Pivot Pharmaceuticals Inc. (OTCQB: PVOTF) (CSE: PVOT) is pleased to announce that it has entered into an arm's-length non-binding letter of intent (the “LOI”) pursuant to which Pivot proposes to acquire (the “Proposed Transaction”) Agro-Biotech Inc. (“Agro-Biotech”), a Health Canada ACMPR Licensed Producer located in Saint-Eustache, Québec. Following the completion of the Proposed Transaction, which is anticipated to occur by April 15, 2018, Agro-Biotech will continue to operate on a standalone basis.
The Proposed Transaction contemplates the acquisition by Pivot of: (i) all of the issued and outstanding shares (the “Agro-Biotech Shares”) of Agro-Biotech; and (ii) all of the issued and outstanding shares (the “Property Holdco Shares”) of a separate corporation (the “Property Holdco”) which owns the premises occupied by Agro-Biotech. The consideration to be paid by Pivot to Agro-Biotech’s shareholders for the Agro-Biotech Shares is comprised of: (i) a cash component of $25,000,000 payable in tranches; and (ii) an equity component of 35,000,000 common shares of Pivot to be issued at a deemed price per share of $2.0571 (representing a deemed value of $72,000,000), for an aggregate deemed value for the Agro-Biotech Shares of $97,000,000. The consideration to be paid by the Issuer to Property Holdco’s shareholders for the Property Holdco Shares is a single cash payment of $3,600,000 payable within one year of the closing of the Proposed Transaction. The aggregate deemed value of the Proposed Transaction (for the acquisition of both the Agro-Biotech Shares and the Property Holdco Shares) is $100,600,000.
Pursuant to the Proposed Transaction, Pivot will also undertake to invest $15,000,000 in the development of Agro-Biotech’s business.
There are a number of conditions precedent to the completion of the Proposed Transaction, including, but not limited to, completion of satisfactory due diligence, receipt of all necessary regulatory approvals, including the approval of the Canadian Securities Exchange (“CSE”), and completion of the definitive transaction documentation.
It is expected that Pivot will have to complete a financing in order to satisfy its financial obligations in connection with the Proposed Transaction. Pivot has engaged Origin Merchant Partners as financial advisors in order to assist in obtaining the required financing.
In connection with the Proposed Transaction, Pivot has agreed to pay to Tremblant Management Inc. a finder’s fee equal 2.5% of the deemed value of the Agro-Biotech Shares (2.5% of $97,000,000) payable in common shares of Pivot to be issued upon closing of the Proposed Transaction.
Highlights of the Transaction
Pivot is a differentiated player in the cannabis industry due to its approach to improving dosing and bioavailability of cannabinoids with proven pharmaceutical and patented formulation and delivery technologies. Upon the addition of Agro-Biotech, the Company will become vertically integrated, controlling the entire manufacturing process from “seed to derivatives” and capturing margin along the entire supply chain.
Upon closing of the Proposed Transaction and Agro-Biotech being granted a Dealer’s License, Pivot intends to extract and sell oils and isolates, formulate pharmaceutical grade preparations, perform analytical testing, undertake research and development, produce and sell derivatives and be able to conduct import and export activities in its Good Manufacturing Process (GMP) facility. This will ensure that our formulators will have the purest cannabinoids needed to develop and commercialize quality products using patented drug delivery technologies from cannabis oils. Securing the upstream supply ensures a competitive advantage for products derived from Pivot’s patented formulation technologies. This includes semi-solid creams, gels, capsules, transdermal patches and ready-to-infuse beverage formulations.
Agro-Biotech operates a fully licensed, purpose-built, indoor hydroponic cannabis production facility located in Saint-Eustache, Québec, 40 kilometres north of Montréal. Phase I is now complete and Phase II and Phase III are expected to be completed by the end of September 2018, resulting in a total grow area of 75,000 sq. ft., capable of producing a cumulative 10,000 kgs per year.
Agro-Biotech received its Producer’s License from the Office of Medical Cannabis on January 12, 2018. Upon the anticipated issuance of a Sales License from Health Canada initial revenue is expected in June 2018. The facility design includes extraction and purification areas expected to be operational following the successful application and receipt of a Dealer’s License from Health Canada.
Agro-Biotech is one of only six Licensed Producers in Québec, Canada’s second largest province with a population of over 8.4 million people. Owners of 75 high quality cannabis strains, including high expressors of CBD, Agro-Biotech's genetics will enable it to bring unique, differentiated cannabis products to market.
As part of this transaction, Pivot will relocate its head office and all operational functions from Vancouver to Saint-Eustache, Québec and will formulate its industry-leading, patented pipeline of pharmaceutical-grade bio-cannabis products within the Agro-Biotech building. By taking advantage of Hydro-Québec’s preferential pricing for cannabis producers, Scientific Research and Experimental Development Tax Incentive credits, access to an experienced and skilled pharmaceutical research, development and manufacturing labour force in the Greater Montréal area, as well as proximity to major domestic and international markets, Pivot is perfectly positioned and prepared for the legalization of cannabis and cannabis derivatives in Canada and parts of the European Union.
Generation of Revenue:
Upon issuance of the Health Canada Sales License, Agro-Biotech will be permitted to supply patients with dried cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR) program. Pivot aims to further increase revenues with the extraction sales of oils and purification of isolates. Each of these activities are expected to significantly increase revenues from dried flower to oil to isolates and finished formulations.
Growing International Presence:
Pivot currently manufactures several bio-cannabis products in Germany and Israel and intends to supply North American and EU markets once appropriate licenses are in place. Upon closing of the previously announced “RTIC” transaction, Pivot foresees entering the cannabis derivatives market in California, including the sale of capsules, bulk powder, beverages and stick packs.
Highly Experienced Management Teams:
The Agro-Biotech management team has extensive experience and is guided by a knowledgeable and talented Master Grower, each with over 20 years in the cannabis and fertilizer industries. Pivot will leverage Agro-Biotech’s experienced leadership and integrate technology and research and development for the purpose of accelerating development and growth potential.
“The shareholders of Agro-Biotech are extremely excited to be partnering with Pivot to create a world-class cannabis company in Québec. Combining our experience, modern facility, master growing techniques and Pivot’s pharmaceutical know-how will bring tremendous value to stakeholders,” said Yan Dignard, President of Agro-Biotech. He also stated that “joining the Pivot team will open doors to keep innovating with our unique production process and cannabis genetics. Agro-Biotech will retain a high level of independence and our existing management and production teams will continue to produce high quality products. ”
Dr. Patrick Frankham, Pivot’s CEO stated, “I am delighted to welcome Agro-Biotech to Pivot. I look forward to working closely with the team in our new headquarters located in the greater Montréal area. With this acquisition, we are well positioned to enter the Québec cannabis market and attract experienced scientists to our organization. Pivot will seek to expand its footprint in the province beginning immediately following financing activities which are underway. After several months of identifying and discussing with potential partners in the cannabis space, the Pivot management team and our scientific advisors agreed that it was in the best interest of our shareholders to acquire the compliment of licenses which will enable us to develop our pipeline of patented formulation and delivery technologies all under one vertically integrated process from seed to derivatives. Pivot will only work with partners who truly control their processes and have the finest infrastructure and qualified personnel. We believe that these characteristics will define best in class products for wellness and health conscious consumers using bio-cannabis. Agro-Biotech will be recognized and known for its high-quality production capabilities.”
Blake, Cassels & Graydon, LLP is acting as legal counsel to Pivot and David Dubois Avocats is acting as legal counsel to Agro-Biotech.
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