Vancouver, British Columbia, November 25, 2019 — Burcon NutraScience Corporation (TSX: BU) (“Burcon” or the “Company”), a global technology leader in the development of plant-based proteins, is pleased to announce a non-brokered private placement of convertible debentures (the “Convertible Debentures”) for an aggregate principal amount of up to $4 million (the “Offering”). Insiders of the Company have agreed to subscribe for Convertible Debentures totaling $2 million in principal amount. The Offering is subject to the approval of the Toronto Stock Exchange (“TSX”).
Each Convertible Debenture will consist of $1,000 principal amount, bear interest at a rate of 8.5% per annum, payable semi-annually in arrears, and be unsecured. The principal amount outstanding under the Convertible Debentures and all accrued and unpaid interest thereon will be payable in cash thirty-six (36) months from the date of issuance of the Convertible Debentures. The Convertible Debentures will be convertible at the option of the holder, in whole or in part, into common shares of the Corporation (the “Shares”) at a conversion price of $1.05 per Share (the “Conversion Price”), which represents approximately a 30% premium to the volume weighted average trading price of the Shares on the TSX for the immediately preceding five trading days.
Burcon, will have the right, at its sole discretion, to force the conversion of the Convertible Debentures if the Shares trade at or above $2.15 per share for a period of 14 consecutive trading days. The Convertible Debentures and the Shares issuable upon conversion of the Convertible Debentures will be subject to a four month and one day statutory resale restriction pursuant to applicable Canadian securities laws.
The Company will pay a cash finder’s fee in connection with the Offering to certain finders not to exceed 4.5% of the gross proceeds received from investors introduced to the Company by the finders.
The Company intends to use the net proceeds from the Offering to: (i) make a further $3 million capital contribution to Merit Functional Foods Corporation (“Merit Foods”); (ii) continue its ongoing research and development program; (iii) further strengthen and expand its intellectual property portfolio; and (iv) for general corporate purposes. In June and September 2019, Burcon contributed an aggregate of $8 million to Merit Foods for its 40% interest in the Merit Foods joint venture. Merit Foods initially planned to construct and commission a 65,000 square foot pea and canola protein production facility in Western Canada (the “Flex Production Facility”). However, Merit Foods has now decided to expand the size of the Flex Production Facility to 88,000 square feet and is incorporating design changes to the initial design, which will facilitate future production capacity expansions. The design modifications and the larger footprint of the Flex Production Facility will enable Merit Foods to economically scale the throughput of pea protein and canola protein as compared to the initial planned capacity. The new budget for the Flex Production Facility has increased from $65 million to $80 million. Merit Foods is in the process of securing expanded bank financing for the increased budget and its shareholders have agreed to contribute an additional $7.5 million in capital pursuant to the terms of the Merit shareholders’ agreement in respect of the construction of the Flex Production Facility. Burcon NutraScience Holdings Corp. (“Burcon Holdings”), a wholly-owned subsidiary of Burcon, currently owns 40% of Merit Foods’ issued and outstanding shares. Burcon has elected to retain its proportionate shareholding in Merit Foods and intends to fund Burcon Holdings with the $3 million from the net proceeds of the Offering.
The Offering is expected to close on or about December 10, 2019 and is subject to certain conditions including, but not limited to, the receipt of all necessary regulatory approvals, including the approval of the TSX.
The issuance of Convertible Debentures to insiders under the Offering will be considered a related party transaction under Multilateral Instrument 61-101. The Company will be relying on exemptions from the formal valuation and minority shareholder approval requirements provided under sections 5.5(a) and 5.7(a) of Multilateral Instrument 61-101 on the basis that the participation in the Offering by insiders does not exceed 25% of the Company’s market capitalization.
The securities being offered under the Offering have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
About Burcon NutraScience Corporation
Burcon is a global technology leader in the development of plant-based proteins. The company has developed an extensive portfolio of composition, application, and process patents originating from a core protein extraction and purification technology. Burcon’s family of plant proteins includes Peazazz®, a uniquely soluble and clean-tasting pea protein, Peazac®, a pea protein that is well-suited for meat analogues and baked goods, Puratein®, Supertein® and Nutratein® canola proteins with exceptional functionality and valuable nutritional profiles, and Nutratein-PS™ and Nutratein-TZ™, Burcon’s new pea and canola protein blends that have exceptional functional characteristics, low allergenicity, and a nutritional value exceeding those of standard pea proteins in the market today. Supertein® and Nutratein® canola proteins are marketed by Merit Functional Foods Corporation under the brand names, Puratein® HS and Puratein®-C, respectively, and Nutratein-PS™ pea and canola protein blend as MeritPro™ HS. Burcon’s CLARISOY® soy protein — under license to the Archer Daniels Midland Company — offers clarity and high-quality protein nutrition for low-pH beverage systems, and excellent solubility and exceptionally clean flavour at any pH. For more information about the company, visit www.burcon.ca.
The TSX has not reviewed and does not accept responsibility for the adequacy of the content of the information contained herein.
This press release contains forward-looking statements or forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements or forward-looking information involve risks, uncertainties and other factors that could cause actual results, performances, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward- looking statements or forward-looking information can be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “project,” “estimate,” “expect,” “believe”, “future,” “likely,” “may,” “should,” “could”, “will” and similar references to future periods. All statements other than statements of historical fact included in this release are forward-looking statements, including, without limitation, statements regarding the Offering, receipt of TSX approval for the Offering and other expectations, intentions and plans contained in this press release. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements or information. Important factors that could cause actual results to differ materially from Burcon’s plans and expectations include the actual results of business negotiations, marketing activities, adverse general economic, market or business conditions, regulatory changes and other risks and factors detailed herein and from time to time in the filings made by Burcon with securities regulators and stock exchanges, including in the section entitled “Risk Factors” in Burcon’s annual information form dated July 2, 2019 filed with the Canadian securities administrators on www.sedar.com. Any forward-looking statement or information only speaks as of the date on which it was made and, except as may be required by applicable securities laws, Burcon disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Although Burcon believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance, and accordingly, investors should not rely on such statements.
CLARISOY is a trademark of Archer Daniels Midland Company.
Manager, Business Development
Burcon NutraScience Corporation
Tel (604) 733-0896, Toll-free (888) 408-7960
Steve Campbell, APR
Campbell & Company Public Relations
Tel (604) 888-5267