Reference in this notice to we, our, us and similar terms
means Burcon NutraScience Corporation (
Burcon
or the
Company
).
Reference in this notice to you, your and similar terms mean to Burcon
shareholders. Unless otherwise indicated, reference herein to $ or dollar
are to Canadian dollars. Certain terms used in this Circular are defined
elsewhere herein.
We are issuing to the holders of common shares in the capital
of the Company (the
Common Shares
) of record at 5:00 p.m. (Toronto
time) on May 30, 2019 (the
Record Date
) and who are resident in Canada
and to shareholders in the United States other than in the states of Arizona,
Arkansas, California, Minnesota, Ohio and Wisconsin (the
Eligible
Jurisdictions
) and outside the Eligible Jurisdictions where the Company is
eligible to make such offer, transferrable rights (
Rights
) to subscribe
for Common Shares on the terms described in this Circular (the
Rights
Offering
). This Circular provides additional details about the Rights
Offering referred to in the Rights Offering notice dated May 23, 2019 (the
Notice
), a copy of which has been filed on SEDAR at
www.sedar.com
and will be mailed to the holders of
Common Shares on or about June 3, 2019.
Each holder of Common Shares on the Record Date resident in an
Eligible Jurisdiction (an
Eligible Holder
) will receive one Right for
each Common Share held as of the Record Date.
You are entitled to subscribe for one (1) Common Share for each
Right held upon payment of the Subscription Price (as defined below) per share
(the
Basic Subscription Privilege
). No fractional Common Shares will be
issued. If you exercise your Basic Subscription Privilege in full, you will also
be entitled to subscribe pro rata for Common Shares (the
Additional Common
Shares
) not otherwise purchased, if any, pursuant to the Basic Subscription
Privilege (the
Additional Subscription Privilege
).
The Rights may be exercised commencing on June 3, 2019 until
5:00 p.m. (Toronto time) on June 25, 2019 (the
Expiry Time
).
Rights
not exercised at or before the Expiry Time will be void and of no value.
The Rights permit the holders thereof to subscribe for and
purchase from Burcon an aggregate of up to 43,941,536 Common Shares based on the
43,941,536
Common Shares outstanding as of the date hereof. During this
period, the Rights will trade on the Toronto Stock Exchange (the
TSX
)
and holders of Rights may sell their Rights through facilities of the TSX.
The Rights may not be transferred to any person within the United States.
The Rights held by holders in the United States may be transferred only through
the facilities of the TSX in transactions that comply with Regulation S under
the United States Securities Act of 1933, as amended (the
U.S. Securities
Act
).
The Rights
are fully transferable into and within
Canada and will be evidenced by transferable rights certificates (each, a
Rights Certificate
), which will be in registered form. Every Right will
entitle the holder thereof to subscribe for one Common Share
at the
Subscription
Price prior to the Expiry Time.
The authorized capital of the Company consists of an unlimited
number of Common Shares without par value. As at the date hereof, there are
43,941,536 Common Shares issued and outstanding as fully paid and non-assessable. In addition, as of the date hereof, the Company has
outstanding incentive stock options to purchase 3,953,739 Common Shares, as well
as outstanding warrants to purchase 1,182,099 Common Shares and an outstanding
convertible note convertible into up to 507,614 Common Shares at a conversion
price of $3.94 per share. Assuming all of the Rights are exercised and no other
issuances of Common Shares occur before the Expiry Time, the Company will have
87,883,072 Common Shares outstanding immediately after the Expiry Time.
The holders of Common Shares are entitled to one vote per
Common Share held at meetings of the holders of Common Shares, to dividends if,
as and when declared by the Companys board of directors and, in the event of
the liquidation, dissolution or winding-up of the Company, to receive on a pro
rata basis the net assets of the Company after payment of debts and other
liabilities, subject to the rights of any securities having priority over the
Common Shares.
The Rights Offering is not subject to any minimum subscription
level. Based on the 43,941,536
Common Shares outstanding as of the date
hereof, a maximum of 43,941,536
Common Shares will be issued upon
exercise of the Rights.
The Common Shares are listed on the TSX under the symbol BU
and the Frankfurt Stock Exchange (
FWB
) under the symbol BNE. The TSX
has conditionally
approved the listing of the Rights and the Common
Shares issuable upon the exercise of the Rights. Such listing will be subject to
the Company fulfilling all of the listing requirements of the TSX. The Rights
will be listed on the TSX under the symbol BU.RT and holders of Rights may
sell their Rights through facilities of the TSX. See
Are there restrictions
on the resale of securities?
below. Trading in the Rights on the TSX will
cease at 12:00 p.m. (Toronto time) on June 25, 2019.
This Circular contains certain forward-looking statements and
forward-looking information as defined under applicable Canadian and U.S.
securities laws (collectively,
forward-looking statements
). All
statements, other than statements of historical fact, are forward-looking
statements. When used in this Circular,
the words estimate, project,
believe, anticipate, intend, expect, plan, predict, may, should,
will, or the negatives of these words or other variations thereof and
comparable terminology are intended to identify forward-looking statements. The
forward-looking statements pertain to, among other things: the timing of and
other procedural matters associated with the Rights Offering; the funds to be
raised under the Rights Offering; estimated costs of the Rights Offering; the
successful completion of the Rights Offering; the use of proceeds from the
Rights Offering; the Companys estimate of how long the funds raised in the
Rights Offering will last from the Expiry Time; the anticipated dilution of
shareholders of the Company and liquidity and working capital of the Company.
The forward-looking statements are based on a number of key
expectations and assumptions made by management of the Company, including, but
not limited to: the maximum number of Common Shares being issued pursuant to the
Rights Offering; the estimated cost of the Rights Offering; the estimated amount
of funds raised under the Rights Offering; the operating expenses of the Company
following the Expiry Time; the availability of additional capital; the Companys
ability to continue as a going concern; and general economic and financial
market conditions.
Although the Company believes that the expectations and
assumptions on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on such forward-looking statements. The
forward-looking statements reflect the Company's current views with respect to
future events based on currently available information and are inherently
subject to risks and uncertainties. Many factors, both known and unknown, could cause actual results, performance or achievements to be
materially different from the results, performance or achievements that are or
may be expressed or implied by such forward-looking statements contained in this
Circular, including, but not limited to: the maximum number of Common Shares
being issued pursuant to the Rights Offering being lower than expected; the
uncertainty associated with estimating actual costs incurred in the Rights
Offering; the actual amount of funds raised under the Rights Offering; the
actual operating expenses of the Company for the 12-month period following the
Expiry Time; delays in obtaining or failure to obtain required approvals to
complete the Rights Offering; the impact of issuance of additional Common Shares
on the market price of the Common Shares; the condition of the global economy;
and the Company's access to funding and its ability to provide the capital
required for product development, operations and marketing efforts, and working
capital requirements.
Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, believed, estimated or expected. The Company
cautions readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. Although the Company has
attempted to identify important factors that could cause actual results to
differ materially from forward-looking statements, there may be other factors
that cause results not to be as anticipated, estimated, described or intended.
The Company disclaims any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect changes in assumptions or the occurrence of anticipated or
unanticipated events, except as required by law.
USE OF AVAILABLE FUNDS
WHAT WILL OUR AVAILABLE FUNDS BE UPON THE CLOSING OF THE
RIGHTS OFFERING?
The following table outlines our available funds upon closing
of the Rights Offering:
|
|
Assuming
|
|
|
Assuming
|
|
|
Assuming
|
|
|
Assuming
|
|
|
|
32.2% of
|
|
|
50% of
|
|
|
75% of
|
|
|
100% of
|
|
|
|
offering
(1)
|
|
|
offering
|
|
|
offering
|
|
|
offering
|
|
A Amount to be
raised by this offering
|
$
|
4,957,776
|
|
$
|
7,689,769
|
|
$
|
11,534,653
|
|
$
|
15,379,538
|
|
B Selling
commissions and fees
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
C Estimated
offering costs (e.g., legal, accounting, audit)
|
$
|
140,000
|
|
$
|
140,000
|
|
$
|
140,000
|
|
$
|
140,000
|
|
D Available funds: D
= A - (B+C)
|
$
|
4,817,776
|
|
$
|
7,549,769
|
|
$
|
11,394,653
|
|
$
|
15,239,538
|
|
E Additional
sources of funding required
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
F Working capital
deficiency
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
G
Total: G = (D+E) F
|
$
|
4,817,776
|
|
$
|
7,549,769
|
|
$
|
11,394,653
|
|
$
|
15,239,538
|
|
|
Note:
|
|
|
1.
|
The Company understands that the Insider Group (defined
below) intends to exercise all of their Basic Subscription Privilege in
connection with the Rights Offering, representing approximately 32.2% of
the Common Shares available under the Rights Offering, being 14,165,073
Common Shares. See
Insider Participation Will Insiders be
Participating?
below.
|
HOW WILL WE USE THE AVAILABLE FUNDS?
Description of
intended use of available
|
|
Assuming
|
|
|
Assuming
|
|
|
Assuming
|
|
|
Assuming
|
|
funds listed in
order of priority
|
|
32.2% of
|
|
|
50% of
|
|
|
75% of
|
|
|
100% of
|
|
|
|
offering
(1)
|
|
|
offering
|
|
|
offering
|
|
|
offering
|
|
Repayment of Loans
(2)
|
$
|
4,171,396
|
|
$
|
4,171,396
|
|
$
|
4,171,396
|
|
$
|
4,171,396
|
|
Capital
expenditures
(3)
|
$
|
-
|
|
$
|
-
|
|
$
|
3,822,695
|
|
$
|
7,822,695
|
|
4
Research and development
|
$
|
256,000
|
|
$
|
1,339,000
|
|
$
|
739,000
|
|
$
|
634,000
|
|
Working capital
|
$
|
390,380
|
|
$
|
2,039,373
|
|
$
|
2,661,562
|
|
$
|
2,611,447
|
|
Total: Equal to G in the available funds
|
$
|
4,817,776
|
|
$
|
7,549,769
|
|
$
|
11,394,653
|
|
$
|
15,239,538
|
|
|
Note:
|
|
|
1.
|
The Company understands that the Insider Group intends to
exercise all of their Basic Subscription Privilege in connection with the
Rights Offering, representing approximately 32.2% of the Common Shares
available under the Rights Offering, being 14,165,073 Common Shares. See
Insider Participation Will Insiders be Participating?
below.
|
|
2.
|
The Company has entered into a Loan Agreement (as defined
below) with the Lender (as defined below) a wholly- owned subsidiary of
Firewood (as defined below). Firewood is wholly-owned by Mr. Alan Chan, a
director of Burcon. Firewood is an insider of Burcon as it currently holds
11,433,287 Common Shares, representing approximately 26% of the
outstanding Common Shares. In addition, Mr. Alan Chan and Ms. Rosanna
Chau, directors of Burcon, are also directors of the Lender.
|
|
3.
|
Capital expenditures relate to Burcons investment in BFF
(as defined below). Under the Shareholders Agreement (as defined below),
BFF will reimburse the Company for its cash expenses incurred to the date
of the Initial Capital Contribution (defined below). Todate, these
expenses total $177,305.
|
On May 23, 2019, Burcons wholly-owned subsidiary,
Burcon NutraScience Holdings Corp. (
Burcon Holdings
) entered into an
unanimous shareholders agreement (the
Shareholders Agreement
) with an
investor group with manufacturing and sales experience in the protein industry
(the
Investor Group
) to become shareholders of Burcon Functional Foods
Corporation (
BFF
). Currently, Burcon Holdings holds 40% and the
Investor Group holds 60% of the issued and outstanding common shares of BFF. The
business of BFF is the commercial production, sales, marketing and distribution
worldwide of Burcons pea protein, pulse protein and canola protein products.
Pursuant to the Shareholders Agreement, the parties agreed that on or before
July 2, 2019, Burcon Holdings and the Investor Group will make a capital
contribution to BFF by way of shareholder loans and/or subscription of shares in
the aggregate of $10,000,000. Burcon Holdings has agreed to make a capital
contribution of $4,000,000 to BFF (less certain deductions for certain
expenses), while members of the Investor Group have agreed to contribute
$4,000,000 and $2,000,000, respectively (each an
Initial Capital
Contribution
). If at least 75% of the Common Shares available pursuant to
the Rights Offering are subscribed for, Burcon will use a portion of the
estimated net proceeds of the Rights Offering to contribute $4,000,000 (less
certain deductions for certain expenses) to BFF. In the event that any of Burcon
Holdings, or a member of the Investor Group fail to contribute its respective
Initial Capital Contribution on or before July 2, 2019, then the Shareholders
Agreement will automatically terminate on July 3, 2019.
Provided
that the Shareholders Agreement has not been previously terminated, the parties
have agreed to make further contributions to BFF on or before September 3, 2019
in the aggregate amount of $10,000,000. Burcon Holdings has agreed to contribute
a further $4,000,000 to BFF, while members of the Investor Group have agreed to
contribute $4,000,000 and $2,000,000, respectively (each an
Additional
Capital Contribution
). Assuming 100% of the Rights Offering is subscribed
for, Burcon will use a further portion of the estimated net proceeds of the
Rights Offering to contribute $4,000,000 to BFF. In the event that any of Burcon
Holdings, or a member of the Investor Group fail to contribute its respective
Additional Capital Contribution (a
Capital Deficiency
), any shareholder
under the Shareholders Agreement that has contributed its full proportionate
share of the Additional Capital Contribution may make a further capital
contribution in the amount of the Capital Deficiency and the proportionate
ownership of each shareholder will be adjusted accordingly. If Burcon Holdings
only contributes its Initial Capital Contribution and not the Additional Capital
Contribution while the remaining shareholders contribute their Initial Capital
Contribution, Additional Capital Contribution and any Capital Deficiency, Burcon
Holdingss ownership interest in BFF will be reduced to 20%. For additional
information regarding the Shareholders Agreement, please see the Companys news
release regarding the Shareholders Agreement, a copy of which has been filed on
SEDAR at
www.sedar.com
.
Concurrently
with the signing of the Shareholders Agreement, Burcon and its wholly-owned
subsidiary, Burcon NutraScience (MB) Corp. has entered into a license agreement
with BFF (the
License Agreement
). Under the License Agreement, Burcon
has granted an exclusive, royalty-bearing, worldwide license to BFF to use and
exploit Burcons pea, pulse and canola protein technologies to make, have made,
use and market and sell Burcons pea, pulse and canola proteins. The License
Agreement has a term of the greater of twenty years and the last to expire of
Burcon patents that are being used to produce products under the License
Agreement. If the Shareholders Agreement is terminated on July 3, 2019 for
failure of a party to make its Initial Capital Contribution, either Burcon or
the BFF can provide written notice to the party to terminate the License
Agreement. For additional information regarding the License Agreement, please
see the Companys news release regarding the License Agreement, a copy of which
has been filed on SEDAR at
www.sedar.com
.
5
On November 13, 2018 Burcon entered into a loan agreement (the
Loan
Agreement
) pursuant to which Large Scale Investments Limited (the
Lender
), a wholly-owned subsidiary of Firewood Elite Limited
(
Firewood
), will make $1,000,000 available to Burcon on an unsecured
basis. On March 27, 2019, Burcon and the Lender amended the Loan Agreement to
increase the principal amount available under the Loan Agreement to $1,500,000
(the
Loan
). As of the date hereof, the Company has drawn down
$1,500,000 under the Loan pursuant to the Loan Agreement.
The
net proceeds from the Loan have been used to continue Burcons commercialization
efforts, for partnering discussions for its Peazazz pea protein technology and
other alternative plant protein technologies, for continued research and
development of Burcons protein extraction and purification technologies, for
work on Burcons intellectual property portfolio and for other general corporate
purposes.
On May 12, 2016, pursuant to a convertible note purchase agreement dated April
7, 2016, Burcon issued to the Lender a convertible promissory note in the
principal amount of $2,000,000 (the
Note
). The Note has a maturity date
of June 21, 2019. The outstanding principal amount of the Note is convertible
into Common Shares.
Assuming
at least 32.2% of the Common Shares available pursuant to the Rights Offering
are subscribed for, the estimated net proceeds of the Rights Offering will be
used in part to repay the Loan and the Note, which both will mature and become
payable, together with and all accrued and unpaid interest thereon. The
Subscription Price of any Common Shares acquired by the Lender pursuant to the
exercise of Rights as holders of Rights will be satisfied in part by the
reduction of the amounts payable to the Lender under the Loan Agreement and the
Note.
Firewood,
the parent company of the Lender, is wholly-owned by Mr. Alan Chan, a director
of Burcon. Firewood is an insider of Burcon as it currently holds 11,433,287
Common Shares, representing approximately 26% of the outstanding Common Shares.
In addition, Mr. Alan Chan and Ms. Rosanna Chau, directors of Burcon, are also
directors of the Lender.
After
the investment in BFF and repayment of the Loan and Note described above, the
remaining estimated net proceeds of the Rights Offering will be used to fund the
Companys ongoing research and development program, further strengthen and
expand its intellectual property portfolio and for general working capital. The
Companys research and development will be focused on further optimizing its
Peazazz® and Peazac® pea proteins as well as its Supertein®, Puratein® and
Nutratein® canola proteins to support Burcons investment in BFF and the License
Agreement. Research and development work, ranging from functional applications
work to shelf-life testing, is and will continue to be undertaken. Burcon has
designed and built a pilot-scale production facility at its technical center in
Winnipeg, complete with an analytical laboratory, for the development and
small-scale production of proteins from various plant sources (the
WTC
). Burcon will continue to operate the WTC to provide samples for
potential market applications for Peazazz® and Peazac® pea proteins as well as
its Supertein®, Puratein® and Nutratein® canola proteins to potential customers
of BFF. The research work is primarily undertaken by our technical team at this
facility, with research and development contracted out as necessary.
The
above use of net proceeds reflects the current intention of the Company based on
information currently available to it and on current circumstances, economic and
otherwise. The actual use of the net proceeds of the Rights Offering may vary
depending on operational and capital needs and the progress of the research and
development programs from time to time. Accordingly, management of the Company
will have the discretion in the application of the proceeds of the Rights
Offering. Unallocated funds, if any, will be used for general working capital
purposes of the Company.
6
Burcon
requires the completion of at least 52% of the Rights Offering to satisfy all of
its short-term liquidity requirements excluding Burcons intended completion of
the Initial Capital Contribution in BFF (as described above). In order to make
the Initial Capital Contribution in BFF and satisfy all of its short-term
liquidity requirements, Burcon requires completion of at least 72% of the Rights
Offering. The Company expects that if only 32.2% of the Rights Offering is
subscribed for, it will have a working capital deficiency in approximately two
months after completion of the Rights Offering.
For these reasons, if at
least 52% of the Rights Offering is not subscribed for, there is substantial
doubt that Burcon will be able to continue as a going concern.
HOW LONG WILL THE AVAILABLE FUNDS LAST?
The Company estimates that the funds raised in the Rights
Offering, assuming 52% participation in the Rights Offering, will last until
June 2020, approximately 12 months from the Expiry Time.
Our
only present means of acquiring investment capital is by means of the sale of
our Common Shares. There is no assurance that we will be able to raise
additional financing in the future. For these reasons, if at least 52% of the
Rights Offering is not subscribed for, there is substantial doubt that we will
be able to continue as a going concern.
INSIDER PARTICIPATION
WILL INSIDERS BE PARTICIPATING?
To
the knowledge of the Company, after reasonable inquiry, all directors, senior
officers and persons controlling over 10% of the Common Shares of the Company
(collectively, the
Insider Group
), as the date hereof, intend to
exercise all of their Basic Subscription Privilege in connection with the Rights
Offering, representing approximately 32.2% Common Shares available under the
Rights Offering, being 14,165,073 Common Shares.
As
at the date hereof, insiders of the Company own or exercise control or direction
over, directly or indirectly, 14,165,073 Common Shares, representing
approximately 32.2% of the issued and outstanding Common Shares. Assuming the
full take-up of their of their Basic Subscription Privileges, these insiders
would own an aggregate of 28,330,146 Common Shares following the Rights
Offering.
WHO ARE THE HOLDERS OF 10% OR MORE OF OUR SECURITIES BEFORE
AND AFTER THE RIGHTS OFFERING?
To the knowledge of the Company, after reasonable inquiry, the
only persons or companies who beneficially own, or control or direct, directly
or indirectly, voting securities of the Company carrying more than 10% of the
voting rights attached to the voting securities of the Company are as
follows:
Name
|
Holdings before the Rights
Offering
(1)
|
Holdings after the Rights Offering
(2)
|
Firewood
|
11,433,287 Common Shares or 26%
|
22,866,574 Common Shares or 26%
|
|
Note:
|
|
|
1.
|
Based on 43,941,536 Common Shares issued and outstanding
as of the date hereof.
|
|
2.
|
Assuming Firewood or its affiliates subscribes for such
number of Common Shares under the Rights Offering to maintain its pro-rata
holdings.
|
7
DILUTION
IF YOU DO NOT EXERCISE YOUR RIGHTS, BY HOW MUCH WILL YOUR
SECURITY HOLDINGS BE DILUTED?
If a shareholder elects not to exercise Rights, the value of
the Common Shares held by such shareholder may be diluted as a result of the
exercise of Rights by other shareholders by approximately 50%, assuming the
issuance of the maximum number of Common Shares under the Rights Offering.
HOW TO EXERCISE THE RIGHTS
HOW DOES A SECURITY HOLDER THAT IS A REGISTERED HOLDER
PARTICIPATE IN THE RIGHTS OFFERING?
If you are a registered holder of Common Shares on the Record
Date resident in an Eligible Jurisdiction, you will find a Rights Certificate
enclosed with the Notice mailed to you on or about June 3, 2019. Registered
holders of Common Shares resident outside the Eligible Jurisdictions will be
sent the Notice for information purposes only, together with a letter advising
them that their Rights Certificates will be held by the Subscription Agent (as
defined below), who will hold such Rights as agent for the benefit of all such
Ineligible Holders.
One (1) Right and payment of the Subscription Price are
required to subscribe for one Common Share under the Basic Subscription
Privilege. The holder of a Rights Certificate may subscribe for all or any
lesser whole number of Common Shares to which the Rights Certificate entitles
such holder by completing and executing Form 1 on the face of the Rights
Certificate and delivering the Rights Certificate so completed and executed
together with the aggregate Subscription Price for such Common Shares to
Computershare Investor Services Inc., the subscription agent retained by Burcon
in connection with the Rights Offering (the
Subscription Agent
). The
Subscription Price is payable in Canadian funds by certified cheque, bank draft
or money order payable to the order of Computershare Investor Services Inc.
All payments, together with Form 1 duly completed on the Rights Certificate,
must be sent to the office of the Subscription Agent (the
Subscription
Office
) before the Expiry Time by courier to 8
th
Floor, 100
University Ave., Toronto, Ontario M5J 2Y1
,
Canada, Attention: Corporate
Actions or by mail to P.O. Box 7021 31 Adelaide St. E. Toronto, Ontario M5C 3H2,
Canada, Attention: Corporate Actions. The method of delivery of a subscription
is at each holders discretion and risk. Delivery to the Subscription Agent will
only be effective when the subscription is actually received by the Subscription
Agent at the Subscription Office. If mail is used for delivery of a
subscription, sufficient time must be allowed to avoid late delivery, and
registered mail is suggested.
Completion of Form 1 on the Rights Certificate
constitutes a representation that the holder of a Rights Certificate is neither
an Ineligible Holder (as defined below) nor the agent of any such person.
HOW DOES A SECURITY HOLDER THAT IS NOT A REGISTERED HOLDER
PARTICIPATE IN THE RIGHTS OFFERING?
Only registered Eligible Holders will be provided with Rights
Certificates. For Eligible Holders whose Common Shares are held through a
securities broker or dealer, bank or trust company or other participant (each, a
Participant
) in the book based system administered by CDS Clearing and
Depositary Services Inc. (
CDS
) or Depository Trust Company
(
DTC
) (such shareholders being referred to as
Beneficial Eligible
Holders
), Rights Certificates will be issued in registered form to CDS or
DTC, as the case may be, and will be deposited with CDS or DTC, as the case may
be. The Company expects that each Beneficial Eligible Holder will receive a
confirmation of the number of Rights issued to it from its Participant in
accordance with the practices and procedures of that Participant. CDS and DTC
will be responsible for establishing and maintaining book-entry accounts for
Participants holding Rights. A Beneficial Eligible Holder holding Common Shares
through a Participant may subscribe for Common Shares by instructing the
Participant holding its Rights to exercise all or a specified number of such
Rights and forwarding the aggregate Subscription Price for each Common Share
subscribed for in accordance with the terms of the Rights Offering to the
Participant which holds the Beneficial Eligible Holders Rights. Participants may have an earlier
deadline for receipt of instructions and payment than the Expiry Time.
8
The aggregate Subscription Price is payable by direct debit
from the Beneficial Eligible Holders brokerage account or by electronic funds
transfer or other payment mechanism satisfactory to the Participant. The entire
Subscription Price for Common Shares subscribed for must be paid at the time of
subscription and must be received by the Subscription Agent prior to the Expiry
Time. Accordingly, if a Beneficial Eligible Holder is subscribing through a
Participant, such Beneficial Eligible Holder must deliver payment (by method
described above) and instructions to the Participant sufficiently in advance of
the Expiry Time to allow the Participant to properly exercise the Rights on such
Beneficial Eligible Holders behalf.
Participants that hold Rights for more than one Beneficial
Eligible Holder may, upon providing evidence satisfactory to the Company and the
Subscription Agent, exercise Rights on behalf of its accounts on the same basis
as if the Beneficial Eligible Holders were holders of Common Shares.
The Company and the Subscription Agent shall have no liability
for: (a) the records maintained by CDS or DTC, as the case may be, or
Participants relating to the Rights or the book-entry accounts maintained by CDS
or DTC, as the case may be; (b) maintaining, supervising or reviewing any
records relating to such Rights; (c) any advice or representation made or given
by CDS, DTC or Participants with respect to the rules and regulations of CDS or
DTC, as the case may be; (d) any action to be taken by CDS, DTC or Participants;
or (e) any failure by Participants to take any action or any matter relating to
the Rights or the exercise thereof.
The ability of a person having an interest in Rights held
through a Participant to pledge such interest or otherwise take action with
respect to such interest (other than through a Participant) may be limited due
to the lack of a physical Rights Certificate.
Beneficial Eligible Holders whose Common Shares are held
through a Participant must arrange purchases or transfers of Rights and the
exercise of Rights to purchase Common Shares through their Participant. The
Company anticipates that each such purchaser of a Right or Common Shares will
receive a customer confirmation of purchase from the Participant from whom such
Right or Common Shares is purchased in accordance with the practices and
procedures of such Participant.
WHO IS ELIGIBLE TO RECEIVE RIGHTS?
Holders of Common Shares on the Record Date resident in an
Eligible Jurisdiction are eligible to receive Rights. The Rights and Common
Shares have not and will not be registered under the laws of any jurisdiction
outside of the Eligible Jurisdictions.
If you are a holder of Common Shares on the Record Date
resident outside of an Eligible Jurisdiction (an
Ineligible Holde
r),
you will find an exempt purchaser status certificate (
Exempt Status
Certificate
) enclosed with the Notice mailed to you on or about June 3,
2019. If you deliver a completed and executed Exempt Status Certificate to
Burcon on or before June 18, 2019 and your eligibility to participate in the
Rights Offering is confirmed by Burcon, the Subscription Agent will forward to
you a Rights Certificate evidencing the number of Rights you are entitled to. If
you do not satisfy Burcon as to your eligibility to participate in the Rights
Offering on or before June 18, 2019, the Subscription Agent will attempt, on a
best efforts basis, to sell your rights on the TSX prior to the Expiry Time. The
Subscription Agents ability to sell the Rights, and the prices obtained for the
Rights, are dependent on market conditions. The proceeds received by the
Subscription Agent, if any, from the sale of the Rights, net of any applicable
costs, expenses and taxes, will be divided among the Ineligible Holders on a pro
rata basis according to the total number of Common Shares held by them on the
Record Date.
An Ineligible Holder who wishes to exercise Rights, and who is
resident of a jurisdiction where the Rights Offering and the distribution and
exercise of Rights is lawful and exempt from any prospectus or similar filing
requirement, must complete and deliver the Exempt Status Certificate. Among
other things, an Ineligible Holder seeking eligibility to participate in the
Rights Offering must represent and warrant to the Company and the Subscription Agent and their respective directors, officers and
employees that under the laws of such persons place of residence, such person
is entitled to receive, own and exercise the Rights and that the distribution
to, and exercise by, such person of such Rights is not unlawful and is exempt
from any prospectus or similar filing requirement under the laws applicable to
such person or the laws of such persons place of residence and does not require
obtaining any approvals of a regulatory authority in such persons place of
residence. In addition, such Ineligible Holder must acknowledge that the Company
and the Subscription Agent and their respective directors, officers, and
employees are relying on such representations and warranties and are entitled
and requested to do so in accepting such subscription and in issuing and
distributing the subscribed for Common Shares. The Company may, in its sole
discretion, determine such persons eligibility.
9
The Subscription Agent will hold the Rights of Ineligible
Holders until June 18, 2019, following which the Subscription Agent will, prior
to the Expiry Time, attempt to sell such Rights on the TSX, on a best efforts
basis. The Subscription Agents ability to sell the Rights, and the prices
obtained for the Rights, are dependent on market conditions. The Subscription
Agent will not be subject to any liability for failure to sell any Rights held
for the benefit of Ineligible Holders at any particular price or prices, or at
all. The proceeds received by the Subscription Agent, if any, from the sale of
the Rights delivered to it, net of any applicable costs, expenses and taxes will
be divided among the Ineligible Holders on a pro rata basis according to the
total number of Common Shares held by them on the Record Date. The Subscription
Agent will mail cheques to the Ineligible Holders at their addresses appearing
in the records of the Subscription Agent for their respective proportions of
those net proceeds, subject to any applicable taxes which must be withheld for
particular Ineligible Holders, provided that the Subscription Agent will not be
required to make any such payment to any Ineligible Holder if the amount owing
to such holder is less than $10.00. Such amount will be used by the Company to
offset a portion of the remuneration of the Subscription Agent for its services.
The Rights Offering does not constitute an offer or a
solicitation to any person in any jurisdiction in which such offer or
solicitation is unlawful. The Rights Offering is not being made to, nor will
subscriptions be accepted from or on behalf of, holders of Rights in any
jurisdiction in which the making or acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, in its
sole discretion, take such action as it may deem necessary to extend the Rights
Offering to holders of Common Shares in such jurisdiction.
Any person
resident outside of Canada or the United States (excluding Arizona, Arkansas,
California, Minnesota, Ohio and Wisconsin), who is subject to the laws of a
jurisdiction where the Rights Offering may be lawful, should seek advice from a
lawyer or other qualified securities authority to satisfy himself, herself or
itself with respect to the availability and applicability of any exemption or
other provision of the applicable securities legislation that would make the
Rights Offering to him, her or it lawful.
WHAT IS THE ADDITIONAL SUBSCRIPTION PRIVILEGE AND HOW CAN
YOU EXERCISE THIS PRIVILEGE?
A holder of a Rights Certificate who subscribes, pursuant to
the Basic Subscription Privilege, for all of the Common Shares to which a Rights
Certificate entitles such holder may subscribe for Additional Common Shares at
the Subscription Price by completing and executing Form 2 on the face of the
Rights Certificate and delivering the Rights Certificate so completed and
executed together with the aggregate Subscription Price for such Additional
Common Shares to the Subscription Agent. If there is an insufficient number of
Common Shares available to satisfy the subscriptions for Additional Common
Shares, the number of Common Shares, if any, available to a subscriber for
Additional Common Shares will be equal to the lesser of: (a) the number of
Common Shares for which the subscriber has subscribed under the Additional
Subscription Privilege; and (b) the number (disregarding fractions) obtained by
multiplying the aggregate number of Additional Common Shares that may be
acquired upon exercise of the Rights issued that were not exercised under the
Basic Subscription Privilege by a fraction, the numerator of which is the number
of Common Shares subscribed for by such holder under the Basic Subscription
Privilege and the denominator of which is the aggregate number of Common Shares
acquired under the Basic Subscription Privilege by all participants that have
subscribed for Additional Common Shares under the Additional Subscription
Privilege.
10
If any holder of Rights has subscribed for fewer Additional
Common Shares than such holders pro rata allotment of Additional Common Shares,
the excess Additional Common Shares will be allocated in the manner set out in
(b) above among the holders who were allotted fewer Additional Common Shares
than they subscribed for.
To subscribe for Additional Common Shares pursuant to the
Additional Subscription Privilege, a holder of Rights must complete and execute
Form 2, as well as Form 1, on the face of the Rights Certificate and deliver the
Rights Certificate so completed and executed together with the aggregate
Subscription Price for such Additional Common Shares to the Subscription Agent
at the Subscription Office. The Subscription Price is payable in Canadian funds
by certified cheque, bank draft or money order payable to the order of
Computershare Investor Services Inc. All payments, together with Form 1 and 2
duly completed on the Rights Certificate, must be received by the Subscription
Agent at the Subscription Office before the Expiry Time. Subscribers for
Additional Common Shares will be notified as soon as practicable after the
Expiry Time of the number of Additional Common Shares, if any, allotted to them.
Any excess subscription monies will be returned by mail without interest or
deduction.
HOW DOES A RIGHTS HOLDER SELL OR TRANSFER RIGHTS?
The Rights will be listed on the TSX until 12:00 p.m. (Toronto
time) on June 25, 2019.
Rights Certificates are in registered form. A holder of Rights
may, rather than exercising such holders Rights to subscribe for Common Shares,
sell or transfer such Rights into and within Canada
to others (except
Ineligible Holders) personally or through the usual investment channels (such as
stock brokers or investment dealers qualified to do business in the holders
jurisdiction) by completing and executing Form 3 on the face of the Rights
Certificate and delivering the Rights Certificate so completed and executed to a
purchaser (the
Transferee
). The Transferee may exercise all of the
Rights of the transferring holder without obtaining a new Rights Certificate.
Rights Certificates will not be registered in the name of an Ineligible Holder.
Payment of any service charge, commission or other fee payable in connection
with the trading of Rights will be the responsibility of the holders of the
Rights.
The
signature on Form 3 of any transferring Rights holder must be guaranteed by an
Eligible Institution or otherwise to the satisfaction of the Subscription Agent.
An
Eligible Institution
means a major Canadian Schedule I chartered
bank, a member of the Securities Transfer Agents Medallion Program (STAMP), a
member of the Stock Exchanges Medallion Program (SEMP) or a member of the New
York Stock Exchange, Inc. Medallion Signature Program (MSP). Members of these
programs are usually members of recognized stock exchanges in Canada and members
of the Investment Dealers Association of Canada. The signature of the Transferee
on any one or more of the forms on the Rights Certificate must correspond
exactly with the name of the Transferee shown on Form 3. If Form 3 of the Rights
Certificate is properly completed, the Company and the depositary will treat the
transferee (or the bearer if no transferee is specified) as the absolute owner
of the Rights Certificate for all purposes and will not be affected by notice to
the contrary. A Rights Certificate so completed should be delivered to the
appropriate person in ample time for the transferee to use it before the
expiration of the Rights.
If you are a beneficial holder, you must arrange for the
transfer of Rights through the CDS, DTC or otherwise.
For Eligible Holders resident in the United States, Rights may
be transferred only in transactions outside of the United States in accordance
with Regulation S under the U.S. Securities Act of 1933 (the
U.S. Securities
Act
), which will permit the resale of the Rights by persons through the
facilities of the TSX, provided that the offer is not made to a person in the
United States, neither the seller nor any person acting on its behalf knows that
the transaction has been prearranged with a buyer in the United States, and no
directed selling efforts are conducted in the United States in connection with
the resale. Directed selling efforts means any activity undertaken for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for the securities being offered.
Certain additional conditions are applicable to the Companys affiliates, as
that term is defined under the U.S. Securities Act. In order to enforce this
resale restriction, holders thereof will be required to execute a declaration
certifying that such sale is being made outside the United States in accordance
with Regulation S under the U.S. Securities Act.
11
WHEN CAN YOU TRADE SECURITIES ISSUABLE UPON THE EXERCISE OF
YOUR RIGHTS?
The Common Shares are listed on the TSX under the symbol BU
and the FWB under the symbol BNE.
The TSX has conditionally approved
the listing of the Common Shares issuable upon the exercise of the Rights. Such
listing will be subject to the Company fulfilling all of the listing
requirements of the TSX. The Common Shares issuable upon the exercise of the
Rights will also be listed on TSX. The Common Shares issuable upon the exercise
of the Rights will be available for trading on or about June 26, 2019.
ARE THERE RESTRICTIONS ON THE RESALE OF SECURITIES?
The Rights being issued hereunder and the Common Shares
issuable upon exercise of the Rights are being distributed by the Company
pursuant to exemptions from the registration and prospectus requirements under
Canadian securities legislation.
Resale of the Rights and the underlying Common Shares may be
subject to restrictions pursuant to applicable securities legislation then in
force. Set out below is a general summary of the restrictions governing first
trades in the Rights and the underlying Common Shares in Canada. Additional
restrictions apply to insiders of the Company and holders of Rights and
underlying Common Shares who are control persons or the equivalent or who are
deemed to be part of what is commonly referred to as a control block in
respect of the Company for purposes of securities legislation.
Each holder is
urged to consult his, her or its professional advisors to determine the exact
conditions and restrictions applicable to trades of the Rights and the
underlying Common Shares.
Generally, the first trade in Rights and the Common Shares
issuable upon exercise of the Rights will be exempt from the prospectus
requirements of Canadian securities legislation, if: (a) the Company is and has
been a reporting issuer in a jurisdiction of Canada for the four months
immediately preceding the trade; (b) the trade is not a control distribution;
(c) no unusual effort is made to prepare the market or to create a demand for
the Rights or the Common Shares; (d) no extraordinary commission or other
consideration is paid in respect of such trade; and (e) if the selling
securityholder is an insider or officer of the Company, the selling
securityholder has no reasonable grounds to believe that the Company is in
default of securities legislation. If such conditions have not been met, then
the Rights and the Common Shares may not be resold except pursuant to a
prospectus or prospectus exemption, which may only be available in limited
circumstances. As of the date hereof, the Company has been a reporting issuer
for more than four months in the provinces of British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, New Brunswick and Nova Scotia.
The Company has filed with the SEC in the United States a
registration statement on Form F-7 under the U.S. Securities Act (the
Registration Statement
) so that the Common Shares issuable upon the
exercise of the Rights will not be subject to transfer restrictions. However,
for such Eligible Holders resident in the United States, the Rights may be
transferred only in transactions outside of the United States in accordance with
Regulation S under the U.S. Securities Act, which will permit the resale of the
Rights by persons through the facilities of the TSX, provided that the offer is
not made to a person in the United States, neither the seller nor any person
acting on its behalf knows that the transaction has been prearranged with a
buyer in the United States, and no directed selling efforts, as that term is
defined in Regulation S under the U.S. Securities Act, are conducted in the
United States in connection with the resale. Certain additional conditions are
applicable to the Companys affiliates, as that term is defined under the U.S.
Securities Act. In order to enforce this resale restriction, holders thereof
will be required to execute a declaration certifying that such sale is being
made outside the United States in accordance with Regulation S under the U.S.
Securities Act, which is included as part of Form 3.
The foregoing is a summary only and is not intended to be
exhaustive. Holders of Rights or the underlying
Common Shares
should consult with their advisors concerning restrictions on resale, and
should not resell their Rights or the underlying Common Shares until they have
determined that any such resale is in compliance with the requirements of
applicable legislation.
12
WILL WE ISSUE FRACTIONAL UNDERLYING SECURITIES UPON EXERCISE
OF THE RIGHTS?
No fractional Common Shares
will be issued. Where the
exercise of Rights would otherwise have entitled a Rights holder to receive
fractional Common Shares, the Rights holders entitlement will be rounded down
to the next lowest whole number of Common Shares.
DEPOSITORY
WHO IS THE DEPOSITORY?
Computershare Investor Services Inc., the Subscription Agent,
is the depositary for the Rights Offering. The Subscription Agent has been
appointed to receive subscriptions and payments from holders of Rights and to
perform the services relating to the exercise and transfer of the Rights.
ADDITIONAL INFORMATION
WHERE CAN YOU FIND MORE INFORMATION ABOUT US?
For further information regarding the Company, please refer to
the continuous disclosure documents filed by the Company with Canadian
securities regulatory authorities at
www.sedar.com
and the Companys website at
www.burcon.ca
.
MATERIAL FACTS AND MATERIAL CHANGES
There is no material fact or material change about the Company
that has not been generally disclosed. See discussion regarding the Shareholders
Agreement and License Agreement disclosed under the heading
Use of Available
Funds What Will Our Available Funds Be Upon the Closing of the Rights
Offering?
above.
DOCUMENTS FILED AS PART OF THE REGISTRATION
STATEMENT
The following documents have been filed with the SEC as part of
the Registration Statement of which this Circular forms a part: (i) the
Companys Annual Information Form for the year ended March 31, 2018; (ii) the
Companys audited consolidated annual financial statements as at and for the
years ended March 31, 2018 and 2017; (iii) managements discussion and analysis
for the audited consolidated annual financial statements for the year ended
March 31, 2018; (iv) the unaudited condensed consolidated interim financial
statements for the three and nine months ended December 31, 2018 and the
corresponding managements discussion and analysis; (v) the management
information circular dated June 25, 2018; (vi) the consent of
PricewaterhouseCoopers LLP; (vii) press release dated May 23, 2019; and (viii)
the powers of attorney. Shareholders in the U.S. are encouraged to read the
Registration Statement, including exhibits, carefully and in their entirety.
13
BURCON NUTRASCIENCE
CORPORATION
("BURCON")
NOTICE TO SECURITY HOLDERS May 23, 2019
The purpose of this notice is to advise holders of common
shares in the capital of Burcon (the "
Common Shares
") of a proposed
offering of rights ("
Rights
") of Burcon (the "
Rights Offering
").
Reference in this notice to "we", "our", "us" and similar terms
means Burcon. Reference in this notice to "you", "your" and similar terms mean
to Burcon shareholders.
We currently have sufficient working capital to last one
month. We require 52% of the offering to last 12 months.
WHO CAN PARTICIPATE IN THE RIGHTS OFFERING?
Holders of Common Shares of record as at 5:00 p.m. (Toronto
time) on May 30, 2019 (the "
Record Date
") may participate in the Rights
Offering. However, as discussed below, the Rights will only be offered to
shareholders of Burcon (the "
Eligible Holders
") in all of the Provinces
and Territories of Canada and to shareholders resident in the United States
other than in the states of Arizona, Arkansas, California, Minnesota, Ohio and
Wisconsin (the "
Eligible Jurisdictions
").
WHO IS ELIGIBLE TO RECEIVE RIGHTS?
The Rights will be offered to the Eligible Holders in the
Eligible Jurisdictions. You will be presumed to be resident in the place shown
in our records as your registered address, unless the contrary is shown to our
satisfaction.
This notice is not to be construed as an offering of the
Rights, nor are the Common Shares issuable upon exercise of the Rights offered
for sale, in any jurisdiction outside the Eligible Jurisdictions or to
shareholders who are resident of any jurisdiction other than the Eligible
Jurisdictions (the "
Ineligible Holders
"). The Rights and Common Shares
have not and will not be registered under the laws of any jurisdiction outside
the Eligible Jurisdictions.
Ineligible Holders will not receive a Rights Certificate (as
defined below), but will be sent a letter describing how Ineligible Holders may
participate in the Rights Offering.
HOW MANY RIGHTS ARE WE OFFERING?
We are offering a total of 43,941,536 Rights to purchase
43,941,536 Common Shares pursuant to the Rights Offering.
HOW MANY RIGHTS WILL YOU RECEIVE?
Each Eligible Holder will receive one Right for each Common
Share held as of the Record Date.
WHAT DOES ONE RIGHT ENTITLE YOU TO RECEIVE?
Before the Expiry Time (as defined below) you will be entitled
to subscribe (the "
Basic Subscription Privilege
") for one Common Share
for every Right held upon payment of the subscription price of $0.35 per Common
Share (the "
Subscription Price
"). No fractional Common Shares will be
issued.
Any Eligible Holder who exercises all of their Rights under the
Basic Subscription Privilege will also have the additional privilege of
subscribing, pro rata, for additional Common Shares at the Subscription Price
(the "
Additional Subscription Privilege
"). The Common Shares available
under the Additional Subscription Privilege will be those Common Shares issuable
under the Rights Offering that have not been subscribed and paid for under the
Basic Subscription Privilege by June 25, 2019.
Any Eligible Holder who exercises their Rights must enclose
payment in Canadian funds by certified cheque, bank draft or money order payable
to the order of Computershare Investor Services Inc. (the "
Subscription
Agent
"), the subscription agent retained by Burcon in connection with the
Rights Offering.
HOW WILL YOU RECEIVE YOUR RIGHTS?
If you are a registered holder of Common Shares on the Record
Date resident in the Eligible Jurisdictions, you will find a certificate (the
"
Rights Certificate
") representing the total number of Rights to which
you are entitled to as at the Record Date enclosed with this notice.
If you are an Ineligible Holder, you will find enclosed an
exempt purchaser status certificate. If you deliver a completed and executed
exempt purchaser status certificate to Burcon on or before June 18, 2019 and
your eligibility to participate in the Rights Offering is confirmed by Burcon,
the Subscription Agent will forward to you a Rights Certificate evidencing the
number of Rights you are entitled to. If you do not satisfy Burcon as to your
eligibility to participate in the Rights Offering on or before June 18, 2019,
the Subscription Agent will attempt, on a best efforts basis, to sell your
rights on the Toronto Stock Exchange ("
TSX
") prior to the Expiry Time.
The Subscription Agent's ability to sell the rights, and the prices obtained for
the rights, are dependent on market conditions. The proceeds received by the
Subscription Agent, if any, from the sale of the rights, net of any applicable
costs, expenses and taxes, will be divided among the Ineligible Holders on a pro
rata basis according to the total number of Common Shares held by them on the
Record Date.
WHEN AND HOW CAN YOU EXERCISE YOUR RIGHTS?
The Rights may be exercised commencing on June 3, 2019 until
5:00 p.m. (Toronto time) on June 25, 2019 (the "
Expiry Time
").
Rights
not exercised at or before the Expiry Time will be void and of no value.
The
Rights will be listed on the TSX under the symbol "BU.RT" and the holders of the
Rights may trade them through the facilities of the TSX. Trading in the rights
on the TSX will cease at 12:00 p.m. (Toronto time) on June 25, 2019.
Only registered Eligible Holders will be provided with Rights
Certificates. If you hold your Common Shares through a securities broker or
dealer, bank or trust company or other participant (each, a
"
Participant
") in the book-based system administered by CDS Clearing and
Depositary Services Inc. ("
CDS
") or Depository Trust Company
("DTC")
, Rights Certificates will be issued in registered form to CDS or
DTC, as the case may be, and will be deposited with CDS or DTC, as the case may
be. Burcon expects that each beneficial Eligible Holder will receive a
confirmation of the number of Rights issued to it from its Participant in
accordance with the practices and procedures of that Participant. CDS and DTC
will be responsible for establishing and maintaining book-entry accounts for
Participants holding Rights. Participants may establish their own deadlines for
receiving instructions prior to the Expiry Time and you should therefore
immediately contact your Participant to instruct them to exercise or sell or
transfer your rights.
WHAT ARE THE NEXT STEPS?
This document contains key information you should know about
Burcon. You can find more details in Burcon's rights offering circular dated May
23, 2019. To obtain a copy, visit Burcon's profile on the SEDAR website at
www.sedar.com, visit www.burcon.ca, ask your dealer representative for a copy or
contact Dorothy Law at (604) 733-0896 Ext. 12 or dlaw@burcon.ca. You should read
the rights offering circular, along with Burcon's continuous disclosure record,
to make an informed decision. Holders in the United States should also review
the Company's Registration Statement on Form F-7 filed with the United States
Securities and Exchange Commission that can be found at www.sec.gov.
"
Johann F. Tergesen
"
Johann F. Tergesen
President
and Chief Executive Officer
2