/NOT FOR DISSEMINATION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES/
One of the First Fully Integrated Companies to
Address the Growing Demand for CBD Products from Hemp and
Cannabis
OTTAWA, Dec. 3, 2018 /CNW Telbec/ - LiveWell Canada
Inc. ("LiveWell" or the "Company") (CSE: LVWL) is
pleased to announce that LiveWell has signed a binding letter of
agreement to acquire 100% of Vitality CBD Natural Health Products
Inc. and its wholly-owned U.S. subsidiaries ("Vitality"),
which will result in a reverse takeover transaction by Vitality
(the "Transaction").
The Transaction will enable the combined companies to become a
new leader in the health and wellness market for CBD products from
hemp and cannabis. Vitality, a cultivator and producer of hemp CBD,
and LiveWell, a cannabidiol ("CBD") researcher, developer,
marketer and distributor, will combine their U.S. and Canadian
operations to address the anticipated growing demand for CBD and
other cannabinoid products in North American and international
markets.
The Transaction will bring together strategically aligned U.S.
and Canadian assets to create one of the first fully integrated CBD
companies: one of the largest hemp cultivation and CBD extraction
operations in North America, which
is anticipated to be producing 3,000 kilograms per day of CBD
isolate by mid-2019; CBD research, product development and GMP
manufacturing facilities; international sales networks; and
experienced leadership. The new Canadian company ("Merger
Co") will be headquartered in Ottawa,
Ontario, with locations in Las
Cruces, New Mexico, and Eureka,
Montana, United States, in
addition to Gatineau, Quebec,
Canada.
Legalization and acceptance of CBD products for health and
wellness is accelerating globally. CBD is most commonly used
to treat anxiety, insomnia, pain and nausea, but is being
investigated as a treatment for other conditions. Earlier this
year, the U.S. FDA approved the CBD drug, Epidiolex, for treatment
of childhood epilepsy. The World Health Organization has
recommended that CBD be descheduled across its 194 nation
members.
The market for hemp CBD products is rapidly emerging and is
expected to eclipse recreational cannabis. CBD and other
cannabinoids can be extracted from both hemp and cannabis, but hemp
faces fewer legal restrictions worldwide and is more economical to
cultivate than cannabis. The Brightfield Group of Chicago has estimated that the North American
market alone for CBD from hemp could reach US$22 billion by 2022.
On Nov. 29, 2018, the U.S. Senate
and House Agriculture Committee Chairmen jointly announced an
agreement in principle that would legalize hemp under the U.S. 2018
Farm Bill. The anticipated passage of the final Farm Bill is
expected to dramatically impact the demand for hemp products in
the United States -- and possibly
beyond, therefore potentially positioning the Merger Co to
capitalize on this opportunity. Although hemp cultivation,
processing and sales are currently legal in the U.S. under the
Agricultural Act of 2014 if conducted pursuant to a state
Department of Agricultural pilot program, the passage of the 2018
Farm Bill would essentially grant industrial hemp the same
unrestricted legal status federally as any other agricultural
commodity.
Being able to address the full spectrum of this emerging market,
from large-scale cultivation to safe and effective consumer
outcomes, makes the Merger Co unique among its peers. "This
transaction is about meeting and satisfying patient and consumer
needs. We are transforming to a global life sciences company,
leveraging a robust supply chain and production capacity, while
focusing on a differentiated brand development strategy that
prioritizes innovative and functional products and outcomes," said
David Rendimonti, President and CEO
of LiveWell.
"While North American markets are the primary focus for
wholesale and consumer sales initially, European and South American
markets are also on the horizon for the Merger Co.," Mr. Rendimonti
said.
"As the cannabis and hemp industry grows and matures, we believe
the combined organization better positions us for large-contract
opportunities, greater market awareness and long-term success,"
said Robert Leaker, President and CEO of Vitality. He further
added: "We'll have the resources to rapidly scale to meet the
anticipated explosive demand in newly legalized CBD markets
worldwide, we'll have broader management experience, and we already
share a vision of excellence backed by research and science."
The two companies have a history of strategic joint ventures.
As previously announced on October 30,
2018, Vitality and LiveWell signed a binding term sheet on
October 27, 2018, for a major CBD
supply and marketing deal with Global Wellness Distributors LLC., a
company controlled by a U.S. private equity firm ("CBD
Transaction"). The CBD Transaction, anticipated to be
finalized by December 31, 2018, is
for 1,000 kg/month commencing in January
2019, increasing to 3,000 kg/month in April 2019.
SUMMARY OF NEW MERGER CO
- 20,000 acres of CBD hemp harvested in 2018.
- Two extraction facilities with capacity to produce an estimated
100 kg/day of CBD isolate starting in December 2018, increasing to 3,000 kg/day by the
second half of 2019.
- Footprint in Canada and
the United States.
- Personalized diagnostics and patented therapeutics R&D
capabilities.
- 36,000-square-foot nutraceuticals development and manufacturing
facility, including 20 pharmaceutical-grade clean rooms. Located
close to Canada/U.S. border near
Windsor, Ontario, the facility is
certified by Health Canada, is FDA registered and has NSF
certifications for GMP, for Sport, and is USDA-Certified
Organic.
- Team of researchers and scientists specializing in CBD and
other cannabinoids. Have completed a seven-month study and major
market report on CBD, as well as a white paper on CBD from
Industrial Hemp.
- 540,000-square-foot greenhouse facility on 100 acres of land
with 61,000 square feet completed for cannabis production (20,000
sq. ft. grow space and 41,000 sq. ft. support space).
- LiveWell's current market capitalization is floating at
approximately $110-$120 million, which will represent 15% of the
Merger Co.
As noted below under "Financial Terms of the Transaction", this
Transaction will result in a reverse takeover of LiveWell by
Vitality. Accordingly, this constitutes a fundamental change
under CSE Policy 8 and therefore the Transaction and successful
listing of the new Merger Co will be subject to CSE approval (see
below "Transaction Conditions").
About Vitality CBD Natural Health Products
Inc.
Vitality is a privately-owned Canadian company and one
of North America's largest
cultivators and producers of bulk CBD isolates from hemp.
Vitality's hemp cultivation, processing and sale activities are
fully certified and compliant under U.S. state and federal laws, as
per the Montana Farm Act. It also has cultivation operations
in Alberta. In 2018, Vitality
planted and harvested 20,000 acres of industrial hemp, purposely
planted for CBD production (19,000 in Montana across 33 farms and 1,000 acres at one
farm in Alberta).
Vitality is currently producing CBD isolate in its facility at
Eureka, Montana, with existing
capacity to reach 100 kg/day of CBD isolate in December 2018. Vitality also acquired
additional production capacity in Las
Cruces, New Mexico, where it plans to retrofit the existing
production/extraction equipment. By the second half of 2019,
Vitality's total production capacity of CBD products, at both
plants, is anticipated to reach more than 3,000 kg/ day. Vitality
management anticipates a capital investment of up to US$10 million for the New Mexico location, to be funded by future
capital raise. The products offered include CBD isolate, CBD
distillate and CBD full-spectrum soft gels.
About LiveWell Canada Inc.
LiveWell is an innovative
Canadian hemp and cannabis company focused on advanced research on
CBD and other cannabinoids, as well as developing, marketing and
distributing consumer health and wellness products. The
company is a late-stage cannabis cultivation applicant with two
locations: Ottawa, Ontario, and
Litchfield, Quebec. A
Research and Innovation Centre is also planned for the site in
Litchfield to further LiveWell's
discovery in CBD and other cannabinoids.
LiveWell's team of researchers and scientists recently completed
a seven-month study and major market report on CBD, has published a
white paper on CBD from Industrial Hemp, is working on CBD product
formulations and partnering with other research entities. LiveWell
has leadership experience from the pharmaceutical, engineering,
consumer marketing, food and grocery industries, and the ability to
leverage commercial and strategic expertise in global markets.
In October 2018, LiveWell
announced it was acquiring Acenzia Inc., a Windsor, Ont.-based developer and manufacturer
of nutraceutical products for the health and wellness market.
Acenzia specializes in patented therapeutics specific to particular
medical conditions and personalized diagnostics. It also offers a
manufacturing facility that is certified by Health Canada, is FDA
registered and has NSF certifications for GMP, for Sport, and is
USDA-Certified Organic. The acquisition is expected to close
by the end of 2018.
FINANCIAL TERMS OF THE TRANSACTION
At the closing of
the Transaction, LiveWell will issue sufficient number of common
shares to shareholders of Vitality in order for Vitality
shareholders to own 85% of the total fully diluted outstanding and
issued common shares of LiveWell. Furthermore, Vitality
shareholders are entitled to receive an additional 5% of the total
fully diluted outstanding and issued common shares of LiveWell if
Vitality achieves the performance milestone, as defined in the
binding letter of agreement, by June 30,
2019. The Transaction will constitute a reverse takeover of
LiveWell (see below for appointment of Directors and
Officers). Because the Merger Co intends to list on one of
the major stock exchanges in the United
States shortly after the closing of the Transaction, the
parties may consider a share consolidation at the closing of the
Transaction, which will be determined at the time of the definitive
agreement.
The following includes pertinent, relevant unaudited financial
information of Vitality at October 31,
2018, as prepared by Vitality management:
- Current assets were approximately US$400
million, virtually all related to the estimated carrying
value of inventory (harvested hemp biomass) on 20,000 acres based
on observable market transactions excluding volume discount.
- Total liabilities were approximately US$30 million, including US$0.7 million customer deposits.
For the ten months ended October 31,
2018, Vitality had not generated significant revenue
(approximately US$1 million) due to
its start-up phase and new extraction facility that becomes fully
operational in December 2018. Its operating expenses
for the same period were approximately US$2
million.
Audited consolidated financial statements of Vitality for the
period from August 1, 2017, to
September 30, 2018, will be provided
to LiveWell shareholders to approve the Transaction (see below
Transaction Conditions).
DIRECTORS AND KEY EXECUTIVES
When the Transaction
closes, the following directors and key executive officers will be
appointed to lead the Merger Co:
Mike Mueller, Chairman of the
Board
Mr. Mueller was President and CEO of MDS Capital Corp.
from 2003 to 2005. Prior to that, he held a number of senior
positions at TD Bank Financial Group, including Senior VP and
Country Head of its USA Division,
and Vice Chairman and Head of Global Investment Banking. Mr.
Mueller has served on a number of corporate and non-profit boards,
including as Chairman of PSP Investments. He is currently Chairman
of Revera Inc., a privately held company in the seniors living
space, with more than 50,000 residents worldwide.
Bill MacKinnon, Audit
Committee Chairman
Mr. MacKinnon is a Chartered Professional
Accountant. He was the CEO of KPMG from April 1999, until his retirement in December 2008. Post-retirement he has served on a
number of corporate and non-for-profit boards, including Telus
Corporation and The Public Sector Investment Board. He presently
serves on the Audit Committee of both these organizations.
Owen Kenney,
Director
The CEO of VitalPure Nutraceutical and co-founder
of Vitality, Mr. Kenney has more than 20 years of experience in
residential, agricultural, commercial and civil construction and
operations, overseeing negotiations with municipalities,
landowners, engineers, lawyers and other professionals.
Kent Hoggan,
Director
Mr. Hoggan has more than four decades of experience
in the United States as a real
estate developer specializing in infrastructure and other projects
involving zoning, government entitlements and clearance.
David Rendimonti, Director and
Chief Executive Officer
Mr. Rendimonti has a 30-year track
record in building and leading top brands in the life sciences
sector through senior roles at some of the world's most prominent
healthcare organizations, such as Johnson & Johnson and Wyeth
Pharmaceuticals (a Pfizer company).
Robert Leaker, President and Chief Operating
Officer
Mr. Leaker has more than two decades of leadership
experience and a track record of creating and commercializing new
business ventures, leveraging his unique background in science,
engineering and business finance.
Steven Archambault, Chief
Financial Officer and Chief Administrative Officer
Mr.
Archambault is an accomplished finance executive with more than 20
years of experience with private and public companies, including
companies listed on the NYSE and TSE senior exchanges.
The Board will also appoint two additional independent directors
from the life sciences sector during the first half of
2019.
INDEPENDENT COMMITTEE AND ADVISORS
In light of the conflict of interests from certain executives
and directors due to equity ownership in both LiveWell and
Vitality, the Chairman of LiveWell also serving as a director of
Vitality, and LiveWell's Chief Innovation and Science Officer also
serving as the President and CEO of Vitality, the Board of
Directors of LiveWell created an Independent Committee to review
and preliminary approve the binding letter of agreement. The
Independent Committee retained the services of Haywood Securities
Inc. to obtain a fairness opinion on the Transaction and retained
Lawson Lundell as legal
advisors.
Given the conflict of interests described above, the Board of
Directors of Vitality also created an Independent Committee to
review and approve the binding letter of agreement. Vitality
and the Independent Committee utilized Durham Jones & Pinegar,
P.C. and the Law Office of David W.
Steffensen, P.C. as U.S. legal advisors and will also retain
a Canadian legal advisor.
TRANSACTION CONDITIONS
The Transaction is subject to the following key deliverables:
execution of definitive agreement, following satisfactory due
diligence by both LiveWell and Vitality; completion of the audited
consolidated financial statements for Vitality; completion of the
fairness opinion by Haywood Securities Inc.; final approval by
LiveWell's Independent Committee; completion and consummation of
the acquisition of Acenzia Inc. by LiveWell; completion and
consummation of the acquisition of all of the assets (free and
clear of all liens and encumbrances) of Vitalpure LLC by Vitality;
approval by LiveWell's shareholders at a Special Meeting to be
scheduled; receipt of regulatory approval; and other customary
closing conditions.
The Transaction is expected to close by March 31, 2019.
Cautionary Note Regarding Forward-Looking Statements
This release includes forward-looking statements about
LiveWell and its business. Often, but not always, forward-looking
statements can be identified by the use of words such as "plan",
"continue", "expect", "schedule", "project", "intend", "believe",
"anticipate", "estimate", "may", "will", "potential", "proposed"
and other similar words, or statements (including negative
variations) that certain events or conditions "may" or "will"
occur.
These forward-looking statements include, but are not limited
to, statements regarding benefits and timing of the proposed
Transaction, the completion of the CBD Transaction, the completion
of LiveWell's acquisition of Acenzia Inc., the completion of
Vitality's acquisition of Vitalpure LLC, the hemp production
capacities of Vitality, the estimated value of Vitality's assets
and liabilities, and the market demand and growth with respect to
CBD and other cannabinoid products. There are a number of
risks and uncertainties associated that could cause actual results
to differ materially from the forward-looking statements included
in this communication. For example, the expected timing and
likelihood of completion of the pending Transaction, including the
due diligence and the timing, receipt and terms and conditions of
any required governmental and regulatory approvals of the pending
Transaction that could reduce anticipated benefits or cause the
parties to abandon the transaction, the ability to successfully
integrate the businesses, the occurrence of any event, change or
other circumstances that could give rise to the termination of the
Transaction agreement, the possibility that LiveWell shareholders
may not approve the Transaction, the risk that the parties may not
be able to satisfy the conditions to the proposed transaction in a
timely manner or at all, risks related to disruption of management
time from ongoing business operations due to the proposed
Transaction, and the risk that any announcements relating to the
proposed Transaction could have adverse effects on the market price
of LiveWell's common stock. All such factors are difficult to
predict and are beyond our control.
Furthermore, the forward-looking events and circumstances
discussed in this release may not occur by certain specified dates
or at all and could differ materially as a result of unknown and
known risk factors and uncertainties affecting LiveWell and
Vitality. Accordingly, LiveWell cautions that this foregoing list
of material factors is not exhaustive, and readers are encouraged
to read all Risk Factors disclosed in the Company's Management
Discussion & Analysis dated October 26,
2018.
The forward-looking information contained in this press
release represents expectations of LiveWell as of the date of this
press release and accordingly, is subject to change after such
date. Readers should not place undue importance on forward-looking
information and should not rely upon this information as of any
other date. While LiveWell may elect to, it does not undertake to
update this information at any particular time except as required
in accordance with applicable securities laws.
Neither the Canadian Securities Exchange nor its Regulation
Services Provider accepts responsibility for the adequacy or
accuracy of this release.
For more information, visit livewellcorp.com
SOURCE LiveWell Canada Inc.