Amended: Unilock Capital Corp. provides update on proposed acquisition of Small Pharma Ltd. and private placement financings

Unilock Capital Corp. (“Unilock”) is pleased to provide an update on its previously announced qualifying transaction with Small Pharma Ltd (“Small Pharma”). As announced by Unilock on December 2, 2020, pursuant to the terms of a definitive agreement among Small Pharma, Unilock and certain shareholders of Unilock (the “Definitive Agreement”), Unilock has agreed to acquire all of the issued and outstanding ordinary shares in the capital of Small Pharma (the “Small Pharma Shares”) upon the terms and conditions set out in the Definitive Agreement (the “Proposed Transaction”). The Proposed Transaction is expected to constitute Unilock’s “qualifying transaction” pursuant to the policies of the TSX Venture Exchange (the “TSXV” or the “Exchange”). Unless otherwise indicated, all currency references contained herein are to Canadian dollars.

BROKERED FINANCING

In connection with the Proposed Transaction, Small Pharma intends to complete a brokered private placement financing (the “Brokered Financing”) of subscription receipts (the  “Subscription  Receipts”) of Small Pharma at a price of $0.96 per Subscription Receipt (the “Issue Price”) for gross proceeds of $58,000,000. Each Subscription Receipt shall entitle the holder thereof to receive, upon the satisfaction or waiver (to the extent such waiver is permitted) of certain escrow release conditions prior to the escrow release deadline, including all conditions precedent to the Proposed Transaction being satisfied, and without payment of additional consideration therefor, one ordinary share of Small Pharma (each, a “Small Pharma Share”). Concurrent with the completion of the Proposed Transaction, each Small Pharma Share underlying the Subscription Receipts will be exchanged for common shares in the capital of the issuer resulting from the Proposed Transaction (the “Resulting Issuer”) at the Exchange Ratio (as defined below) in accordance with the terms of the Proposed Transaction (each, a “Resulting Issuer Share”).

Small Pharma and Unilock have engaged Canaccord Genuity Corp. and Eight Capital to act as co-lead agents (the “Agents”) to offer the Subscription Receipts for sale on a “commercially reasonable efforts” agency basis. In connection with the Brokered Financing, the Agents will receive a cash fee (the “Agents’ Commission”) equal to 7.0% of the gross proceeds of the Subscription Receipts sold in the Brokered Financing (reduced to 3.5% in respect of sales to the president’s list) and compensation warrants (the “Agents’ Warrants”) equal to 7.0% of the number of Subscription Receipts sold in the Brokered Financing (reduced to 3.5% in respect of sales to the president’s list). Each Agents’ Warrant will be exercisable to acquire one Small Pharma Share at the Issue Price for a period of 24 months from the satisfaction of the escrow release conditions. In accordance with the terms of the Proposed Transaction, the Agents’ Warrants will be exchanged for warrants of the Resulting Issuer on the same economic terms.

The gross proceeds from the Brokered Financing (less an amount equal to 50.0% of the Agents’ Commission and less all of the reasonable costs and expenses of the Agents in connection with the Brokered Financing) (the “Escrowed Proceeds”) will be held in escrow until the satisfaction of the applicable escrow release conditions.

Upon completion of the Proposed Transaction, the proceeds of the Brokered Financing are anticipated to be used principally for clinical development of Small Pharma’s lead DMT-based medicine, the research and development of Small Pharma’s pipeline of psychedelics-based medicines and for general working capital purposes.

The Brokered Financing is anticipated to close on or about March 3, 2021, or such other date as the Agents and Small Pharma may agree. The terms of the Brokering Financing including the gross proceeds and the Issue Price may change depending on market conditions.

NON-BROKERED FINANCING

 In connection with the Proposed Transaction, Small Pharma has completed a non-brokered private placement of convertible notes (the “Non-Brokered Notes”) for aggregate gross proceeds of $5,000,000 (the “Non-Brokered Financing”). The Non-Brokered Notes bear interest at 6% per annum, mature on July 1, 2021 and will be convertible into Small Pharma Shares immediately prior to the closing of the Proposed Transaction at a price equal to 80% of the Issue Price.

THE QUALIFYING TRANSACTION

It is anticipated that the acquisition of the Small Pharma Shares by Unilock will be conducted by way of an offer or share exchange in accordance with the laws of England and Wales, being the corporate jurisdiction of Small Pharma. The final acquisition structure will be determined by the parties to accommodate efficiencies for various legal structures, tax and accounting treatment and securities regulation. The Proposed Transaction will constitute a reverse take-over of Unilock by Small Pharma.

Prior to the completion of the Qualifying Transaction, it is anticipated that the outstanding common shares of Unilock (the “Unilock Common Shares”) shall be consolidated on a 4.6:1 basis (the “Unilock Share Consolidation”) and the outstanding Small Pharma Shares shall be split on a 1:100 basis (the “Small Pharma Share Split”). Unless otherwise noted, all share figures contained in this press release assume the completion of the Unilock Share Consolidation and Small Pharma Share Split.

As consideration for the acquisition of all of the outstanding Small Pharma Shares, the holders of the issued and outstanding Small Pharma Shares will receive Unilock Common Shares at an exchange ratio as set out in the Definitive Agreement (the “Exchange Ratio”) which is based on (i) the deemed price of the Unilock Common Shares of either $0.17 or $0.21, depending on the pre-money valuation of Small Pharma for the Brokered Financing; and (ii) the Issue Price. Assuming the Brokered Financing is completed at the Issue Price, the Exchange Ratio shall be one (1) Unilock Common Share for each one(1) Small Pharma Share.

Upon completion of the Proposed Transaction, it is the intention of the parties that Unilock will be renamed “Small Pharma Inc.” or such other name as may be determined by the parties and accepted by applicable regulatory authorities.

CAPITALIZATION

 Immediately prior to the completion of the Proposed Transaction and prior to the Unilock Share Consolidation and the Small Pharma Share Split, (i) Unilock will have 6,000,000 Unilock Common Shares issued and outstanding, as well as options to acquire up to an aggregate of 600,000 Unilock Common Shares; and (ii) assuming the completion of a $58,000,000 Brokered Financing, Small Pharma will have issued and outstanding 2,286,215 Small Pharma Shares, options to acquire up to an aggregate of 308,977 Small Pharma Shares, £2,597,512 principal amount of existing convertible notes (the “Existing Notes”) convertible into Small Pharma Shares at a price equal to 64% of the Issue Price, $5,000,000 principal amount of Non-Brokered Notes convertible into Small Pharma Shares at a price equal to 80% of the Issue Price, 60,416,667 Subscription Receipts convertible into 60,416,667 Small Pharma Shares, and

Agents’ Warrants issued in connection with the Brokered Financing exercisable into a maximum of 4,229,167 Small Pharma Shares.

Based upon the number of issued and outstanding securities in each of Unilock and Small Pharma on the date hereof, assuming the completion of the Brokered Financing for gross proceeds of $58,000,000 and taking into effect the Unilock Share Consolidation and the Small Pharma Share Split, it is expected that the Resulting Issuer will have approximately 304,209,166 Resulting Issuer Shares issued and outstanding on a non-diluted basis, of which (i) the current shareholders of Unilock will hold 1,304,348 Resulting Issuer Shares representing approximately 0.4% of the issued and outstanding share capital of the Resulting Issuer; (ii) the former shareholders of Small Pharma will hold approximately 228,621,500 Resulting Issuer Shares, representing approximately 75.2% of the issued and outstanding share capital of the Resulting Issuer; (iii) the holders of the Existing Notes will hold approximately 7,356,235 Resulting Issuer Shares, representing approximately 2.4% of the issued and outstanding share capital of the Resulting Issuer (assuming an exchange rate of $1.74:£1.00); (iv) the holders of the Non-Brokered Notes will hold approximately 6,510,417 Resulting Issuer Shares, representing approximately 2.1% of the issued and outstanding share capital of the Resulting Issuer; and (iv) purchasers of Subscription Receipts under the Brokered Financing will hold approximately 60,416,667 Resulting Issuer Shares representing approximately 19.9% of the issued and outstanding share capital of the Resulting Issuer. The accrued interest on the Existing Notes and/or the Non-Brokered Notes may potentially be convertible into Small Pharma Shares at the same applicable conversion prices of such notes. The above figures assume that such interest is paid in cash and not converted into shares.

DIRECTORS AND OFFICERS OF THE RESULTING ISSUER

The following sets out the names and the backgrounds of the currently proposed directors and officers of the Resulting Issuer. In addition to such directors and officers, the Resulting Issuer intends to add additional directors prior to the completion of the Proposed Transaction.

Peter Rands, Chief Executive Officer and Director

 Mr. Rands is a qualified patent attorney in the United Kingdom and Europe with over 10 years’ experience in the pharmaceutical industry. Mr. Rands has always had a passion for pharmaceutical innovation. Mr. Rands graduated from the University of Oxford in 2003 with a first class degree in Chemistry, following which he trained and qualified as a UK and European patent attorney specializing in pharmaceuticals.

In 2008, Mr. Rands joined Teva Pharmaceutical, a generic pharmaceutical company, to work directly with pharmaceutical formulation teams. Peter left Teva in 2011 to return to private practice with AmLaw 100 firm Mintz Levin, where he advised start-up and mid-cap innovative pharma companies on IP and legal matters. Mr. Rands left Mintz Levin in 2015 to set up Small Pharma.

Marie Layzell, Chief Operating Officer and Director

Ms. Layzell has over 20 years’ experience in the pharmaceutical industry as an analytical scientist and consultant, and has advised multiple large pharmaceutical projects on CMC drug development. Ms. Layzell graduated from the University of Hertfordshire in 1998 with a degree in human biology, following which she worked in numerous Contract Diagnostic Organizations including Prova (R&D) Ltd, Bodycote Testing and Exova Group. During this time, Ms. Layzell managed the CMC development for numerous small molecules and biological entities; supervising teams of analysts and working with formulators to progress development.

Since 2011, Ms. Layzell has worked as an analytical consultant at Eviva Pharma. Ms. Layzell has  worked with Small Pharma since 2015 and assumed the role of Senior Research Manager heading up CMC activities in May 2016.

Carol Routledge, Chief Medical and Scientific Officer

 Dr. Routledge is a dynamic R&D professional and drug development expert with over 30 years’ of experience within UK and US based pharmaceutical and biotechnology companies and the non-profit sector with a focus on drug acquisition and profiling of new chemical entities and biologics. She has held multiple leadership roles across drug discovery and development.

 Dr. Routledge’s preclinical and clinical experience spans both psychiatric and neurological indications, with a strong focus on understanding and treating mental health disorders. Roles in Syntex, Wyeth, BTG and GlaxoSmithKline include leading drug discovery and development activities across several therapeutic areas but focusing strongly on neuroscience diseases and with an emphasis on translational medicine.

 Dr. Routledge also has experience managing and sourcing opportunities at a semi-philanthropic dementia discovery fund. Other recent expertise includes leading the preclinical and clinical research strategy across Alzheimer’s Research UK for response-mode, strategic funding and for global projects. Dr. Routledge built and led, as Managing Director, an independent and global initiative focused on the early detection of neurodegenerative diseases (EDoN). Dr. Routledge has a 1st Class Honors degree in Zoology and a PhD in neuropharmacology.

David Steel, Chief Financial Officer 

Mr. Steel is a Chartered Accountant with extensive international and capital markets experience gained from senior finance roles in both large multinational and SME organizations.

Prior to joining Small Pharma, Mr. Steel spent six years as Chief Financial Officer of Feronia Inc., a TSXV listed African agribusiness, where he led successful debt and equity financings of over US$140 million. Previously, Mr. Steel was Director of Finance for Misys plc, a multinational technology business supplying software to the global financial services sector, where he managed a global finance team of 70+ people located in 11 countries. As well as managing the global finance function, Mr. Steel played an active operational role and managed the integration of a £365 million multinational acquisition. Mr. Steel’s other roles include Group Financial Controller for Fuller, Smith & Turner plc, a UK listed brewer and pub company, and head of Financial Planning and Analysis and Financial Systems at Inchcape plc, a leading global premium automotive group. David holds a BA degree from Abertay University in Scotland and is qualified as a Chartered Accountant in Edinburgh.

Harry Chew, Director

 Mr. Harry Chew is currently a director of Unilock. Mr. Chew is a financier and venture capitalist based  in Vancouver, Canada. Mr. Chew has been a founder of and the principal investor in several businesses in emerging markets and currently serves as a director and officer of Pacific Paradym Energy Inc. He was a director and officer of Shogun Capital Corp. (TSXV: SHO) which eventually was acquired by Aurora Cannabis Inc. (TSX: ACB). Mr. Chew has been a director and officer of numerous reporting issuers and has extensive experience in the capital markets. Mr. Chew was educated at Simon Fraser University (BBA) and is a member of the Chartered Professional Accountants of British Columbia.

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 with 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 CPC program. Mr. Kimel acts as corporate counsel for numerous companies listed on the Toronto Stock Exchange and the TSXV. 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 Western University in London, Ontario.

 As at the date hereof, the above individuals, own in the aggregate, directly or indirectly, 1,026,609 (44.9%) of the issued and outstanding Small Pharma Shares and 1,000,000 (16.7%) of the outstanding Unilock Common Shares. Based on the current shareholdings, present knowledge of each of Unilock and Small Pharma, and assuming completion of a $58,000,000 Brokered Financing and after taking into effect the Unilock Share Consolidation and the Small Pharma Share Split, it is anticipated that following the closing of the Proposed Transaction, no person or company will beneficially own, directly or indirectly, or control or direct more than 10% of the voting rights associated with the issued and outstanding Resulting Issuer Shares other than Peter Rands, Chief Executive Officer of Small Pharma, who is expected to own, directly or indirectly, 103,188,407 Resulting Issuer Shares representing approximately 33.9% of the issued and outstanding Resulting Issuer Shares on completion of the Proposed Transaction.

FINANCIAL INFORMATION FOR UNILOCK

The following tables set forth selected historical financial information for Unilock for the fiscal years ended February 29, 2020 and February 28, 2019 and the nine months ended November 30, 2020, and selected balance sheet data for such fiscal years and period. The financial statements of Unilock have been prepared in accordance with IFRS and are denominated in Canadian dollars.

Balance Sheet

FINANCIAL INFORMATION FOR SMALL PHARMA
The following tables set forth selected historical financial information for Small Pharma for the fiscal years ended February 28, 2020 and 2019 and nine months ended November 30, 2020, and selected balance sheet data for such fiscal years and period. The financial statements of Small Pharma have been prepared in accordance with IFRS and are denominated in British pounds.

For reference, the daily average exchange rate for Canadian dollars to British pounds as quoted by the Bank of Canada on November 30, 2020 is $1.7306:£1.00.

SPONSORSHIP

Unilock will be seeking an exemption from the sponsorship requirements of the TSXV in connection with the Transaction. There is no assurance that the TSXV will exempt Unilock from all or part of the applicable sponsorship requirements of the TSXV.

SIGNIFICANT CONDITIONS TO CLOSING

 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 the Board of Directors of each of Unilock and Small Pharma, acceptance or approval of Small Pharma shareholders, obtaining necessary third party approvals, TSXV acceptance and the completion of the Brokered Financing. There can be no assurance that the Proposed Transaction or the Brokered Financing will be completed as proposed or at all.

Since the Proposed Transaction is an arm’s length transaction, Unilock is not required to obtain shareholder approval for the Proposed Transaction. Unilock will be required to obtain shareholder approval in respect of the Unilock Share Consolidation, the reconstitution of the board of the Resulting Issuer and related matters.

ARM’S LENGTH QUALIFYING TRANSACTION

 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.