Flowr & Needle Enter into a Letter of Intent
February 16, 2018
The Needle Capital Corp. (TSXV:NEDL.P) (“Needle” or the “Company”), a capital pool company as defined under Policy 2.4 – Capital Pool Companies (“CPC”) of the TSX Venture Exchange (the “Exchange”), is pleased to announce it has entered into a letter of intent dated February 12, 2018 (the “LOI”) with The Flowr Corporation (“Flowr”), a private company incorporated under the Business Corporations Act (Ontario), whereby Needle and Flowr will complete an arrangement, amalgamation, share exchange or similar transaction to ultimately form the resulting issuer (the “Resulting Issuer”) who will continue on the business of Flowr (the “Transaction”), subject to the terms and conditions outlined below. Needle intends that the Transaction will constitute its Qualifying Transaction, as such term is defined in the policies of the Exchange.
Flowr, through its subsidiary, The Flowr Group (Okanagan) Inc., which has its producer’s license under the Access to Cannabis for Medical Purposes Regulations (ACMPR), is a vertically-integrated Canadian cannabis company, from seed to sale, with head offices in Markham, ON and large-scale, Good Manufacturing Practices (GMP) compliant production facilities in Kelowna, B.C.
In connection with the Transaction, Needle anticipates that the 7,200,000 shares in the capital of Needle (the “Needle Shares”) currently issued and outstanding will be consolidated (the “Consolidation”) on a basis to be determined once pricing of the Brokered Private Placement (as defined below) is finalized.
Summary of the Qualifying Transaction
The LOI contemplates Needle and Flowr completing an arm’s length business combination transaction, pursuant to which Needle Shares, or Resulting Issuer shares (as the case may be), will be issued to holders of shares of Flowr on the basis of one post-Consolidation Needle Share (or Resulting Issuer share as applicable) for every one Flowr share (the “Exchange Ratio”), provided that the Exchange Ratio may change in order to give effect to a deemed value of $0.15 per pre-Consolidation Needle Share.
As described below, on completion of the Transaction, the securityholders of Flowr would own a majority of the issued and outstanding shares of the Resulting Issuer. The common shares of the Resulting Issuer will be listed for trading on the Exchange. Further information about the proposed Transaction will be provided in a subsequent news release.
The parties to the Transaction are at arm’s length and it is therefore anticipated that the approval of the shareholders of Needle in respect of the Transaction will not be required. The Company does plan to hold a special meeting of shareholders whereat, among other things, the shareholders of Needle will be asked to approve: (i) the Consolidation; (ii) the change of name of Needle to a name provided by Flowr; (iii) the appointment of a new slate of directors, conditional upon completion of the Transaction; and (iv) the continuance to become a corporation governed by the Business Corporations Act (Ontario). It is anticipated that the Transaction and the definitive agreement in respect of the Transaction (the “Definitive Agreement”) will be put before the shareholders of Flowr for their approval.
Pursuant to the terms of the LOI, until the earliest of (i) the execution of the Definitive Agreement; (ii) mutual agreement of Needle and Flowr; or (iii) the termination of the LOI in accordance with its terms, Needle and Flowr have agreed not to solicit, negotiate, accept or discuss with any other entity, any transaction that would be in opposition to or in competition with the Transaction.
The completion of the Transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including but not limited to (i) the negotiation of the Definitive Agreement; (ii) receipt of all requisite regulatory, stock exchange, court or governmental approvals, authorizations and consents; (iii) the absence of any material change or a change in a material fact or a new material fact affecting Needle or Flowr; (iv) completion of the Brokered Private Placement (as defined below); and (v) if applicable, each company having received appropriate approvals from their shareholders. There can be no assurance that the Transaction will be completed on the terms proposed above or at all.
Brokered Private Placement
In connection with the Transaction, it is anticipated that Flowr will complete a brokered private placement of Flowr common shares. The size of the offering and the issue price at which the Flowr common shares will be sold are to be determined in the context of the market (the “Brokered Private Placement”). Subject to applicable laws and Exchange Policies, it is anticipated that each Flowr share issued pursuant to the Brokered Private Placement will be exchangeable into freely tradable common shares of the Resulting Issuer upon completion of the Transaction.
The Resulting Issuer
Upon completion of the Transaction the Resulting Issuer is expected to change its name to The Flowr Corporation or such other name as determined by Flowr and the Resulting Issuer will be a technology issuer under the TSX-V Rules.
Concurrent with the completion of the Transaction, it is expected that all directors and officers of Needle will resign and be replaced by nominees put forth by Flowr. Additional directors will be added to the board of directors of the Resulting Issuer (the “Board”) in the normal course and once identified, information with respect to the proposed additional directors will be included in a subsequent news release.
Core Flow Canada Holdings Inc., a holding company existing under the laws of the State of New York, currently owns 48,265,168 shares of Flowr, representing approximately 46% of the total issued and outstanding shares of Flowr as at the date hereof (calculated on an undiluted basis).
Arm’s Length Transaction
The proposed Transaction is an arm’s length transaction in accordance with the policies of the TSXV and is not subject to Needle shareholder approval.
Flowr is proposing to apply to the TSX-V for an exemption from applicable sponsorship requirements, failing which Flowr will ask the lead agent of the Brokered Private Placement to act as sponsor.
About The Needle Capital Corp.
The Needle Capital Corp. is a capital pool company. The Company’s principal business activity is to identify and evaluate opportunities for acquisition of assets or business. The Company was founded on April 25, 2017 and is headquartered in Calgary, Alberta.
About The Flowr Corporation
Flowr, through its subsidiaries, is a vertically-integrated Canadian cannabis company focused on the natural science of cannabis. With head offices in Markham, ON. and production in Kelowna, B.C., Flowr builds and operates large-scale, GMP compliant cultivation facilities utilizing their own patented growing systems. Flowr’s investment in research and development ensures that its master growers are able to supply patients with consistent, high-quality medicinal cannabis. With a sense of craftsmanship and a spirit of innovation, Flowr is also well positioned with a line of premium quality cannabis products for the upcoming adult-use market.
A comprehensive press release with further particulars relating to the Transaction, including further particulars of the Resulting Issuer and the Brokered Private Placement, will follow in accordance with the policies of the Exchange. In addition, a summary of Flowr’s financial information will be included in subsequent news release.
All information contained in this press release with respect to the Company and Flowr was supplied, for inclusion herein, by the respective parties and each party and its directors and officers have relied on the other party for any information concerning the other party.
For more information or interview requests, please contact:
The Needle Capital Corp.
Daniel Lanskey – Director, President and Chief Executive Officer
The Flowr Corporation
Anthony Giorgi – Director and Chief Executive Officer: email@example.com
Helen Hatzis: firstname.lastname@example.org
As noted above, completion of the Transaction is subject to receipt of all requisite regulatory, stock exchange, court or governmental approvals, authorizations and consents, approval of the shareholders of Flowr and Needle (as applicable), and completion of the Consolidation by Needle. Where applicable, the Transaction cannot close until the required approvals have been 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 continuous disclosure document containing full, true and plain disclosure regarding the Transaction, required to be filed with the securities regulatory authorities having jurisdiction over the affairs of the Company, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. The trading in the securities of Needle on the Exchange, should be considered highly speculative.
Trading in the common shares of the Company is presently halted and is expected to remain halted pending closing of the Transaction. While halted, the common shares of the Company may only trade upon Exchange approval and the filing of required materials with the Exchange as contemplated by Exchange policy.
Although the Company believes, in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Company can give no assurance that they will prove to be correct. When used in this press release, the words “estimate”, “project”, “belief”, “anticipate”, “intend”, “expect”, “plan”, “predict”, “may” or “should” and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. The forward-looking statements and information in this press release include information relating to the business plans of Needle and Flowr, the Transaction (including Exchange approval, court approval, and the closing of the Transaction), the board of directors and management of the Resulting Issuer upon completion of the Transaction and the Brokered Private Placement. Such statements and information reflect the current view of Needle and/or Flowr, respectively. Risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.
By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks: (i) there is no assurance that Needle and Flowr will obtain all requisite approvals for the Transaction, including the approval of their respective shareholders (as applicable), the approval of the Exchange for the Transaction (which may be conditional upon amendments to the terms of the Transaction) or court approval of the Transaction; (ii) there is no assurance the Brokered Private Placement will be completed as contemplated or at all; (iii) following completion of the Transaction, the Resulting Issuer may require additional financing from time to time in order to continue its operations and financing may not be available when needed or on terms and conditions acceptable to the Resulting Issuer; (iv) new laws or regulations could adversely affect the Resulting Issuer’s business and results of operations; and (v) the stock markets have experienced volatility that often has been unrelated to the performance of companies. These fluctuations may adversely affect the price of the Resulting Issuer’s securities, regardless of its operating performance. There are a number of important factors that could cause Needle’s and Flowr’s actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others: currency fluctuations; limited business history of Needle; disruptions or changes in the credit or security markets; results of operation activities and development of projects; project cost overruns or unanticipated costs and expenses, and general market and industry conditions. The terms and conditions of the Qualifying Transaction may be based on the Company’s due diligence and the receipt of tax, corporate and securities law advice for both the Company and Flowr. The Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, Flowr, their securities, or their respective financial or operating results (as applicable).
Needle cautions that the foregoing list of material factors is not exhaustive. When relying on Needle’s forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Needle has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. The forward-looking information contained in this press release represents the expectations of Needle as of the date of this press release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Needle does not undertake to update this information at any particular time except as required in accordance with applicable laws.
This press release is not an offer of the securities for sale in the United States. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.
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, 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 Transaction and has neither approved nor disapproved the contents of this press release.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.
Source: The Needle Capital Corp