Primary Energy Metals (PRIM-Cse) to Acquire Colombian Licensed Producer
July 11, '19 - NR
Primary Energy Metals is pleased to announce that it has completed its initial due diligence review of NNZ Consulting Corp. (“NNZ”). Following the review, the board of directors has resolved to move forward with the acquisition of NNZ (the “Transaction”), and has entered into a comprehensive letter of intent with NNZ, dated effective July 8, 2019, in furtherance of the Transaction. NNZ is a privately-held company which, through its subsidiary, Ihuana SAS (“Ihuana”), is licensed to cultivate, produce and distribute cannabidiol (“CBD”) based medical grade cannabis in Colombia. Ihuana SAS is seeking to become a large scale producer of naturally grown premium quality non-psychoactive cannabis, with its primary operations centralized in the Bogota savannah in central Colombia.
Colombia has recently adopted progressive laws on the cultivation and sale of medical cannabis, and is expected to pass new legislation on the taxation of CBD, opening the door for international exportation. At the same time, Colombia has the ideal climate for cultivation, demonstrated by a robust agricultural industry. Low labour and construction costs coupled with an established infrastructure for agricultural exports allows for Colombia to produce cannabis efficiently and inexpensively.
In consideration for the acquisition of NNZ, the Company proposes to issue 40,000,000 common shares (the “Consideration Shares”) to the existing shareholders of NNZ. A portion of the Consideration Shares may be subject to an escrow arrangement in accordance with the policies of the Canadian Securities Exchange (the “Exchange”). The Company also proposes to issue 4,000,000 common shares (the “Finders’ Fee Shares”) to certain arms’-length third-parties who assisted in introducing the Transaction to the Company, as well as 800,000 common shares (the “Advisory Fee Shares”) to a contractor, as consideration for certain corporate finance advisory services provided to the Company. The Finders’ Fee Shares, and the Advisory Fee Shares, will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws. The Company is not expected to assume any long-term liabilities in connection with the Transaction, but will assume responsibility for all ongoing obligations of NNZ.
In connection with completion of the Transaction, the Company intends to undertake a non-brokered private placement (the “Financing”) through the offering of up to 11,666,667 subscription receipts (each, a “Receipt”) at a price of $0.30 per Receipt for gross proceeds of $3,500,000. The proceeds from the Financing will be held in escrow pending completion of the Transaction. Upon completion of the Transaction, each Receipt will automatically be converted into one unit (each, a “Receipt Unit”) of the Company. Each Receipt Unit will consist of one common share of the Company, and one common share purchase warrant entitling the holder to acquire an additional common share of the Company at a price of $0.60 for a period of twenty-four months from completion of the Transaction. The Company may pay finders’ fees to eligible parties who have assisted the Company in introducing subscribers to the Financing. All securities issued in connection with the Financing will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
Prior to completion of the Transaction, the Company intends to offer a credit facility (the “Facility”) to NNZ to finance the operating capital requirements of NNZ prior to completion of the Transaction. It is expected that total advances under the Facility will be limited to $250,000, and that the Facility will accrue interest at a rate of ten percent per annum. The Facility will be secured against a general charge over all of the assets of NNZ, and will be repayable within ninety days in the event the Transaction does not proceed.
Upon completion of the Transaction, the Company will focus its efforts on the existing business of NNZ, and will change its name to reflect its activities in the South American cannabis sector. No changes to the board of directors or management of the Company are anticipated in connection with the Transaction.
The Transaction constitutes a “Fundamental Change” for the Company under the polices of the Exchange. Pending completion of filings with the Exchange in connection with the Transaction, trading in the Company’s common shares has been halted at the request of the Company. It is anticipated that trading will remain halted until the Transaction has been completed.
Completion of the Transaction is subject to a number of conditions, including the completion of the Financing, the approval of the shareholders of the Company, and the approval of the Exchange. The Transaction cannot be completed until these conditions are satisfied, and there can be no assurance that the Transaction will be completed in a timely fashion, or at all. Further information concerning the Transaction, including financial information for NNZ and Ihuana, will be available in the listing statement being prepared by the Company for filing with the Exchange. Once complete, a copy of the listing statement will be available for review under the Company’s profile on SEDAR ( www.sedar.com).
ON BEHALF OF THE BOARD OF DIRECTORS
PRIMARY ENERGY METALS INC.
Joel Shacker
Chief Executive Officer
For further information, readers are encouraged to contact Patrick Morris, Director, at 604.761.8597 or by email at info@primaryenergymetals.com |
