Trius and Starling Brands Enter Into Letter of Intent for Proposed Reverse Takeover Transaction

Trius Investments Inc. (TSXV:TRU.H) (“Trius”) and Starling Brands Inc. (“Starling”) are pleased to announce that they have entered into a binding letter of intent (the “LOI”) to complete a business combination transaction (the “RTO Transaction”) that will result in the reverse take-over of Trius by Starling. The entity resulting from the RTO Transaction (the “Resulting Issuer”) will continue to carry on the business of Starling. The LOI was negotiated at arm’s length and is dated April 10, 2019.

Description of Starling

Starling is a Toronto-based cannabis company that produces mass-scale medical and recreational cannabis products in California. Founded in 2017, Starling leverages its strong portfolio of brands and integrated production capabilities to deliver high-quality, consistent cannabis-derived products for itself and its wholesale and white label customers. Starling is incorporated under the federal laws of Canada.

Starling’s wholly-owned subsidiary, Kase Manufacturing, is a 22,000 square foot facility located in Ceres, California, and is one of the first cannabis volatile extraction and manufacturing labs approved for annual licensing in California. Kase also holds licenses for cultivation and distribution.

Starling also owns the worldwide rights to Jayden’s Juice, its flagship brand. Jayden’s Juice consists of a line of products derived from a CBD-rich cannabis strain and has received international recognition as a CBD medicinal brand. Starling is also developing new brands including vape pens and topicals to be introduced in 2019.

Terms of the RTO Transaction

The RTO Transaction is expected to be completed by way of an amalgamation between Starling and a wholly-owned subsidiary of Trius, but may be completed by way of arrangement, takeover bid, share exchange, share purchase, or another structure acceptable to Trius and Starling.  The RTO Transaction will not be completed while Trius is listed on the TSX Venture Exchange (“TSXV”).

Pursuant to the RTO Transaction, the holders of common shares of Starling (“Starling Shares”) will receive common shares of the Resulting Issuer (“Resulting Issuer Shares”) in exchange for their Starling Shares on the basis of an exchange ratio (the “Exchange Ratio”) to be determined, but which shall reflect the value of Starling as a proportion of the aggregate value of Starling and Trius. For the purpose of such calculation, Starling’s value shall be equal to the number of Starling Shares issued and outstanding multiplied by the issue price of the subscription receipts (“Subscription Receipts”) pursuant to a concurrent brokered private placement (the “Private Placement”) to be completed by Starling. Trius’ value shall be $4,480,000, inclusive of additional common shares proposed to be issued by Trius in connection with the RTO Transaction.

Upon the satisfaction or waiver of the conditions set out in the definitive transaction agreement to be entered into by Trius and Starling (the “Definitive Agreement”), the following, among other things, will be completed in connection with the RTO Transaction:

• Trius will (a) continue from the Province of Alberta into the Province of British Columbia; (b) consolidate its outstanding common shares (the “Trius Shares”) such that the Starling Shares may be exchanged on a 1:1 basis for Resulting Issuer Shares, having regard for the Exchange Ratio; and (c) change its name to a name approved by Starling;
• all outstanding Starling convertible debt will convert into Starling Shares in accordance with its terms;
• all outstanding Starling Shares will be acquired by Trius, and each former holder of Starling Shares will receive one Resulting Issuer Share in consideration for each such Starling Share;
• all outstanding convertible securities of Starling will either automatically adjust in accordance with their terms, or will be exchanged for convertible securities of the Resulting Issuer, such that following the completion of the RTO Transaction, the holders of such securities will be entitled to acquire Resulting Issuer Shares in lieu of Starling Shares, as adjusted to reflect the Exchange Ratio; and
• the board of directors and management of the Resulting Issuer will be replaced with nominees of Starling.

Following completion of the RTO Transaction, the Resulting Issuer will continue the business of Starling.

The RTO Transaction constitutes an Arm’s Length Transaction under the policies of the TSXV. It is intended that the RTO Transaction will be completed by August 30, 2019.

Private Placement

Starling intends to complete a concurrent Private Placement of Subscription Receipts for aggregate gross proceeds of at least $5,000,000 through one or more Canadian investment dealers. The Subscription Receipts are proposed to be ultimately exchanged, upon satisfaction of certain conditions, for securities of the Resulting Issuer in connection with the RTO Transaction. The issue price per Subscription Receipt, securities issuable upon exchange thereof, and other terms of the Private Placement will be determined in the context of the market.

Listing

An application will be made to voluntarily delist the Trius Shares from the TSXV and to list the Resulting Issuer Shares on the Canadian Securities Exchange (“CSE”). The delisting of Trius from the TSXV and the listing of the Resulting Issuer on the CSE will be subject to all applicable shareholder and regulatory approvals.

Conditions of the RTO Transaction

Completion of the RTO Transaction is subject to the satisfaction of customary closing conditions, including:

• the satisfactory completion of due diligence by each of Trius and Starling;
• receipt of all required approvals and consents relating to the RTO Transaction, including without limitation all approvals of the shareholders of Trius and Starling required by the TSXV, CSE, and under applicable corporate or securities laws, the TSXV’s approval for delisting of the Trius Shares, and the CSE’s approval for listing the Resulting Issuer Shares; and
• completion by Starling of the Private Placement for minimum aggregate gross proceeds of $5,000,000.

Secured Bridge Loan

Following execution of a Definitive Agreement and subject to any applicable regulatory approvals, upon written request from Starling Trius will make available to Starling a bridge loan (the “Bridge Loan”) of up to a maximum of the lesser of (i) $1,000,000 and (ii) such maximum amount as permitted by any applicable policies of the CSE. The Bridge Loan will not be advanced while Trius is listed on the TSXV. The Bridge Loan will bear interest at 8% per annum, will mature one year from the date of the Bridge Loan, and will be secured against collateral to be determined by the parties, acting reasonably. On closing of the RTO Transaction, the Bridge Loan will be consolidated as a debt assumed by the Resulting Issuer.

Additional Information Regarding the RTO Transaction

Further details of the RTO Transaction (including business and financial information in respect of Starling) and the Private Placement will be included in a comprehensive press release and other disclosure documents to be filed by Trius in connection with the RTO Transaction.

To Trius’ knowledge, at the time of entering into the LOI none of its directors, officers or significant shareholders had any direct or indirect interest in, nor any other relationships with, Starling or its assets.

For further information please contact:

Trius Investments Inc.

Joel Freudman
President and Chief Executive Officer
Telephone: (647) 880-6414

Starling Brands Inc.

Media Relations and Investor Relations:
Tara Murphy
Telephone: (647) 556-0430
IR@StarlingBrands.com

Neither the TSXV nor its Regulation Services Provider (as that term is defined in policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release. Neither the CSE (operated by CNSX Markets Inc.) nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this press release.

Completion of the RTO Transaction is subject to a number of conditions including, but not limited to, the parties entering into the Definitive Agreement, TSXV acceptance and, if applicable pursuant to TSXV requirements, shareholder approval. Where applicable, the RTO Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the RTO Transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the management information circular or listing statement to be prepared in connection with the RTO Transaction, as applicable, any information released or received with respect to the RTO Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Trius should be considered highly speculative. The TSXV has in no way passed upon the merits of the RTO Transaction and has neither approved nor disapproved the contents of this press release.

All information contained in this press release with respect to Trius and Starling was supplied by the parties respectively for inclusion herein, and each party and its directors and officers have relied entirely on the other party for any information concerning the other party. Trius has not conducted due diligence on the information provided by Starling and does not assume any responsibility for the accuracy or completeness of such information.

This press release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities described herein in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws, and may not be offered or sold within the United States or to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

This press release contains certain forward-looking statements that reflect the current views and/or expectations of management of Trius and Starling, respectively, with respect to performance, business and future events, including but not limited to express or implied statements and assumptions regarding the intention of Trius and Starling to negotiate for or complete the RTO Transaction, the Private Placement or the Bridge Loan as proposed or at all. Forward-looking statements are based on the current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which Trius and Starling operate. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions, which are difficult to predict. In particular, there is no guarantee that the parties will successfully negotiate and enter into the Definitive Agreement or complete the RTO Transaction contemplated herein; that the due diligence of Trius and/or Starling will be satisfactory; that Starling will successfully complete the Private Placement; that Starling will introduce new brands as outlined herein or at all; or that Trius and Starling will obtain any required shareholder or regulatory approvals, including delisting of the Trius Shares from the TSXV and the listing of the Resulting Issuer Shares on the CSE. Accordingly, readers should not place undue reliance on forward-looking statements and information herein, which are qualified in their entirety by this cautionary statement. Neither Trius nor Starling undertakes any obligation to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.

Source: www.globenewswire.com