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Arrowstar enters LOI to merge with Adastra in RTO

2019-08-08 20:27 ET - News Release

Mr. Phillip Thomas reports

ARROWSTAR SIGNS LOI WITH ADASTRA LABS HOLDINGS LTD.

Arrowstar Resources Ltd. has entered into a letter of intent to enter into a share exchange agreement with Adastra Labs Holdings Ltd. whereby the parties will complete a business combination by way of a transaction that will constitute a reverse takeover of the company by Adastra. Pursuant to the transaction, the company will first apply to delist from the TSX Venture Exchange. Then, on closing of the transaction, all of the issued and outstanding common shares of Adastra will be exchanged for common shares of the company, which will result in Adastra becoming a wholly owned subsidiary of the company or otherwise combining its corporate existence with a wholly owned subsidiary of the company. The resulting issuer upon completion of the transaction will change its business from mining to cannabis standard processor and analytical testing laboratory, and apply to be listed on the Canadian Securities Exchange.

Description of Adastra and its business

Adastra is a private company incorporated under the B.C. Business Corporations Act in 2018 to capitalize on the significant opportunities in the cannabis industry. It is headquartered in Langley, B.C., where it has invested in repurposing a former food manufacturing facility into a cannabis standard processor and analytical testing laboratory. Adastra's focus is to provide B2B (business to business) services for cannabis extractions and concentrates through its standard processing subsidiary Adastra Labs Inc. while offering full-spectrum cannabis analytical testing services to its customers through its testing lab subsidiary Chemia Analytics Inc., co-located in its Langley facility. Adastra is also developing its own cannabis-extract-related products through its brand subsidiary Adastra Brands Inc.

Transfer of listing to the Canadian Securities Exchange

Upon closing of the transaction and subject to receipt of approvals of the TSX-V for the delisting of the Arrowstar shares from the TSX-V and the CSE for the listing of the Arrowstar shares on the CSE, the listing of the Arrowstar shares will be transferred from the TSX-V to the CSE. The TSX-V delisting is subject to the company receiving approval from the TSX-V, and the CSE listing is subject to the company receiving approval from the CSE. There can be no assurance that the TSX-V will approve the proposed TSX-V delisting or that the CSE will approve the listing of the resulting issuer's shares. Non-approval of the transfer of the listing will prohibit or negatively impact closing of the transaction with the result that the company may need to seek and secure another acquisition of a business or assets to ensure that the company will meet the TSX-V's continued listing requirements.

Shareholder approvals for Arrowstar

Prior to the completion of the transaction, Arrowstar will call a meeting of its shareholders for the purpose of approving, among other matters: (i) the TSX-V delisting; (ii) the listing on the CSE; and (iii) the approval of the transaction.

The transaction is a non-arm's-length transaction. Arrowstar has prepared and filed with the CSE a CSE Form 2A listing statement, providing comprehensive disclosure on Adastra and the transaction in connection with the application to list on the CSE.

Adastra private placement

Prior to or concurrently with closing, Adastra is to complete up to $4-million in 12 per cent secured convertible debentures convertible to units and a private placement of a minimum $1-million and a maximum of $5-million. Final terms of the Adastra private placement, such as pricing, financing structure, commission, and finders' or agents' fees will be subject to final approval by Adastra, the CSE and/or other applicable regulatory authorities.

Securities exchange and Arrowstar warrants

Pursuant to the transaction, all of the existing 80,798,000 Adastra shares will be acquired by Arrowstar in consideration of Arrowstar issuing one Arrowstar share for each one Adastra share issued and outstanding immediately prior to closing.

In addition, all Adastra shares issued in the Adastra private placement will be exchanged into additional Arrowstar shares upon completion of the transaction at the exchange ratio, and all Adastra convertible securities issued in the Adastra private placement shall be exchanged, at the exchange ratio, for an equivalent number of Arrowstar convertible securities on the same terms and conditions with the exercise/conversion price adjusted based on the exchange ratio.

Further, following closing, the outstanding Arrowstar warrants will remain in effect.

Management of the resulting issuer

Upon closing of the transaction, Philip Thomas and Andrew Jarvis, Arrowstar's current directors and officer, will resign. The board of directors of the resulting issuer will consist of four directors, including Blaine Bailey, Stephen Brohman, who will also be appointed chief financial officer, and George Routhier and Andy Hale, who will be appointed president and chief executive officer of the resulting issuer.

More details of insiders and proposed directors and officers of the resulting issuer will be disclosed in a further news release.

Name change

It is anticipated that Arrowstar will be renamed Adastra Labs Holdings Ltd. following completion of the transaction.

Arrowstar

Arrowstar will consolidate its shares on a one new Arrowstar share for five old Arrowstar shares prior to closing of the transaction. It is a condition to the share exchange agreement that prior to the closing of the completion of the transaction, Arrowstar will complete an equity offering, postshare consolidation, to raise $500,000, such concurrent financing to consist of 10 million common shares at a price of five cents per offering share, or such other terms as Arrowstar and Adastra may agree, mutually in writing.

Closing conditions

The completion of the transaction is subject to several conditions, including, but not limited to, the following:

  • Completion of mutually satisfactory due diligence;
  • Completion of the private placement;
  • Receipt of all required regulatory, corporate and third party approvals, including approvals by the TSX-V, the CSE, the shareholders of Arrowstar and Adastra, and fulfilment of all applicable regulatory requirements and conditions necessary to complete the transaction.

Trading halt

Trading in the company's shares was halted on June 13, 2018, and is expected to remain halted until closing of the transaction and listing on the CSE.

Recycling Fuel Technologies Inc. (RFT)

The company has terminated the RFT letter of intent dated June 12, 2018.

Further information

Further details about the transaction and the resulting issuer will be provided in the listing statement to be prepared and filed in respect of the transaction on the SEDAR profile of Arrowstar and in a comprehensive news release and in the disclosure document to be prepared and filed in respect of the transaction.

We seek Safe Harbor.

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