VANCOUVER, Dec. 31, 2018 /CNW/ - Bevo Agro Inc. ("Bevo" or the "Company"; TSXV: BVO) is pleased to announce, further to its press release dated October 4, 2018, that it has received conditional acceptance from the TSX Venture Exchange (the "TSXV") for completion of the previously announced proposed reverse take-over (the "Reverse Take-over") of Bevo by Sun Pharm Investments Ltd. ("Sun Pharm") and spin out of Bevo's interest in CubicFarm Systems Corp. ("Cubic") to the shareholders of Bevo by way of a plan of arrangement (the "Plan of Arrangement"). Such acceptance was received December 21, 2018, is valid for a period of 90 days, and is conditional upon Bevo meeting a number of conditions, including providing the following disclosures to supplement Bevo's information circular dated November 23, 2018 (the "Circular").
Additional Non-Arm's Length Party Transactions – in addition to the current transactions described on page 96 of the Circular, in the past five years Sun Pharm has undertaken the following debt settlement transactions with non-arm's length parties: on July 17, 2017, Zenabis Limited Partnership (the predecessor to Sun Pharm) issued the equivalent of 6,853,740 Sun Pharm shares to each of Bluecore Medical Partnership and Blue Samurai Medical Partnership in settlement of shareholder advanced of $6,850,000 provided by each of them earlier in 2017.
Available Funds and Principal Purposes – the below table provides an update to the tables of available funds and proposed uses set out on page 104 of the Circular, prepared assuming that all outstanding convertible debt of Sun Pharm is repaid as opposed to being converted in accordance with its terms, and that Zenabis competes in January 2019 a financing set out in a term sheet with a Canadian chartered bank. The terms of the Secured Convertible Note and the Unsecured Convertible Note, which are listed in the below table, allow Bevo, as it exists following completion of the Reverse Take-over and the Plan of Arrangement (the "Resulting Issuer"), to force conversion of the amounts owing thereunder into common shares of the Resulting Issuer ("Resulting Issuer Shares") should the Resulting Issuer Shares trade at a volume weighted average price of at least approximately $3.97 per share for any 20 business day period following the completion of the Reverse Take-over, provided that the average trading volume during such period is at least an average of over $5,000,000 per day. The volume weighted average price of the Bevo shares for the 20 business day period ending December 28, 2018, being the last trading day prior to this Press Release, was $5.08. The average daily trading volume during such period was approximately $141,700, provided, however, that the number of issued and outstanding Resulting Issuer Shares is expected to substantially increase upon the completion of the Reverse Take-over, as set out in the Circular. In addition, the conversion price for the principal indebtedness of the Secured Convertible Note and the Unsecured Convertible Note is equivalent to ~$2.65 per Resulting Issuer Share. As a result, $43,633,360 shown as repayment in the uses of funds is only likely to occur to the extent the share price of the Resulting Issuer is less than ~$2.65 per Resulting Issuer Share.
Finally, while repayment of Convertible Debenture is included under the uses of funds, the holder of the Convertible Debenture has the right to convert the principal into Sun Pharm shares at a conversion price that is at a fixed discount to the per share price of an equity financing completed concurrently with the Reverse Take-over.
Sources of Funds | $ |
Bevo Working Capital as of September 30, 2018 | 6,143,000 |
Sun Pharm Working Capital as of September 30, 2018 | (11,348,000) |
Funds made available through financings completed in October 2018 | 40,702,184 |
Funds raised through private placement in November 2018 | 2,100,000 |
Propagation Business EBITDA1 | 10,500,000 |
Net Revenue from Cannabis Business2 | 40,500,000 |
Term Loan3 | 46,700,000 |
Warrants Exercised4 | 1,750,000 |
Total | 137,047,184 |
Uses of Funds | $ |
Repayment of Secured Convertible Note | 27,500,000 |
Repayment of Unsecured Convertible Note | 16,133,360 |
Repayment of Convertible Debenture | 4,150,000 |
Repayment of Existing Bevo FCC Debt | 20,865,000 |
Repayment of Existing Topgro FCC Debt | 2,700,000 |
Repayment of Existing Equipment Loans | 392,000 |
Topgro Cash Purchase Price and Topgro Capex5 | 9,800,000 |
National Access Cannabis Subscription Cost6 | 5,000,000 |
Cannabis Business SG&A Costs7 | 36,000,000 |
Closing Fees and Expenses8 | 3,825,000 |
Working capital anticipated to be allocated to Capital Expenditures, Investments and Other Expenses | 5,497,184 |
Residual unallocated working capital | 5,184,640 |
Total | 137,047,184 |
(1) Assumed to be $7m per year based on historical performance; this is less than the $7.7m in annual EBITDA reported by Bevo for its fiscal year ending 30 June 2018: see news release of Sept 28, 2018 | |
(2) Based on existing constructed annual capacity of 6,000kg, sold at $6.00 per gram, net of $1.50 per gram in variable costs | |
(3) Based on the term sheet provided by a Canadian chartered bank and the intended uses thereof; Zenabis has not executed the term sheet but is in the process of negotiating the terms. | |
(4) Proceeds from the exercise of 28.2% of the Secured Convertible Note warrants confirmed as exercised at ~$2.62 per Sun Pharm common share as of the date hereof. | |
(5) Includes $9.3m related to the cash purchase price of the asset and $500k for conversion capex | |
(6) Assumed to occur on 26 October 2019 | |
(7) Assumed to be $2m per month | |
(8) Estimated to be $825,000 for legal fees at closing and $3,000,000 for financial advisor fees at closing based on a share price of the Resulting Issuer of $5.00 per share. The financial advisor fee is dependent on the Bevo share price and may change depending on the actual trading price of the Resulting Issuer upon closing of the Reverse Take-over. | |
The transaction costs included in the above table consist of fees payable to Agentis Capital Partners of $3,000,000, based on a Resulting Issuer share price of $5.00 per share, pursuant to its engagement letter with Bevo dated April 25, 2018. The financial advisor fee is dependent on the Resulting Issuer share price and may change as a result of the actual trading price of the Resulting Issuer upon closing of the Reverse Take-Over.
Principal Securityholders - the following table provides an update to the table of Principal Securitiyholders set out on page 105 of the Circular, showing holdings both on a non-diluted and fully-diluted basis:
Name | Non-Diluted Resulting Issuer Shares(1) | Diluted Resulting Issuer Shares(2) |
Bluecore Medical Partnership | 32,548,392 (17.61%) | 33,757,003(3) (18.15%) |
Blue Samurai Medical Partnership | 32,548,392 (17.61%) | 33,757,003(4) (18.15%) |
Brar Bioceutical Corp. | 25,758,352 (13.94%) | 26,740,349(5) (14.39%) |
(1) | Assumes that none of the Bevo Shareholders make an Election to receive Zenabis Preferred Shares, and assuming no convertible securities are converted into Sun Pharm Shares prior to the completion of the Reverse Take-Over, in which case the number of issued and outstanding shares upon completion of the Reverse Take-Over is expected to be 184,812,532. |
(2) | Assumes that none of the Bevo Shareholders make an Election to receive Zenabis Preferred Shares, and assuming that only the principal shareholder has converted or exercised their convertible securities, and no other convertible securities have been converted into Zenabis Shares. |
(3) | Assumes the conversion of the Unsecured Convertible Note in the amount of $3,200,000 held by Bluecore Medical Partnership into 1,208,611 Zenabis Shares at a price of approximately $2.65 per share (after taking into account the Exchange Ratio). |
(4) | Assumes the conversion of the Unsecured Convertible Note in the amount of $3,200,000 held by Blue Samurai Medical Partnership into 1,208,611 Zenabis Shares at a price of approximately $2.65 per share (after taking into account the Exchange Ratio). |
(5) | Assumes the conversion of the Unsecured Convertible Note in the amount of $2,600,000 held by Brar Bioceutical Corp. into 981,997 Zenabis Shares at a price of approximately $2.65 per share (after taking into account the Exchange Ratio). |
Seed Share Resale Requirements – finally, the TSXV is imposing seed share resale restrictions on the following holders:
Escrowed Shares
Name | Number of Shares | Terms of Escrow |
Rockheights Investments Ltd. | 5,944,235 | 25% released on issuance of TSXV Bulletin |
Hodson, Vaughn | 1,486,059 | 25% released on issuance of TSXV Bulletin |
Perera, Samira | 990,706 | 25% released on issuance of TSXV Bulletin |
Camele, Daniel | 561,403 | 25% released on issuance of TSXV Bulletin |
Khara, Mandeep | 495,353 | 25% released on issuance of TSXV Bulletin |
Oppal, Wally | 495,353 | 25% released on issuance of TSXV Bulletin |
Al-Barqhouty, Nadim | 371,515 | 25% released on issuance of TSXV Bulletin |
Juneja, Angaddeep | 247,676 | 25% released on issuance of TSXV Bulletin |
Lluncor, David | 247,676 | 25% released on issuance of TSXV Bulletin |
Eutis, James | 247,676 | 25% released on issuance of TSXV Bulletin |
Bozzard, Charlene | 49,535 | 25% released on issuance of TSXV Bulletin |
Chaundhry, Ankush | 49,535 | 25% released on issuance of TSXV Bulletin |
Dosanjh, Pardeep | 49,535 | 25% released on issuance of TSXV Bulletin |
Jung, David | 49,535 | 25% released on issuance of TSXV Bulletin |
Mangat, Mandeep | 49,535 | 25% released on issuance of TSXV Bulletin |
Potros, Eyedis | 49,535 | 25% released on issuance of TSXV Bulletin |
Sonik, Rajiv | 49,535 | 25% released on issuance of TSXV Bulletin |
Escrowed Stock Options
Name | Number of Options | Terms of Escrow |
Natasha Ryz (Dr.) | 495,393 | 20% released on issuance of TSXV Bulletin |
Karen Parent | 495,393 | 20% released on issuance of TSXV Bulletin |
This press release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
NEITHER THE TSXV NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSXV) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
This news release contains statements that may constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information may include, among others, statements regarding the future plans, costs, objectives or performance of Bevo or Sun Pharm, or the assumptions underlying any of the foregoing. In this news release, words such as "may", "would", "could", "will", "likely", "believe", "expect", "anticipate", "intend", "plan", "estimate" and similar words and the negative form thereof are used to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. No assurance can be given that any events anticipated by the forward-looking information will transpire or occur, including the completion of the Reverse Take-Over and Plan of Arrangement. Forward-looking information is based on information available at the time and/or management's good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond Bevo and Sun Pharm's control. These risks, uncertainties and assumptions include, but are not limited to, those described Bevo's Management's Discussion & Analysis for the fiscal year ended June 30, 2018, a copy of which is available on SEDAR at www.sedar.com, and could cause actual events or results to differ materially from those projected in any forward-looking statements. Bevo does not intend, nor does Bevo undertake any obligation, to update or revise any forward-looking information contained in this news release to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws.
About Bevo Agro
Bevo Agro is North America's leading supplier of propagated agricultural plants, operating approximately 53 acres of state-of-the-art greenhouse facilities on 98 acres of land in Langley, BC and 20 acres of land in Pitt Meadows, BC. The Company's main products have been the propagation of vegetable plants such as tomatoes, peppers, cucumbers, and other plants such as bedding plants, flowers and grasses. The Company markets its products to established greenhouse growers, nurseries and retail outlets throughout North America.
About Sun Pharm
Sun Pharm is currently a leader in agriculture, technology, pharmaceutical sales, consumer packaged goods, international distribution and brand marketing, with cannabis and cannabis-related purchase orders from the provinces of New Brunswick, British Columbia, Nova Scotia, and Yukon Territory. Sun Pharm is currently a privately-held cannabis company which has one of the largest, federally licensed indoor medical cultivation footprints in Canada, operating two licensed production facilities in British Columbia and New Brunswick, with a third expected to be coming online shortly in Nova Scotia. Sun Pharm is currently working towards globally recognized EU GMP certifications. Sun Pharm has one of the most experienced management teams in the industry, with expertise in retail consumer packaged goods, global pharmaceutical sales and manufacturing, quality assurance, and commercialized cultivation. The growing team has more than two decades of experience in organic cultivation and distribution of herbs and nutraceutical products throughout the Americas, North Africa, and the Middle East. Sun Pharm's sales team has more than two decades in product development, commercialization, and retail and pharmaceutical sales including international distribution.
SOURCE Bevo Agro Inc.
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