Salona Global Medical Device Corporation (the
“
Company” or “
SGMD”) (TSXV:SGMD)
announced today a plan to launch an intellectual property (IP)
business unit through a transaction with a business that has a
portfolio of several revenue and royalty generating products
ranging from wearable technology to products for physical stability
as well as expertise in development and design of many medical
devices it has innovated over the past several years (the
“
Target”).
The cash flow positive Target, which generated
$8,000,000 in revenues in 2020 with 50% gross margins, develops IP
and designs cutting edge medical devices in very specific, targeted
markets (such as the sports medicine industry) on behalf of niche,
well-funded clients.
The Target captures value and revenue in one or
more of the following ways:
- Rights to the IP in markets the
niche client does not address, namely broader global healthcare
markets that SGMD does target;
- Upfront payments and milestone
bonuses for the development of the IP and the design of the
product; and/or
- Long-term, recurring royalty
streams from the IP for the life of the patent from the
commercially successful clients.
The Value of the Transaction to
SGMDThe Company is focused on the IP value of the
transaction and the near term downstream revenue potential in SGMD
markets. As the Target generates revenue and cash flow by designing
products and creating IP for its niche clients, it simultaneously
gains the expertise applicable to specific medical device markets
SGMD intends to serve. The key aspect of the Company’s proposed
transaction is the commercialized expertise or IP rights the Target
retains for products in markets their clients do not address,
specifically certain global healthcare markets that SGMD targets,
such as recovery medicine.
As an example, the Target developed and
commercialized IP for a well-funded, niche client in a specific
sports medicine market, and as part of the development agreement,
the Target retained IP and marketing rights for SGMD’s market for
general recovery medicine in the non-sports market. These are the
types of growth opportunities SGMD looks to leverage with this
transaction.
“We are pleased to be in a position to launch
our IP acquisition business unit and become a fully integrated
medical device company just a few months after listing,” said Les
Cross, Chairman and interim CEO of SGMD. “As we have developed our
deal pipeline, we often unearth not just companies for sale, but
products and untapped IP we can transact adding to the assets we
can leverage into our global sales channel. This is a great
IP-driven medical device transaction with fantastic design
expertise and IP that we could leverage globally in our target
market. It has a treasure trove of design expertise and
intellectual property. By reformulating the products at our
facility, we aim to boost sales at increasing margins.”
Details of the Proposed
TransactionThe transaction, as currently negotiated by
both parties and subject to adjustments in advance of execution of
a definitive agreement, is expected to be split 40% stock and 60%
in cash. There is expected to be an initial payment of US$3,500,000
followed by a payment expected in January 2023 of up to (1)
US$3,500,000, and (2) 6,383,954 common shares of SGMD based upon
cash flow milestones. SGMD plans to finalize this transaction with
existing cash on the balance sheet. (SGMD has approximately 63.8
million common shares outstanding, on partially diluted basis,
including 19.162 million common shares of SGMD issuable pursuant to
exchangeable shares of a subsidiary). “With our previous
announcement in July to acquire a company with a wide base of
clinics in the U.S., we stand to benefit greatly with this proposed
transaction as we aim to sell IP-driven products into that
channel,” continued Mr. Cross. “We are building a fully integrated
company with a strategy of acquiring platform businesses that are
already cash flow positive, and then improving our results through
revenue enhancement and operational synergies. We look forward to
finalizing agreements with both targets shortly and continue onto
the next set of targets. Our M&A team is working diligently so
we can meet our goal of frequent and accretive deals every
quarter.”
The Company and the Target executed a
non-binding letter of intent on June 23, 2021(the
“LOI”) and SGMD is finalizing a definitive
agreement for the transaction with the Target.
The Company has posted its latest corporate
presentation, along with a webcast led by Chairman & interim
CEO Les Cross, at www.salonaglobal.com/investors.
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 herein will be completed as proposed or at all.
Completion of the acquisition contemplated 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 director, 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 and timing of the
proposed acquisitions; the transaction with the Target providing
significant global growth opportunities to sell certain medical
devices into markets served by SGMD; the terms and amounts of the
final negotiated consideration/payments; the Company launching an
IP business unit and becoming a fully integrated medical device
company; the Company being able to leverage globally in its target
market the design expertise of the Target; SGMD boosting sales and
profits at great margins reformulating the Target’s products at
SGMD’s facility for other segments of the healthcare market; the
Company’s acquisition strategy; the Company finalizing agreements
with targets shortly and continuing onto the next set of targets;
the Company completing frequent and accretive deals every quarter;
information relating to the business plans of the Company; the
Company’s acquisition strategy; and information with respect to
future growth and growth strategies; 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;
statements regarding anticipated revenue and positive cash of
acquired companies; 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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