Le Lézard
Classified in: Business
Subjects: SHAREHOLDER RIGHTS PLANS, SHAREHOLDER RIGHTS PLANS, SHAREHOLDER RIGHTS PLANS, MISCELLANEOUS, MERGERS AND ACQUISITIONS (M&A)

Mercal Capital Corp. Announces Amendment to Letter of Intent With Vitality CBD Natural Health Products Inc.


OTTAWA, Dec. 07, 2018 (GLOBE NEWSWIRE) -- Mercal Capital Corp. ("Mercal" or the "Corporation", NEX: MUL.H) today announced that it has amended its letter of intent with Vitality CBD Natural Health Products Inc. (formerly known as Serenity CBD Canada Inc.), a corporation incorporated under the Canada Business Corporations Act ("Vitality").

On February 26, 2018, Mercal announced that it had entered into a letter of intent dated February 22, 2018, with Vitality (the "Letter of Intent") by which Mercal would purchase from Vitality shareholders all of the issued and outstanding shares in the capital of Vitality in consideration for the issuance to Vitality shareholders of a certain number of common shares in the capital of Mercal. The parties had intended that the proposed transaction would constitute Mercal's Qualifying Transaction as defined in Policy 2.4 of the policies of the TSX Venture Exchange (the "Qualifying Transaction"). Further details regarding the Qualifying Transaction can be found in the Corporation's news release filed on SEDAR on February 26, 2018. Mercal is no longer proceeding with the Qualifying Transaction and effective November 13, 2018, Mercal transferred to NEX.

Instead of proceeding with the Qualifying Transaction, the Letter of Intent has been amended such that Mercal shall delist from the NEX board of the TSXV and Vitality will merge with Mercal in consideration of the issuance to Mercal shareholders of a certain number of common shares in the capital of Vitality (the "Amended Letter of Intent"), in the same proportion (subject to the dilutive effect of financings, stock option issuances and other transactions completed by Vitality which have diluted all the shareholders of Vitality equally on a pro-rata basis.) as expressed in the initial Letter of Intent.

Prior to listing on the TSX Venture Exchange as a Capital Pool Company, Mercal entered into a CPC Escrow Agreement dated March 28, 2016, by and among Mercal, Equity Financial Trust Company (now TSX Trust Company) and certain security holders of Mercal party thereto (the "CPC Escrow Agreement"), as required by section 11.1 of Policy 2.4 of the TSX Venture Exchange Corporate Finance Manual. Pursuant to section 11.2(a)(ii) of Policy 2.4 of the TSX Venture Exchange Corporate Finance Manual, upon the transfer of Mercal to NEX on November 13, 2018, half (1,100,000) of the common shares issued to Related Parties of Mercal at a discount to the initial public offering price were cancelled (the "Initial Cancellation of Discount Seed Shares").

There are currently 6,975,000 common shares of Mercal issued and outstanding. Pursuant to Sections 4.2 and 4.3 of the CPC Escrow Agreement, upon Mercal's delisting from the NEX, the other half (1,100,000) of the common shares issued to Related Parties of Mercal at a discount to the initial public offering price are to be cancelled (the "Cancellation of the Balance of the Discount Seed Shares"). The sole reason to delist from NEX is Mercal's management's desire to complete the transaction contemplated by the Amended Letter of Intent for the clear benefit it provides to Mercal shareholders. As a result, Mercal intends to request from the TSX Venture Exchange a waiver of section 11.2(a)(ii) of Policy 2.4 of the TSX Venture Exchange Corporate Finance Manual (Cancellation of Escrow Shares where issuer is moved to NEX), Section 4.2 of the CPC Escrow Agreement (Cancellation of Certain Escrow Securities Held by Related Parties of the CPC) and section 4.3 of the CPC Escrow Agreement (Cancellation of Other Escrow Securities). If Mercal's request for waiver is denied, the number of issued and outstanding common shares of Mercal upon delisting will be reduced to 5,875,000.

Under the proposed terms of the transaction contemplated by the Amended Letter of Intent:

(a) approximately 3,992,390 shares are to be issued to Mercal shareholders which shall equal 2.92% of the issued and outstanding shares of Vitality on a fully-diluted basis (which percentage was originally expressed to be 5.0% in the Letter of Intent dated February 22, 2018, but has been diluted by a series of financings, stock option issuances and other transactions which have been completed by Vitality since that time which have diluted all the shareholders of Vitality equally on a pro-rata basis.) or 0.6796 common shares of Vitality for each 1 common share of Mercal; and

(b) all fully vested stock options of Mercal shall be converted into stock options of Vitality.

Upon the closing of the transactions contemplated by the Amended Letter of Intent, the expected process of distribution to the Mercal shareholders of their common shares of Vitality is by letter of transmittal.

Completion of the transactions contemplated by the Amended Letter of Intent is to occur prior to and as a condition precedent of the Transaction between Vitality and LiveWell Canada Inc. ("LiveWell") as described in a press release issued by LiveWell and filed on SEDAR on December 3, 2018, such that following the completion of Transaction between Vitality and LiveWell, the current shareholders of Mercal will own shares of LiveWell.

Prior to listing on the TSX Venture Exchange as a Capital Pool Company, the directors and officers of Mercal signed undertakings as required by section 3.3(a)(ii) of Policy 2.4 of the TSX Venture Exchange Corporate Finance Manual, that among other things, "in the event that the Exchange delists the Listed Shares of the CPC, then within 90 days from the date of such delisting, they will, in accordance with applicable law, wind-up and liquidate the CPC's assets and distribute its remaining assets, on a pro rata basis, to its shareholders unless, within that 90 day period, the shareholders, pursuant to a majority vote, exclusive of the votes of Non-Arm's Length Parties to the CPC, approve another use of the remaining assets". Prior to completion of the transaction contemplated by the Amended Letter of Intent, Mercal will hold a shareholders meeting to seek approval to delist from NEX and to use the assets of Mercal for purposes of completing the transactions contemplated by the Amended Letter of Intent. The resolution to delist from the NEX will require approval of a majority of the minority of the shareholders of Mercal. To approve the completion of the transactions contemplated by the Amended Letter of Intent will require approval of the shareholders of Mercal exclusive of the votes of Non-arm's Length Parties (as defined in the TSXV Corporate Policy Manual) of Mercal.

Completion of the transactions contemplated by the Amended Letter of Intent will be subject to a number of conditions, including but not limited to execution of definitive agreements, receipt of all applicable consents and approvals of the transaction contemplated by the Amended Letter of Intent.

ABOUT MERCAL

The Corporation is a capital pool company (a "CPC") that has not commenced commercial operations and has no assets other than cash. Except as specifically contemplated in the TSX Venture Exchange Inc.'s CPC policy, until the completion of its qualifying transaction, the Corporation will not carry on business, other than the identification and evaluation of businesses or assets with a view to completing a proposed qualifying transaction.

For further information, please contact:

Mercal Capital Corp.
Tim McCunn
Chief Executive Officer
Telephone: (613) 566-2831
Email: [email protected]

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


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