Black Sparrow Capital Corp. Enters Into Letter of Intent With Pure Natures Wellness Inc. to Complete Qualifying Transaction

Black Sparrow Capital Corp. Enters Into Letter of Intent With Pure Natures Wellness Inc. to Complete Qualifying Transaction
  
 

TORONTO, ONTARIO--(Marketwired - Jun 26, 2014) - Black Sparrow Capital Corp. ("Black Sparrow" or the "Company") (TSX-VENTURE:BLC.H) announced today that it has entered into a non-binding letter of intent (the "LOI") with Pure Natures Wellness Inc. doing business as Aphria ("Aphria") which outlines the general terms and conditions of a proposed transaction pursuant to which a direct wholly-owned subsidiary of Black Sparrow will amalgamate with Aphria, resulting in Black Sparrow owning all of the issued and outstanding securities of Aphria. Holders of shares of Aphria will receive shares of Black Sparrow on the basis of one Black Sparrow share for each Aphria share, pursuant to the amalgamation on the terms, and subject to the conditions contained in the Definitive Agreement (as defined below) (the "Proposed Transaction"). The LOI was negotiated at arm's length and is effective as of June 26, 2014.

Black Sparrow is a capital pool company listed on the NEX board of the TSX Venture Exchange (the "TSXV") and the Proposed Transaction would constitute the Company's qualifying transaction under TSXV Policy 2.4 - Capital Pool Companies.

Aphria, based in Leamington, Ontario, is in the business of producing and supplying medical marijuana pursuant to the Marihuana for Medical Purposes Regulations (the "Regulations"). It is expected that, prior to the closing of the Proposed Transaction, Aphria will have received its final license (the "License") from Health Canada designating Aphria as a "licensed producer" pursuant to the Regulations.

The transaction terms outlined in the LOI are non-binding on the parties and the LOI is expected to be superseded by a definitive agreement (the "Definitive Agreement") to be signed between the parties. The Proposed Transaction is subject to regulatory approval, including the approval of the TSXV, and the satisfaction of customary closing conditions, including the approval of the Definitive Agreement and the Proposed Transaction by the directors of each of Black Sparrow and Aphria and completion of due diligence investigations to the satisfaction of each of Black Sparrow and Aphria, as well as the conditions described below. The definitive legal structure for the Proposed Transaction will be determined after the parties have considered all applicable tax, corporate and securities law, and accounting efficiencies.

Trading in the common shares of Black Sparrow (the "Black Sparrow Shares") will be halted as a result of this announcement and will remain halted until the resumption of trading is approved by the TSXV.

The Proposed Transaction

As of the date hereof, (i) Black Sparrow has 5,000,000 Black Sparrow Shares outstanding; and (ii) Aphria has 38,679,587 common shares (the "Aphria Shares"), 5,791,460 common share purchase warrants (the "Aphria Warrants") and 2,600,000 options (the "Aphria Options") outstanding. In addition, pursuant to an engagement letter dated June 25, 2014 between Aphria and Clarus Securities Inc., prior to the completion of the Proposed Transaction, Aphria expects to complete a concurrent private placement financing and issue up to an aggregate of 8,846,154 Aphria Shares (assuming the full exercise of the over-allotment option by the agents in the financing) and 5,351,923 Aphria Warrants (including broker warrants to be issued), as described further below.

Pursuant to the terms of the Proposed Transaction, and based on the foregoing, Black Sparrow will: (i) subject to the receipt of all regulatory approval, including the approval of its shareholders and the TSXV, reorganize its share structure such that it will have only 2,300,000 common shares issued and outstanding following the issuance of any finder's fee compensation and immediately prior to the issuance of the Consideration Shares (as defined below); (ii) acquire all of the issued and outstanding securities of Aphria, and as consideration, will issue, on a one-for-one basis, approximately 47,525,741 Black Sparrow Shares (the "Consideration Shares") in exchange for the then issued and outstanding Aphria Shares (which for greater certainty includes the Aphria Shares to be issued in the concurrent financing); and (iii) issue convertible securities of Black Sparrow in exchange for the then issued and outstanding convertible securities of Aphria with substantially the same terms with appropriate adjustments (the "Replacement Convertible Securities").

Following the completion of the Proposed Transaction there will be 49,825,741 (on a non-diluted basis) and 65,769,124 (on a fully-diluted basis) common shares of the resulting issuer (the "Resulting Issuer Shares").

It is expected that following completion of the Proposed Transaction but prior to giving effect to the concurrent financing (described below), the current holders of Black Sparrow Shares will hold approximately 5.6% of the outstanding Resulting Issuer Shares and the then current holders of Aphria Shares will hold approximately 94.4% of the Resulting Issuer Shares, all on a non-diluted basis. Following completion of the Proposed Transaction and after giving effect to the concurrent financing, it is expected that the then current holders of Black Sparrow Shares will hold approximately 4.6% of the outstanding Resulting Issuer Shares and the then current holders of Aphria Shares (including the concurrent financing participants) will hold approximately 95.4% of the Resulting Issuer Shares, all on a non-diluted basis.

Other Conditions to the Proposed Transaction

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

Other conditions to completion of the Proposed Transaction include, but are not limited to:

• Negotiation and execution of the Definitive Agreement in respect of the Proposed Transaction;
• Preparation and filing of a management information circular outlining the definitive terms of the Proposed Transaction in accordance with the rules of the TSXV;
• Receipt of all requisite approvals from directors, shareholders and regulatory authorities relating to the Proposed Transaction, including, without limitation, TSXV approval; and
• Receipt by Aphria of the License.

Concurrent Financing

Pursuant to the engagement letter with Clarus Securities Inc., it is expected that prior to the completion of the Proposed Transaction, Aphria will complete a private placement (the "Private Placement") of subscription receipts (the "Offered Securities"). The conversion of the Offered Securities into Aphria Shares and Aphria Warrants, respectively, will be conditional upon the satisfaction of various conditions, including the satisfaction of conditions necessary for the completion of the Proposed Transaction (the "Escrow Release Condition"). An aggregate of 8,846,154 Aphria Shares are expected to be issued pursuant to the Private Placement at a subscription price of $1.30 for gross proceeds of approximately $11.5 million (assuming the exercise in full of the over-allotment option by the agents in the financing). An aggregate of 5,351,923 Aphria Warrants (which includes an aggregate of 928,846 broker warrants) are also expected to be issued pursuant to the Private Placement. Each Aphria Warrant issued in connection with the Private Placement, other than the broker warrants, will be exercisable for one Aphria Share at a price of $1.70. Each broker warrant will be exercisable for one Aphria Share and one half of one Aphria Warrant at a price of $1.30. The Aphria Warrants (including the broker warrants) are exercisable on or before the date that is 24 months following the satisfaction of the Escrow Release Condition.

Board of Directors and Management

The proposed board and management team of the Resulting Issuer is expected to consist of, among others, the following individuals: Vic Neufeld (President and Chief Executive Officer and director), John Cervini (Chief Administrative Officer and director), Cole Cacciavillani (Chief Operating Officer and director), Dennis Staudt (director), and Jonathan Leong (as Chief Financial Officer).

Further Information

Further details about the Proposed Transaction and the resulting issuer will be provided in a comprehensive press release when the parties enter into a Definitive Agreement and in the disclosure document to be prepared and filed in respect of the Proposed Transaction.

Investors are cautioned that, except as disclosed in the disclosure document to be prepared in connection with the Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

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

Sponsorship for a Qualifying Transaction of a capital pool company is required by the TSXV, unless an exemption from the sponsorship requirement is available. Black Sparrow will engage a sponsor in connection with the Proposed Transaction if required in accordance with the requirements of the TSXV.

The Delavaco Group is acting as an advisor to Aphria and Clarus Securities Inc. is acting as financial advisor to Aphria.

Cautionary Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Corporation's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this release contains forward-looking information relating to the completion of the Proposed Transaction, the number of securities of Black Sparrow that may be issued in connection with the Proposed Transaction, the ownership of Black Sparrow following the Proposed Transaction, the concurrent financing, shareholder approval and the parties' ability to satisfy closing conditions and receive necessary approvals. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Corporation. Although such statements are based on management's reasonable assumptions, there can be no assurance that the Proposed Transaction will occur, or that if the Proposed Transaction does occur, it will be completed on the terms described above.

The forward-looking information contained in this release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

Neither the TSX Venture Exchange nor it 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 release.

Black Sparrow Capital Corp.Michael GalloroPresident, Chief Executive Officer,Chief Financial Officer and Director(416) 907.5644 ext. 105Pure Natures Wellness Inc.Vic NeufeldPresident and Chief Executive Officer(844) 427-4742