Mr. Scott Dowty reports
AUSTRALIS CAPITAL AND FOLIUM BIOSCIENCES AGREE TO MERGER TO CREATE A PUBLICLY HELD VERTICALLY INTEGRATED PRODUCER OF NON-PSYCHOACTIVE CANNABINOIDS
Australis Capital Inc. has entered into an agreement and plan of merger by and among Australis Capital, Folium Equity Holding LLC and Folium Merger Sub LLC, a newly formed and wholly owned Colorado subsidiary of Australis Capital, pursuant to which Australis Capital will acquire all of the outstanding Folium membership units not already owned by Australis Capital. The agreement was signed on Dec. 10, 2019. The proposed transaction will be completed by way of a merger between Folium and Merger Sub, and Folium will become a wholly owned subsidiary of Australis Capital. Australis Capital will be rebranded as Folium Biosciences prior to the proposed transaction and will carry on the current business of Folium.
"AUSA made a strategic investment in Folium almost a year ago after spending six months getting to know Kashif, his exceptional team and their unparalleled proprietary ecosystem, all supported by significant due diligence on the non-psychoactive cannabinoid space in the U.S. and abroad," commented Scott Dowty, chief executive officer of Australis Capital. "AUSA is uniquely positioned to add immediate and material value to Folium with a management team with combined decades of experience in public companies to guide Folium as the newly legal CBD [cannabidiol] market in the U.S. continues to grow. Folium's core tenants of quality, science, scale and innovation -- coupled with its broad customer base, long runway of product innovation, operating history, minimal debt structure and opportunities to further grow the business organically and through M&A [mergers and acquisitions] -- makes this an exciting and unique opportunity for AUSA stakeholders."
Founded in 2014, Folium has grown into a substantial, vertically integrated, business-to-business producer, manufacturer and distributor of broad-spectrum, hemp-derived, non-psychoactive cannabinoids in North America. Folium's proprietary processes and infrastructure deliver high-quality products to diverse industries across the United States and to 27 countries. Folium is on track to achieve in excess of 60-per-cent sales growth in 2019 and expects continued growth with a new purpose-built extraction facility, which is anticipated to come on line in early 2020 and deliver approximately 10 times Folium's current extraction capacity. Folium has invested heavily in producing broad-spectrum hemp oil in its most natural form through an innovative extraction and purification process. Most importantly, Folium Biosciences has achieved this growth while being profitable from year 1. Additional information concerning Folium, including financial information and costs associated with the construction of Folium's new purpose-built extraction facility, will be contained in Australis Capital's management information circular to be prepared in connection with the meeting of Australis Capital shareholders.
"Folium is truly unique in that our exponential growth has been all organic and funded through our sales, which has enabled us to demonstrate a track record of consistent profitability," commented Kashif Shan, chief executive officer and co-founder of Folium Biosciences. "Now, with access to the public markets and the strategic addition of key seasoned management personnel experienced in operating a public company, we are positioned to navigate to the next level of success in concert with the existing leadership team here at Folium."
Folium's existing management team has over 100 years of collective experience in consumer products, food and pharmaceuticals, with an overall team of 242 employees. With this experience, Folium drives innovation in cannabinoid research, development and extraction. Folium's goal is to exceed the standards for analytical test methodology with a full suite of testing at every step of the process.
The common shares of Australis Capital were halted from trading on the Canadian Securities Exchange, effective Dec. 11, 2019, in connection with the proposed transaction and are not expected to recommence trading on the CSE until the filing of the management information circular for the associated meeting and the completion of all filings with the CSE.
Upon completion of the proposed transaction, the members of Folium will exchange their units for common shares of Australis Capital, such that current shareholders of Australis Capital will hold approximately 11 per cent of the resulting issuer shares and current members of Folium will hold approximately 89 per cent of the resulting issuer shares, resulting in a reverse takeover of Australis Capital. In addition, it is contemplated that prior to completion of the proposed transaction, Australis Capital will reincorporate under the laws of Delaware.
The proposed transaction is anticipated to constitute a fundamental change, in accordance with the policies of the CSE, and, as such, approval of Australis Capital shareholders and the CSE will be required. Australis Capital will seek shareholder approval for the proposed transaction, the Delaware reincorporation, a reverse stock split and certain ancillary matters at a special meeting of Australis Capital shareholders at a date to be determined. A copy of the merger agreement and the management information circular prepared in connection with this meeting will be available under Australis Capital's profile on SEDAR.
In connection with the proposed transaction, and also in order to avoid being classified as an investment company under the U.S. Investment Company Act of 1940, the company intends to divest certain investment assets prior to the completion of the proposed transaction. Among other measures and subject to certain exceptions, a company is deemed an investment company if it: (i) engages in the business of investing, reinvesting, owning, holding or trading in securities; and (ii) owns or proposes to acquire investment securities having a value exceeding 40 per cent of the value of its total assets. Australis Capital's board has adopted a resolution to take advantage of a safe harbor under the U.S. Investment Company Act of 1940 that provides the company a window of time to divest some of its investment securities to satisfy the 40 per cent standard. Australis Capital believes that coming into compliance with the 40 per cent standard will enable the company to avoid application of the costly and restrictive registration and other provisions of the U.S. Investment Company Act of 1940.
About Folium Equity Holding LLC
Folium, headquartered in Colorado Springs, Colo., is a vertically integrated, business-to-business producer, manufacturer and distributor of hemp-derived, non-psychoactive cannabinoids. Built on the core tenants of quality, science, scale and innovation, Folium controls all aspects of the supply chain from genetics and extraction to bulk and finished products.
About Australis Capital Inc.
Australis Capital operates and builds transformative, differentiated companies -- primarily in the United States -- in the highly regulated, fragmented and rapidly expanding cannabis industry.
We seek Safe Harbor.
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