- Canbud Distribution has entered into a non-binding Letter of Intent with Molecular Science Corp. (MSC)
- Under the terms of the LOI, Canbud would acquire all of the issued and outstanding common shares of MSC by way of a three-cornered amalgamation
- A wholly-owned subsidiary to be incorporated by Canbud would amalgamate with MSC with the resulting entity becoming a wholly-owned subsidiary of Canbud
- MSC shareholders would receive an aggregate of 70,600,000 common shares in exchange for their shares of MSC
- All of Canbud’s existing directors and management team members are expected to remain following the completion of the transaction
- Molecular Science Corp. is an established Health Canada licensed GMP analytical science and services company
- Canbud Distribution Corp. is a science and technology company focused on the global hemp space
- Canbud Distribution Corporation (CBDX) opened trading at C$0.13 per share
Canbud Distribution has entered into a non-binding Letter of Intent with Molecular Science Corp (MSC).
Under the terms of the LOI, Canbud would acquire all of the issued and outstanding common shares of MSC by way of a three-cornered amalgamation. MSC is a privately held analytical science and services company, carrying on the business of testing cannabis and related pharmaceutical products.
The transaction will be structured as a three-cornered amalgamation, pursuant to which a wholly-owned subsidiary to be incorporated by Canbud would amalgamate with MSC, with the resulting entity becoming a wholly-owned subsidiary of Canbud.
MSC shareholders would receive an aggregate of 70,600,000 common shares in exchange for their common shares of MSC.
Upon closing of the transaction, Canbud may also issue up to 1,765,000 common shares as a finder’s fee. The transaction is subject to receipt of all necessary regulatory approvals, including approval of the Canadian Securities Exchange.
Once the transaction has closed, the outstanding capitalization of Canbud is expected to consist of approximately 160,839,597 common shares and, options and warrants to purchase 11,600,000 and 49,630,600 common shares. Current MSC shareholders are expected to own approximately 43.9% of the corporation’s common shares on a non-diluted basis, and 35.7% on a fully diluted basis.
Canbud and MSC have agreed to negotiate the terms of a definitive agreement within 30 days of the LOI.
Following the execution of a definitive agreement, Canbud would provide MSC with a bridge loan of up to $500,000, to be used by MSC for the repayment of certain debt and for working capital purposes. The loan would bear interest at 5% per annum, mature in sixty days and be secured against the shares and assets of MSC and its operating subsidiaries.
In the event that the bridge loan is advanced, and the definitive agreement is terminated, the principal amount advanced under the loan and all accrued interest would immediately become due and payable. In addition, MSC would be required to pay to Canbud a break fee of $150,000 if MSC breaches the binding provisions of, or terminates the binding provisions of the LOI and enters into an alternative transaction with a third party within 12 months.
The common shares issued in exchange for MSC common shares would be subject to resale restrictions. Shareholders would be permitted to trade 20% of the shares after three months from closing and a further 20% of the shares after each successive three-month period thereafter until 15 months following the closing date.
All of Canbud’s existing directors and management team members are expected to remain following the completion of the transaction.
All directors and officers of MSC are expected to resign other than Mauro Aiello and Sherry Farsami, who would remain as Interim CEO and Director, Quality Assurance of the amalgamated entity carrying on the business of MSC.
Completion of the proposed transaction would be subject to a number of conditions, including, without limitation, the following:
- receipt of the required approval for the proposed transaction from the shareholders of MSC within 30 days of the signing of the definitive agreement between the parties;
- receipt of all regulatory approvals (including applicable CSE approvals for the listing of the common shares of the corporation issuable to the security holders of MSC);
- there having been no acquisitions or disposals (other than in the ordinary course of business), no debt or equity capital raisings (excepting for the corporation), no new material contracts (excepting for the corporation) or related party transactions and no loss of any material license;
- no shareholders of MSC have exercised dissent rights with respect to the amalgamation of MSC and Subco;
- no material adverse change affecting MSC or the corporation; and
- such other conditions as the parties decide are reasonable in the context of the proposed transaction.
Steve Singh, CEO of Canbud stated,
“We are extremely pleased to announce the Letter of Intent to acquire MSC, a leader within the Canadian analytical service sector. Analytical testing is a critical component of the seed-to-sale supply chain and MSC’s ability to attract and retain marque customers in a very competitive area is evidence of its technical capabilities.
The proposed transaction is intended to enable the corporation to expand its current focus and become more intricately connected within the supply chain in the cannabis and hemp sector as licensed producers refine and expand their cannabis 2.0 type product offerings, which require additional testing to conform to Health Canada regulations. The corporation’s management believes that there is an opportunity for MSC to expand its current service offerings into emerging markets such as testing for psychedelics, which makes this acquisition an exciting avenue for MSC and in-tune for the corporation to drive revenue growth.”
The transaction would be an arms-length transaction for Canbud and would not constitute a fundamental change or result in a change of control of the corporation, within the meaning of the policies of the CSE.
Formed in January 2017, MSC is an established Health Canada licensed GMP analytical science and services company. MSC tests cannabis and related pharmaceutical products for a range of purposes:
- Commercial release of cannabis products, as required by Health Canada or other authorities, including for export to international markets;
- Testing of new formulations for product development and registration, including chemical analysis of products beyond regulatory requirements for clinical purposes; and
- In-process testing and testing of manufacturing inputs (e.g., biomass, oils, etc.) for value-added products and process development.
Canbud Distribution Corp. is a science and technology company focused on the global hemp space inclusive of hemp cannabinoids (CBD).
Canbud Distribution Corporation (CBDX) opened trading at C$0.13 per share.