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TORONTO, Oct. 3, 2018 /CNW/ - 22 Capital Corp. (TSXV:
LFC.P) ("22 Capital") and Trichome Financial Corp.
("Trichome") are pleased to announce that they have on
October 2, 2018 entered into a
binding letter agreement (the "Letter Agreement") which
outlines the general terms and conditions pursuant to which 22
Capital and Trichome have agreed to complete a transaction that
will result in a reverse take-over of 22 Capital by the
shareholders of Trichome (the "Transaction"). The Letter
Agreement was negotiated at arm's length by independent members of
the management of Trichome and independent members of the board of
directors of 22 Capital. The Transaction, if completed, will
constitute 22 Capital's "Qualifying Transaction" as such term is
defined in Policy 2.4 of the TSX Venture Exchange
("TSXV"), and it is anticipated that the resulting issuer
will be listed as a Tier 1 Investment issuer on the TSXV.
Currently a subsidiary of CannaRoyalty Corp.
("CannaRoyalty") (CSE: CRZ), Trichome is a private
corporation. Each of Trichome and CannaRoyalty exists under
the laws of the Province of Ontario.
Terms of the Transaction
Prior to the completion of the Transaction, Trichome intends to
complete a brokered private placement (the "Offering") of
subscription receipts ("Subscription Receipts") in an amount
and at a price (the "Offering Price") to be determined in
the context of the market. Each Subscription Receipt will be
automatically converted into one common share of Trichome
("Trichome Share") immediately prior to completion of the
Transaction. The net proceeds from the Offering will be used
to fund specialty finance solutions to Trichome's growing pipeline
of opportunities in the cannabis sector. Further details
regarding the Offering, including the name of any broker engaged in
connection therewith, will be included in a subsequent news release
once additional details become available.
In connection with the Transaction, 22 Capital will effect a
consolidation (the "Consolidation") of its common shares
(the "Pre-Consolidation Shares") into such number of common
shares ("Post-Consolidation Shares") as is equal to the
quotient obtained by dividing 1,521,000 by the Offering
Price. 22 Capital will then acquire all of the issued and
outstanding Trichome Shares on the basis of one Post-Consolidation
Share for each Trichome Share outstanding.
About Trichome Financial Corp.
Trichome was incorporated on September
18, 2017 and is a specialty finance company focused on
providing flexible and creative capital solutions to the global
legal cannabis market. It was created to address the lack of credit
availability in the large, growing and increasingly complex
cannabis market. Founded by industry leaders CannaRoyalty Corp.,
Stoic Advisory, and Sprott Inc. (TSX: SII), Trichome's experienced
management team has a unique edge to capitalize on proprietary deal
flow and insight while developing a first mover advantage as a
global cannabis focused specialty finance company. Trichome
provides customized financing solutions across the industry value
chain to support growth, capital expenditures, M&A, working
capital and other needs. Transactions are typically
structured to earn attractive rates of contractual cash flows,
retain optionality on value creation and ensure return of capital.
Leveraging the combined resources and knowledge of its founders and
management, it is able to offer significant value-added financial,
product, market and operational support to its partner
companies.Trichome's current assets are all based in Canada and it has no operations or assets in
the United States.
About CannaRoyalty
CannaRoyalty is a North American cannabis consumer product
company currently focused on building a leading distribution
business in California, the
world's largest regulated cannabis market. By building a
world-class logistics platform and supporting contract
manufacturing assets, CannaRoyalty intends to support the growth of
new and established cannabis brands. CannaRoyalty believes
California, home to some of the
world's most discerning consumers and a nexus of information and
trends, will be the point of inception for the global cannabis
brands of the future. CannaRoyalty has developed a diversified
portfolio of assets within the cannabis sector, including research,
infrastructure and intellectual property to support our existing
brands, partner products and distribution networks. The company's
leadership and staff combines passion and a hands-on understanding
of the cannabis industry, with proven financial and legal
expertise. CannaRoyalty's shares trade on the Canadian Stock
Exchange (CSE) under the symbol CRZ and in the US on the OTCQX
under the symbol CNNRF.CannaRoyalty owns 1,600,000 Trichome Shares,
representing approximately 68.9% of the Trichome Shares.
Directors and Executive Officers
Subject to applicable shareholder and TSXV approval, it is
anticipated that the directors and officers of the resulting issuer
will be:
Marc Lustig, Chairman of the
Resulting Issuer
Mr. Lustig is the Founder and CEO of CannaRoyalty and is the
Chairman of Trichome and a director of 22 Capital. He holds
MSc and MBA degrees from McGill
University. He began his professional career in the
pharmaceutical industry at Merck & Co. In 2000, he started his
capital markets career in institutional equity research in the Life
Sciences sector at Orion Securities. For the next 14 years, Mr.
Lustig worked as an executive at GMP Securities L.P. and as Head of
Capital Markets at Dundee Capital Markets before becoming Principal
at KES 7 Capital. Mr. Lustig founded Cannabis Royalties &
Holdings Corp. in early 2015.
Michael Ruscetta, Chief
Executive Officer of the Resulting Issuer
Mr. Ruscetta is the Chief Executive Officer of Trichome, joining in
May, 2018 after previously managing the RCM Special Situations
Fund, a Canadian focused value-oriented equity fund. Previously,
Mr. Ruscetta served as Co-Head of Goldman Sachs' Canada Special
Situations Group, a multi-asset principal investing platform, and
as Managing Director of Amaranth Advisors (Canada) ULC, a multi-strategy investment fund
that was headquartered in Connecticut. Mr. Ruscetta also has held
numerous roles at CIBC, including many years in its merchant
banking division working exclusively on a wide array of customized
principal investments.
Kevin Jarrett, Vice President
of Investments of the Resulting Issuer
Mr. Jarrett joined Trichome in December
2017 after working as a VP, Investments at Grenville
Strategic Royalty Corp. (now Flow Capital Corp), a publicly-traded
royalty investor making investments in North American late stage
venture and early stage growth companies. Mr. Jarrett spent six
years and co-led due diligence and transactional execution efforts
on over $60 million in royalty
investments at Grenville. Mr.
Jarrett initially joined CannaRoyalty to lead the launch of
Trichome Financial while assisting CannaRoyalty's business
development team with transactions related to their US portfolio.
Prior to Grenville, Mr. Jarrett
served as an analyst at Quantum Leap Asset Management, where he
helped to lead the underwriting, execution and monitoring of the
Quantum Leap Mortgage Investments portfolio of residential real
estate assets within the Greater Toronto
Area.
Afzal Hasan, Director of the
Resulting Issuer
Mr. Hasan is the President and General
Counsel of CannaRoyalty. He obtained a Juris Doctor (J.D.)
and a Bachelor of Science (B. Sc.), Commerce and Human Biology,
from the University of Toronto. Prior
to joining CannaRoyalty, Mr. Hasan worked as a securities lawyer at
Cassels Brock & Blackwell LLP, where he developed a broad
spectrum of experience providing advice to both public and private
companies on transactions in diverse industry sectors. Mr.
Hasan's experience prior to his career in the private legal
practice includes a secondment at the Mergers and Acquisitions
Group in the Corporate Finance Branch of the Ontario Securities
Commission, working with the United Nations and the wholesale
banking division of a major multi-national bank in Thailand and completing independent research
in microbial genetics at the University of
Toronto.
Timothy Diamond, Director of
the Resulting Issuer
Mr. Diamond brings to Trichome over 25 years of entrepreneurial and
managerial experience across asset management, merchant banking,
and venture investing including founding, building and successfully
exiting several companies. He has particular experience in guiding
rapidly expanding businesses in the financial services sector. From
2009-2013, he led, grew and sold Nova Potash Corporation, a mining
company with property in Ethiopia,
and Basis Medical Technologies, Inc., an international medical
device business. In 2007, he seeded and assisted Street Capital
Financial Corporation, a Canadian mortgage origination company that
was sold in 2011 to Council Corporation, a public company based in
Toronto. From 1995-2004, he
co-founded and led the sale of Triax Capital Corp., Skylon Capital
Corp. and Venture Link Capital Corp., all Canadian-based mutual
fund wholesalers. Mr.Diamond holds a B.A. from the University of Western Ontario.
Marissa Lauder, Director of
the Resulting Issuer
Marissa
Lauder is the Executive Vice President, Chief Financial
Officer and Corporate Secretary of Street Capital Group Inc. (TSX:
SCB) and Street Capital Bank of Canada. She is a seasoned financial executive
with more than 18 years of experience in the financial services
sector in Canada. Ms. Lauder was
an executive at Home Trust Company for 6 years where she held
executive positions in both Finance and Risk Management. Ms. Lauder
also spent over 5 years at the Office of the Superintendent of
Financial Institutions of Canada
as a senior advisor in the regulation sector contributing to the
development of local and international regulatory policy for
accounting, capital and disclosure. She earned her CPA, CA
designation while working in Ernst and Young's Toronto Financial
Services office and holds a Bachelor of Commerce degree from the
University of Toronto.
Onekanew Christian Sinclair, Director of the Resulting
Issuer
Onekanew Sinclair is a well-regarded member of the
Opaskwayak Cree Nation ("OCN") and co-chair of Manitoba's Northern Economic Development
Strategy. He currently serves on the board of National Access
Cannabis (TSX-V: META), in which OCN is both a significant
shareholder and lender. Since 2002, he has worked with Indigenous
groups across Canada and
the United States, focused on
corporate development for major natural resource projects related
to hydro, mining, oil and gas. Onekanew Sinclair is well-connected
and highly regarded by the First Nations communities throughout
Manitoba and Canada, linking together development and
partnerships with Indigenous and non-Indigenous communities.
Dr. Jonathan Page, Director of
the Resulting Issuer
Dr. Page is the Co-Founder and Chief Executive Officer of Anandia
Labs, which provides industry-leading analytical testing services
including potency, pesticides, microbes and terpenes to Licensed
Producers and patients. Anandia Labs was recently acquired by
Aurora Cannabis for $115 million. He
received his PhD from the University of
British Columbia (1998) then undertook postdoctoral training
in Munich and Halle, Germany (1998-2003). He followed that by
directing a lab at the National Research
Council's Plant Biotechnology Institute from 2003-2013.
Brent Cox, Director of the
Resulting Issuer
Mr. Cox is an experienced investor and financier. Brent is a
founding partner of The Inception Companies, a private investment
vehicle focused on the global cannabis market, following a number
of years at The Yucaipa Companies, where he helped invest and
monitor over USD$4.0 billion of
private equity transactions. Mr. Cox currently serves on the board
of The Pharm (Sunday Goods), a
successful vertically integrated U.S. cannabis company, and
formerly served on the board of MedMen.
As at the date hereof, the proposed directors of the resulting
issuer beneficially own, in the aggregate, directly or indirectly,
approximately 15% of the Trichome Shares.
Mr. Marc Lustig, the Chairman of
the board of directors of Trichome beneficially owns approximately
2,000,000 of the issued and outstanding Pre-Consolidation Shares
and 500,000 options of 22 Capital (representing 19.7% on a
basic basis and 21.4% on a fully-diluted basis). Mr. Lustig
beneficially owns approximately 100,000 of the Trichome Shares
(representing 4.3% on a basic basis and 1.8% on a
fully-diluted basis). Each of Jay
Goldman (a director of 22 Capital) and Steven Mintz (a director and officer of 22
Capital) beneficially own 1,000,000 of the issued and outstanding
Pre-Consolidation Shares and 200,000 options of 22 Capital
(representing 9.9% on a basic basis and 10.25% on a fully-diluted
basis). Additionally, Mr. Goldman and Mr. Mintz beneficially own,
direct or control 10,600 and 21,200, respectively, non-voting
preferred shares of Trichome which represents 0.33% and 0.67%,
respectively, of the issued and outstanding preferred shares. Mr.
Lustig recused himself from all negotiations, deliberations and
approvals of the Letter Agreement in respect of both 22 Capital and
Trichome. Based on the foregoing and the fact that Mr. Lustig is
not a "control person" (within the meaning of the policies of the
TSXV) of either 22 Capital or Trichome, the Transaction is not
expected to constitute a Non-Arm's Length Qualifying Transaction,
within the meaning of the applicable policies of the TSXV.
Conditions to Transaction
Prior to completion of the Transaction (and as conditions of
closing):
- 22 Capital shall convene a meeting of its shareholders for the
purpose of approving, among other matters: (i) the Consolidation;
(ii) a name change to such name as may be approved by Trichome and
acceptable to applicable regulatory authorities; (iii) the election
of the directors; and (iv) the approval of the Transaction, if
required by the TSXV.
- 22 Capital will prepare a filing statement (or management
information circular) in accordance with the rules of the TSXV,
outlining the terms of the Transaction. Trichome will provide
assistance and details as to the business, assets, properties and
operations of Trichome and will be responsible for any and all
audited annual financial statements, interim financial statements,
if applicable, and pro forma financial statements related to its
business and operations.
- 22 Capital and Trichome intend to enter into a definitive
agreement (the "Definitive Agreement") in respect to the
Transaction.
- Trichome will obtain the requisite shareholder approvals for
the Transaction and the ancillary matters contemplated in the
Definitive Agreement.
- All requisite regulatory approvals relating to the Transaction,
including, without limitation, TSXV approval, will have been
obtained, as well as all third party approvals including any
lenders, financial institutions, licensors or strategic
partners.
Pre-Closing Capitalization of 22 Capital and Trichome
As of the date hereof, 22 Capital has 10,140,000
Pre-Consolidation Shares issued and outstanding, options (the
"Options") to acquire an aggregate of 1,010,000
Pre-Consolidation Shares at an exercise price of C$0.10 per Pre-Consolidation Share, and broker
warrants (the "Broker Warrants") to acquire 560,000
Pre-Consolidation Shares at an exercise price of C$0.10 per Pre-Consolidation Share. As a
condition of the Transaction, the expiry date of the Options will
be amended to expire on the date which is six months following the
closing of the Transaction.
As of the date hereof, Trichome has 2,320,000 Trichome Shares
and 3,171,301 Class A preference series 1 shares of Trichome issued
and outstanding (all of which will convert into Trichome Shares
prior to closing), and convertible securities to acquire an
aggregate of 1,479,915. Trichome Shares at an exercise
price of C$4.73 per share.
Additional Information Regarding the Transaction
The Transaction is subject to requisite regulatory approval,
including the approval of the TSXV and standard closing conditions,
including the approval of the directors of each of 22 Capital and
Trichome of the Definitive Agreement, as well as the
conditions described above. The legal structure for the Transaction
will be determined after the parties have considered all applicable
tax, securities law, and accounting efficiencies.
22 Capital was incorporated under the provisions of the
Business Corporations Act (Ontario) with its registered and head office
in Toronto, Ontario. It is a
capital pool company and intends for the Transaction to constitute
its "Qualifying Transaction" as such term is defined in the
policies of the TSXV. 22 Capital is a "reporting issuer" within the
meaning of the Securities Act (Ontario), Securities Act (British Columbia) and Securities Act
(Alberta).
Trading in the Pre-Consolidation Shares of 22 Capital is halted
at present. It is unlikely that the Pre-Consolidation Shares of 22
Capital will resume trading until the Transaction is completed and
approved by the TSXV.
Sponsorship
22 Capital expects to request an exemption from the requirement
to obtain a sponsor in respect of the proposed Transaction, in
accordance with the policies of the TSXV. Any such exemption
will be subject to the approval of the TSXV.
Further Information
All information contained in this news release with respect to
22 Capital and Trichome was supplied by the parties respectively,
for inclusion herein, and each party and its directors and officers
have relied on the other party for any information concerning the
other party.
Completion of the Transaction is subject to a number of
conditions, including but not limited to, TSXV acceptance and if
applicable pursuant to the requirements of the TSXV, majority of
the minority 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 TSXV has in no way passed upon the merits of the proposed
Transaction and has neither approved nor disapproved the contents
of this press release.
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.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
INFORMATION:
This news release contains "forward-looking information" and
"forward-looking statements" (collectively, "forward-looking
statements") within the meaning of the applicable Canadian
securities legislation. All statements, other than statements of
historical fact, are forward-looking statements and are based on
expectations, estimates and projections as at the date of this news
release. Any statement that involves discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions, future events or performance (often but not always
using phrases such as "expects", or "does not expect", "is
expected", "anticipates" or "does not anticipate", "plans",
"budget", "scheduled", "forecasts", "estimates", "believes" or
"intends" or variations of such words and phrases or stating that
certain actions, events or results "may" or "could", "would",
"might" or "will" be taken to occur or be achieved) are not
statements of historical fact and may be forward-looking
statements. In this news release, forward-looking statements
relate, among other things, to: the terms and conditions of the
proposed Transaction and the terms and conditions of the proposed
Offering. Forward-looking statements are necessarily based upon a
number of estimates and assumptions that, while considered
reasonable, are subject to known and unknown risks, uncertainties,
and other factors which may cause the actual results and future
events to differ materially from those expressed or implied by such
forward-looking statements. Such factors include, but are not
limited to: general business, economic, competitive, political and
social uncertainties; and the delay or failure to receive board,
shareholder or regulatory approvals. There can be no assurance that
such statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue
reliance on the forward-looking statements and information
contained in this news release. Except as required by law, 22
Capital and Trichome assume no obligation to update the
forward-looking statements of beliefs, opinions, projections, or
other factors, should they change.
SOURCE Trichome Financial Corp.
