Trius and African Cannabis Enter Into Letter of Intent for Proposed Reverse Takeover Transaction
Trius and African Cannabis Enter Into Letter of Intent for Proposed Reverse
Takeover Transaction
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
FREDERICTON, New Brunswick, Oct. 24, 2018 -- Trius Investments Inc. (“Trius” or the “Company”) (TSXV:TRU.H) and African
Cannabis Corp. (“African Cannabis”) are pleased to announce that they have entered into a binding letter of intent (the “LOI”) to
complete a business combination by way of a reverse takeover (the “RTO Transaction”) of the Company by the shareholders of
African Cannabis. Upon completion of the RTO Transaction, the combined entity (the “Resulting Issuer”) will continue to carry
on the business of African Cannabis. The closing of the RTO Transaction is subject to the receipt of all necessary approvals,
including without limitation regulatory approval for the listing of the common shares of the Resulting Issuer (the “Resulting
Issuer Shares”) on the Canadian Securities Exchange or another recognized junior Canadian stock exchange (an “Exchange”)
and the concurrent delisting of the common shares of Trius (the “Trius Shares”) from the TSX Venture Exchange (the “TSXV”).
The LOI was negotiated at arm’s length and is dated October 12, 2018, as amended effective October 19, 2018.
In connection with the RTO Transaction, African Cannabis intends to complete a brokered private placement of subscription
receipts (the “Subscription Receipts”) to raise aggregate gross proceeds of up to C$15,000,000 (the “Offering”). African
Cannabis has entered into an agreement with Canaccord Genuity Corp. (“Canaccord”) on behalf of a syndicate of agents
including PI Financial Corp. (together with Canaccord, the “Agents”) to complete the Offering on the terms described below.
Description of African Cannabis
African Cannabis is a Toronto-based company incorporated in British Columbia in 2018, that was formed to be involved in the
production, cultivation, extraction and export of medical cannabis in multiple African countries. African Cannabis was founded
and is led by Carl Esprey and Kojo Annan, both experienced African business people with over 40 years’ combined experience
on the continent.
Through local subsidiaries, African Cannabis currently holds a medical cannabis license in Lesotho and has entered into a
joint venture with a Zimbabwean State-owned enterprise in order to obtain a license in that country. African Cannabis is in
discussion with multiple other countries in Africa to develop the industry and ultimately produce medical cannabis at multiple
sites across the African continent.
Further details concerning African Cannabis, its operations, management, and financial status will be provided via
comprehensive news release following completion of due diligence and the negotiation of a definitive agreement in respect of
the RTO Transaction (the “Definitive Agreement”).
Private Placement of Subscription Receipts
In connection with the RTO Transaction, African Cannabis has entered into an agreement with Canaccord on behalf of the
Agents, whereby the Agents will assist African Cannabis in selling on a commercially reasonable efforts private placement
basis up to 30,000,000 Subscription Receipts at a price of C$0.50 per Subscription Receipt amounting to aggregate gross
proceeds of up to C$15,000,000. Closing of the Offering is expected to occur on or about November 30, 2018 (the “Closing
Date”) and is subject to certain conditions including, but not limited to, the receipt of all necessary regulatory and corporate
approvals. Pursuant to the terms of the Offering, the Agents have been granted an option to arrange for the sale of up to an
additional 10,000,000 Subscription Receipts for additional gross proceeds of up to C$5,000,000, which option is exercisable
by the Agents any time prior to the Closing Date.
Each Subscription Receipt shall entitle the holder to receive, upon satisfaction of certain escrow release conditions and
without payment of additional consideration, one unit of African Cannabis (a “Unit”). Each Unit shall be comprised of one
common share of African Cannabis (a “Common Share”) and one half of one Common Share purchase warrant (each whole
warrant, a “Warrant”). Each Warrant shall be exercisable into one Common Share at a price of C$0.75 for a period of 24
months from the date the escrow release conditions are satisfied.
Net proceeds of the Offering will be used to fund construction of cultivation facilities in Zimbabwe and Lesotho, for strategic
acquisition opportunities, and for general working capital purposes.
Terms of the RTO Transaction
The RTO Transaction is expected to be completed by way of an amalgamation between African Cannabis and a subsidiary of
Trius, following which the Resulting Issuer will continue the business of African Cannabis and will change its name to “African
Cannabis Corp.” The RTO Transaction constitutes an Arm’s Length Transaction under the policies of the TSXV.
As of the date hereof, Trius has 11,270,841 Trius Shares outstanding and 1,125,000 stock options (the “Trius Options”) to
acquire Trius Shares outstanding. Prior to the completion of the RTO Transaction, the Trius Shares will be consolidated on the
basis of 1.7 old Trius Shares for one new Trius Share (the “Consolidation”), with the Trius Options adjusted accordingly,
resulting in approximately 6,629,906 Trius Shares outstanding on a non-diluted post-Consolidation basis.
Upon completion of the RTO Transaction and following the Consolidation, holders of Common Shares (including the Common
Shares received upon the automatic exchange of the Subscription Receipts) will receive one Resulting Issuer Share for each
Common Share held, and the Common Shares will be cancelled. African Cannabis currently has 183,788,850 Common
Shares outstanding. Any convertible securities of African Cannabis then outstanding (including the Warrants issuable upon the
automatic exchange of the Subscription Receipts) shall be exchanged on a one-for-one basis for equivalent securities of the
Resulting Issuer. The RTO Transaction values African Cannabis at approximately C$91.9 Million.
Upon completion of the RTO Transaction and assuming completion of only the Minimum Offering (as defined below), it is
expected that the ownership of the Resulting Issuer Shares on a non-diluted basis will be approximately as follows: 3.3% by
current holders of Trius Shares; 91.7% by current holders of Common Shares; and 5.0% by subscribers to the Offering.
Subject to the receipt of applicable regulatory approvals, the Resulting Issuer will pay a finder's fee to a third party in
connection with the RTO Transaction in the amount of 5% of the value of the RTO Transaction, to be paid in the form of
Resulting Issuer Shares.
Management and Directors of the Resulting Issuer
When the RTO Transaction is completed, it is anticipated that the board of directors of the Resulting Issuer shall be
reconstituted to consist of such directors as African Cannabis shall determine, and each of the officers of Trius shall resign
and be replaced with officers appointed by the new board of directors.
Conditions to the RTO Transaction
The RTO Transaction is subject to the satisfaction of customary closing conditions, including as follows:
• each of Trius and African Cannabis obtaining any requisite director and shareholder approvals, including:
• in the case of African Cannabis, for the RTO Transaction;
• in the case of Trius, the TSXV will require majority of the minority shareholder approval for the delisting application;
• the completion of due diligence investigations to the satisfaction of each of Trius and African Cannabis;
• African Cannabis completing the Offering for minimum gross proceeds of C$5,000,000 (the “Minimum Offering”);
• Trius and African Cannabis entering into the Definitive Agreement; and
• all requisite regulatory and stock exchange approvals relating to the RTO Transaction, including without limitation Exchange
approval for the listing of the Resulting Issuer Shares, having been obtained.
Additional Information Regarding the RTO Transaction
Subject to regulatory approval, after the Definitive Agreement has been signed African Cannabis may request that Trius
advance a bridge loan to African Cannabis for up to $250,000 on terms to be set out in a definitive loan agreement to be
entered into between Trius and African Cannabis (the “Bridge Loan”). It is anticipated that the Bridge Loan, if advanced, will
bear interest at the rate of 8% per annum and will have a maturity date of one year from the date of the Bridge Loan, unless
extended by mutual agreement of Trius and African Cannabis. The Bridge Loan would be secured, in first position, by a
general security agreement granting a security interest in all of the personal property, assets and undertakings of African
Cannabis. African Cannabis would use any proceeds from the Bridge Loan for general working capital purposes pending
completion of the RTO Transaction.
It is intended that the RTO Transaction will occur after the Trius Shares have been delisted from the TSXV. The final legal
structure for the RTO Transaction will be determined after the parties have considered all applicable tax, securities law and
accounting efficiencies.
Trius and African Cannabis shall use their commercially reasonable efforts to complete the RTO Transaction by January 31,
2019.
To Trius’ knowledge, at the time of entering into the LOI none of its directors, officers or significant shareholders had any direct
or indirect interest in, nor any other relationships with, African Cannabis or its assets.
Further Information
For further information please contact:
Joel Freudman Carl Esprey
President and Chief Executive Officer Chief Executive Officer
Trius Investments Inc. African Cannabis Corp.
Telephone: (647) 880-6414 Email: [email protected]
Telephone: (212) 896-1204
Neither the TSXV nor its Regulation Services Provider (as that term is defined in policies of the TSXV) accepts responsibility
for the adequacy or accuracy of this press release. Neither the Canadian Securities Exchange nor its regulation services
provider has reviewed or accepts responsibility for the adequacy or accuracy of this release.
Completion of the RTO Transaction is subject to a number of conditions including, but not limited to, the parties entering into
the Definitive Agreement, TSXV acceptance and, if applicable pursuant to TSXV requirements, shareholder approval. Where
applicable, the RTO Transaction cannot close until the required shareholder approval is obtained. There can be no assurance
that the RTO 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 RTO Transaction, as applicable,
any information released or received with respect to the RTO Transaction may not be accurate or complete and should not be
relied upon. Trading in the securities of Trius should be considered highly speculative. The TSXV has in no way passed upon
the merits of the RTO Transaction and has neither approved nor disapproved the contents of this press release.
All information contained in this press release with respect to Trius and African Cannabis was supplied by the parties
respectively for inclusion herein, and each party and its directors and officers have relied entirely on the other party for any
information concerning the other party. Trius has not conducted due diligence on the information provided by African Cannabis
and does not assume any responsibility for the accuracy or completeness of such information.
This press release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities described herein
in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933,
as amended (the “U.S. Securities Act”) or any state securities laws, and may not be offered or sold within the United States or
to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from
such registration is available.
This press release contains certain forward-looking statements that reflect the current views and/or expectations of
management of Trius and African Cannabis, respectively, with respect to performance, business and future events, including
but not limited to express or implied statements and assumptions regarding the intention of Trius and African Cannabis to
negotiate for or complete the RTO Transaction, the Offering or the Bridge Loan as proposed or at all. Forward-looking
statements are based on the current expectations, beliefs, assumptions, estimates and forecasts about the business and the
industry and markets in which Trius and African Cannabis operate. Forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and assumptions, which are difficult to predict. In particular, there is no guarantee
that the parties will successfully negotiate and enter into the Definitive Agreement or complete the RTO Transaction
contemplated herein; that the due diligence of Trius and/or African Cannabis will be satisfactory; that African Cannabis will
successfully complete the Offering and/or use the proceeds therefrom as specified herein; or that Trius and African Cannabis
will obtain any required shareholder or regulatory approvals, including the listing of the Resulting Issuer Shares on an
Exchange and the concurrent delisting of the Trius Shares from the TSXV. Accordingly, readers should not place undue
reliance on forward-looking statements and information herein, which are qualified in their entirety by this cautionary
statement. Neither Trius nor African Cannabis undertakes any obligation to release publicly any revisions for updating any
voluntary forward-looking statements, except as required by applicable securities law.