticipate", "expects" and similar expressions. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding the Proposed Transaction and the future plans and objectives of the Company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include the failure to satisfy the conditions to completion of the Proposed Transaction set forth above and other risks detailed from time to time in the filings made by the Company with securities regulations.
The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. As a result, the Company cannot guarantee that the Proposed Transaction will be completed on the terms and within the time disclosed herein or at all. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Company will update or revise publicly any of the included forward-looking statements as expressly required by Canadian securities law.
In the case of Frontier, this news release includes certain "forward-looking statements" which are particular to Frontier and are not comprised of historical facts. Forward-looking statements include estimates and statements that describe Frontier's future plans, objectives or goals, including words to the effect that Frontier or its management expects a stated condition or result to occur. Forward-looking statements may be identified by such terms as "believes", "anticipates", "expects", "estimates", "may", "could", "would", "will", or "plan". Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Although these statements are based on information currently available to Frontier, Frontier provides no assurance that actual results will meet management's expectations. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward looking information in this news release includes, but is not limited to, Frontier's objectives, goals or future plans, statements, research results, timing of the commencement of operations and estimates of market conditions. Factors that could cause actual results to differ materially from such forward-looking information include, but are not limited to, the ability of the Frontier to successfully implement its scientific research and product development strategy and whether these will yield the expected benefits; competitive factors in Frontier's industry sector; the success or failure of product development programs; currently existing applicable laws and regulations or future applicable laws and regulations that may affect Frontier' s business; decisions of regulatory authorities and the timing thereof; claims or concerns regarding the safety or efficacy of marketed products or product candidates; the economic circumstances surrounding Frontier's business, including general economic conditions in Canada, the US and worldwide; changes in exchange rates; changes in the equity market; inflation; uncertainties relating to the availability and costs of financing needed in the future; and those other risks to be disclosed in the filing statement or other disclosure document to be prepared in connection with the Proposed Transaction. Although Frontier believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. Frontier disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.
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