Abacus Health Products Enters Into $15 Million Bought Deal Equity Financing
WOONSOCKET, RI and TORONTO, ON – January 30, 2019 – Abacus Health Products, Inc. (the “Company”), an Ontario corporation formerly known as World Wide Inc., is pleased to announce that it has completed its previously announced business combination (the “Business Combination”) with Abacus Health Products, Inc. (“Abacus”), a Delaware corporation. In connection with the Business Combination, which closed on January 29, 2019, Abacus completed a private placement offering of 4,000,000 subscription receipts (the “Subscription Receipts”) at a price of US$3.75 per Subscription Receipt for aggregate gross proceeds in the amount of US$15,000,000 (the “Offering”). The brokered portion of the Offering was led by Eight Capital, on behalf of a syndicate of agents including Haywood Securities Inc., Cormark Securities Inc. and Paradigm Securities Inc. (collectively, the “Agents”). Eight Capital acted as the sole bookrunner in connection with the brokered portion of the Offering.
Innovative Line of Pain Relief Products
Abacus is a company engaged in the development and commercialization of over-the-counter (OTC) topical pain-relieving medications which contain organic and natural ingredients, including CBD, a cannabinoid-rich hemp extract from Cannabis sativa L plant. Abacus products combine science with organic and natural ingredients to provide effective and safe pain relief. Abacus’ products are aimed at the rapidly growing market for topical pain relief, are based on proprietary patent-pending technologies and are registered with the U.S. Food and Drug Administration (the “FDA”).
Abacus currently offers its two product lines across all 50 states of the United States:
- CBD CLINICTM (B2B) products are sold exclusively to registered health practitioners such as chiropractors, acupuncturists, massage therapists, and physical therapists. The products are available in several formulations to address incremental levels of pain.
- CBDMEDICTM (B2C) products are sold directly to consumers through retail pharmacy chains as well as through an e-commerce platform and are segmented into several categories based on types of pain: Active Sport, Back & Neck, Muscle & Joint, Arthritis and Massage Therapy.
Abacus believes that the pain management market represents a therapeutic area with substantial unmet needs for patients in pain as well as for physicians who must balance pain control with risks of severe side-effects. The American Academy of Pain Medicine has estimated that chronic pain affects approximately 100 million Americans and research reports indicate that the market for topical pain therapeutics was US$7.4 billion in 2017 and is expected to grow at an annual rate of 7.4% to US$13 billion by 2025.
Abacus’ sales strategy for its CBDMEDIC products is focused on establishing strong relationships with, and distribution by, retail pharmacy, mass and grocery store markets, and to support sales through an e-commerce platform. Abacus has directly engaged in discussions with some of the largest retail pharmacy chains and is in the process of entering into agreements with leading national brokers who sell consumer health care products to the retail pharmacy, mass and grocery store market, and expects to start selling through these channels in 2019. Abacus expects the retail pharmacy channel to be a key distribution channel and a driver of sales.
The CBD CLINIC product line is sold only to professional practitioners through a distributor network and through the Abacus e-commerce platform. Abacus’ sales activities in this market are focused on maximizing the breadth and quality of its distributor network as well as maximizing direct sales to practitioners who have registered with Abacus through an inside-sales team. Abacus believes its dual channel approach to healthcare practitioners will allow it to efficiently reach the majority of healthcare practitioners in the United States.
Abacus’ products are manufactured in accordance with cGMP manufacturing standards and in a FDA-compliant and audited manufacturing facility, which ensures consistent high quality of product.
Abacus is also developing a pipeline of other CBD products addressing additional medical indications and targeting the health and wellness segments.
“At Abacus our focus is on delivering safe, effective and long-lasting pain relief products. We are thrilled to reach this important milestone and become a public company which will allow us to aggressively pursue the significant market opportunity that has come about following the recent passing of the 2018 US Farm Bill. We look forward to introducing our products to consumers across the United States over the coming months.” said Perry Antelman, CEO of Abacus.
Completion of the Offering
The Offering was completed in two tranches. On December 21, 2018, Abacus issued 3,272,350 Subscription Receipts at a price of US$3.75 per Subscription Receipt (the “Issue Price”) for total gross proceeds of US$12,271,312.50. On January 7, 2019, Abacus issued an additional 727,650 Subscription Receipts at the Issue Price, for total gross proceeds of US$2,728,687.50, and for aggregate gross proceeds under the Offering of US$15,000,000. In connection with the closing of the Business Combination, the 4,000,000 Subscription Receipts issued pursuant to the Offering were automatically converted into 4,000,000 Class A shares in the capital of Abacus which were then exchanged for subordinate voting shares of the Company (“Subordinate Voting Shares”) on a one-for-one basis pursuant to a series of steps outlined in the Merger Agreement (as defined below). The Canadian dollar equivalent of the Issue Price is C$4.97, based on the Bank of Canada exchange rate of C$1.3260 per US$1.00 on January 28, 2019. The Subordinate Voting Shares will trade in Canadian dollars.
Completion of the Business Combination and Escrow Release
The Business Combination was completed on January 29, 2019 by way of a merger and share exchange pursuant to an agreement and plan of merger dated December 21, 2018 among the Company, Abacus and World Wide Subco Inc., a wholly-owned subsidiary of the Company (the “Merger Agreement”). As a result of the Business Combination, the securityholders of Abacus became securityholders of the Company.
On January 28, 2019, prior to the closing of the Business Combination, the Company implemented a dual-class voting structure, including the amendment of the terms of its existing commons shares and their redesignation as Subordinate Voting Shares and the creation of a new class of proportionate voting shares (the “Proportionate Voting Shares”), and also changed its name to “Abacus Health Products, Inc.” Each Subordinate Voting Share carries the right to one vote per share on all matters to be voted on by shareholders of the Company, and each Proportionate Voting Share carries the right to 100 votes per share on all matters to be voted on by shareholders of the Company. The Proportionate Voting Shares are convertible in accordance with their terms into Subordinate Voting Shares at a ratio of 100 Subordinate Voting Shares per Proportionate Voting Share.
The proceeds from the Offering, less certain expenses, were placed into escrow on completion of the Offering. The escrowed proceeds from the Offering, less the commission of the Agents and certain fees and expenses, were released from escrow immediately prior to the completion of the Business Combination.
As a result of the Business Combination and the Offering, an aggregate of 5,564,331 Subordinate Voting Shares and 117,319.64 Proportionate Voting Shares are now issued and outstanding.
The Company has received conditional approval from the Canadian Securities Exchange (“CSE”) for the listing of its Subordinate Voting Shares, which are expected to commence trading on the CSE under the ticker symbol “ABCS” at market open on Wednesday, January 30th, 2019. Listing is subject to the Company fulfilling all listing requirements of the CSE. Full details of the Company including the Business Combination are set out in the Company’s listing statement dated January 29, 2019 (the “Listing Statement”). A copy of the Listing Statement can be found under the Company’s profile on SEDAR at www.sedar.com.
Board and Management Changes
Following the completion of the Business Combination, the board of directors and management team of the Company have been re-constituted. The directors of the Company are now Perry Antelman, Phillip (Phil) C. Henderson, Jesse Kaplan and Eyal Rosenthal. The Chief Executive Officer and Chief Financial Officer of the Company are now respectively Perry Antelman and Henry (Hank) R. Hague, III. Additional information in respect of the persons who are serving as directors and officers of the Company further to the completion of the Business Combination is available in the Listing Statement.
Principal Shareholder – Required Early Warning Disclosure
As part of the transactions contemplated under the Merger Agreement, an aggregate of 9,292.97 and 8,865.83 Proportionate Voting Shares were respectively issued at closing of the Business Combination on January 29, 2019 to Perry Antelman, the Chief Executive Officer and a Director of the Company, and his spouse, Tamara Kesselman, for the acquisition of their shares of Abacus, representing (i) approximately 7.9% and 7.6%, respectively, of the outstanding Proportionate Voting Shares, (ii) approximately 15.5% of the Proportionate Voting Shares on a combined basis, (iii) approximately 5.4% and 5.1%, respectively, of the voting rights attached to the outstanding Proportionate Voting Shares and Subordinate Voting Shares, and (iv) approximately 10.5% of the voting rights attached to the outstanding Proportionate Voting Shares and Subordinate Voting Shares on a combined basis. In addition, Perry Antelman holds options exercisable to acquire 194,395 Subordinate Voting Shares, as a result of the Business Combination.
On a partially diluted basis, assuming the exercise of his options and the exchange of his Proportionate Voting Shares for Subordinate Voting Shares, Perry Antelman would beneficially own 1,123,691 Subordinate Voting Shares, representing approximately 16.8% of the outstanding Subordinate Voting Shares after giving effect to such exercise and exchange (and representing approximately 5.4% of the voting rights attached to the Proportionate Voting Shares and Subordinate Voting Shares). On a partially diluted basis, assuming the exchange of her Proportionate Voting Shares for Subordinate Voting Shares, Tamara Kesselman would beneficially own 886,583 Subordinate Voting Shares, representing approximately 13.7% of the outstanding Subordinate Voting Shares after giving effect to such exchange (and representing approximately 5.1% of the voting rights attached to the Proportionate Voting Shares and Subordinate Voting Shares). Together, assuming such conversions and exercise, Perry Antelman and his spouse would beneficially own 2,010,274 Subordinate Voting Shares, representing approximately 26.5% of the outstanding Subordinate Voting Shares (and representing approximately 10.5% of the voting rights attached to the Proportionate Voting Shares and Subordinate Voting Shares).
In addition, Perry Antelman and Tamara Kesselman respectively hold an interest of 10.56% and 10.55% in Aidance Skincare & Topical Solutions, LLC (“Aidance”), which as part of the transactions contemplated under the Merger Agreement received an aggregate of 16,000 Proportionate Voting Shares for the acquisition of its shares of Abacus, representing approximately 13.6% of the outstanding Proportionate Voting Shares of the Company, and approximately 9.25% of the voting rights attached to the Proportionate Voting Shares and Subordinate Voting Shares. Assuming the exchange of its Proportionate Voting Shares for Subordinate Voting Shares, Aidance would beneficially own 1,600,000 Subordinate Voting Shares, representing approximately 22.3% of the outstanding Subordinate Voting Shares after giving effect to the exchange (and approximately 9.25% of the voting rights attached to the Proportionate Voting Shares and Subordinate Voting Shares).
Prior to the completion of the Business Combination, Perry Antelman, Tamara Kesselman and Aidance did not beneficially own or control any securities of the Company. Each of them acquired the securities for investment purposes, and currently has no other plans or intentions that relate to or would result in any change to their respective investment in the Company. However, depending on market conditions, general economic and industry conditions, trading prices of the Company’s securities, the Company’s business, financial condition and prospects and/or other relevant factors, each of them may develop such plans or intentions in the future and, at such time, may from time to time acquire or dispose of securities of the Company. As disclosed in the Listing Statement, customary 180 days lock-up agreements have been entered by each of them in connection with the Business Combination. An early warning report will be filed by Perry Antelman and his spouse, and by Aidance in accordance with applicable securities laws.
About Abacus Health Products, Inc.
Abacus is a company engaged in the development and commercialization of over-the-counter (OTC) FDA-registered topical pain-relieving medications which contain organic and natural ingredients, including CBD, a cannabinoid-rich hemp extract from Cannabis sativa L plant. The products of Abacus are aimed at the rapidly growing market for topical pain relief and are based on proprietary patent-pending technologies developed by Abacus. Abacus’ formulations combine science with organic and all-natural ingredients and provide natural and safe pain relief. All products commercialized by Abacus are registered with the FDA and utilize FDA-approved analgesic ingredients. Abacus currently offers two lines of products: (i) CBD CLINICTM, marketed to the professional practitioner market, and (ii) CBDMEDICTM, marketed to the consumer market. Abacus is also developing a pipeline of other CBD products addressing additional medical indications and targeting the health and wellness segments. The products of Abacus are currently offered across the United States and are produced by a contract manufacturer in an FDA-compliant and audited manufacturing facility.
The CSE (operated by CNSX Markets Inc.) has in no way passed upon the merits of the Business Combination and has neither approved nor disapproved of the contents of this press release.
This announcement does not constitute an offer, invitation or recommendation to subscribe for or purchase any securities and neither this announcement nor anything contained in it shall form the basis of any contract or commitment. In particular, this announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States, or in any other jurisdiction in which such an offer would be illegal.
The securities described herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and accordingly may not be offered or sold within the United States or to “U.S. persons”, as such term is defined in Regulation S promulgated under the U.S. Securities Act (“U.S. Persons”), except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities requirements or pursuant to exemptions therefrom. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the Company’s securities to, or for the account or benefit of, persons in the United States or U.S. Persons. For more information about the transactions described herein, please refer to the Listing Statement.
Certain statements in this press release are forward-looking statements and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. These statements generally can be identified by the use of forward-looking words such as “may”, “should”, “will”, “could”, “intend”, “estimate”, “plan”, “anticipate”, “expect”, “believe” or “continue”, or the negative thereof or similar variations. Forward-looking statements in this news release include, but are not limited to, information concerning the listing of the Subordinate Voting Shares, including whether conditions to the listing of the Subordinate Voting Shares will be satisfied, expectations for the effects of the Business Combination or the ability of the combined company to successfully achieve business objectives, and expectations for other economic, business, and/or competitive factors. Those assumptions and factors are based on information currently available to the Company. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: ability to obtain requisite regulatory approvals and the satisfaction of other conditions to the listing of the Subordinating Voting Shares; the potential impact of the announcement of the consummation of the Business Combination on relationships, including with regulatory bodies, employees, suppliers, customers and competitors; changes in general economic, business and political conditions, including changes in the financial markets; changes in applicable laws; compliance with extensive government regulation; and the diversion of management time on the Business Combination. Should one or more of these risks, uncertainties or other factors materialize, or should assumptions underlying the forward-looking information or statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Readers should not place undue reliance on forward-looking statements and forward-looking information. The forward-looking information contained in this release is made as of the date hereof and the Company assumes no obligation to update or revise any forward looking statements or forward-looking information that are incorporated by reference herein, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Additional information about the risks and uncertainties is contained under “Risk Factors” in the Listing Statement, which is available under the Company’s SEDAR profile at www.sedar.com, and in other filings that the Company has made and may make with applicable securities authorities in the future. The foregoing statements expressly qualify any forward-looking information contained herein. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.
For further information, including regarding the early warning report, including a copy of same (which will be filed on SEDAR at www.sedar.com), please contact:
Hank Hague, Chief Financial Officer of the Company, at 401-467-2223.