Shogun Capital Corp.

August 09, 2016 16:53 ET

Shogun Capital Corp. Announces Proposed Acquisition of International Cannabis Corp

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 9, 2016) - Shogun Capital Corp. ("Shogun") (NEX:SHO.H) is pleased to announce that it has entered into a definitive acquisition agreement (the "Definitive Agreement") with International Cannabis Corp ("ICC") pursuant to which Shogun has agreed to acquire all of the issued and outstanding common shares in the capital of ICC (the "ICC Common Shares") upon the terms and conditions set out in the agreement (the "Proposed Transaction").


Pursuant to the Definitive Agreement, Shogun has agreed to acquire all of the issued and outstanding ICC Common Shares by way of a "three-cornered merger" pursuant to the provisions of the BVI Business Companies Act (Territory of the British Virgin Islands) (the "BVI Act"). Pursuant to a merger agreement to be entered into between ICC, Shogun and a wholly-owned subsidiary of Shogun to be incorporated under the BVI Act ("Shogun Capital Sub") will merge (the "Merger") to form a new merged corporation and the separate existence of ICC and Shogun Capital Sub will cease. The surviving merged corporation will be a wholly-owned subsidiary of Shogun.

The Proposed Transaction will constitute a reverse take-over of Shogun by ICC where the existing shareholders of ICC will own, assuming completion of the Private Placement (as defined below), a majority of the outstanding common shares in the capital of Shogun (the "Shogun Common Shares").

The Proposed Transaction is expected to constitute Shogun's "qualifying transaction" pursuant to the policies of the TSX Venture Exchange (the "TSXV").


As consideration for the acquisition of all of the outstanding securities of ICC, the holders of the issued and outstanding ICC Common Shares will receive Shogun Common Shares at an exchange ratio of one Shogun Common Share for each 1.25 ICC Common Shares (the "Exchange Ratio"). The current issued and outstanding share capital of Shogun consists of 6,200,010 Shogun Common Shares and options to purchase an additional 480,000 Shogun Common Shares at an exercise price of $0.10 per share for a fully-diluted share capital of 6,680,010 Shogun Common Shares. There are currently 100,000,000 ICC Common Shares issued and outstanding.

Upon completion of the Proposed Transaction, it is the intention of the parties that Shogun will be renamed "International Cannabis Corporation" (the "Resulting Issuer") and its shares (the "Resulting Issuer Shares") will be listed for trading on the TSXV under the ticker symbol "ICC".


In conjunction with the Merger, ICC and Shogun have entered into an engagement letter with GMP Securities L.P. to act as lead agent and sole bookrunner together with a syndicate (the "Agents") in connection with a private placement (the "Private Placement") of subscription receipts of ICC ("ICC Subscription Receipts") to raise gross proceeds of up to $6,500,000 (or approximately US$5,000,000). Each ICC Subscription Receipt is convertible into one ICC Common Share. ICC has granted the Agents an option to arrange for the purchase of up to $975,000 of additional Subscription Receipts from ICC at the issue price per Subscription Receipt (the "Issue Price"), exercisable at any time up to two (2) days prior to the closing date of the Private Placement.

At the effective time of the completion of the Proposed Transaction, the ICC Common Shares acquired upon conversion of the ICC Subscription Receipts will be automatically exchanged for freely trading Resulting Issuer Shares at the Exchange Ratio without payment of any additional consideration or any further action on the part of the holder thereof.

In connection with the Private Placement, the Agents are entitled to receive a cash commission equal to 7.0% of the aggregate gross proceeds of the sale of ICC Subscription Receipts. In addition, the Agents will be granted non-transferable broker warrants ("ICC Broker Warrants") equal to 7.0% of the aggregate number of ICC Subscription Receipts issued, each ICC Broker Warrant being exercisable for one ICC Common Share for a period of 24 months from the date of issuance at the Issue Price. At the effective time of the completion of the Proposed Transaction, each ICC Broker Warrant will be exchanged into one broker warrant of the Resulting Issuer (each a "Resulting Issuer Broker Warrant"). Each Resulting Issuer Broker Warrant shall entitle the holder thereof to subscribe for that number of Resulting Issuer Shares equal to the number of Shogun Common Shares issued in exchange for each ICC Common Share pursuant to the Qualifying Transaction at an exercise price per Resulting Issuer Share equal to the Issue Price multiplied by the Exchange Ratio for a period of two years from the date of issue.

ICC intends to use the net proceeds from the Private Placement for the construction of facilities necessary from the production and processing of recreational cannabis, medicinal cannabis and industrial hemp, and general corporate purposes.


ICC was incorporated pursuant to the provisions of the BVI Act on April 29, 2014. ICC's head office is located at Plaza Independencia 737, Montevideo, CP 11.000, Uruguay.

ICC was founded in 2014 with the objective of becoming the first integrated cannabis company in the world. ICC is a licensed and authorized producer, developer and vendor of recreational cannabis, medicinal cannabis and industrial hemp in Uruguay. ICC is not a reporting issuer and its securities are not listed or posted for trading on any stock exchange.

Recreational Cannabis

In June 2012, the Uruguayan Government, under then President Mujica, announced plans to legalize state-controlled sales of cannabis as a way to minimize drug-related crime and health issues. A long political process began and the proposed projects for legalization changed specifics. On December 20, 2013, Uruguayan Law No. 19,172 (the "Cannabis Law") was passed, creating the Uruguayan Institute for the Regulation and Control of Cannabis ("IRCCA"), with the purpose of regulating and controlling the production, planting, growing, harvesting, distribution and dispensing of cannabis. The Cannabis Law also legalized the consumption, household production and government sale of cannabis for recreational purposes. The Cannabis Law gave the Government of Uruguay control over and the capacity of regulating the activities of importing, exporting, planting, cultivation, harvesting, production, acquisition, storage, marketing and distribution of cannabis and its derivatives.

ICC operates its recreational cannabis business segment in accordance with the laws and regulations in Uruguay and the terms of a license granted to it by IRCCA. In October 2015, following a lengthy public tender process, IRCCA granted a license to ICC for the production and sale of recreational cannabis in Uruguay. ICC was one of only two companies in Uruguay to receive a license from IRCCA. ICC has been growing recreational cannabis since March 2016 and the first harvest took place in June 2016. Recreational cannabis will continue to be harvested on a monthly basis to reach the initial annual production target of two tonnes. ICC anticipates selling recreational cannabis to authorized pharmacies in Uruguay commencing in August 2016.

Medicinal Cannabis

ICC's medicinal cannabis business segment operates through ICC's subsidiary, Tersum S.A. ("Tersum"), in accordance with Uruguayan laws and regulations and the terms of authorizations granted by IRCCA and the Uruguayan Ministry of Livestock, Agriculture and Fisheries. ICC's objectives in this segment relate to the extraction, analysis, production and, where lawful, export, of cannabinoids, cannabigerol and cannabichromene to treat diseases or minimize specific symptoms. ICC expects to harvest its first crop to be used for medicinal cannabis by December 2016, and anticipates selling medicinal cannabis in Uruguay commencing in the first quarter of 2017.

Industrial Hemp

ICC's industrial hemp business segment will also operate through Tersum in accordance with Uruguayan laws and regulations and the terms of authorizations granted by IRCCA and the Uruguayan Ministry of Livestock, Agriculture and Fisheries. Hemp is a high performance harvest which has a number of industrial uses. Focusing on innovation, ICC is currently developing the retail brand GROW. ICC expects to harvest its first crop to be used for industrial hemp by December 2016, and anticipates selling industrial hemp products where lawful commencing in the first quarter of 2017.

Outstanding Securities

There are currently 100,000,000 ICC Common Shares issued and outstanding that are held by seven beneficial shareholders of ICC. Union Group International Holdings Limited ("Union Group"), a corporation incorporated pursuant to the provisions of the BVI Act, owns 50,000,000 ICC Common Shares, representing 50% of the outstanding ICC Common Shares. The beneficial shareholders of Union Group are Juan Sartori (Montevideo, Uruguay) and Dundee Corporation (Ontario, Canada).

Selected Financial Information of ICC

The following table sets forth selected historical financial information for ICC for the period from April 29, 2014 (date of incorporation) to December 31, 2014, the year ended December 31, 2015 and the six month period ended June 30, 2016. The financial statements of ICC have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and are denominated in U.S. dollars.

Balance Sheet Data As at June 30, 2016
As at December 31, 2015
As at December 31, 2014
Total assets 8,081,466 2,509,531 55,000
Total liabilities 1,636,359 2,515,479 21,216
Shareholders' equity 6,445,107 (5,948) 33,784


Upon completion of the Proposed Transaction, the board of directors of the Resulting Issuer will be comprised of Guillermo Delmonte, Ravi Sood and Michael Galego. Brief biographies for the proposed directors and officers of the Resulting Issuer are set out below:

Guillermo Delmonte, Chief Executive Officer and Director

Mr. Delmonte is a Certified Public Accountant from the ORT University of Uruguay and holds a Financial Advisor certificate from the Institut d'Estudis Financers Barcelona, Spain. Mr. Delmonte has over ten years of experience in banking management and accounting. Mr. Delmonte has provided input to the Government of Uruguay on the implementation of Uruguay's new cannabis regime. Mr. Delmonte is a resident of Montevideo, Uruguay.

Oscar Alejandro Leon Bentancor, Chief Financial Officer

Mr. Leon is a Certified Public Accountant from the Universidad de la República Uruguay. Mr. Leon has over twenty-five years of experience in financial management, accounting, project finance and risk analysis. In April, 2013, he was appointed as a director of Union Agriculture Group Corp, the largest agribusiness in Uruguay, and in May, 2013, he was appointed as a director of UAG S.A., a public company listed on the Montevideo Stock Exchange. He also has also acted as a director of a company listed on the Australian Securities Exchange, and for various mining and energy companies. Mr. Leon is a resident of Montevideo, Uruguay.

Ravi Sood, Director

Mr. Ravi Sood is a financier and venture capitalist based in Toronto, Canada. Mr. Sood has been a founder of and the principal investor in several businesses in emerging markets and currently serves as a director and Chairman of Feronia Inc., Galane Gold Ltd. and Transeastern Power Trust. He was the founder and Chief Executive Officer of Navina Asset Management Inc., a global asset management firm headquartered in Toronto, Canada. Mr. Sood led the investment activities of Navina and its predecessor company, Lawrence Asset Management Inc., from its founding in 2001 until he sold the firm in 2010. Mr. Sood was educated at the University of Waterloo (B.Mathematics) where he was a Descartes Fellow and the recipient of numerous national awards.

Michael Galego, Director

Mr. Michael Galego is a lawyer with more than ten years of merger/acquisition and corporate finance experience. Mr. Galego serves as Deputy General Counsel and Secretary of Pacific Exploration & Production Corp. (TSX: PRE) and General Counsel and Secretary of CGX Energy Inc. (TSXV: OYL). Mr. Galego is also a member of the board of directors of CGX Energy Inc. Recently, Mr. Galego was a member of the Board of Directors of Woulfe Mining Corp. (CSE: WOF) and instrumental in its sale to Almonty Industries Inc. (TSXV: AII) by way of plan of arrangement. Mr. Galego previously acted as legal counsel to several public and private companies operating in the Latin American resource sector, including Gran Colombia Gold Corp., Pacific Infrastructure Inc. and PetroMagdalena Energy Corp. Mr. Galego began his legal career as an associate in the business law department of Osler, Hoskin & Harcourt LLP. Mr. Galego is a graduate of York University (Hons. B.A.) and the University of Windsor (LL.B).

Richard Kimel, Corporate Secretary

Mr. Kimel is a partner at the law firm of Aird & Berlis LLP. Mr. Kimel practices in the areas of corporate finance and corporate/commercial law, focusing primarily on public and private financings, mergers and acquisitions and ongoing general corporate and commercial activities. His practice consists of advising a wide range of both domestic and international clients. Mr. Kimel acts as corporate counsel for numerous companies listed on the Toronto Stock Exchange and the TSXV. He has considerable experience in mergers and acquisitions (cross-border and domestic) of both public and private corporations, public offerings (both initial and secondary), private placement financings (including debt and equity offerings), hedge fund formations and financings, corporate governance matters, and the formation and completion of qualifying transactions for companies established under the TSXV Capital Pool Company (CPC) program. Mr. Kimel also acts as a director or officer for a number of his publicly listed clients. Mr. Kimel received his LL.B. from the University of Toronto and an Honours degree in Business Administration from the Richard Ivey School of Business at the University of Western Ontario.


The completion of the Proposed Transaction is subject to a number of conditions precedent, including but not limited to satisfactory due diligence reviews, negotiation and execution of definitive transaction documentation, approval by both boards of directors, approval of ICC shareholders, obtaining necessary third party approvals (including approval from IRCCA), TSXV acceptance and the completion of the Private Placement. There can be no assurance that the Proposed Transaction or the Private Placement will be completed as proposed or at all.


GMP Securities L.P., subject to the completion of satisfactory due diligence, has agreed to act as sponsor of Shogun in connection with the Proposed Transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion. GMP Securities L.P. will receive a sponsorship fee and will be reimbursed for their legal and other expenses.


The Proposed Transaction will not constitute a non-arm's length qualifying transaction or a related party transaction pursuant to the policies of the TSXV.


Shogun is a capital pool company created pursuant to the policies of the TSXV. It does not own any assets, other than cash or cash equivalents and its rights under the Definitive Agreement. The principal business of Shogun is to identify and evaluate opportunities for the acquisition of an interest in assets or businesses and, once identified and evaluated, to negotiate an acquisition or participation subject to acceptance by the TSXV so as to complete a qualifying transaction in accordance with the policies of the TSXV.

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

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the 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 TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Certain information in this press release may contain forward-looking statements. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. Shogun assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements unless and until required by securities laws applicable to Shogun. Additional information identifying risks and uncertainties is contained in filings by Shogun with the Canadian securities regulators, which filings are available at

The Shogun Common Shares will remain halted until such time as permission to resume trading has been obtained from the TSXV. Shogun is a reporting issuer in Alberta and British Columbia.

Contact Information