ADE Adex Mining Inc

Dragonfly Capital Corp. (TSXV: DRC) (“Dragonfly” or the “Company”) and 2591046 Ontario Corp. (d/b/a Future Fertility) (the “Target”) are pleased to announce that they have entered into a binding letter of intent dated May 8, 2019 (the “LOI”), pursuant to which Dragonfly and the Target intend to complete a business combination which will constitute a reverse take-over of Dragonfly (the “Transaction”). The Transaction is not a non-arm’s length “Qualifying Transaction” for Dragonfly, as such term is defined in Policy 2.4 of the Corporate Finance Manual of the TSX Venture Exchange (the “TSXV”).

Terms of the Transaction

Under the terms of the LOI, it is intended that the Transaction will be carried out by way of a three-cornered amalgamation pursuant to an amalgamation agreement (the “Definitive Agreement”) to be entered into among the parties. Pursuant to the Transaction, a wholly-owned subsidiary of Dragonfly will amalgamate with the Target to form a newly amalgamated company (“Amalco”), and former Target shareholders will receive one Post-Consolidation Dragonfly Share (as defined below) for each Post-Consolidation Target Share (as defined below) held and Amalco will become a wholly-owned subsidiary of Dragonfly. As a result, Dragonfly (the “Resulting Issuer”) will indirectly carry on the business of the Target following completion of the Transaction and will change its name to “Future Fertility Inc.” or such other name as agreed to by the parties to better reflect the business that will be carried on by the Resulting Issuer. Prior to completion of the Transaction, the Target expects to complete the Concurrent Offering, as more particularly described below. The common shares of the Resulting Issuer will, subject to the approval of the TSXV, be listed for trading on the TSXV. It is anticipated that the Resulting Issuer will be listed as a Tier 2 life sciences issuer.

As of the date hereof, Dragonfly has 16,311,000 common shares issued and outstanding (the “Dragonfly Shares”) and no warrants or options exercisable for Dragonfly Shares outstanding. In order to align the value of the Dragonfly Shares and Target Shares (as defined below), the Dragonfly Shares will be consolidated (the “Dragonfly Consolidation”) at a ratio of 10.8740 pre-consolidation Dragonfly Shares for every 1 post-consolidation Dragonfly Share (each a “Post-Consolidation Dragonfly Share”), resulting in 1,500,000 Post-Consolidation Dragonfly Shares being issued and outstanding (prior to giving effect to the Transaction and Concurrent Offering).

As of the date hereof, the Target has (i) 15,759,330 issued and outstanding common shares (each a “Target Share”), (ii) 3,300,000 options of the Target, each convertible into a Target Share at an exercise price of $0.15 (the “Options”), (iii) 1,200,000 common share purchase warrants each convertible into a Target Share at an exercise price of $0.15 (the “$0.15 Warrants”) and (iv) 4,353,330 common share purchase warrants each convertible into a Target Share at an exercise price of $0.25 (the “$0.25 Warrants”, collectively with the $0.15 Warrants, the “Warrants”).   

Prior to the completion of the Transaction, the Target Shares will be consolidated (the “Target Consolidation”) at a ratio of two pre-consolidation Target Shares for every one post-consolidation Target Share (each, a “Post-Consolidation Target Share”) resulting in 7,879,665 Post-Consolidation Target Shares being issued and outstanding (prior to giving effect to the Transaction and Concurrent Offering) and Options outstanding to acquire 1,650,000 Post-Consolidation Target Shares and Warrants outstanding to acquire 2,776,665 Post-Consolidation Target Shares.

In connection with the Transaction, each Option will be exchanged for a Resulting Issuer option on the same terms and conditions as the prior Option other than each two Options will now be exercisable to receive one Post-Consolidation Dragonfly Share. In addition, each Warrant will remain outstanding and each two Warrants will be exercisable for one Post-Consolidation Dragonfly Share on the same terms.

In connection with the Transaction, Dragonfly will be seeking shareholder approval of the Dragonfly Consolidation, the Name Change and setting the new number of directors at six. The Target will be seeking shareholder approval with respect to the Target Consolidation and the Amalgamation. The Transaction has been unanimously approved by the Boards of Directors of Dragonfly and the Target.

Closing of the Transaction is expected to occur on or before August 30, 2019 (the “Closing Date”). The LOI will automatically terminate if a Definitive Agreement is not entered into by May 31, 2019, subject to any mutually agreed extension.

The Company and the Target will provide further details in respect of the Transaction, including a summary of the final agreed-upon material terms and conditions, once a Definitive Agreement has been fully negotiated and entered into by the parties.

The Company has also agreed to use its reasonable efforts to obtain TSXV approval to loan up to $100,000 to the Target on a secured basis, subject to any terms and conditions imposed by the TSXV. The gross proceeds of the loan will be used for general working capital purposes. The loan will be subject to TSXV approval.

About the Target

The Target is an Ontario-incorporated private company using artificial intelligence for reproductive medicine to give patients personalized insight into their decision making and help improve outcomes for patients.

The Target was incorporated on August 8, 2017 and since that time the Target’s focus has been on developing a technology platform that will enable physicians and patients to assess the relative quality of women’s eggs based on a single image.  Utilizing widely available camera attachments, the Target’s patent-pending cloud-based software can analyze an image of an egg and deliver a percentage-based assessment of the likelihood that the egg will fertilize under normal conditions.  The predictive algorithm underlying the Target’s software was trained on a large data set from a well-known fertility clinic in Toronto.  The Target has formed strategic partnerships with seven additional fertility clinics around the world in order to increase its access to data and receive feedback on its technology platform. 

As of December 31, 2018 (all figures CAD, unaudited) the Target had assets of $135,467 and liabilities of $39,768.  For the 12 months ended December 31, 2018, the Target had no revenue, and a net loss of $457,121.

Rene Bharti of Toronto, Canada, is a founder of the Target and holds in excess of 20% of the issued and outstanding shares of the Target. 

There are no relationships between any non-arm’s length party of Dragonfly and the Target or its assets and the Qualifying Transaction will be an arm’s length transaction. There are no beneficial interests held in the Target or its assets by any non-arm’s length parties to Dragonfly.

Concurrent Offering

Prior to, or concurrently with the closing of the Transaction, the Target intends to complete a brokered private placement offering of subscription receipts of the Target (the “Subscription Receipts”) conducted by a syndicate of agents (the “Agents”) led by Beacon Securities Limited for maximum gross proceeds of $5 million. Each Subscription Receipt will, upon satisfaction of the escrow release conditions, be exercisable for one Target unit (each a “Target Unit” and collectively the “Target Units”) at a price per Target Unit to be determined in the context of the market. It is anticipated that each Target Unit shall be comprised of one Post-Consolidation Target Share and one half of one common share purchase warrant, exercisable for 24 months from the date of completion of the Transaction at a price to be determined (the “Concurrent Offering”).  

In consideration of the Agents related to the Concurrent Offering, the Target has agreed to pay the Agents a cash fee equal to 7% of the gross proceeds of the Concurrent Offering and, subject to regulatory approvals, issue compensation options to the Agents equal to 7% of the aggregate number of Target Units issued by the Target under the Concurrent Offering. 

The net proceeds of the Concurrent Offering will be used for product regulatory approvals in the US, Canada, European Union and Japan; hiring sales and marketing personnel; new product development; data collection and data security personnel; insurance; costs related to the Transaction; and general working capital purposes.

Conditions of the Transaction

Completion of the proposed transaction is subject to a number of conditions including, but not limited to: (i) completion of mutually satisfactory due diligence reviews; (ii) execution of the Definitive Agreement and related transaction documents; (iii) requisite shareholder approvals; (iv) receipt of all requisite regulatory approvals relating to the Transaction, including, without limitation, the TSXV; (v) completion of the Concurrent Offering for minimum gross proceeds of $2.5 million; and (vi) no material adverse changes.

Sponsorship

The Transaction is subject to the sponsorship requirements of the TSXV, unless an exemption from the sponsorship requirement is available or a waiver is granted. The Company intends to apply for an exemption to the sponsorship requirement. There is no assurance that an exemption from this requirement will be obtained.

Management and Insiders of the Resulting Issuer

Upon completion of the Transaction, it is anticipated that the current directors and officers of the Company will resign and the proposed board of directors of the Resulting Issuer will include six directors to be nominated by the Target provided that the Company shall be entitled to nominate up to one initial director of the Resulting Issuer if the Company’s fully diluted pro forma ownership interest in the Resulting Issuer on the Closing Date is equal to or greater than 10% (calculated on a fully diluted basis). 

It is anticipated that the management team of the Resulting Issuer following the completion of the Transaction will be comprised of Rene Bharti as Executive Chairman, James Lanthier as Chief Executive Officer, Olga Balanovskaya, as Chief Financial Officer and Neil Said as Corporate Secretary.

The relevant experience of the proposed officers of the Resulting Issuer is set out below:

Mr. James Lanthier is a seasoned technology and media executive with a strong background in M&A and finance. He is currently the President and CEO of Magnolia Colombia Ltd, a TSXV listed company.  His prior public company roles include CEO of Tangelo Games, COO and a member of the founding management team of Mood Media (TSX: MM) and COO / CFO of Fun Technologies, sold to Liberty Media.  Mr. Lanthier has extensive capital markets and M&A experience and, additionally, has served as Non-Executive Director of a number of public companies.

Rene Bharti has held several key roles in both public and private companies, including those in the resource, technology and entertainment industry. Mr. Bharti co-founded ARHT Media, along with legendary singer Paul Anka, with the aim of creating the world’s most lifelike digital humans to conduct e-commerce in a unique and viable platform. Mr. Bharti currently is the chairman and founder of Future Fertility, the world’s leader in applying Artificial Intelligence (A.I.) to IVF. Rene Bharti holds a Bachelor of Commerce (Honors) from Queens University.

Olga Balanovskaya, CPA, CGA, ACCA has over 18 years of private and public company experience in the capacity of senior controller and Chief Financial Officer (CFO). Ms. Balanovskaya has been a CFO of two public companies, Organic Potash Corporation (CNSX:OPC) and Adex Mining Inc. (TSXV: ADE), and of a number of private companies. Ms. Balanovskaya was a Senior Accountant, Assurance with MNP LLP from January 2011 to July 2013. She is a member of the Chartered Professional Accountants of Ontario as well as the Association of Chartered Certified Accountants (UK); has a Diploma in International Accounting Standards from the Institute of Financial Accountants (UK).

Mr. Neil Said is a corporate securities lawyer who works as a legal consultant to various Toronto Stock Exchange, TSX Venture Exchange and Canadian Securities Exchange listed companies in the technology, mining, oil & gas and cannabis industries. He also sits on the board of directors of various public and private companies.  Mr. Said previously worked as a securities lawyer at a large Toronto corporate law firm, where he worked on a variety of corporate and commercial transactions.  Mr. Said obtained a Juris Doctor from the Faculty of Law at the University of Toronto and he received a Bachelor of Business Administration (Honours) with a minor in Economics from Wilfrid Laurier University.

Details with respect to the proposed directors of the Resulting Issuer will be announced in a subsequent press release once available.

Circular

In connection with the Transaction and pursuant to TSXV requirements, Dragonfly will file a circular or filing statement on SEDAR, which will contain details regarding the Transaction, the Definitive Agreement, the Concurrent Offering, Dragonfly, the Target and the Resulting Issuer.

About Dragonfly

Dragonfly is a capital pool company within the meaning of the policies of the TSXV and does not have any operations and has no assets other than cash. Dragonfly’s business is to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction under the policies of the TSXV.

Cautionary Note Regarding Forward Looking Information

This press release contains statements that constitute “forward-looking information” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation, All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that discusses predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements contained in this press release include, without limitation, statements regarding: the terms, conditions, and completion of the Transaction and the Concurrent Offering; the timing of the closing of the Transaction and the Concurrent Offering; the provision of a loan to the Target; the anticipated size and structure of the board of directors of the Resulting Issuer; the management of the Resulting Issuer and the business and operations of the Resulting Issuer. In making the forward- looking statements contained in this press release, the Company has made certain assumptions, including that: due diligence will be satisfactory; the Concurrent Offering will be completed on acceptable terms; the loan will be approved the by the TSXV; all applicable shareholder, and regulatory approvals for the Transaction will be received. Although the Company believes that the expectations reflected in forward-looking statements are reasonable, it can give no assurance that the expectations of any forward-looking statements will prove to be correct. Known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: results of due diligence; availability of financing; delay or failure to receive board, shareholder or regulatory approvals; and general business, economic, competitive, political and social uncertainties. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this press release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward-looking statements or otherwise.

For further information contact: Martin Bajic| 601-551-6770 Martin@nwcapital.ca  

Not for distribution to United States newswire services or for dissemination in the United States. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities 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 may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

All information provided in this press release relating to the Target has been provided by management of the Target and has not been independently verified by management of the Company. As the date of this press release, the Company has not entered into a Definitive Agreement with the Target, and readers are cautioned that there can be no assurances that a Definitive Agreement will be executed.

Completion of the 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 management information circular or filing statement to be prepared in connection with the 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.