Chelsea Acquisition Corporation Announces Proposed Qualifying Transaction CALGARY, ALBERTA -- (Marketwired) -- 07/15/13 -- Chelsea Acquisition Corporation ("Chelsea" or the "Corporation") (TSX VENTURE:CAV.P) is pleased to announce details concerning its proposed qualifying transaction involving a proposed business combination with Pediapharm Inc. ("Pediapharm"). Pediapharm is a private specialty pharmaceutical company dedicated to serving the needs of the pediatric community. Chelsea has entered into a letter agreement with Pediapharm dated June 25, 2013 (the "Letter Agreement"), pursuant to which Chelsea and Pediapharm intend to complete a business combination (the "Transaction") by way of an amalgamation to form a new company ("Amalco") called "Pediapharm Inc." Pursuant to the Transaction, Chelsea will amalgamate with Pediapharm to form Amalco and: (i) the issued and outstanding Pediapharm Common Shares will be exchanged for an aggregate of 36,666,667 common shares of Amalco (the "Amalco Common Shares") with a deemed value of $0.30 per share; (ii) the outstanding Pediapharm share purchase warrants will be exchanged for share purchase warrants of Amalco; (iii) each three (3) issued and outstanding Chelsea Common Shares will be exchanged for one (1) Amalco Common Share for an aggregate of 3,666,667 Amalco Common Shares; and (iv) each three (3) outstanding stock options and agents' options of Chelsea will be exchanged for one stock option or agents' option of Amalco exercisable at $0.30 per share. It is intended that the Transaction, when completed, will constitute the qualifying transaction of the Corporation pursuant to Policy 2.4 of the TSX Venture Exchange Inc. (the "TSX Venture") Corporate Finance Manual. The Transaction is subject to the policies of the TSX Venture relating to qualifying transactions, as well as shareholder approval of each of Chelsea and Pediapharm. About Pediapharm Pediapharm is the only private Canadian specialty pharmaceutical company, dedicated to serving the needs of the pediatric community. Its mission is to bring to the Canadian market the latest innovative pediatric products with the objective to improve the health and the well-being of children in Canada. Since its debut in 2008, Pediapharm has entered into numerous commercial agreements with partners from Canada and other countries around the world. Pediapharm Corporate History and Structure Pediapharm was incorporated under the Canada Business Corporations Act ("CBCA") on February 24, 2003. The head and registered office of Pediapharm is located at 1 Place du Commerce, Suite 225, Ile-des-Soeurs, Quebec, H3E 1A2. Pediapharm has one wholly-owned subsidiary, Pediapharm Licencing Inc. which is incorporated under the CBCA. Pediapharm currently has 11,414,001 Pediapharm Common Shares issued and outstanding. Pediapharm has no stock options, warrants, anti-dilution or other rights to purchase Pediapharm Common Shares issued or outstanding, other than (i) an aggregate of 342,857 share purchase warrants exercisable at $1.05 (the "Pediapharm Warrants"); (ii) convertible debentures of Pediapharm in the aggregate amount of principal and interests, accrued as of August 31, 2013 of approximately $1,985,000 which will be converted into Pediapharm Common Shares (the "Pediapharm Debentures"); (iii) 602,038 options to purchase Pediapharm Common Shares held by current or former directors, officers or employees of Pediapharm at exercise prices ranging from $0.87 to $1.05 (the "Pediapharm Options"); and (iv) additional rights to purchase Pediapharm Common Shares pursuant to certain anti-dilution provisions, rights, deferred stock units and agreements. The two largest shareholders of Pediapharm are Sylvain Chretien of Verdun, Quebec and FIER of Longueuil, Quebec; who own 29.8%, and 11.22%, respectively. Financial Information of Pediapharm Based on audited management prepared financial statements for the year ended December 31, 2012, Pediapharm had revenue of $2,490,503, operating expenses of $4,714,433, and a net loss of $2,223,930. In addition, as at December 31, 2012, Pediapharm had working capital of $212,268, assets of $1,723,778 and liabilities of $2,812,900. Based on unaudited management prepared financial statements for the period ended March 31, 2013, Pediapharm had revenue of $828,629, operating expenses of $1,000,867, and a net loss of $276,871. In addition, as at March 31, 2013, Pediapharm had working capital of $116 094, assets of $1,986,604, and liabilities of $3,352,597. Summary of the Proposed Qualifying Transaction Pursuant to the arm's length Letter Agreement, and subject to the terms and conditions thereof, Chelsea and Pediapharm have agreed to complete the Transaction to form Amalco. Pursuant to the Letter Agreement, the parties have agreed to use their "commercially reasonable efforts" to cause Pediapharm to complete a private placement (the "Pediapharm Private Placement") of subscription receipts of Pediapharm (the "Subscription Receipts") at a price of $0.30 per receipt (the "Offering Price") for gross proceeds of a minimum of $4,000,000 and a maximum of $6,000,000. Each Subscription Receipt will be automatically converted into one Amalco Common Share concurrent with the completion of the Transaction at no additional cost to the holder. The parties acknowledge that Pediapharm intends to engage a syndicate of agents to be determined (the "Agents") to act as agents on a "commercially reasonable efforts" basis for the Pediapharm Private Placement and in connection therewith intends to pay a cash commission to the Agents in an amount to be determined. The parties agree the net proceeds of the Pediapharm Private Placement will be held in escrow and released concurrent with the completion of the Transaction. The parties also agree Pediapharm may proceed with a non-brokered private placement of units of Pediapharm (the "Pediapharm Units") at a price per unit to be determined, for gross proceeds of up to $500,000 to close on or before August 31, 2013. Each Pediapharm Unit will consist of one Pediapharm Common Share and one share purchase warrant of Pediapharm (the "Pediapharm Financing Warrants") exercisable at a price per share to be determined, for a period of two years from closing of such private placement. Pediapharm may also choose to proceed by way of financing in the same maximum amount by way of a loan or any other financing agreement. Summary of Proposed Directors and Officers The board of Chelsea will be replaced to consist of seven (7) directors all of whom will be nominees of Pediapharm, namely, Sylvain Chretien, Pierre Lapalme, three other members of the current board of Pediapharm and two independent directors from outside the province of Quebec to be determined, provided TSX Venture does not object to such nominations and such persons are eligible to act as directors pursuant to the requirements of the CBCA. After the closing of the Transaction, the officers of Amalco will be appointed by the Board of Directors of Amalco and will include Sylvain Chretien as Chief Executive Officer, Benoit Hebert as Vice-President, Business Development and Licensing, Roland Boivin as Chief Financial Officer, Ashok Bhaseen as Vice-President, Marketing and Sales and a Corporate Secretary to be determined by the Board of Directors of the Resulting Issuer. Sylvain Chretien, Chief Executive Officer and Director Sylvain Chretien, Age 48, President, Chief Executive Officer and Director: Mr. Chretien is the founder of Pediapharm as well as the president and CEO since January 2008. He has over 24 years of experience in both the pharmaceutical and the biotechnology sectors, where he occupied various executive positions in sales, marketing and business development. He worked with Nordic Laboratories from 1989 to 1994; with Pfizer Canada from 1994 to 1998; and with Biorthex Inc. from January 1998 to June 2000. Before founding Pediapharm, Mr. Chretien had his own consulting company called Gestion BioPrisma. Mr. Chretien was a Director of Biophage Pharma and Warnex. He was President of the Pharmaceutical Marketing Club of Quebec (PMCQ) in 1998 and executive member of BioQuebec in 2000. Mr. Chretien holds an MBA in Management of Bio Industries from the Universite du Quebec a Montreal and a B.Sc. in Sciences of Physical Activities from the University of Laval. Roland Boivin, Chief Financial Officer Roland Boivin, Age 46, is the proposed Chief Financial Officer of Pediapharm. From 1990 to 2008, Mr. Boivin held several management positions at 3M Canada, including Business Manager - Consumer Division. In that role, he had overall financial responsibility for the Canadian consumer market. His most recent role at 3M was General Manager - Quebec and he became a member of the Company's Executive Committee. Mr. Boivin has since developed expertise in Finance, Accounting, Corporate Governance and Continuous Disclosure with small and medium size publicly listed companies. Mr. Boivin has been the Chief Financial Officer of Golden Hope Mines Limited, a public company listed on TSX Venture since June 2011. Mr. Boivin obtained his Bachelor of Commerce from McGill University and his MBA from Queen's University. Benoit Hebert, Vice-President, Business Development and Licensing Benoit Hebert, Age 46 has been the Vice-President, Business Development and Licensing of Pediapharm since September 2009. Mr. Hebert has more than 15 years of industry experience and has a rare-blend of scientific expertise and business skills. Focusing on pharmaceutical business transactions since 2000, he worked at Axcan Pharma Inc. from July 2003 to November 2006. Mr. Hebert has lead international licensing transactions, participated actively in product acquisitions, managed international product development alliances and global supplier relationship. Mr. Hebert holds an MBA in Management of Bio-industries from the Universite du Quebec a Montreal. Mr. Hebert also received a M.Sc. in Immunology and a Ph.D. in Virology from the Institut Armand-Frappier. Before returning to Canada in 2000, he was a NSERC postdoctoral fellow in structural biology at Purdue University. He is past-president and a director of the Canadian Healthcare Licensing Association (CHLA). Ashok Bhaseen, Vice-President, Marking and Sales Ashok Bhaseen, Age 56 has been the Vice-President, Marketing and Sales of Pediapharm since September 2009. Mr. Bhaseen brings over 30 years of experience of Global Pharmaceutical marketing. He worked with Abbott Pharmaceuticals from 1995 to 2006, among various roles as Commercial Director for Pacific, Asia, Australia and Africa with Abbott International and Canadian Market in marketing, sales, business development, health communication and pharmacy programs. He also worked with IMS Americas as Director, National Accounts from June 2006 to November 2008. Prior to IMS and Abbott, he worked in International markets as General Manager, Sales Manager and Group Product Manager with Johnson and Johnson from 1986 to 1988 and Parke Davis from 1988 to1990. He has successfully launched several new products in Canada and International markets in primary care, specialty, devises and OTC area. Mr. Bhaseen is also Global President of Thyroid Federation International. Mr. Bhaseen holds a Masters degree in Pharmaceutical Sciences from the University of Saugor and an MBA from the University of Bombay. Pierre Lapalme, Director Pierre Lapalme, Age 72, has been the Chairman of the Board of Pediapharm since September 2009. Mr. Lapalme has served as Director and Chairman of the Board of Biomarin Pharmaceutical Inc. since January 2004. Throughout his career, Mr. Lapalme held numerous senior management positions in the pharmaceutical industry, including Chief Executive Officer and Chairman of the Board of Rhone Poulenc Pharmaceuticals, Inc. Canada (known as Sanofi Aventis), and Senior Vice-President and General Manager of North America Ethicals. Mr. Laplante was also President and CEO of Ethypharm North America from 1995 to 2004. Mr. Lapalme has also served on the board of directors of public companies during the past five years: Insy's Therapeutic, a specialty pharma corporation based in Arizona and traded on NASDAQ (since March 2011), Sciele Pharmaceuticals Inc. (from 1998 to 2008) and Bioxel Pharma (from 2004 to 2009). He also serves on the board of two private biotech companies and was appointed to the board of Aeterna Zentaris in December 2009. Mr. Lapalme studied at the University of Western Ontario and INSEAD France. Information Concerning Chelsea Chelsea is a capital pool company that completed its initial public offering and the Chelsea Common Shares are listed for trading on TSX Venture. Chelsea currently has 11,000,000 Chelsea Common Shares outstanding, stock options outstanding to acquire 1,100,000 Chelsea Common Shares at a price of $0.10 per share until March 1, 2022, and agent's options outstanding to acquire 300,000 Chelsea Common Shares at a price of $0.10 per share until March 5, 2014. As at June 15, 2013, Chelsea had cash and near cash assets, net of liabilities, of approximately $500,000. Other Matters Concerning the Qualifying Transaction The completion of the Transaction is subject to the approval of TSX Venture and all other necessary regulatory approval. The completion of the Transaction is also subject to additional conditions precedent, including completion of the Private Placement for gross proceeds of a minimum of $4.0 million, shareholder approval of Chelsea and Pediapharm, satisfactory completion of due diligence reviews by the parties, board of directors approval of Chelsea and Pediapharm, completion of the Escrow Transfer (defined below) and certain other usual conditions. The Transaction will be an arm's length transaction as none of the directors, officers or insiders of Chelsea own any interest in Pediapharm. Chelsea also announces it has reserved a price of $0.10 per Chelsea Common Share ($0.30 per Amalco Common Share) for the grant of stock options to acquire up to 10% of the number of issued and outstanding Amalco Common Shares (the "Stock Options") in the event the Transaction is completed. The grant of the Stock Options is subject to regulatory approval. The Stock Options will be granted to directors, officers, employees and consultants of Amalco, concurrent with the completion of the Transaction. The parties have agreed that on completion of the Transaction, Macquarie Private Wealth Inc. ("Macquarie") shall be paid a finder's fee of: (i) $200,000, with $50,000 being payable in cash and the balance to be payable by the issuance of 500,000 Amalco Common Shares; and (ii) Candido Services (9132-8757 Quebec Inc.) ("Candido") shall be paid a finder's fee of $130,000 with $32,500 being payable in cash and the balance to be payable by the issuance of 325,000 Amalco Common Shares, resulting in total finder's fees of $330,000 ($82,500 in cash and $247,500 in Amalco Common Shares). Concurrent with the closing of the Transaction, the current founding shareholders of Chelsea will transfer within escrow an aggregate of 1,333,333 Amalco Common Shares at a price of $0.21 per share to the insiders of Pediapharm, subject to the receipt of all necessary regulatory approval (the "Escrow Transfer"). Chelsea will apply to the TSX Venture for an exemption from the sponsorship requirements in connection with the Qualifying Transaction. There is no assurance that such exemption will be granted. If such exemption is not granted, Chelsea will be required to engage a sponsor for the Transaction. Trading of the Chelsea Common Shares will not resume until all documents required by the TSX Venture have been filed. Chelsea will issue a further news release when TSX Venture has received the necessary documentation and trading of the Chelsea Common Shares is to resume. As indicated above, completion of the Transaction is subject to a number of conditions, including but not limited to, TSX Venture acceptance and shareholder approval. 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 Information Circular to be 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 the Corporation should be considered highly speculative. Neither the TSX Venture nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture) has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Neither Pediapharm nor Chelsea will update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Chelsea. The securities of Chelsea being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States. Contacts: Chelsea Acquisition Corporation Douglas Stuve Director (403) 234-3337 Pediapharm Inc. Sylvain Chretien Chief Executive Officer (514) 239-7966
Chelsea Acquisition Corporation Announces Proposed Qualifying Transaction
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