AIM3 and Southern Sun Enter Into Letter of Intent to Complete Qualifying Transaction
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
TORONTO, Jan. 21, 2019 (GLOBE NEWSWIRE) — AIM3 Ventures Inc. (TSXV:AIMC.P) (“AIM3″) and Southern Sun Pharma Inc. (“Southern Sun” or the “Company”) are pleased to announce that they have entered into a binding letter of intent dated January 21, 2019 (the “LOI”), which outlines the terms and conditions pursuant to which AIM3 and the Company will complete a transaction that will result in a reverse take-over of AIM3 by Southern Sun (the “Proposed Transaction”). The Proposed Transaction will be an arm’s length transaction, and, if completed, will constitute AIM3’s “Qualifying Transaction” (as such term is defined in Policy 2.4 of the TSX Venture Exchange (the “TSXV”) Corporate Finance Manual (the “Manual”)).
In connection with the Proposed Transaction, AIM3 and the Company will issue a subsequent news release setting out further information contemplated in Policy 2.4 of the Manual.
Southern Sun has been operating since February 2017 and was incorporated on June 7, 2018 under the Business Corporations Act (British Columbia) and is not a reporting issuer in any province or territory of Canada. The Company is led by a team of executives with a proven track record of execution and creation of shareholder value in Africa. Warren Schewitz, a resident of Cape Town, South Africa indirectly holds a controlling interest in Southern Sun. Southern Sun aims to differentiate itself through best of class cultivation, processing, distribution, brand and retail with a focus on the significant sub-Saharan African consumer demographic. To date, in South Africa, the Company has applied for a cannabis cultivation, production and extraction licence; in Lesotho, the Company has entered into a share purchase agreement to acquire ownership of the majority of an existing cannabis production licence holder with closing expected in the next few weeks; in Malawi, the Company has entered into a memorandum of understanding to acquire an ownership position in two separate cultivation cannabis licence applicants; and in Zimbabwe, the Company has entered into a memorandum of understanding with a governmental agency to acquire an ownership position in a cultivation cannabis licence.
Southern Sun aims to capitalize on significantly lower cost production in Africa to distribute and supply both the local cannabis market and export markets with a focus on countries in near proximity to its headquarters in South Africa. The Company plans to build a fully integrated cultivation, extraction, processing and product manufacturing facility at each of its locations with a combination of outdoor greenhouses and controlled growing environments.
Southern Sun is also establishing a retail footprint and uniquely African brand and product line. This includes both the rollout of their own stores as well as through partnerships and joint ventures with major retailers and beverage distributors. The brand and retail arm of the Company is overseen by a team of veteran South African retailers who have been successful at building brands from inception into major retail chains.
AIM3 was incorporated under the Business Corporations Act (Ontario) and is a Capital Pool Company (as defined in the policies of the TSXV) listed on the TSXV. AIM3 has no commercial operations and no assets other than cash.
Proposed Transaction Summary
The Proposed Transaction is expected to be structured as a three-cornered amalgamation pursuant to the provisions of the Business Corporations Act (British Columbia) (the “BCA”), whereby AIM3 will incorporate a wholly-owned subsidiary, under the BCA, which will amalgamate with Southern Sun (the “Amalgamation”) to form a newly amalgamated company (“Amalco”). In connection with the Amalgamation, holders of common shares in the capital of Southern Sun (“Southern Sun Shares”) will receive one common share in the capital of the Resulting Issuer (as defined below) for each Southern Sun Share held immediately before the Amalgamation and each whole Southern Sun common share purchase warrant will be exchanged for a common share purchase warrant to acquire one common share in the capital of the Resulting Issuer. In addition, each outstanding AIM3 common share (the “AIM3 Shares”) and security convertible into an AIM3 Share shall be adjusted in accordance with its terms to account for the Consolidation (as defined below) and, in respect of certain of the AIM3 stock options, to amend the expiry date of such options to a date that is 12 months following completion of the Proposed Transaction.
In connection with the Proposed Transaction, it is anticipated that AIM3 will consolidate its common shares (“AIM3 Shares”) on the basis of an agreed upon formula whereby the value of AIM3 will be divided by the combined value of AIM3 and Southern Sun to yield a percentage with such percentage representing the percentage ownership of the Resulting Issuer to be held by AIM3 shareholders and whereupon such AIM3 Shares will be consolidated accordingly to yield such percentage ownership upon completion of the Proposed Transaction (the “Consolidation”). More specifically and as set forth in detail in the LOI, upon completion by the Company of a financing within set parameters (the “Consolidation Financing”), the total issued and outstanding Southern Sun Shares, including Southern Sun Shares issued in connection with the Consolidation Financing, will be multiplied by the subscription price per security from such Consolidation Financing to yield the value of the Company for purposes of determining the combined value of AIM3 and the Company on which the Consolidation will be based.
Upon completion of the Proposed Transaction, Amalco and will carry on the business of Southern Sun as a wholly-owned subsidiary of AIM3. Accordingly, AIM3 will change its name (“Name Change”) to a name to be determined by the Company and as may be acceptable to the TSXV and regulatory authorities (the “Resulting Issuer”).
In addition, if deemed necessary to facilitate completion of the Proposed Transaction, AIM3 will continue out of the Province of Ontario and into the Province of British Columbia and in connection therewith, will adopt a new general by-law in accordance with the provisions of the BCA (the “Continuation”). It is also expected that AIM3 will put in place a new stock option plan on terms acceptable to the TSXV and applicable regulatory authorities (the “Option Plan”).
The Proposed Transaction is subject to the parties entering into a definitive agreement in respect of the Proposed Transaction (the “Definitive Agreement”) on or before April 15, 2019, or such other date as AIM3 and the Company may mutually agree. Completion of the Proposed Transaction is also subject to a number of other conditions, including obtaining all necessary board, shareholder and regulatory approvals, including TSXV approval.
In connection with the Proposed Transaction, AIM3 will convene a meeting of its shareholders for the purpose of approving, among other matters, the Consolidation, the Continuation, the election of the Board Nominees (if necessary pursuant to applicable law; as defined herein), the Proposed Transaction (if required by the policies of the TSXV), the Name Change and the adoption of the new Option Plan. Southern Sun will convene a meeting of its shareholders for the purpose of approving the Amalgamation.
As at the date of this news release, on a pre-Consolidation basis, AIM3 has: (a) 10,650,000 AIM3 Shares; and (b) 1,065,000 stock options and 500,000 broker warrants, each exercisable to acquire one AIM3 Share. As at the date hereof, the Company has 20,770,000 Southern Sun Shares and 2,199,395 common share purchase warrants, each exercisable to acquire one Southern Sun Share.
As at the date hereof it is not possible for the parties to determine the number of Resulting Issuer Shares that will be issued upon completion of the Proposed Transaction nor the ownership percentages associated with AIM3 and the Company as this will depend upon the Consolidation Financing and the Consolidation, both factors having an impact on the total number of Resulting Issuer Shares that will be issued in connection with the Amalgamation.
A joint management information circular of AIM3 and Southern Sun will be prepared and filed in accordance with the policies of the TSXV and mailed to shareholders of record of each of AIM3 and Southern Sun.
In connection with the Proposed Transaction, it is expected that Southern Sun will undertake one or more financings for aggregate gross proceeds of up to $10,000,000 but not less than $5,000,000. Notwithstanding the foregoing, at the time of such financings the Company will consider, among other things, general market conditions, the development and growth of the Company along with the capital requirements necessary to execute on the business plan and strategy of the Company and may revise or adjust the scope of the financings accordingly.
Officers and Directors
Prior to completion of the Proposed Transaction and subject to approval by the TSXV and the filing of all required materials, the members of the board of directors of the Resulting Issuer (the “Board Nominees”) will be nominated by the Company and elected by the shareholders of AIM3, such election to be subject to the completion of the Proposed Transaction. Further, the officers of the Resulting Issuer will be determined prior to completion of the Proposed Transaction.
Non-Arm’s Length Parties
Alan Friedman serves as a director on the boards of both AIM3 and Southern Sun, a position that Mr. Friedman has disclosed to AIM3 and Southern Sun. Neither Mr. Friedman, nor any other party to the Proposed Transaction or their respective Associates or Affiliates (as defined in the Manual), is a Control Person (as defined in the Manual) of both AIM3 and the Company and as such the Proposed Transaction will not be a Non-Arm’s Length Party Transaction (as defined in the Manual).
Trading in AIM3 Shares
Trading in AIM3 Shares has been halted in compliance with the policies of the TSXV. Trading in AIM3 Shares will remain halted pending the review of the Proposed Transaction by the TSXV and satisfaction of the conditions of the TSXV for resumption of trading. It is likely that trading in the AIM3 Shares will not resume prior to the closing of the Proposed Transaction.
About Southern Sun
Southern Sun is a Canadian registered company with an exclusive focus on cannabis in Africa. Led by a team of executives with a proven track record of execution and shareholder value creation on the African continent, the Company aims to differentiate itself through best in class cultivation, processing, distribution, brand and retail. The Company has a portfolio of licences and licence-applications in South Africa, Lesotho, Malawi and Zimbabwe. In addition, the Company is establishing a retail footprint and uniquely African brand and product line both with their own stores as well as established partnerships with major retailers and beverage distributors focused on the significant sub-Saharan African consumer demographic.
Cautionary Note Regarding Forward-Looking Information
This press release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of AIM3 and Southern Sun with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding: (i) expectations regarding whether the Proposed Transaction will be consummated, including whether conditions to the consummation of the Proposed Transaction will be satisfied including, but not limited to, the necessary board, shareholder and regulatory approvals and the timing associated with obtaining such approvals, if at all; (ii) the timing for completing the Proposed Transaction, if at all; (iii) whether and on what basis the AIM3 Shares will be consolidated and if the Consolidation will be approved by shareholders and the timing associated therewith; (iv) the necessity of the Continuation and if determined necessary, the timing associated therewith; (v) the timing associated with entering into the Definitive Agreement and the terms and conditions therein; (vi) the financings including the size and timing associated with completing such financings; (vii) the preparation and delivery to shareholders of a joint management information circular, the timing associated with its preparation and delivery to shareholders and the convening of the necessary shareholder meetings; (viii) the business plans and expectations of the Company including, in Lesotho, the expected timing for closing the share purchase transaction; (ix) trading in AIM3 Shares and when such trading will resume, if at all; (x) the issuance of and timing associated with issuing a further comprehensive news release or news releases; and (xi) expectations for other economic, business, and/or competitive factors.
Investors are cautioned that forward-looking information is not based on historical facts but instead reflect AIM3 and Southern Sun’s respective management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although AIM3 and the Company believe that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Resulting Issuer. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the ability to consummate the Proposed Transaction; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other conditions to the consummation of the Proposed Transaction on the proposed terms and schedule; the potential impact of the announcement or consummation of the Proposed Transaction on relationships, including with regulatory bodies, employees, suppliers, customers and competitors; changes in general economic, business and political conditions, including changes in the financial markets; changes in the perception and demand for cannabis in both local and export markets; changes in applicable laws and regulations both locally and in foreign jurisdictions; compliance with extensive government regulation and the costs associated with compliance; costs of building and developing projects and product opportunities; the risks and uncertainties associated with foreign markets; and the diversion of management time on the Proposed Transaction. This forward-looking information may be affected by risks and uncertainties in the business of AIM3 and the Company and market conditions.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although AIM3 and the Company have attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended and such changes could be material. AIM3 and the Company do not intend, and do not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to TSXV acceptance and, if applicable pursuant to TSXV requirements, majority of the minority shareholder approval. Where applicable, the Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the joint management information circular of AIM3 and Southern Sun to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of AIM3 should be considered highly speculative.
The TSXV has in no way passed upon the merits of the Proposed Transaction and has not approved or disapproved of the contents of this news 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.
SOURCE AIM3 Ventures Inc.
For further information: please contact:
Southern Sun Pharma Inc.
Phone (+27) 82 040 7274
AIM3 Ventures Inc.
Zachary Goldenberg, Chief Executive Officer