Salona Global Medical Device Corporation (the
“
Company”, “
SGMD” or
“
Salona Global”) (TSXV: SGMD) announced today the
execution of a non-binding Letter of Intent (the
“
LOI”) memorializing the terms and conditions of a
potential acquisition of a target business (the
“
Target”).
Under the terms of the LOI, SGMD would acquire
100% of the stock of the Target, a nationwide (U.S.) vertically
integrated company founded more than a decade ago with proprietary
brands and products specializing in ergonomic equipment and
fittings, as well as a wide range of medical tools distributed to
physical therapy clinics. According to SGMD’s due diligence, the
Target had 2020 unaudited revenue in excess of $11,000,000. In
2020, the Target generated 35% gross profit margins with positive
cash flow.
The acquisition, as contemplated, would be
highly accretive, with the increase in revenues and profits far
outweighing the increase in the shares issued for the
acquistion.
If closed, the transaction would provide
additional U.S. organic growth opportunities for future acquisition
candidates through access to the Target’s large nationwide clinical
footprint. Additionally, SGMD plans to expand selected branded
products, intellectual property and designs owned by the Target
into the European and Global markets.
According to the LOI, the consideration would
include a down payment of US$3,200,000 and 3,709,585 restricted
(12-month hold) common shares of SGMD (SGMD has approximately 63.8
million common shares outstanding, on a partially diluted basis
assuming exchangeable shares of 19.162 million common shares of
SGMD) followed by an earn-out payment expected 13 months after the
closing estimated to be $1,500,000, split 61.5% cash and 38.5%
shares (valued at a 10% discount to the 20-day vwap on the one year
anniversary of the close assuming the stock trades above $2 per
share). SGMD plans to close this acquisition with existing cash on
the balance sheet.
“We are pleased to have executed this LOI to
acquire this strategically important company which is another key
building block in creating a world-class, fast growing global
medical device company,” said Les Cross, Chairman and interim CEO
of SGMD. “This company adds several key components to our growth
platform: both significant domestic distribution at the clinical
level and a small but lucrative group of products that we can
extend into the European and global market -- all while being
tremendously accretive.”
“With our plan to acquire IP-driven device
companies, we stand to benefit greatly with this transaction from
their wide base of clinics in the U.S. that could add to our
domestic revenue growth,” continued Mr. Cross. “This Target does
have certain specialized products that we believe we can extend
into the European market, but its main value, besides its margins
and cash flow, lies in the access to the top physical therapy
clinics in the country. Our plan is always to surround our
customer, whether in the U.S. or globally. We remain focused on
several potential acquisitions of high-tech IP-driven devices to
leverage our platform.”
SGMD is currently negotiating and working on a
definitive agreement for the transaction contemplated by the
LOI.
For more information please contact:
Les CrossChairman of the Board and Interim Chief
Executive OfficerTel: 1 (800) 760-6826Email:
Info@Salonaglobal.com
Additional Information
There can be no assurance that the acquisition
contemplated in the LOI will be completed as proposed or at all.
Completion of the acquisition contemplated in the LOI is subject to
a number of conditions, including but not limited to, negotiation
and execution of a definitive agreement and completion of due
diligence.
There can be no assurance that any of the
potential acquisitions in advanced negotiations will be completed
as proposed or at all and no definitive agreements have been
executed. Completion of any transaction will be subject to
applicable directors, shareholder and regulatory approvals.
The securities referred to in this news release
have not been, nor will they be, registered under the United
States Securities Act of 1933, as amended, and may not be offered
or sold within the United States or to, or for the account or
benefit of, U.S. persons absent U.S. registration or an applicable
exemption from the U.S. registration requirements. This news
release does not constitute an offer for sale of securities for
sale, nor a solicitation for offers to buy any securities. Any
public offering of securities in the United States must be made by
means of a prospectus containing detailed information about the
company and management, as well as financial statements.
Unless otherwise specified, all dollar amounts
in this press release are expressed in Canadian dollars.
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.
Certain statements contained in this press
release constitute "forward-looking information" as such term is
defined in applicable Canadian and United States securities
legislation. The words "may", "would", "could", "should",
"potential", "will", "seek", "intend", "plan", "anticipate",
"believe", "estimate", "expect" and similar expressions as they
relate to the Company, including: closing of the proposed
acquisition; information relating to the business plans of the
Company; statements regarding anticipated revenue and positive
cash of acquired companies; the Company’s acquisition strategy;
future acquisitions and the structure and financing of such
acquisitions; information with respect to future growth and growth
strategies; the Company’s organic growth plan and strategy and
the manner in which the Company proposes to accomplish it; and
anticipated trends in the Company’s industry; are intended to
identify forward-looking information. All statements other than
statements of historical fact may be forward-looking
information. Such statements reflect the Company's current views
and intentions with respect to future events, and current
information available to the Company, and are subject to certain
risks, uncertainties and assumptions, including: the Company and a
target being satisfied with due diligence; the Company successfully
negotiating and executing definitive agreements for an acquisition;
closing conditions being satisfied or waived; and the Company
obtaining all requisite approvals for a transaction. Many factors
could cause the actual results, performance or achievements that
may be expressed or implied by such forward-looking
information to vary from those described herein should one or more
of these risks or uncertainties materialize. Examples of such
risk factors include, without limitation: credit; market (including
equity, commodity, foreign exchange and interest rate);
liquidity; operational (including technology and infrastructure);
reputational; insurance; strategic; regulatory; legal;
environmental; capital adequacy; the general business and
economic conditions in the regions in which the Company
operates; the ability of the Company to execute on key
priorities, including the successful completion of acquisitions,
business retention, and strategic plans and to attract,
develop and retain key executives; difficulty integrating newly
acquired businesses; the ability to implement business
strategies and pursue business opportunities; disruptions in or
attacks (including cyber-attacks) on the Company's information
technology, internet, network access or other voice or data
communications systems or services; the evolution of various types
of fraud or other criminal behavior to which the Company is
exposed; the failure of third parties to comply with their
obligations to the Company or its affiliates; the impact of
new and changes to, or application of, current laws and
regulations; granting of permits and licenses in a highly
regulated business; the overall difficult litigation
environment, including in the United States; increased competition;
changes in foreign currency rates; increased funding costs
and market volatility due to market illiquidity and competition for
funding; the availability of funds and resources to pursue
operations; critical accounting estimates and changes to
accounting standards, policies, and methods used by the
Company; the occurrence of natural and unnatural catastrophic
events and claims resulting from such events; and risks
related to COVID-19 including various recommendations, orders and
measures of governmental authorities to try to limit the
pandemic, including travel restrictions, border closures,
non-essential business closures, quarantines,
self-isolations, shelters-in-place and social distancing,
disruptions to markets, economic activity, financing, supply
chains and sales channels, and a deterioration of general
economic conditions including a possible national or global
recession; as well as those risk factors discussed or referred
to in the Company’s disclosure documents filed with United States
Securities and Exchange Commission and available at www.sec.gov,
and with the securities regulatory authorities in certain provinces
of Canada and available at www.sedar.com. Should any factor affect
the Company in an unexpected manner, or should assumptions
underlying the forward-looking information prove incorrect, the
actual results or events may differ materially from the
results or events predicted. Any such forward-looking information
is expressly qualified in its entirety by this cautionary
statement. Moreover, the Company does not assume responsibility
for the accuracy or completeness of such forward-looking
information. The forward-looking information included in this
press release is made as of the date of this press release and
the Company undertakes no obligation to publicly update or
revise any forward-looking information, other than as required by
applicable law.
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