TORONTO, Aug 6, 2019 – Flow Capital Corp. (TSXV: FW) (“Flow Capital” or the “Company”) is pleased to announce that it has completed its previously announced transaction with Flow Capital Priority Return Fund LP (the “Fund”), pursuant to which Flow has raised $10 million through the granting of a royalty in certain of its existing investments to the Fund (the “Transaction”).
Under the Transaction, a collection of institutional and high net worth investors have invested $10 million (the “Investment Amount”) into the newly-created Fund, which has in turn paid the Investment Amount to the Company in return for a royalty interest in 8 of Flow’s existing investments (the “Underlying Royalty Contracts”).
Under the terms of the Transaction:
(a) an amount equal to the lesser of 1% per month of the outstanding Investment Amount or the royalty payments received by Flow Capital from the Underlying Royalty Contracts will be paid to investors (the “Class A Return”). Flow Capital will retain all royalty payments from the Underlying Royalty Contracts that are in excess of the Class A Return (the “Adjusted Net Royalty Payments”);
(b) the first $11 million of cash buyout payments received by Flow Capital from the Underlying Royalty Contracts will be used to redeem units of the Fund held by investors as and when such buyout payments are received by Flow Capital, with the remainder of all buyout proceeds from these investments to be retained by Flow Capital;
(c) if by the third anniversary of the establishment of the Fund there has been less than $5 million in redemptions, investors will receive an enhanced return equal to 20% of the Adjusted Net Royalty Payments on a monthly basis until such time as there have been $5 million in redemptions; and
(d) Flow Capital will have no obligation to make any payments to the Fund unless and until it receives corresponding royalty and buyout payments under the Underlying Royalty Contracts.
With respect to the 8 Underlying Royalty Contracts:
(i) since the dates of the original investments, the revenues of the 8 investee companies have collectively increased by approximately 88.1%;
(ii) the revenues of the 8 investee companies are on a run rate to generate approximately $148 million in aggregate annual revenues; and
(iii) Flow Capital has earned an approximate 93% cash-on-cash return from the 8 investments to date. For the 8 Underlying Royalty Contracts, the 93% return represents the royalty payments received from the start of the investment over the amount invested.
About Flow Capital
Flow Capital Corp. is a diversified alternative asset investor and advisor, specializing in providing minimally dilutive capital to emerging growth businesses. To apply for financing, visit www.flowcap.com.
For further information, please contact:
Flow Capital Corp.
Chief Executive Officer
1 Adelaide Street East, Suite 3002,
PO Box 171,
Toronto, Ontario M5C 2V9
Forward-Looking Information and Statements
This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Flow Capital’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Flow Capital’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. The forward-looking information contained herein may include, but is not limited to, information with respect to: the company’s prospective financial performance, including the company’s opinion regarding the current and future performance of its portfolio, expenses and operations; anticipated cash needs and need for additional financing; anticipated funding sources; future growth plans; royalty acquisition targets and proposed or completed royalty transactions; estimated operating costs; estimated market drivers and demand; business prospects and strategy; anticipated trends and challenges in the Company’s business and the markets in which it operates; and the company’s financial position. By identifying such information and statements in this manner, Flow Capital is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.
An investment in securities of the company is speculative and subject to a number of risks including, without limitation, risks relating to: the need for additional financing; the relative speculative and illiquid nature of an investment in the company; the volatility of the company’s
share price; the company’s ability to generate sufficient revenues; the company’s ability to manage future growth; the limited diversification in the company’s existing investments; the company’s ability to negotiate additional royalty purchases or other forms of investment from new investee companies; the company’s dependence on the operations, assets and financial health of its investee companies; the company’s limited ability to exercise control or direction over investee companies; potential defaults by investee companies and the unsecured nature of certain of the company’s investments; the company’s ability to enforce on any default by an investee company; competition with other investment entities; tax matters, including the potential impact of the Foreign Account Tax Compliance Act on the company; the potential impact of the company being classified as a Passive Foreign Investment Company; the company’s ability to pay dividends in the future and the timing and amount of those dividends; reliance on key personnel; dilution of shareholders’ interest through future financings; and general economic and political conditions; as well as the risks discussed in the company’s public filings. Although Flow Capital has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.
In connection with the forward-looking information and forward-looking statements contained in this press release, Flow Capital has made certain assumptions. Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect the company’s business and its ability to identify and close new opportunities with new investees are material factors that the company considered when setting its strategic priorities and objectives, and its outlook for its business. Although Flow Capital believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements.
The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Flow Capital does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward- looking information and statements attributable to Flow Capital or persons acting on its behalf is expressly qualified in its entirety by this notice.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.