The Needle Capital Corp. Enters into Agreement with The Flowr Corporation to Complete Business Combination and Concurrent Financing Transactions

The Needle Capital Corp. (TSXV:NEDL.P) (“Needle” or the “Company”), a capital pool company as defined under Policy 2.4 – Capital Pool Companies (“CPC”) of the TSX Venture Exchange (the “Exchange”), is pleased to announce it has entered into a business combination agreement dated August 27, 2018 (the “Agreement”) with The Flowr Corporation (“Flowr”) whereby Needle and Flowr will effect a transaction that will result in a reverse takeover of Needle by the shareholders of Flowr (the “Transaction”) to ultimately form the resulting issuer (the “Resulting Issuer”). Upon completion of the Transaction, it is the intention of the parties that the Resulting Issuer  will continue the business of Flowr subject to the terms and conditions outlined below. Needle intends that the Transaction will constitute its Qualifying Transaction, as such term is defined in Policy 2.4 of the Exchange.  In addition, the Transaction constitutes a “Non-Arm’s Length Qualifying Transaction” as defined in Policy 1.1 of the Exchange.

Flowr is a vertically-integrated Canadian cannabis company, from seed to sale, with head offices in Markham, ON and large-scale production facilities in Kelowna, B.C.  Flowr’s subsidiary, The Flowr Group (Okanagan) Inc. (“Flowr Okanagan”), is a Licensed Producer under the Access to Cannabis for Medical Purposes Regulations.  Flowr Okanagan was granted its production licence on December 1, 2017 and its sales licence on August 10, 2018.  The current business of Flowr was originally undertaken exclusively through Flowr Okanagan. Flowr Okanagan was incorporated on June 28, 2013, under the laws of the Province of British Columbia, in the name of “Cannatech Plant Systems Inc.” to participate in the emerging market for medical cannabis. Flowr was incorporated on October 25, 2017, and on December 1, 2017, a reorganization was effected that saw Flowr introduced as the parent company of Flowr Okanagan.

For the fiscal year ended December 31, 2017, audited numbers indicate that Flowr had total assets of approximately CAD $21.5 million, total liabilities of approximately CAD $2.0 million and total equity of approximately CAD $19.5 million. For the fiscal year ended December 31, 2017, audited numbers indicate that Flowr had total revenue of $Nil and total operating loss of approximately CAD $2.8 million. As at and for the six month period ended June 30, 2018, Flowr’s unaudited interim financial statements indicate that Flowr had total assets of approximately CAD $29.1 million, total liabilities of approximately CAD $2.2 million, total equity of approximately CAD $26.9 million, total revenue of $Nil and a total operating loss of approximately CAD $6.2 million.

Summary of the Qualifying Transaction

On or immediately prior to the completion of the Transaction, Needle will effect a consolidation of the 7,200,000 common shares of Needle (the “Needle Shares”) currently issued and outstanding on a 17 to 1 basis (the “Consolidation”) resulting in an aggregate of approximately 423,529 Needle Shares.

The parties to the Transaction are at arm’s length and therefore the approval of the shareholders of Needle in respect of the Transaction will not be required.  The Company held a special meeting of shareholders on April 13, 2018 whereat, among other things, the shareholders of Needle approved: (i) the Consolidation; (ii) the change of name of Needle to The Flowr Corporation or such other name as Flowr may determine and the board of directors of Needle may approve; (iii) the appointment of a new slate of directors, conditional upon completion of the Transaction; and (iv) the continuance of Needle to become a corporation governed by the Business Corporations Act (Ontario). Copies of the management information circular of Needle dated March 9, 2018, and certain related documents and agreements have been filed with Canadian securities regulators and are available at the SEDAR website at www.sedar.com under Needle’s profile.

Flowr held an annual and special meeting of shareholders on August 23, 2018 whereat, among other things, the shareholders of Flowr approved the Transaction and the Agreement.

The Agreement provides that Needle and Flowr will be completing a business combination transaction, pursuant to which the Needle Shares will be issued to holders of shares of Flowr (the “Flowr Shares”) on the basis of one post-Consolidation Needle Share for every one Flowr Share.  As described below, on completion of the Transaction, the securityholders of Flowr will own a large majority of the issued and outstanding common shares of the Resulting Issuer (“Resulting Issuer Shares”) and the Resulting Issuer Shares will be listed for trading on the Exchange.

The completion of the Transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including but not limited to (i) receipt of all requisite regulatory, stock exchange, court or governmental approvals, authorizations and consents; (ii) the absence of any material change or a change in a material fact or a new material fact affecting Needle or Flowr; (iii) completion of the Subscription Receipt Financing (as defined below); and (iv) completion of the Consolidation. There can be no assurance that the Transaction will be completed on the terms proposed above or at all.

Subscription Receipt Financing

In connection with the Transaction, Flowr proposes to complete both (i) a brokered private placement, co-led by Clarus Securities Inc. and Eight Capital (the “Co-Lead Agents”) on behalf of a syndicate of agents (together with the Co-Lead Agents, the “Agents”), and (ii) a non-brokered private placement, of up to an aggregate of 13,807,734 subscription receipts (“Subscription Receipts”) at a price of $2.60 per Subscription Receipt to raise aggregate gross proceeds of up to $35,900,108.40 (the “Subscription Receipt Financing”). Each Subscription Receipt will automatically convert into one Flowr Share on the satisfaction or waiver of all conditions precedent to the Transaction and certain other ancillary conditions (the “Release Conditions”) without any further consideration on the part of the purchaser.  The gross proceeds from the Subscription Receipt Financing, less 50% of the  Agents’ Commission (as defined below) and the Agents’ expenses incurred in connection with the Subscription Receipt Financing, will be held in escrow pending the satisfaction of the Release Conditions, whereupon the Flowr Shares underlying the Subscription Receipts will be issued to the purchasers and the net proceeds of the Subscription Receipt Financing will be paid to Flowr and the balance of the Agents’ Commission will be paid to the Agents.

The Agents are entitled to a cash commission payable to the Agents by Flowr on closing of the Subscription Receipt Financing in an amount equal to 6% of the gross proceeds of the Subscription Receipt Financing (and reduced to 3% on president’s list orders and 1% for the lead order) (“Agents’ Commission”).  The Agents will also receive broker warrants (the “Broker Warrants”) on closing of the Subscription Receipt Financing equal to 3% of the total Subscription Receipts sold in the Subscription Receipt Financing (and reduced to 1.5% on president’s list orders).  Each Broker Warrant will entitle the holder thereof to purchase one Resulting Issuer Share at an exercise price of $2.60 per share for a period of 24 months following the closing of the Subscription Receipt Financing.

In the event the Transaction does not occur by 5:00 p.m. (Toronto time) on the date that is three months from the closing date of the Subscription Receipt Financing, the gross proceeds of the Subscription Receipt Financing shall be returned to the purchasers pro rata without any deduction or interest and the Subscription Receipts shall be automatically cancelled.

Subject to applicable laws and the policies of the Exchange, it is anticipated that, upon completion of the Transaction, each Flowr Share issued pursuant to the Subscription Receipt Financing will be exchangeable into one freely tradable Resulting Issuer Share.

It is intended that the net proceeds raised pursuant to the Subscription Receipt Financing will be used for facility expansion, marketing initiatives, capacity expansion, working capital and general corporate purposes.

Details of the Proposed Transaction

The Transaction will be structured as a three-cornered amalgamation (the “Amalgamation”) pursuant to which Flowr will amalgamate with a wholly-owned subsidiary of Needle (“Subco”) to form an amalgamated entity (“Amalco”) which will continue as a wholly-owned subsidiary of Needle. In addition to the Needle common shares, options and agent’s warrants currently outstanding, the Transaction will involve the issuance of approximately 85,692,095 Resulting Issuer Shares (including the Resulting Issuer Shares issued in connection with the Subscription Receipt Financing) at a deemed issue price of $2.60 per Resulting Issuer Share (post-Consolidation) . In addition, the Corporation will issue Resulting Issuer stock options and Resulting Issuer Broker Warrants, in exchange for the outstanding Flowr stock options; and Broker Warrants, respectively.

It is expected that following completion of the Transaction, and assuming that the Subscription Receipt Financing is fully subscribed, the current holders of Needle Shares will hold approximately 0.5% of the outstanding Resulting Issuer Shares, the subscribers in the Subscription Receipt Financing will hold approximately 15.9% of the outstanding Resulting Issuer Shares and the holders of Flowr Shares will collectively hold approximately 83.6% of the outstanding Resulting Issuer Shares, all as calculated on a non-diluted basis immediately following the closing of the Transaction.

It is anticipated that immediately following the Transaction, the only shareholders that will hold greater than 10% of the issued and outstanding Resulting Issuer Shares will be:

Thomas Flow Investments Inc., governed by the laws of Canada and owned by Thomas Flow (a director of Flowr and an anticipated director of the Resulting Issuer). Thomas Flow Investments Inc. will own approximately 26,025,000 shares in the Resulting Issuer (or 18.5% of the Resulting Issuer on a fully diluted basis); and

Core Flow Canada Holdings Inc., governed by the laws of New York and of which David Miller and Steven Klein are directors (and are also anticipated directors of the Resulting Issuer). Core Flow Canada Holdings Inc. will own 49,419,014 shares, or convertible shares, in the Resulting Issuer (or 34.7% of the Resulting Issuer on a fully diluted basis).

The Resulting Issuer

Immediately prior to the completion of the Transaction, the Resulting Issuer is expected to change its name to The Flowr Corporation, and the Resulting Issuer will be an Industrial/Technology/Life Sciences issuer under the policies of the Exchange.

Concurrent with the completion of the Transaction, all directors and officers of Needle will resign and be replaced by nominees put forth by Flowr. The following individuals are expected to be appointed as new directors and/or officers of Flowr pursuant to the Transaction:

Thomas (“Tom”) Flow, President and Director

Tom is widely recognized globally for his cannabis thought leadership and expertise building and operating cannabis cultivation facilities. Tom co-founded MedReleaf in 2014 and sits on the boards of several cannabis-related companies including Plant Properties Inc.

Steven Klein, Chief Strategy Officer and Director

Steven is the Chief Executive Officer of Apple Core Holdings. Apple Core Holdings, founded in 1995, is a privately held company with investments across a range of verticals.  It owns and operate hotels and event spaces, and provide seed capital to hedge funds, venture capital funds, and private equity funds.  Apple Core Holdings also makes direct investments in early and mid-stage companies in a variety of fields, including Internet and mobile technologies and services, biotech, and entertainment.  Previously, Steven was an attorney at Skadden Arps, and Slate, Meagher & Flom LLP.

David Miller, General Counsel and Director

David is the Chief Financial Officer and General Counsel of Apple Core Holdings (the business of which is described above). David studied accounting at The Wharton School of Business and received his law degree from Duke University.

Lyle Oberg, Chief Policy and Medical Officer and Director

Lyle was a member of the Alberta Legislature from 1993 to 2008, and was the former Alberta Minister of Finance. Lyle was also formerly a medical doctor practising in Alberta.

David Towill, Director

David is a partner at Thomas Butler LLP and primarily practices in the areas of commercial transactions, trusts/estates and real estate matters. David was educated at the University of British Columbia where he completed both a Bachelor of Arts and his Law degree.

Alexander (“Alex”) Dann, Chief Financial Officer

Alex is a bilingual chartered accountant with over 25 years of experience leading financial operations and strategic planning for multinational public companies, primarily in the mining and manufacturing sectors.

David Ralston, Chief Operating Officer

David is a senior executive with 30 years of experience in technology, service operations, sales and marketing and customer service in the telecommunications, Internet, data centre and software industries.

In addition it is anticipated that Vinay Tolia will become CEO of the Resulting Issuer and a Director once appropriate approvals are obtained.

Vinay Tolia

Vinay is the managing member of Bengal Capital Trading LLC, a derivatives trading firm with a focus on listed equity options. Vinay attended the University of Michigan where he obtained a BA in economics and BSE in Industrial and Operations Engineering.

Sponsorship

Flowr intends to apply to the Exchange for an exemption from applicable sponsorship requirements, failing which Flowr will ask Clarus Securities Inc. to act as sponsor.

About The Needle Capital Corp.

The Needle Capital Corp. is a CPC. The Company’s principal business activity is to identify and evaluate opportunities for acquisition of assets or business. The Company was incorporated on June 1, 2016, and is headquartered in Calgary, Alberta.

About The Flowr Corporation

Flowr, through its subsidiaries, is a vertically-integrated Canadian cannabis company focused on the natural science of cannabis. With head offices in Markham, ON and production in Kelowna, B.C., Flowr builds and operates large-scale, GMP compliant cultivation facilities utilizing their own patented growing systems. Flowr’s investment in research and development ensures that its master growers are able to supply patients with consistent, high-quality medicinal cannabis. With a sense of craftsmanship and a spirit of innovation, Flowr is also well positioned with a line of premium quality cannabis products for the upcoming adult-use market.

Website: flowr.ca

Additional Information

All information contained in this press release with respect to the Company and Flowr was supplied, for inclusion herein, by the respective parties and each party and its directors and officers have relied on the other party for any information concerning the other party.

Contact Information

For more information or interview requests, please contact:

The Needle Capital Corp.
Daniel Lanskey – Director, President and Chief Executive Officer
61 451 558018
dan.lanskey@ascresources.biz

The Flowr Corporation

David Miller – Director and General Counsel

(917) 579-5373

dmiller@flowr.ca

Alex Dann – Chief Financial Officer

(416) 464-4067

adann@flowr.ca

Cautionary Note

Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a CPC should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

Forward-Looking Information

Although the Company believes, in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be   placed on them because the Company can give no assurance that they will prove to be correct. When used in this press release, the words “estimate”, “project”, “belief”, “anticipate”, “intend”, “expect”, “plan”, “predict”, “may” or “should” and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information. The forward-looking statements and information in this press release include information relating to the business plans of Needle and Flowr, the Transaction (including receipt of Exchange approval, and the closing of the Transaction and timing thereof), the board of directors and management of the Resulting Issuer and the business to be conducted by the Resulting Issuer upon completion of the Transaction, completion of the Consolidation, the number of Needle Shares to be issued in connection with the Transaction and the relative ownership thereof, and the Subscription Receipt Financing and the use of proceeds therefrom. Such statements and information reflect the current view of Needle and/or Flowr, respectively. Risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks: (i) there is no assurance that Needle and Flowr will obtain all requisite approvals for the Transaction, including the approval of the Exchange for the Transaction (which may be conditional upon amendments to the terms of the Transaction) or court approval of the Transaction; (ii) there is no assurance that the Subscription Receipt Financing will be completed as contemplated or at all; (iii) following completion of the Transaction, the Resulting Issuer may require additional financing from time to time in order to continue its operations and financing may not be available when needed or on terms and conditions acceptable to the Resulting Issuer; (iv) new laws or regulations could adversely affect the Resulting Issuer’s business and results of operations; and (v) the stock markets have experienced volatility that often has been unrelated to the performance of companies. These fluctuations may adversely affect the price of the Resulting Issuer’s securities, regardless of its operating performance. There are a number of important factors that could cause Needle’s and Flowr’s actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others: currency fluctuations; limited business history of Needle; disruptions or changes in the credit or security markets; results of operation activities and development of projects; project cost overruns or unanticipated costs and expenses, and general market and industry conditions. The terms and conditions of the Qualifying Transaction may be based on the Company’s due diligence and the receipt of tax, corporate and securities law advice for both the Company and Flowr. The Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, Flowr, their securities, or their respective financial or operating results (as applicable).

Needle cautions that the foregoing list of material factors is not exhaustive. When relying on Needle’s forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Needle has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors. The forward-looking information contained in this press release represents the expectations of Needle 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. Needle does not undertake to update this information at any particular time except as required in accordance with applicable laws.

This press release is not an offer of the securities for sale in the United States.  The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration.  This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

Jim Walsh
The Flowr Corporation
+1-607-275-7141
jwalsh@flowr.ca

Bruce Dunbar
The Flowr Corporation
+1-917-756-4065
brucecdunbar@gmail.com

Click here to connect with The Flowr Group (Okanagan) Inc. for an Investor Presentation.

Subsequent to this press release, The Flowr Corporation went public on September 26, 2018 under the ticker symbol TSXV:FLWR.

Source: globenewswire.com