TORONTO, June 14, 2018– Flow Capital Corp. (TSXV: FW)(“Flow Capital”,“Flow” or the “Company”) is pleased to provide the following corporate update.
Flow Capital Vision
Flow Capital is a diversified alternative asset investor and advisor, operating two divisions: an investment operation providing revenue-linked capital to emerging growth businesses, and an institutional advisory sales platform providing pension funds, charities and endowment clients with access to leading institutional money managers from around the world.
The investment operation will utilize the Flow Capital name and brand in the marketplace. Flow will primarily make revenue-linked investments in North American emerging growth businesses and will also provide a range of financial products and advisory services to assist these companies in fulfilling their growth objectives. Flow is seeking to fill a significant unmet need in the financing market for profitable or near profitable, small and medium sized enterprises (“SMEs”) looking to grow their business without the dilution of equity or heavily restrictive covenants of secured debt. This operation – the former Grenville royalty investment business – will continue to execute on the investment direction that was established in 2016.
Flow Capital’s last three investments are emblematic of its growth-oriented investment thesis. Solar Brokers, Stability Healthcare and Dionymed Holdings earn greater than $69 million in combined run-rate revenue. They are companies of scale and growth. Each company has a strong customer value proposition, is capital efficient, and is led by a proven management team with a significant ownership stake.
Boardwalktech, which recently listed on the TSX Venture Exchange (the “TSXV”), is representative of Flow Capital’s ability to not only invest capital, but also provide expertise in exchange for equity, in order to concurrently build value in its portfolio companies and generate returns for its shareholders. Advisory services will remain one of Flow Capital’s key offerings to SMEs.
Flow Capital’s second line of business will retain its former brand and be known as LOGiQ Global Partners. Global Partners has relationships with over thirty third-party investment managers, which ensures that pension and endowment clients have exposure to highly-skilled investment managers in every asset class and style, including the burgeoning market for alternative investment vehicles. LOGiQ generates recurring fees from the investment mandates it secures on behalf of investment managers.
Flow Capital earned revenues of approximately $2,544,420and generated cash in Q1 2018, and on June 7, 2018 held a cash balance of approximately $9.1 million. Synergies are expected through the rationalization of back office and financial operations.
Board of Directors
Flow also wishes to announce that Alan Torrie has been appointed as a director of the Company and will become Chair of Flow’s Audit Committee.
Alan Torrie brings extensive executive, financial and director experience to the Flow Capital Board. He has held several senior executive roles, including as the former President and Chief Executive Officer of Morneau Shepell and MDS Diagnostics. He currently serves as Chair of the Board of Extendicare and is a Director and member of the Audit Committee and Governance Committee of Green Shield Canada. He previously served as a Director of Trillium Health Partners, Cynapsus Therapeutics, and Appleby College.
“We are delighted and feel privileged to have an executive of Alan’s experience, stature and integrity join us as we execute on the vision of Flow Capital,” stated Vernon Lobo.
Contemporaneous with Alan’s appointment as a director, Peter Kampian and Eldon Smith have resigned from the board. Flow Capital wishes to thank Peter and Eldon for their contributions and service to Flow’s predecessor companies.
Vernon Lobo has assumed the role of Executive Chair and will continue to chair Flow Capital’s Investment Committee. Catherine McLeod-Seltzer, formerly Chair of Grenville’s board, will continue to serve as a Director of Flow.
“We are very happy to announce that Vernon Lobo has agreed to assume the role of Executive Chair of the company. Since he took the position of Chair of the Investment Committee in late 2016, there has been a notable change in the terms and structure of our investments. These include stronger incentive alignment with managers/owners, better security interests, and in certain cases, additional upside in the form of equity participation through instruments such as warrants. He also played an instrumental role in sourcing and negotiating the LOGiQ transaction. We look forward to having him continue to source investments and provide guidance on deal terms and structure as we embark on a more refined and disciplined strategy to create value. As part of that transition, the board has approved certain option grants and a private placement to ensure that key executives are properly motivated and aligned with shareholders to create value moving forward,” stated Catherine McLeod-Seltzer.
Option Grants
The Corporation has granted options to acquire an aggregate of 2,700,000 Common Shares to its Executive Chairman and Chief Financial Officer on the following terms:
In addition, the Company has granted each non-executive director of the Company options to acquire 200,000 Common Shares, and a non-executive employee has been granted options to acquire 100,000 Common Shares, with all such options bearing the same terms as set out above.
Incentive-Driven Private Placement
The Corporation also announces that it intends to complete a non-brokered private placement of units of the Corporation (each, a “Unit”) at a price of $0.18 per Unit, for gross proceeds of approximately $900,000 (the “Offering”) with key members of Flow’s investment team subscribing for Units. Each Unit is comprised of one common share of the Corporation (each, a “Common Share”) and one Common Share purchase warrant of Flow Capital (a “Warrant”). Each Warrant entitles the holder thereof to purchase one additional Common Share, at a price of $0.22 per Common Share, for a period of 60 months following the date of issuance of the Warrant. The securities issued under the Offering will be subject to a four-month hold period in accordance with applicable securities legislation.
As a complement to the option grants, this incentive-driven, management-led private placement further increases management’s ownership and alignment with shareholders, while also increasing cash available for new investments.
Completion of the Offering is subject to a number of conditions including, without limitation, receipt of all required regulatory approvals, including the approval of the TSX Venture Exchange.
Change of Auditors
The Corporation confirms that its board of directors has approved the appointment of Goodman & Associates LLP (“Goodman”) as the Corporation’s new independent auditors, replacing PricewaterhouseCoopers LLP (“PWC”). The appointment of Goodman as the new independent auditors of the Corporation was approved by the shareholders of the Corporation at the shareholders meeting held on May 31, 2018. The decision to change auditors was not the result of any disagreement between the Corporation and PWC or any reportable event within the meaning of applicable securities laws. There were no reservations in PWC’s reports for the two most recently-completed fiscal years or for any period subsequent to the most recently-completed period for which an audit report was issued and preceding the date of change.
In accordance with regulatory requirements, the Corporation has filed a Notice of Change of Auditor (“Notice”) and has received a response letter from PWC, the former auditor, confirming their agreement with the information provided in the Notice. The Corporation has also received a response from Goodman, the successor auditor, confirming their agreement with the information provided in the Notice. The Notice and response letters have been filed on SEDAR.
Management Loan
In connection with renewing his consulting services agreement, Flow Capital has agreed to extend to Robb McLarty a loan of $200,000.
About Flow Capital
Based in Toronto, Flow Capital Corp. is a diversified alternative asset investor and advisor, operating two divisions: an investment operation providing revenue-linked capital to emerging growth businesses, and an institutional advisory sales platform providing pension funds, charities and endowment clients with access to leading institutional money managers from around the world.
For further information, please contact:
Flow Capital Corp.
Robb McLarty
Chief Executive Officer (Acting)
robb@flowcap.com
Phone: (416) 777-0383
1 Adelaide Street East, Suite 3002,
PO Box 171,
Toronto, Ontario M5C 2V9
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 the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’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, the Company 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 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 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 Acton the Company; the potential impact of the Company being classified as a Passive Foreign Investment Company (“PFIC“); the Company’s ability to pay dividends in the future and the timing and amount of those dividends; reliance on key personnel, particularly the Company’s founders; dilution of shareholders’ interest through future financings; and general economic and political conditions; as well as the risks discussed in the Company’s and Grenville’s public filings. Although the Company 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, the Company 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.
Key assumptions include, but are not limited to: assumptions that the Canadian and U.S. economies relevant to the Company’s investment focus will remain relatively stable over the next 12 to 24 months; that interest rates will not increase dramatically over the next 12 to 24 months; that the Company’s existing investees will continue to make royalty payments to the Company as and when required; that the businesses of the Company’s investees will not experience material negative results; that the Company will be able to successfully integrate and grow the businesses of its predecessor companies; that the Company will continue to grow its portfolio in a manner similar to what has already been established; that tax rates and tax laws will not change significantly in Canada and the U.S.; that more small to medium private and public companies will continue to require access to alternative sources of capital; that the Company will have the ability to raise required equity and/or debt financing on acceptable terms; and that the Company will have sufficient free cash flow to pay dividends. The Company has also assumed that access to the capital markets will remain relatively stable, that the capital markets will perform with normal levels of volatility and that the Canadian dollar will not have a high amount of volatility relative to the U.S. dollar. In determining expectations for economic growth, the Company primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies. Although the Company 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 the Company 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 the Company 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.
