Next Hydrogen Corporation and BioHep Technologies Ltd. Announce Execution of Definitive Agreement for Reverse Takeover Transaction and Concurrent Financing
Not for distribution in the U.S. or to U.S. newswire services.TORONTO, March 04, 2021 (GLOBE NEWSWIRE) — Further to the press release dated December 21, 2020, Next Hydrogen Corporation (“Next Hydrogen” or the “Company“) and BioHep Technologies Ltd. (“BioHep”), are pleased to announce that, further to their letter of intent dated December 21, 2020, Next Hydrogen and BioHep have entered into a definitive amalgamation agreement dated March 3, 2021 (the “Amalgamation Agreement”), pursuant to which Next Hydrogen and a newly-formed subsidiary of BioHep will amalgamate to form a subsidiary of BioHep (“Amalco”) and the shareholders of Next Hydrogen will receive common shares of BioHep (the “Transaction”). Upon completion of the Transaction, it is the intention of the parties that BioHep (the “Resulting Issuer”) will continue on the business of Next Hydrogen. Closing of the Transaction is conditional on, among other things, BioHep completing the Arrangement (as defined below), the TSX Venture Exchange (the “Exchange”) approving the listing of the common shares of the Resulting Issuer (“Resulting Issuer Shares”) and other customary conditions.In connection with the Transaction, Next Hydrogen has engaged National Bank Financial Inc. (“NBF”) and TD Securities Inc. (“TD”, together with NBF, the “Active Bookrunners”) as active bookrunners on behalf of a syndicate of agents, including Echelon Wealth Partners Inc. as a passive bookrunner (collectively, the “Agents“), to act as agent on a best efforts basis in connection with a brokered private placement offering of subscription receipts (“Subscription Receipts“) of Finco for gross proceeds of up to $50,000,000 (the “Concurrent Financing“). The Concurrent Financing will be priced in the context of the market. The net proceeds of the Concurrent Financing will be used to further develop the Company’s products, hire additional team members, conduct research and development, repay certain indebtedness of the Company and for general corporate purposes. Under the terms of the Concurrent Financing, the Agents will be granted an over-allotment option to place up to an additional 15% of the number of Subscription Receipts issuable under the Concurrent Financing.Raveel Afzaal, President & CEO stated, “Next Hydrogen’s large IP portfolio was developed by proven experts in water electrolysis. Water electrolysis is the only way to generate green hydrogen which is expected to represent 25% of all energy consumption by 2050. This is a significant market opportunity that will continue to grow globally and there are less than ten notable water electrolysis companies to service this need. Our revolutionary electrolyzer design is purpose built for integration with renewable energy sources and allows for higher current densities, dynamic response and scalability. This financing is expected to accelerate our product development and help drive wide-scale adoption of our green hydrogen solutions to cost-effectively decarbonize the very large industrial and transportation sectors.”Summary of the Transaction and Concurrent FinancingThe Amalgamation Agreement provides for, among other things, a three cornered amalgamation (the “Amalgamation”) pursuant to which (i) Next Hydrogen and a newly-formed subsidiary of BioHep (“Finco”) will amalgamate pursuant to the provisions of the Business Corporations Act (Ontario) to form Amalco; (ii) all of the outstanding common shares of Next Hydrogen (“Next Hydrogen Shares”) will be cancelled and in consideration therefore holders thereof will receive Resulting Issuer Shares on the basis of one Resulting Issuer Share for every one common share of Next Hydrogen (the “Exchange Ratio”); (iii) all of the outstanding common shares of Finco (“Finco Shares”) will be cancelled and in consideration therefore holders thereof will receive Resulting Issuer Shares based on the Exchange Ratio; and (iv) Amalco will become a wholly-owned subsidiary of the Resulting Issuer. After giving effect to the Amalgamation, the prior shareholders of Next Hydrogen will collectively exercise control over the Resulting Issuer. Pursuant to the Amalgamation, all securities of Next Hydrogen convertible into Next Hydrogen Shares will cease to represent a right to acquire Next Hydrogen Shares and will provide for the right to acquire the same number of Resulting Issuer Shares at the same exercise price per share, reflecting the Exchange Ratio.The gross proceeds (less 50% of the agents’ commissions and any expenses incurred by the agents at closing of the Concurrent Financing) (the “Escrowed Proceeds”) from the Concurrent Financing will be held in escrow pending the completion of the Transaction which is expected to close on or about April 15, 2021. If all conditions to the completion of the Transaction are satisfied on or before the date that is 90 days from the closing of the Concurrent Financing or such later date as may be agreed to by the Agents and the Company (the “Escrow Deadline”), the net proceeds from the sale of the Subscription Receipts will be released from escrow to the Resulting Issuer and each Subscription Receipt will be exchanged through a series of steps under the Amalgamation for one Resulting Issuer Share. If the Transaction is not completed on or before the Escrow Deadline or is terminated at an earlier time, then the Escrowed Proceeds (plus accrued interest) for the Subscription Receipts will be returned to subscribers on a pro rata basis. To the extent that the Escrowed Proceeds (plus accrued interest) are not sufficient to satisfy the subscription price paid each subscriber, the Company will contribute such amounts as are necessary to satisfy the shortfall.Closing of the Concurrent Financing is expected to occur during the week of April 5, 2021 and is subject to customary conditions and regulatory approvals.Prior to completion of the Amalgamation, it is intended that BioHep will complete an arrangement pursuant to Section 288 of the Business Corporations Act (British Columbia) (the “Arrangement”), which will result in the spin-out of certain assets and liabilities of BioHep into a newly incorporated subsidiary of BioHep. Completion of the Amalgamation is also subject to BioHep consolidating its outstanding common shares on the basis of one post-consolidation share (“BioHep Post-Consolidation Shares”) for every 13.3 pre-consolidation shares (the “Consolidation”) and to BioHep changing its name to “Next Hydrogen Solutions Inc.” or such other name as BioHep and Next Hydrogen may determine (the “Name Change”).The parties to the Transaction act at arm’s length and therefore the approval of the shareholders of BioHep in respect of the Transaction will not be required. However, BioHep will hold an annual general and special meeting of its shareholders on April 12, 2021, whereat, among other things, the shareholders of BioHep will be asked to approve (i) the Arrangement; (ii) the Consolidation; (iii) the change of name of BioHep to “Next Hydrogen Solutions Inc.” (the “Name Change”) or such other name as BioHep and Next Hydrogen may determine; (iv) the appointment of a new slate of directors, conditional upon completion of the Transaction; and (v) the approval of BioHep’s fixed 20% stock option plan (collectively, the “BioHep Meeting Matters”).The completion of the Transaction is subject to, among others, the following conditions: (a) a special majority of the shareholders of Next Hydrogen shall have approved the Amalgamation Agreement; (b) BioHep shall have received all of the necessary shareholder and regulatory approvals, as applicable, to complete the BioHep Meeting Matters; (c) BioHep shall have completed the Consolidation, the Name Change and the Arrangement; (d) the Resulting Issuer Shares shall have been conditionally approved for listing on the Exchange; (e) all other consents, orders and approvals relating to the Amalgamation shall have been obtained; (f) the Amalgamation Agreement shall not have been terminated; (g) dissent rights shall not have been exercised with respect to the Amalgamation by the shareholders of Next Hydrogen; (h) the Exchange shall have granted an exemption from the Exchange’s sponsorship requirement or a sponsor shall have filed an acceptable sponsor’s report with the exchange; (i) there shall be prospectus exemptions available for the Amalgamation under applicable securities laws of the United States for any BioHep Post-Consolidation Shares to be issued in the United States; and (j) there shall not be in force any order restraining or enjoining the transactions contemplated by the Amalgamation Agreement. The terms and conditions of the 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 BioHep.Other Significant Conditions to ClosingCompletion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange requirements, approval by a majority of the minority shareholders. 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 listing 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 non-listed issuer should be considered highly speculative. The Exchange has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.Next HydrogenNext Hydrogen’s principal business is in the development of water electrolysis technology targeted at significantly reducing the cost of hydrogen generation from electricity sources, including renewable energy at scale. Next Hydrogen has been awarded more than 30 patents in connection with its designs/products as well as third-party validation of its intellectual property.Next Hydrogen’s head office is located in Ontario and is a corporation existing under the Business Corporations Act (Ontario).Resulting IssuerFollowing completion of the Transaction, the Resulting Issuer will carry on the business currently carried on by Next Hydrogen. The Resulting Issuer will be an Industrial or Technology issuer under the policies of the Exchange.It is expected that immediately following completion of the Transaction before giving effect to the Concurrent Financing, there will be an aggregate of 17,328,932 Resulting Issuer Shares outstanding. It is expected that following completion of the Transaction before giving effect to the Concurrent Financing, the current holders of BioHep Shares will hold approximately 4.32% of the outstanding Resulting Issuer Shares, and the holders of Next Hydrogen Shares will collectively hold approximately 95.68% of the outstanding Resulting Issuer Shares, all as calculated on a non-diluted basis immediately following the closing of the Transaction.To the knowledge of the directors and executive officers of Next Hydrogen and BioHep, the only person who is expected to beneficially own, directly or indirectly, or exercise control or direction over more than 10% of the Resulting Issuer Shares is Disruptive Ventures Inc., who will hold approximately 20.29% of the Resulting Issuer Shares.Summary Financial Information of Next HydrogenThe following table presents selected financial statement information on the financial condition and results of operations for Next Hydrogen. Such information is derived from the unaudited financial statements of Next Hydrogen for the years ended December 31, 2020 and 2019. The information provided herein should be read in conjunction with Next Hydrogen’s audited financial statements, which will be filed on SEDAR in connection with the Transaction.Note:
(1) Subsequent to the end of the reporting period, the Company completed a $6.0 million equity financing.Management of the Resulting IssuerSubject to Exchange approval, upon completion of the Transaction, it is expected that the board of directors and the senior officers of the Resulting Issuer will be the following proposed individuals. Please see below for a brief biography for each proposed individual:Raveel Afzaal – proposed President and Chief Executive OfficerMr. Afzaal brings deep capital markets expertise through a distinguished career in equity research over the past decade with a focus on Sustainability and Industrial Technologies. Prior to joining Next Hydrogen, he was an equity research analyst covering the Canadian Sustainability and Special Situations verticals for Canaccord Genuity. During his equity research career, Raveel was ranked in Brendan Wood surveys based on Buy Side nominations as well as by Thomson Reuters for estimates accuracy. Prior to joining equity research, Raveel worked in venture capital with XPV Capital. He graduated with a Bachelor of Mathematics and a Bachelor of Arts (Economics) from the University of Waterloo. He is also a CFA charterholder.Kasia Malz – proposed Chief Financial OfficerMs. Malz brings over 10 years of diverse financial leadership experience working in start-up and high-growth environments. Previously CFO of Titanium Transportation Group Inc., Kasia took the company public and grew the business from $40 million to $200 million in annual revenues. Kasia has her CPA, Chartered Accountant designation and is a licensed Certified Public Accountant in the state of Illinois. She holds a Masters of Accounting and an Honours Bachelor of Mathematics from the University of Waterloo.Jim Hinatsu – proposed Chief Operating OfficerMr. Hinatsu has more than 20 years of experience designing and developing electrochemical and hydrogen systems. Jim was the VP of Advanced Engineering for Stuart Energy Systems, where he led both R&D and IP development. Jim has also worked in the areas of fuel cells, electrochemical synthesis and corrosion protection. He holds a Ph.D, an M.A.Sc, and a B.A.Sc in Chemical Engineering from the University of Toronto.Michael Stemp – proposed Chief Technology OfficerMr. Stemp has more than 20 years of experience designing and developing hydrogen systems, including as Director of Advanced Engineering for Stuart Energy Systems. Mike holds a Ph.D in Materials Science from the Swiss Federal Institute of Technology in Lausanne, Switzerland, and an M.A.Sc and B.A.Sc in Materials Science and Engineering from the University of Toronto.Walter Howard – proposed DirectorMr. Howard brings extensive experience in operations, business development, finance, and M&A in the utility industry. He has held CEO, EVP and SVP positions with innovators in related syngas, wind energy, and cogeneration firms including Westinghouse Plasma Corp, Zegen, Noble Environmental Power (developer/owner of 486 wind turbines), General Electric Capital, and US Generating, as well as the water industry. Mr. Howard’s career spans more than 35 years of successfully executed technology development and implementation, project development and execution, and project finance. His projects have won multiple industry awards. He holds a Master’s degree in Engineering from Cornell University and an MBA from Harvard University.Matthew Fairlie – proposed DirectorMr. Fairlie is the former CTO and Executive VP of Stuart Energy Systems where he pioneered new concepts in water electrolyzer systems. He is also a former Vice Chair of the National Hydrogen Association in Washington, the former Chairman of the Hydrogen Business Council of Canada and is a Director of the California Hydrogen Business Council. Matthew holds an MSc in Physics from the University of Toronto and a DBA from Queens Business School in Kingston, Ontario.Allan MacKenzie – proposed DirectorMr. MacKenzie is the owner and principal of Disruptive Ventures, a technology private equity fund. Previously, Mr. MacKenzie was a partner of Octane Venture Partners, an oil and gas technology venture capital fund. With over 15 years of total investing experience, Mr. MacKenzie has also served as Chairman of two software technology companies, Tynt and Optessa. Mr. MacKenzie was the CFO of Quack.com, which was acquired at a significant premium by AOL. Mr. MacKenzie holds a BSc in Engineering and a BA in Economics from Stanford University. He also holds an MBA from the University of Western Ontario.SponsorshipUnder the policies of the Exchange, the parties to the Transaction will be required to engage a sponsor for the Transaction unless an exemption or waiver from this requirement can be obtained. The Company expects that the Transaction will be exempt from the sponsorship requirement of the Exchange as a result of a concurrent offering to be undertaken in connection with the Transaction. There is no assurance that an exemption or waiver from this requirement can or will be obtained.Additional InformationBorden Ladner Gervais LLP is acting as legal counsel to the Company, and Goodmans LLP is acting as legal counsel to the Agents.Investors are cautioned that, except as disclosed in the management information circular or listing statement to be prepared in connection with 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 non-listed issuer should be considered highly speculative.Neither the TSX Venture Exchange, Inc. nor its Regulation Services Provider (as that term is defined in the polices of the TSX Venture Exchange) has in any way passed upon the merits of the Transaction and associated transactions and neither of the foregoing entities accepts responsibility for the adequacy or accuracy of this release or has in any way approved or disapproved of the contents of this press release.For further information, please contact:Cautionary StatementsThis news release contains “forward-looking information” within the meaning of applicable securities laws relating to the proposal to complete the Transaction and associated transactions (including the Concurrent Financing), including statements regarding the terms and conditions of the Transaction and the Concurrent Financing, the business plans and objectives of Next Hydrogen and the Resulting Issuer, expectations for other economic, business and competitive factors and approval of regulatory bodies. 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 and 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. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the Transaction or the Concurrent Financing; the Transaction and associated transactions (including the Concurrent Financing) will differ from those that currently are contemplated; and that the Transaction and associated transactions (including the Concurrent Financing) will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The terms and conditions of the Transaction or the Concurrent Financing may change based on the Company’s due diligence and the receipt of tax, corporate and securities law advice for Next Hydrogen and BioHep. The statements in this press release are made as of the date of this release.The common shares have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement. 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 jurisdiction in which such offer, solicitation or sale would be unlawful.