MPX Bioceutical Corporation today announced it has entered into a binding share purchase agreement to acquire all of the outstanding shares in the capital of Spartan Wellness Corporation from Ninth Square Capital Corporation and Veteran Grown Corporation both of which are at arm’s length to the Company. Spartan is a Canadian organization whose mission is to help veterans suffering from various ailments, mostly psychological, to reduce or eliminate dependencies on opioids by directing them towards medical cannabis.
Pursuant to the terms of the Purchase Agreement, MPX will acquire all of the Spartan Shares for a total purchase price of up to $6,000,000 comprised of the following consideration and based upon the achievement of certain milestones as set out below during the period beginning on the Closing Date and ending on the date that is twenty-four (24) months following the date on which Canveda is fully licensed to produce, distribute and sell Cannabis products under Health Canada’s Access to Cannabis for Medical Purposes Regulations:
1. up to $4,500,000 satisfied through the issuance of 4,687,500 common shares in the capital of MPX issued at a price of $0.96 per MPX Share; and 2. up to $1,500,000 satisfied through the issuance of 1,304,348 common share purchase warrants each exercisable into one (1) MPX Share at an exercise price of $1.15 for a period of three (3) years from the Closing Date.
The first tranche of the aforementioned securities will be issued on closing with the remainder being issued based upon Spartan reaching certain milestones, including directing a percentage of its sales through Canveda Inc., a wholly-owned subsidiary of the Company. Canveda is a Licensed Producer under the ACMPR having received its Cultivation License on June 12, 2017. Following the closing of the acquisition of all the Spartan Shares by MPX which is expected to take place on or about October 1, 2018, Spartan will be rebranded as “Spartan Wellness by MPX.”
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Spartan is one of the leading Cannabis Access point providers for Veterans in Canada with its network of 500 patients consuming close to 500 kilograms annually. MPX plans to utilize Spartan as an additional sales channel to ensure continued growth in its patient user base and expects that Spartan will convert much of its pre-existing patient base over to its MPX/Salus Medical products. In addition to this valuable patient network, the acquisition of the Spartan Shares is expected to immediately contribute to revenue growth at the Company as Spartan receives sales commission from the licensed producers that supply its patients with cannabis.
Veterans benefit from insurance coverage provided by Blue Cross in cooperation with the Canadian Department of Veteran Affairs Canada, which provides them with improved access to medical cannabis. In 2017-2018, 7,298 veterans were reimbursed by Blue Cross for cannabis for medical purposes, at a cost of approximately $51 million. Under these policies, veterans are provided with reimbursement coverage for up to 3 grams of cannabis per day. However, Spartan can help these veterans through the exceptional approval process to secure coverage for up to 10 grams a day, thereby reducing their reliance on highly addictive and unsafe opioids as their only treatment option. As a result of these insurance policies that provide favorable coverage to veterans, the Company believes that men and women who have served in the military represent a major market for its medical cannabis products.
“We are proud to contribute to the fight against opioid addiction, which has taken a devastating toll on veterans in Canada,” said Michael Arnkvarn, Executive Vice President of MPX Canada. “Medical cannabis can offer a safer, much less addictive alternative for patients, and potentially help them reduce or completely avoid opioid use. Spartan has a unique profile in the Canadian veteran community and attends military veterans’ events across Canada on a regular basis. Through information sessions, they recruit and support new members/patients who are struggling with opioid addiction. We look forward to using this platform to engage more closely with veterans and emergency services personnel to help them live healthy, happy and productive lives.”
According to a report in the Globe and Mail from May 2018, the number of Canadian veterans prescribed opioids or tranquilizers has declined significantly in recent years while those authorized to use medical cannabis has significantly increased, echoing trends in the U.S. where states that have legalized cannabis report declines in opioid overdoses.
“Spartan is cash flow positive and acquiring it will enable us to build on its prior success to rapidly secure market share, grow patient numbers and ultimately secure retail sales for our Canveda operation in the highly competitive Canadian market,” stated W. Scott Boyes, MPX’s Chairman, President and CEO. “Veteran patients have a premium value in Canada due to their enhanced insurance coverage. Furthermore, we expect Spartan to grow its patient numbers over time as it opens additional information rooms across the country to increase veteran support and awareness, among other initiatives. Achievement by Spartan of the final milestones will represent sales of the full production capacity of MPX’s Canveda facility in Peterborough, Ontario.”
Robert Kennedy, Co-Founder and Vice President of Spartan, commented, “Many men and women who are serving or have served in the Canadian military struggle with addiction. Veterans who have traumatic experiences associated with military operations or day-to-day life in the military may also suffer from a mental illness, such as depression or post-traumatic stress disorder along with chronic physical injuries.”
“There is a major need for better support services for these patients, and here at Spartan we have put together a team of experts with a proven history of successfully treating veterans, understanding their needs and culture,” stated Riad Byne, Co-Founder and CEO of Spartan. “We are excited to become part of MPX’s cannabis operations, which will give us the necessary resources to expand our network and help even more veterans beat opioid addiction.”
As part of the acquisition, MPX along with the Sellers will create the Veteran Growth Fund (the “Fund”) that will be established using some MPX Shares and Warrants as an additional effort to assist veterans in need. The Fund will more effectively connect MPX with the Canadian veteran community, which is estimated to be approximately 700,000 individuals.
A “Cannabis Sales Unit” is deemed to be 1 gram of dried cannabis or equivalent amount of a class of cannabis specified in Schedule 3, “Equivalent Amounts”, of the Cannabis Act (Canada), being: (a) 1 gram of dried cannabis; (b) 5 grams of fresh cannabis; (c) 15 grams of solids containing cannabis; (d) 70 grams of non-solids containing cannabis; (e) 0.25 grams of solid or non-solid concentrates; or (f) 1 cannabis plant seed; however, notwithstanding the equivalence formula in the Cannabis Act (Canada), for the purposes of determining the milestones for the purchase price and cannabis oils shall be converted to grams of dried cannabis according to the equivalency supplied by the selling licensed producer as indicated on their website and the label on each product as required by the ACMPR.
MPX has agreed to pay a finder’s fee equal to 5% of the MPX Shares issued to the Sellers at the deemed price of $0.96 per MPX Share to Michael Yosher such that Mr. Yosher will be issued up to 156,200 MPX Shares, with 39,062 MPX Shares issued upon closing and an additional 29,297 MPX Shares issued upon the achievement of each of the above milestones within the Sales Period.
Date: September 24, 2018
Source: APnews