VLCY.P VLCTY Capital Inc

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

VANCOUVER, BC, May 6, 2021 /CNW/ - VLCTY Capital Inc. (TSXV: VLCY.P) ("VLCTY") and BuildDirect.com Technologies Inc. ("BuildDirect" or the "Corporation") are pleased to announce that, further to their previous announcement of a proposed transaction by way of press release on March 19, 2021, they have entered into an amalgamation agreement (the "Amalgamation Agreement") pursuant to which, among other things, VLCTY will acquire all of the issued and outstanding securities of BuildDirect (the "Transaction").

All references to dollars herein are in Canadian dollars ("$") unless otherwise specified.

The Transaction

Subject to approval by the TSX Venture Exchange ("TSXV"), BuildDirect will amalgamate with a wholly-owned subsidiary of VLCTY in order to facilitate the completion of the Transaction. It is the intention of the parties that VLCTY, following the closing of the Transaction (then referred to as the "Resulting Issuer"), will be listed on the TSXV as a Tier 1 Technology issuer, and that the business of the Resulting Issuer will be the business of BuildDirect.

Immediately prior to the completion of the Transaction, VLCTY will effect: (i) the VLCTY Consolidation (as defined below), resulting in an aggregate of approximately 226,091 post-VLCTY Consolidation common shares of VLCTY (each a "VLCTY Share" and, upon closing of the Transactions, a "Resulting Issuer Share")) being issued and outstanding; (ii) a name change pursuant to which VLCTY will change its name to "BuildDirect.com Technologies Inc." or such other name as may be determined by BuildDirect and approved by the board of directors of VLCTY (the "Name Change"); and (iii) the adoption of the New Equity Incentive Plan (as defined below).

Immediately prior to the completion of the Transaction, BuildDirect will effect a consolidation of all of the outstanding common shares and Class AA preferred shares of BuildDirect (collectively, the "BuildDirect Shares") on the basis of 5.393 pre-consolidation BuildDirect Shares to 1 post-consolidation BuildDirect Share (the "BuildDirect Consolidation"), resulting in the post-BuildDirect Consolidation BuildDirect Shares, as detailed below, being issued and outstanding, after giving effect to the conversion of the existing convertible notes for an aggregate principal amount of US$12,601,000 (the "Convertible Notes"). The principal and accrued interest under convertible notes will convert into post-BuildDirect Consolidation BuildDirect Shares and BuildDirect Warrants (as defined below) at the lower of US$4.23 and $4.60 for one (1) such BuildDirect Share and one (1) such BuildDirect Warrant. Upon conversion of the Convertible Notes it is anticipated that 25,767,153 post-BuildDirect Consolidation BuildDirect Shares and 4,293,522 post-BuildDirect Consolidation BuildDirect Warrants will be outstanding.

The Transaction is an "Arm's Length Transaction" (as defined under the policies of the TSXV) and therefore will not require approval by the shareholders of VLCTY under TSXV Policy 2.4 – Capital Pool Companies. The shareholders of VLCTY will, however, be asked to approve the VLCTY Consolidation, the Name Change and the new Equity Incentive Plan. The Transaction is further subject to, among other things, the approval by the shareholders of BuildDirect and the approval of the TSXV.

Upon completion of the Transaction and without giving effect to the Offering, the shareholders of VLCTY will hold approximately 226,091 Resulting Issuer Shares and the shareholders (including former convertible noteholders) of BuildDirect, excluding shares issued in connection with the Offering, will hold approximately 25,767,153 Resulting Issuer Shares.

In addition to the foregoing and without giving effect to the securities issued in connection with the Offering, the former holders of VLCTY securities convertible into VLCTY Shares will hold securities entitling them to acquire up to an additional 33,914 Resulting Issuer Shares (comprised of 600,000 pre-VLCTY Consolidation options and 300,000 pre-VLCTY Consolidation broker warrants) and the former holders of BuildDirect options and warrants convertible into BuildDirect Shares, including BuildDirect Warrants issued upon conversion of the Convertible Notes, will receive securities entitling them to acquire up to an additional 7,183,098 Resulting Issuer Shares.

The Amalgamation Agreement

Under the terms of the Amalgamation Agreement, the Transaction is expected to be completed by way of a three-cornered amalgamation pursuant to the provisions of the Canada Business Corporations Act (the "CBCA"). Pursuant to the terms of the Amalgamation Agreement, it is expected that, among other things, a wholly-owned subsidiary of VLCTY and BuildDirect will amalgamate (the "Amalgamation") and all of the issued and outstanding securities of BuildDirect, immediately following completion of the BuildDirect Consolidation and the VLCTY Consolidation and the conversion of the convertible debentures of BuildDirect into BuildDirect Shares and BuildDirect Warrants, will be exchanged for equivalent securities of VLCTY on a one-for-one basis.

The Amalgamation Agreement includes a number of conditions precedent to the closing of the Transaction, including, but not limited to, receipt of the requisite shareholder approvals, approvals of all regulatory bodies having jurisdiction in connection with the Transaction, approval of the TSXV, including the satisfaction of its listing requirements, and the satisfaction of other closing conditions customary to transactions of this nature. There can be no assurance that the Transaction will be completed as proposed or at all. Following completion of the Transaction, BuildDirect will become a wholly-owned subsidiary of VLCTY which, together, along with the other subsidiaries, will form the Resulting Issuer. The foregoing is a summary of the Amalgamation Agreement and is qualified in its entirety by the Amalgamation Agreement, a copy of which will be available under VLCTY's profile on SEDAR at www.sedar.com.

Shareholders Meetings

In connection with the Transaction, VLCTY will seek shareholder approval at a meeting, to be held on July 2, 2021, to, among other things, (a) change its name to "BuildDirect.com Technologies Inc.", or such other name as may receive approval by the board of directors of VLCTY and BuildDirect's discretion, subject to applicable regulatory and TSXV approvals, (b) consolidate its issued and outstanding shares on the basis of one (1) post-consolidation VLCTY Share for 26.538 pre-consolidation VLCTY common shares (the "VLCTY Consolidation"), and (c) adopt a new long-term omnibus equity incentive plan of the Resulting Issuer (the "New Equity Incentive Plan"). The foregoing approvals will remain subject to the completion of the Transaction.

Special meetings of the holders of common shares and Class AA Preferred Shares of BuildDirect will be held to, among other things: (a) approve the Transaction, (b) approve the Amalgamation Agreement, (c) approve the BuildDirect Consolidation, and (d) approve such other matters that may be required to be approved in order to give effect to the steps set forth in the Amalgamation Agreement and the implementation of the Transaction. The dates for the special meetings of the shareholders of BuildDirect have not yet been set, but are expected to be called shortly.

Closing BuildDirect's Concurrent Financing

In connection with the Transaction, and in connection with VLCTY's previous announcement on March 19, 2021, VLCTY and BuildDirect are also pleased to announce that BuildDirect has completed a private placement offering (the "Offering") of 3,487,000 subscription receipts of BuildDirect (the "Subscription Receipts") at an issue price of $5.75 per Subscription Receipt (the "Issue Price") for aggregate gross proceeds of $20,050,250 (the "Offering"). The proceeds of the Offering have been deposited in escrow with Computershare Trust Company of Canada, as subscription receipt agent. CIBC Capital Markets ("CIBC") and Canaccord Genuity Corp. (together with CIBC, the "Lead Agents"), as co-lead agents and joint bookrunners, together with a syndicate comprised of Cormark Securities Inc., Raymond James Ltd. and PI Financial Corp. (together with the Lead Agents, the "Agents"), acted as agents in connection with the Offering.  In addition, the Agents have an option (the "Over-Allotment Option") to increase the size of the Offering by up to an additional 15% of the number of Subscription Receipts sold. The Over-Allotment Option is exercisable by the Lead Agents, on behalf of the Agents, at any time until May 30, 2021.

Upon satisfaction of the Escrow Release Conditions (as defined below), immediately prior to the closing of the Transaction, each Subscription Receipt will be automatically converted into one (1) post-BuildDirect Consolidation BuildDirect Share and one post-BuildDirect Consolidation BuildDirect Share purchase warrant (a "BuildDirect Warrant"). Each such BuildDirect Warrant will be exercisable for an additional post-BuildDirect Consolidation BuildDirect Share at an exercise price of $6.90 per BuildDirect Share. Upon completion of the Transaction, each BuildDirect Share and each BuildDirect Warrant issued upon conversion of the Subscription Receipts will be exchanged for one (1) Resulting Issuer Share and one (1) Resulting Issuer common share purchase warrant (each, a "Resulting Issuer Warrant"), respectively. Each Resulting Issuer Warrant will entitle the holder thereof to acquire one additional Resulting Issuer Share at an exercise price of $6.90 per Resulting Issuer Share. 

In connection with the Offering and in accordance with the Agency Agreement, BuildDirect granted the Agents non-transferable broker warrants (the "Broker Warrants"). Upon completion of the Transaction, the Broker Warrants will entitle the holders thereof to acquire an aggregate of 188,294 Resulting Issuer Shares at a price of $5.75 per Resulting Issuer Share  at any time on or before the date that is 24 months following the closing of the Transaction.

The Subscription Receipts will be subject to an indefinite hold period as set out in National Instrument 45-102 - Resale of Securities, but the Resulting Issuer Shares and Resulting Issuer Warrants issuable to the holders of BuildDirect Shares and BuildDirect Warrants upon conversion of the Subscription Receipts (and including those Resulting Issuer Shares issuable upon exercise of the Resulting Issuer Warrants and Broker Warrants) will be freely tradable (other than any applicable escrow requirements or seed share resale restrictions pursuant to the TSXV Policy 5.4 - Escrow, Vendor Consideration and Resale Restrictions). Following the closing of the Transaction, it is anticipated that certain Resulting Issuer Shares will be subject to Tier 1 Value Security Escrow and seed share resale matrix restrictions. Full details of such conditions will be set forth in a filing statement that is expected to be filed shortly by VLCTY and BuildDirect (the "Filing Statement").

The gross proceeds of the Offering, less the Agents' fees and expenses, are held in escrow pending satisfaction of certain conditions, including, among others, the completion or waiver of all conditions precedent to the completion of the Transaction and the receipt of shareholder and regulatory approvals required for the completion of the Transaction (the "Escrow Release Conditions") on or before the date that is 120 days after closing of the Offering, pursuant to a subscription receipt agreement entered into with Computershare Trust Company of Canada, as escrow agent. Upon satisfaction of the Escrow Release Conditions, the escrowed proceeds of the Offering, less any amounts owing to the Agents, will be released to BuildDirect.

It is expected that the proceeds of the Offering will be used primarily for repayment of debt, working capital and general corporate purposes.

Directors and Officers of the Resulting Issuer

Upon completion of the Transaction, it is anticipated that the current directors and officers of VLCTY will resign and that the management team of the Resulting Issuer following the completion of the Transaction will be comprised of Dan Park (Chief Executive Officer) and Ethan Rudin (Chief Financial Officer and Corporate Secretary). It is anticipated that following the completion of the Transaction, the Resulting Issuer's board of directors will consist of five directors, being Dan Park, Milan Roy, Julie Todaro, Tim Howley and one additional independent director to be identified prior to closing.

The relevant experience of the proposed officers and directors of the Resulting Issuer is set out below.

Dan Park – Proposed Chief Executive Officer and Director

Dan brings nearly three decades of experience building and leading world-class teams at top-tier multi-billion dollar retail and technology companies. At BuildDirect, Dan leads the executive leadership team and also sits on the BuildDirect Board of Directors. He is responsible for all aspects of the BuildDirect business including strategy and vision creation, operational execution against the strategy, fundraising and external financing, team recruitment and leadership, developing the product strategy and executing against the technology roadmap, and overall P&L management. Dan's career has spanned various sectors and executive management roles including McKinsey and Company, Target, and Payless Shoesource, and as a Captain in the U.S. Army. Most recently, Dan was General Manager and Commercial Vertical Leader of Amazon Business, a channel he built from scratch to several billions of dollars and one of their fastest growing businesses. Prior to that role, he led the global product management team for Amazon Business and held GM roles in the Amazon Consumer Electronics category. Dan earned a Bachelor of Science in Mechanical Engineering from West Point United States Military Academy and a Master's of Business Administration from Harvard University Graduate School of Business Administration

Ethan Rudin - Proposed Chief Financial Officer

Ethan is a financial executive with over 20 years of financial, strategic, and operational leadership over a diverse set of industries, including retail, distribution, CPG, music/media/tech, and financial services. He joined BuildDirect in January 2021 and in addition to leading Finance and Accounting he will also lead Strategic Partnerships and Mergers & Acquisitions.  Prior to joining BuildDirect, Ethan was the Chief Financial Officer at Greenlane Holdings Inc. (GNLN), a leading distributor to smoke shops and dispensaries for vape supplies, packaging, and smoking accessories, which he took public on the NASDAQ in 2019. Ethan's early career began in public accounting at KPMG LLP and in investment banking at Banc of America Securities LLC, JP Morgan, and Citigroup Global Markets. Ethan received a Bachelor of Arts degree in Economics from Tufts University and a Master of Business Administration degree from Columbia Business School.

Natalie Ku – Proposed Chief Operations Officer

Natalie Ku is the Chief Operations Officer at BuildDirect and is responsible for leading the Corporation's sales, marketing, supply chain operations and category management teams.  Natalie joined BuildDirect in 2003 and has previously held positions as BuildDirect's Controller and Vice President, Finance. Natalie holds a Bachelor of Business Administration from Simon Fraser University and a CMA, CPA designation.

Tim Howley – Proposed Director

Tim Howley is the Chief Financial Officer for the Mark Anthony Group of Companies, one of North America's most diversified and successful private beverage companies focused on the alcohol beverage sector. Prior to joining the Mark Anthony Group in 2005, Mr. Howley was CFO then CEO of a major western Canadian retail chain (1999 to 2005) following being a partner with KPMG (1988-1999).  Mr. Howley is a member of the Chartered Professional Accountants of Canada, was elected a Fellow of the Chartered Professional Accountants of British Columbia and is a member of the Canadian Institute of Chartered Business Valuators. He holds an Honours B.A. in Philosophy from the University of Western Ontario and a Masters of Liberal Studies from Simon Fraser University.

Milan Roy  – Proposed Director

Milan Roy is the CFO of Lyra Growth Partners Inc.  Milan supports the investment team at Lyra and sits on the Board of a number of investee companies. He has over 20 years of entrepreneurial and corporate finance experience. Prior to joining Lyra, he started his own firm where he advised food & beverage and tech companies, sometimes acting as a fractional CFO to rapidly growing companies. Prior to that, he worked at Deloitte Corporate Finance for eight years where he led numerous mid-market M&A and growth capital transactions and where he was a National Senior Sector Specialist for Food & Beverage.  Milan is a CFA Charterholder and completed a BBA at the Schulich School of Business.

Julie Todaro – Proposed Director

Julie Todaro is an advisor to technology-based consumer-facing companies on strategic, people, and operational issues, including Airbnb, Inc., Coupang, and Callisto Media Inc.  Previously, she served as President of Homes and Services of Opendoor Technologies Inc. and has also held roles such as the Chief Operating Officer of Drop Technologies, Inc., and Vice President, Consumer Electronics, Vice President, U.S. Books and Amazon.ca and Director of Finance at Amazon.com, Inc.  Julie holds a B.B.A. in Business Administration and Accounting from Texas A&M University and an M.B.A. from The Wharton School of the University of Pennsylvania.

Other Insiders

Upon completion of the Transaction, it is anticipated that Pelecanus Investments Ltd. MDV IX, L.P., as nominee for MDV IX, L.P. and MDV ENF IX, L.P. and Lyra Growth Partners Inc. will be significant shareholders of the Resulting Issuer assuming that no further funds are raised pursuant to the Offering.

Pelecanus Investments Ltd. is a private investment company based in Vancouver, British Columbia.

Lyra Growth Partners Inc. is a private investment fund based in Vancouver, British Columbia.

MDV IX, L.P., as nominee for MDV IX, L.P. and MDV ENF IX, L.P is a private investment fund based in San Mateo, California.

Financial Information of BuildDirect  

The table below sets out certain financial data for the BuildDirect in respect of the periods for which financial information which will be included in the Filing Statement:

Consolidated Capitalization

The following table sets forth the pro forma share capital of the Resulting Issuer, on a consolidated basis, after giving effect to the Transaction:

BuildDirect.com Technologies Inc.

BuildDirect was incorporated on October 20, 1999 pursuant to the CBCA.  The Corporation is not a reporting issuer in any province or territory of Canada.  BuildDirect is an innovative marketplace for purchasing and selling building materials online. The BuildDirect platform connects homeowners and home improvement professionals in North America with suppliers and sellers of quality building materials from around the world, including flooring, tile, decking and more.  BuildDirect's year-over-year growth, proprietary heavyweight delivery network, and digital reach have served to solidify its role as a ground-breaking player in the home improvement industry.

VLCTY Capital Inc.

VLCTY was incorporated on September 16, 2019 pursuant to the provisions of the Business Corporations Act (British Columbia) and is a capital pool company (as defined in the TSXV Corporate Finance Manual) listed on the TSXV and a reporting issuer in the Provinces of British Columbia, Alberta and Ontario. VLCTY has no commercial operations and no assets other than cash.

Additional Information

Sponsorship of a Qualifying Transaction of a capital pool company is required by the TSXV unless an exemption or waiver from the sponsorship requirement is available. A request has been made to the TSXV for a waiver of the sponsorship requirements of Policy 2.2 – Sponsorship and Sponsorship Requirements of the TSXV, but there is no assurance that such waiver will be granted.

Trading in the VLCTY Shares is presently halted. It is uncertain whether the VLCTY Shares will resume trading until the Transaction is completed and approved by the Exchange. There are not any interests in the Transaction held by non-arm's length parties to TSXV.

Except as disclosed herein there are no finder's fees or similar payable for the Transaction.

Minden Gross LLP acts as legal counsel to VLCTY. BuildDirect is represented by Fasken Martineau DuMoulin LLP. The Agents are represented by Norton Rose Fulbright Canada LLP.

Cautionary Note Regarding Forward-Looking Information 

This press release contains statements which constitute "forward-looking statements" and "forward-looking information" within the meaning of applicable securities laws (collectively, "forward-looking statements"), including statements regarding the plans, intentions, beliefs and current expectations of VLCTY and BuildDirect with respect to future business activities and operating performance. Forward-looking statements are often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding: (a) expectations regarding whether the Transaction or the Offering will be consummated including whether the conditions to the consummation of the Transaction, the Offering or the conversion of the Subscription Receipts will be satisfied; (b) the timing for completing the Offering and the Transaction, if at all, and the conditions to such transaction; (c) expectations for other economic, business, and/or competitive factors; and (d) the use of proceeds of the Offering. 

Investors are cautioned that forward-looking statements are not based on historical facts but instead reflect VLCTY and BuildDirect's respective management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although VLCTY and BuildDirect believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed thereon, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the resulting issuer. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are the following: the ability to close the Offering and to consummate the Transaction; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other conditions to the consummation of the Transaction on the proposed terms and schedule; the potential impact of the announcement or consummation of the Transaction 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 and regulations both locally and in foreign jurisdictions; compliance with extensive government regulation; the risks and uncertainties associated with foreign markets; and the diversion of management time on the Transaction. These forward-looking statements may be affected by risks and uncertainties in the business of VLCTY and BuildDirect and general market conditions, including COVID-19.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although VLCTY and BuildDirect have attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended and such changes could be material. VLCTY and BuildDirect do not intend, and do not assume any obligation, to update the forward-looking statements except as otherwise required by applicable law. 

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 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 VLCTY should be considered highly speculative. 

The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release. 

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

SOURCE VLCTY Capital Inc.