Mr. Jonathan Gilbert reports
SCYTHIAN BIOSCIENCES CORP. (FORMERLY KITRINOR METALS INC.) CLOSES REVERSE TAKEOVER TRANSACTION
Scythian Biosciences Corp. (formerly Kitrinor Metals Inc.) has closed the previously announced three-cornered amalgamation whereby Scythian Biosciences Inc. merged with a wholly owned subsidiary of Kitrinor. The transaction constituted a change of business and a reverse takeover transaction of Kitrinor pursuant to the TSX Venture Exchange Policy 5.2 (changes of business and reverse takeovers).
Immediately prior to completing the transaction, Kitrinor changed its name from Kitrinor Metals Inc. to Scythian Biosciences Corp. and consolidated its share capital on the basis of one new common share for 20 old common shares, resulting in a total of approximately 660,583 Kitrinor postconsolidation shares. Further details regarding the transaction can be found in Kitrinor's filing statement dated June 30, 2017, filed under Kitrinor's profile on SEDAR.
The target consolidated its share capital on the basis of one new common share for eighty old common shares. The company issued a total of 2,887,051 Scythian postconsolidated shares to holders of shares of the target.
As part of the transaction, the company also issued 577,198 warrants to holders of Kitrinor warrants, 142,196 warrants to holders of the target's warrants, 10,675 options to Kitrinor option holders and 81,875 options to holders of the target's options. Options were granted pursuant to Kitrinor's and the target's stock option plan in exchange for all stock options of the company (exercise prices determined by dividing the exercise price per share at which such target option was exercisable immediately prior to the transaction, by the Kitrinor consolidation exchange ratio and the Scythian consolidation exchange ratio).
The company is also issuing a total of 75,000 new options exercisable at $8 for a period of five years, as well as 143,750 deferred share units.
The exchange has provided conditional acceptance of the transaction, including the listing of the company as a Tier 2 life sciences issuer on the exchange. The parties to the transaction will be making their final submission to the exchange postclosing in connection with the exchange's issuance of its listing bulletin.
Subscription receipt financing
As previously announced, the target completed a subscription receipt financing for gross proceeds of $13,285,000 with Clarus Securities Inc., the lead agent, and Haywood Securities Inc. and Canaccord Genuity Corp. acting as agents. In connection with the completion of the transaction, the subscription receipts converted on the basis of one subscription receipt for 0.05 share of the company. In relation to the financing, the company issued a total of 1,660,625 Scythian postconsolidated shares to holders of subscription receipts of the target at an effective cost of $8 per Scythian postconsolidated share. Escrowed proceeds of the offering have been released from escrow to the company.
In connection with the completion of the transaction, the company: (i) issued 49,700 shares to Duck Capital Inc. as payment of a finder's fee due under the terms of an agreement dated Jan. 10, 2017; and (ii) settled debt owing to certain target current and former directors and officers through the issuance of 12,500 shares of the company.
New board and management
Upon closing of the transaction, the board of directors and management of the company were reconstituted as follows:
Jonathan Gilbert, chief executive officer, chairman and director
Mr. Gilbert's professional experience spans two decades of corporate finance and technology start-up development. In addition to his position as chief executive officer and director of Scythian Biosciences, Mr. Gilbert is business development manager at Decision Nutrition, a multimedia nutrition consultancy company founded by his wife, Keren Gilbert. Prior to founding Scythian Biosciences, he served as president of New York-based Gilbert Capital Management Corp. for 14 years. Mr. Gilbert received his bachelor of business administration from the George Washington University (BBA) and a master of business administration from Kennedy Western University (MBA). Mr. Gilbert lives in Roslyn Heights, N.Y., with his wife and their three sons.
Jonathan Held, chief financial officer
Mr. Held is a chartered professional accountant, chartered accountant, with CFO-level experience with both private and public companies. Mr. Held has worked with a number of start-up companies in a number of sectors, including technology, real estate and resources, both domestic and international. Mr. Held has been involved in numerous successful public market transactions, including initial public offerings, reverse takeovers and financings. Mr. Held holds a bachelor of mathematics and master of accounting from the University of Waterloo.
David Schrader, chief operating officer
Mr. Schrader has been a practising business lawyer and consultant for over 29 years and is the developer and inventor of the company's drug therapy. Mr. Schrader is currently a partner at the law firm of Moritt Hock & Hamroff. In addition to his private legal practice, Mr. Schrader has previously been general counsel and principal for Laconia Capital, a FINRA-licensed broker dealer; and general counsel and vice-president of strategic management of K-Tex LLC, a Chinese trading company. Mr. Schrader holds numerous educational credentials, including an LLM in business transactions from the University of Alabama school of law; a master in global management from the Thunderbird School of Global Management; both an MBA and master in strategic management from the Kelley School of Business, Indiana University; a JD degree from the Benjamin N. Cardozo school of law; and a bachelor in biology, emphasizing in cell and molecular biology and biochemistry, from Johns Hopkins University. His credentials also include certification programs in supply chain management (Kelley School of Business), chief sustainability officer training (SSC), management practices (Freeman School of Business, Tulane University) and bioethics (Albert Einstein School of Medicine),
Michael Petter, director
Mr. Petter is the chief executive officer of Mikrofax eProcurement Solutions, an international San Francisco-based software development company that specializes in software-as-a-service-based supply chain management workflow tools. A native of London, England, Mr. Petter has a personal background in software development and strategic management with special focus on product marketing and customer satisfaction. Mr. Petter is recognized as a leader in the field of automated supply chain management solutions and is an invited speaker at seminars and regularly consults for private and public companies and elements of the government. Mr. Petter has been a non-executive board member of Scythian Biosciences since inception and also acts as a non-executive board member and mentor to founders in early-stage start-ups. Mr. Petter has a bachelor of computer science from London University, is a past fellow of the Institute of Analysts and Programmers, member of the British Computer Society, Institute of Directors, and is a chartered engineer.
Peter Benz, director
Mr. Benz is a serial entrepreneur who has founded, invested and expanded numerous companies in a cross-section of industry sectors. Mr. Benz has significant experience managing and directing both private and public companies and currently serves as chairman of Optex Systems Holdings Inc. (OTC) and as director and audit committee member of Cogint Inc. (Nasdaq), Lilis Energy Inc. (Nasdaq) and uSell.com Inc. (OTC). Mr. Benz is also currently involved with Viking Asset Management LLC, a privately owned hedge fund sponsor investing in the public equity and alternative investment markets, where he has served as chairman since 2002. Mr. Benz received his bachelor of business administration (BBA) from the University of Notre Dame, United States, in 1982.
Roger Rai, director
Mr. Rai is the managing director of E.S. Rogers Enterprises and president of R3 Concepts Inc. As managing director at E.S. Rogers, Mr. Rai advises Edward Rogers on business, revenue, partnership and talent development. Mr. Rai was previously the vice-president of business development of Peeks Social Ltd., a TSX Venture Exchange-listed company operating Keeks.com, a social networking service focusing on video content. Mr. Rai has managed and directed both private the public companies, having been a director for Sustain Co. Inc. (SMS), Pintree Capital Ltd. (PNP) and The Mint Corp. Mr. Rai has significant experienced in the digital and telecommunications markets, having held various managerial positions. Mr. Rai is the founder and a director of the Onexone Foundation, a charitable organization focused on global child welfare. Born and raised in Toronto, Ont., Mr. Rai received his bachelor of arts (BA) from the University of Western Ontario.
Gary Leong, director
Mr. Leong is the chief scientific officer of Aphria Inc., a Health Canada-licensed producer of medical cannabis products. Mr. Leong has a personal background in quality assurance, quality control, quality system audits, international and domestic regulatory affairs, and product research and development. Mr. Leong currently is the president of Neautrical Solutions Inc. located in Surrey, B.C. Prior to that, he was the chief scientific officer at Jamieson Laboratories Ltd. He began at Jamieson in the year 2000 as the vice-president of scientific and technical affairs. He also held the position of quality control manager at Boehringer Ingelheim Consumer Products: Quest vitamins and development officer at Atomic Energy of Canada: radiochemical company. Mr. Leong's educational background began with a bachelor of science in chemistry and has taken him most recently to an MBA in quality management from City University of Bellevue, Wash. Mr. Leong is currently affiliated with the life sciences working team of Windsor-Essex Economic Development Corp. In the past, he was a member of the natural health products directorate program advisory committee and a board member of the Ontario Ginseng Innovation and Research Consortium.
As a condition to the completion of the transaction, the target was required to enter into a Tier 2 value escrow agreement with the exchange and TSX Trust Company as escrow agent, in respect of 1,975,000 shares of the company. Under the terms of the value escrow agreement, 10 per cent of such escrowed shares are immediately released upon closing with subsequent 15-per-cent releases occurring six, 12, 18, 24, 30 and 36 months from closing.
In addition to the foregoing, Mr. Gilbert, Mr. Petter, Mr. Benz, Mr. Rai, Mr. Leong, Mr. Held, Mr. Schrader, Harvey Lalach, and Haven Astor & Block LLC (a company owned by Mr. Schrader), as principals (as defined under exchange policy) of the company, have entered into a Tier 2 surplus escrow agreement with the exchange and TSX Trust Company as escrow agent, in respect of 150,000 shares of the company, 111,250 DSUs and 62,500 options. Under the terms of the surplus escrow agreement, 5 per cent of such escrowed securities are immediately released upon closing, with a subsequent 5-per-cent release occurring six months from closing, subsequent 10-per-cent release occurring 12 and 18 months from closing, subsequent 15-per-cent release occurring 24 and 30 months from closing, and an additional 40-per-cent release occurring 36 months from closing. A further 2,500 shares of the company are subject to a two-year hold period.
Trading on the exchange
Subject to final acceptance of the exchange, the company expects its common shares to begin trading on the exchange on or about Aug. 8, 2017, under the symbol SCYB.
Information for shareholders
The company's transfer agent, TSX Trust, will be mailing a statement pursuant to the direct registration system to all of the target's former securityholders and Kitrinor's former securityholders representing the company shares that they received in connection with the transaction. Shareholders wishing to receive a physical share certificate should contact TSX Trust for information on how to obtain physical shares certificates in place of a DRS advice.
We seek Safe Harbor.
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