Toronto, Ontario – TheNewswire - June 7, 2022 – Cuspis Capital II Ltd. (TSXV:CCII.P) (“Cuspis” or the “Corporation”), a capital pool company as defined under TSX Venture Exchange (“TSXV” or the “Exchange”) Policy 2.4 – Capital Pool Companies (“Policy 2.4”), is pleased to announce it has entered into a letter of intent dated June 1, 2022 (the “LOI”) with Peninsula Capital Corp. (“Peninsula”), a private company incorporated under the laws of the Province of Ontario, whereby Cuspis and Peninsula will complete an arrangement, amalgamation, share exchange, or similar transaction to ultimately form the resulting issuer (the “Resulting Issuer”) that will continue on the business of Peninsula (the “Transaction”), subject to the terms and conditions outlined below.  Cuspis intends that the Transaction will constitute its Qualifying Transaction, as such term is defined in the policies of the Exchange. Following completion of the Transaction, the Resulting Issuer intends to list as a Tier 1 Real Estate Issuer on the Exchange.

Cuspis completed its initial public offering in December, 2020. The common shares of Cuspis (the “Cuspis Shares”) are listed for trading on the TSXV under the stock symbol “CCII.P”. Cuspis has not commenced commercial operations and has no assets other than cash. Cuspis was incorporated under the laws of the Province of Ontario.

Peninsula has built, and continues to grow, a portfolio of affordable single family rental (“SFR”) housing in US markets, that are undergoing revitalization, and that provide stable, high yielding and growing rental cash flow. Peninsula provides affordable, quality, safe and secure housing to its tenants. Peninsula is focused on growth and specializes in identifying and acquiring stabilized and near stabilized houses with strong tenant bases. Peninsula is based in Toronto, Ontario and was incorporated on August 24, 2015.

For its year ended December 31, 2021, Peninsula had total assets of US$56.4 million and total liabilities of US$29.2 million, for net tangible assets of $27.0 million.  Peninsula had US$2.7 million revenues in its fiscal 2021, and net income of US$12.4 million.  All figures are unaudited. Peninsula is in the final stages of its initial audit which includes the process of converting its accounting systems and processes to International Financial Reporting Standards (“IFRS”). This process includes the fair valuing of Peninsula’s rental properties which has resulted in a US$13.5 million unrealized gain on the fair value of such properties and is reflected in the US$12.4 million net income amount.

Cuspis’ management believes that Peninsula’s focus on affordable housing, and disciplined approach to property acquisition and management, makes for a particularly attractive opportunity in the current environment.

The LOI was negotiated at arm’s length and is effective as of June 1, 2022.  William Ollerhead, the CEO and a director of Cuspis, holds 150,000 common shares of Peninsula. This represents less than four-tenths-of-one-percent of the total currently issued and outstanding Peninsula shares.  None of the current directors or officers of Cuspis hold any director or management position with Peninsula.  The Transaction does not constitute a Non-Arm’s Length Qualifying Transaction, and the approval of the shareholders of Cuspis will not be required.  In the event that approval from the shareholders of Peninsula is required, such approval will be sought as a condition to the closing of the Transaction.

The material terms and conditions outlined in the LOI are non-binding on the parties and the LOI is, among other things, conditional on the execution of a definitive agreement (the “Definitive Agreement”) to be negotiated between the parties. It is currently anticipated that, immediately prior to the completion of the Transaction, Cuspis will effect a share consolidation (the “Consolidation”) on a basis to be determined.

The LOI contemplates that as a condition of closing, Peninsula will complete a private placement of equity securities for gross proceeds of a minimum of $20,000,000 (the “Concurrent Financing”). Pursuant to the Transaction, post-Consolidation Cuspis Shares, in an amount and in a ratio to be determined, will be issued in exchange for outstanding common shares of Peninsula (such ratio being the “Exchange Ratio”). The Exchange Ratio will be determined once the proportionate ownership of the resulting issuer has been established by the parties, which will be a function of the Concurrent Financing.  The value of Cuspis has been established at $2.875 million, or $0.23 per share.

The LOI contemplates that the Transaction will be completed no later than December 1, 2022, or such other date as may be mutually agreed to in writing between Cuspis and Peninsula. There can be no assurance that a Definitive Agreement will be successfully negotiated or entered into, or that the Concurrent Financing or the Transaction will be completed.

Upon completion of the Transaction, the parties intend for the following individuals to comprise the board of directors and management of the Resulting Issuer, while Cuspis and Peninsula may, at their option, each nominate an additional director acceptable to Peninsula.

Director & CEO: Mike Appelton
Toronto, Ontario

Mike is the Founder, President and CEO of Peninsula Capital Corp. He is responsible for asset management of the existing portfolio, directing the acquisition strategy and coordinating all financing activities.

Prior to entering the entrepreneurial world, Mike worked for 15 years in commercial and corporate banking, the majority of which were with GE Capital where he held positions of increasing responsibility in risk management, portfolio management and sales. In his last role with GE Capital he was responsible for structuring and underwriting transactions totaling over $500 million in annual volume.

Director and Chairman of the Board: Michael Newman
Toronto, Ontario

Michael founded InterRent International Properties Inc in 1997, taking it public on the TSX-V in 1999.  He was the CEO and President from 1997 to 2006 and led its conversion to a REIT structure in 2006 and transfer to the TSX.  Michael was the CEO, President and Trustee of InterRent REIT from 2006 until retirement in 2009 Michael successfully grew InterRent to 4,000 units before his retirement from the company.

 

He has served as an independent director on the Board of Directors of 18 TSX-V, CSE or TSX listed companies since 1995, and on the Board of Advisors of two private equity funds.

 

Michael serves on the Independent Review Committee of two TSX listed Mutual Fund Trusts, and is the President of KE Real Estate Holdings Inc., a private real estate company that owns rental properties in the GTA.

 

Director: Robert Macdonald

Ridgeway, Ontario

 

Robert was the Founder, and a Director and CEO for almost 20 years, of Afton Food Group Ltd. (TSE-AAF) and its’ predecessor companies, companies involved in the food services industry. Afton grew from a standing start to over 440 corporate and franchised restaurants, in three countries, generating more than $180 million in system sales per annum. He retired from Afton in 2003.

Robert served as a Director and the Chair of the Audit Committee of the Skor Food Group (TSX-V-SKF) for 8 years, until it was sold in 2009. During that time Skor, which operated as a wholesaler of food products to the food service industry throughout Ontario, grew its’ sales from $10 million to more than $100 million per annum.

Robert has also served as a Director or Investor in several private companies which successfully merged with CPCs on the TSX-V. He also has experience in mergers and acquisitions and has personally acted in substantial capital raises.

 

Director: Scott Samuel
Burlington, Ontario

 

Scott was an investment banker and lawyer for more than three decades on Bay Street with Midland Walwyn Capital, ABN AMRO Bank, Gordon Capital and others. He founded C15 Solutions, Inc. where he is the CEO. He also sits on the boards of C15 Solutions Inc., with Poseidon Investment Management (shareholder) and The Canadian Motorsport Hall of Fame (non-profit). He has extensive experience in M&A, capital raising, and governance with public companies.

 

Director: Mark Hansen
Toronto, Ontario

 

Mark is President of CHC Group of Companies. He oversaw the operations and management of a group of companies that include a private limited partnership with assets in excess of $160 million (1,991 bed student housing), a development company and a small public company with assets in excess of $70 million (first ever public company in Canada focused on student housing).

Mark was previously the Vice President Operations of CAP REIT, responsible for over 14,000 residential units and over 250,000 square feet of commercial space from Ontario to British Columbia. He oversaw revenues in excess of $250 million annually, capex of $30 million annually and the management of over 200 employees.

 

Mark sat on the Board of Directors of InterRent REIT from 2004 to 2007.

 

Peninsula’s management team includes:

CFO: Jared Friedberg, CPA
Stouffville, Ontario

Jared is responsible for all aspects of financial reporting and data analytics for Peninsula Capital Corp. Jared was previously Divisional Business Controller at a TSX listed chemical company where he had P&L accountability, shared with the commercial and operational lead, for a $500 million revenue business.

COO: Mark Thiessen

Leamington, Ontario

 

Mark is responsible for all aspects of Peninsula Capital Corp’s day to day operations. Mark brings 30 years of experience owning and operating businesses in agriculture, e-commerce and energy, specifically companies that are operations and logistics intensive and operated in multiple locations. Mark founded an e-commerce company in 1992 to sell greenhouse grown fresh cut flowers directly to consumers throughout North America.

Principal Shareholders

Mr. Appelton owns 29.6% of the issued and outstanding common shares of Peninsula.  No other shareholder of Peninsula holds 10% or more of its outstanding voting securities.

Conditions to the Transaction

Completion of the Transaction  is subject to a number of conditions, including but not limited to, acceptance by the TSXV, approval of certain matters by the holders of the Cuspis Shares and other customary conditions including:

• completion of the Concurrent Financing; 

• entry into the Definitive Agreement on or before July 31, 2022; 

• receipt of all director, shareholder, third party and requisite regulatory approvals (including Peninsula shareholder approval) relating to the negotiation and execution of a Definitive Agreement in respect of the Transaction and as may be contemplated by the Definitive Agreement; 

• preparation and filing of a disclosure document, as required by the TSXV, (the Disclosure Document”) outlining the definitive terms of the Transaction and describing the business to be conducted by Cuspis following completion of the Transaction, in accordance with the policies of the TSXV; 

• receipt by the TSXV of a Sponsor Report (as defined in the policies of the TSXV), if required, satisfactory to the TSXV and 

• completion of the Consolidation. 

There can be no assurance that the Transaction will be completed as proposed or at all.

Sponsorship

Cuspis intends to make an application for exemption from the sponsorship requirements of the TSXV in connection with the Transaction, however there is no assurance that the TSXV will exempt Cuspis from all or part of applicable sponsorship requirements.

Further Information

Cuspis will provide further details in respect of the Transaction and the Concurrent Financing by way of updating press releases as the Transaction advances, in accordance with the policies of the TSXV

All information contained in this press release with respect to Peninsula and Cuspis (but excluding the terms of the Transaction) was supplied by the parties respectively, for inclusion herein, without independent review by the other party, and each party and its directors and officers have relied on the other party for any information concerning the other party.

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 Disclosure Document 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 a capital pool company 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.

For further information:

William Ollerhead

Cuspis Capital II Ltd.

 

Will@CuspisCapital.com

Tel. (416) 214-0876

 

Forward-Looking Information

This press release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this press release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected” “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”. “estimates”, “believes” or intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this press release, forward-looking statements relate, among other things, to: the Transaction and certain terms and conditions thereof; the business of Peninsula, including the cashflow from its portfolio of SFR properties and the growth of its portfolio of SFR properties; the negotiation and completion of the Definitive Agreement; the terms and completion of the Concurrent Financing; the board of directors and management of the Resulting Issuer upon completion of the Transaction the Consolidation of Cuspis Shares; the Exchange Ratio, TSXV sponsorship requirements and intended application for exemption therefrom; shareholder, director and regulatory approvals; and future press releases and disclosure.  

The forward-looking statements contained in this news release are based on current expectations, estimates, projections and assumptions, having regard to Peninsula and Cuspis’ experience and their perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions pertaining to Peninsula’s business and Peninsula and Cuspis’ ability to continue as going concern. Risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information, including but not limited to: any risks related to the uncertainties surrounding the duration and the direct and indirect impact of the COVID-19 pandemic and general economic conditions, including rising interest rates and inflation, on the business, operations and financial condition of  Peninsula and its tenants, as well as on consumer behavior and the economy in general, including the ability to enforce leases, perform capital expenditure work, increase rents, raise capital through the issuance of common shares or other securities of Peninsula and/or the Resulting Issuer and obtain mortgage financing on Peninsula’s properties; labour availability; changes to regulatory environment; armed hostilities and geopolitical conflicts; failure to obtain necessary regulatory, corporate and third party approvals in a timely fashion, or at all; and risks related to the development and potential development of the Company's SFR portfolio. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

 The forward-looking information contained in this press release represents the expectations of Peninsula and/or Cuspis as of the date of this press release and, accordingly, are subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Cuspis does not undertake to update this information at any particular time except as required in accordance with applicable laws.

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

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws, unless an exemption from such registration is available.

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES.