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
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Hodson,
Vaughn
|
1,486,059
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Perera,
Samira
|
990,706
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Camele,
Daniel
|
561,403
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Khara,
Mandeep
|
495,353
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Oppal,
Wally
|
495,353
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Al-Barqhouty,
Nadim
|
371,515
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Juneja,
Angaddeep
|
247,676
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Lluncor,
David
|
247,676
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Eutis,
James
|
247,676
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Bozzard,
Charlene
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Chaundhry,
Ankush
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Dosanjh,
Pardeep
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Jung,
David
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Mangat,
Mandeep
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Potros,
Eyedis
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following issuance of TSXV Bulletin
|
Sonik,
Rajiv
|
49,535
|
25% released on
issuance of TSXV Bulletin
25% six months following issuance of TSXV Bulletin
25% twelve months following issuance of TSXV Bulletin
25% eighteen months following 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
20% one month following issuance of TSXV Bulletin
20% two months following issuance of TSXV Bulletin
20% three months following issuance of TSXV Bulletin
20% four months following issuance of TSXV Bulletin
|
Karen
Parent
|
495,393
|
20% released on
issuance of TSXV Bulletin
20% one month following issuance of TSXV Bulletin
20% two months following issuance of TSXV Bulletin
20% three months following issuance of TSXV Bulletin
20% four months following 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.