1Vancouver, B.C., September 17, 2021 – Further to its press releases dated February 8, July 6, May 11, May 18, May 25, and September 2, 2021, Cerro Mining Corp. (NEX:CRX.H) (“Cerro” or the “Company”) is pleased to provide the following update on its previously announced proposed reverse take-over (the “Transaction”) of the Company by Friday’s Dog Inc. (formerly CAIR by David Cosmetics Inc.) (“FDI”) by way of amalgamation of FDI and a wholly-owned subsidiary of Cerro, 1308821 B.C. Ltd.
Name Change and Corporate Restructuring of Friday’s Dog Inc.
Following the recent passing of David Babaii, former founder of CAIR by David Cosmetics Inc. (“CbD”), management of FDI have determined to continue to commercialize the science-driven formulation portfolio of pet care products which use natural, non-toxic ingredients and cruelty-free testing under the new brand name “Friday’s Dog” and change the name of CbD to “Friday’s Dog Inc.”. Friday’s Dog brand is intended to be a petcare lifestyle brand focused on delivering a wide breadth of high-quality, scientifically-grounded, and beautiful care and grooming
products for dogs.
In connection with the restructuring of FDI following the passing of David Babaii, management has appointed a new Chief Executive Officer, Richard Scheiner, who has served in senior management positions for Time Incorporated, The Walt Disney Company, Kingworld, and The Guthy-Renker Corporation as further described below. FDI expects that the first products to be rolled out as part of its high margin, diversified product portfolio will be its “Friday’s Dog”
pet care merchandise.
Amended and Restated Amalgamation Agreement
Following the recent restructuring of operations of FDI, Cerro, Subco and FDI entered into an amended and restated amalgamation agreement dated as of September 17, 2021 (the “Amended Amalgamation Agreement”), which amends the prior amalgamation agreement between the parties dated as of July 2, 2021 pursuant to which the parties will complete a three-cornered amalgamation and FDI will amalgamate with Subco to form one corporation (“Amalco”). Each shareholder of FDI will receive one common share of Cerro for each common share of FDI (“FDI Share”) held. On closing of the Transaction, Cerro as the resulting issuer (the “Resulting Issuer”) will change its name to “Friday’s Dog Holdings Inc.” and Amalco will carry on the business of FDI under the name “Friday’s Dog Inc.” as a wholly-owned operating subsidiary of the Resulting Issuer.
In accordance with policies of the TSX Venture Exchange (the “TSXV”), common shares of the Resulting Issuer (“Resulting Issuer Shares”) issued to certain Principals of the Resulting Issuer and their respective Associates (within the meaning of TSXV policies) will be escrowed and released in stages over a three-year period and some of the Resulting Issuer Shares issued to former non-Principal shareholders of FDI will be subject to the TSXV’s seed share resale restrictions. In addition, all Resulting Issuer Shares issued to former shareholders and convertible debenture holders of FDI will be subject to one year or two year pooling requirements, as applicable. Pursuant to the terms of the Amended Amalgamation Agreement, the completion of the Transaction is subject to the satisfaction or waiver of various conditions, including but not limited to the following: (i) approval of the Transaction by the TSXV or such other recognized stock exchange in Canada as mutually agreed to between FDI and Cerro (the “Exchange”); (ii) approval of the Transaction by Cerro’s disinterested shareholders in accordance with the Business Corporations Act (British Columbia) (the “BCBCA”) and applicable Exchange policies; (iii) approval of the Transaction by the disinterested shareholders of FDI; (iv) no dissent rights having been exercised by shareholders of FDI in excess of 10% of the issued FDI Shares; (v) the convertible debentures of FDI will have been converted into FDI Shares; (vi) at least 67% of Cerro’s subscription receipts issued in the private placement that raised $10,109,000 will have been exchanged for common shares and warrants of Cerro and the subscription funds for such subscription receipts currently held in escrow will have been released to Cerro; and (vii) the Transaction will have completed not later than December 31, 2021, provided that the respective board of directors of each of FDI and Cerro shall have the option to mutually extend the deadline to a later date on or before February 28, 2022.
The Amended Amalgamation Agreement may be terminated in accordance with its provisions, if, among other things, any of the closing conditions is not satisfied or waived by the parties, or there is a material breach of the Amended Amalgamation Agreement by a party and the breach is not cured with 15 business days, or if either party accepts a “Superior Proposal” (as defined in the Amended Amalgamation Agreement) from a third party provided that the accepting party has complied with the requirements related to Superior Proposals in the Amended Amalgamation Agreement. Cerro and FDI intend to call a special meeting of their respective shareholders to seek approval of the Transaction by their respective disinterested shareholders. Cerro’s meeting will also be an annual general meeting.
In connection with the entry into the Amended Amalgamation Agreement, FDI disclosed to Cerro that an aggregate of US$1.85 Million of invoices paid by FDI to certain vendors in connection with certain purported equipment/product acquisitions associated with the business of FDI cannot be substantiated by FDI. FDI is currently reviewing its legal options and currently intends to seek reimbursement of the invoices paid from the vendors and/or their affiliates.
There is no assurance that any such amounts will be recovered.
Cerro and FDI Shareholders’ Meetings
The meetings of the respective shareholders of each of Cerro and FDI that were scheduled to be held on Tuesday, September 28, 2021 to approve, among other things, the Transaction have been cancelled. Cerro and FDI intend to call a special meeting of their respective shareholders on a date to be determined by Cerro and FDI to seek approval of the Transaction by their respective disinterested shareholders. Cerro’s meeting will also be an annual general meeting.
A joint management information circular in connection with the meetings of Cerro and FDI will be filed under Cerro’s issuer profile on SEDAR at www.sedar.com. Each registered shareholder of FDI has the right to dissent with respect to the Transaction and be paid fair value for their FDI Shares in accordance with sections 237 to 247 of the BCBCA. The votes of Non-Arm’s Length Parties (within the meaning of TSXV policies) will be excluded, including the votes of Andrew Bowering, director and CEO of the Company, and Anthony Paterson, director of the Company, and their respective Associates (within the meaning of TSXV policies), who are considered Non-Arm’s Length Parties to the Transaction.
Amendment to Concurrent Financing and Extraordinary Resolution of the Subscription Receiptholders
Cerro previously closed a concurrent financing (the “Concurrent Financing”) of 20,218,000 subscription receipts (“Subscription Receipts”) at a price of $0.50 per Subscription Receipt for aggregate gross proceeds of $10,109,000 on May 20, 2021 with each Subscription Receipt to be exchanged for one Cerro common share for no additional consideration at closing. The gross proceeds of the Offering are held in escrow by Computershare Trust Company of Canada (the “Subscription Receipt Agent”), pursuant to the terms of a subscription receipt agreement (the “Subscription Receipt Agreement”) dated May 10, 2021 between the Company and the Subscription Receipt Agent, pending satisfaction or waiver of the escrow release conditions (the “Escrow Release Conditions”) on or before September 30, 2021 (the “Extension Deadline”).
Following the recent changes to the structure of the Transaction, Cerro is soliciting the written resolution of the Subscription Receiptholders holding not less than two thirds of the aggregate number of outstanding Subscription Receipts (the “Minimum Approval Threshold”) to a proposed amendment to the Subscription Receipt Agreement, which among other things, amends the terms of the Subscription Receipts such that each Subscription will be automatically exchanged for one common share and one half of a share purchase warrant (each whole warrant a
“Warrant”) exerciseable at a price of $1.00 for two years following the closing of the Transaction, extends the deadline for satisfaction or waiver of all Escrow Release Conditions to December 31, 2021 or such later date on or before February 28, 2022 as the board of directors of the Company may determine (except as otherwise may be extended in accordance with the terms of the Subscription Receipt Agreement) (the “Extraordinary Resolution”). If the Company does not reach the Minimum Approval Threshold in favour of the Extraordinary Resolution on or before the Extension Deadline then all of the Subscription Receipts will be cancelled by the Subscription Receipt Agent effective as of November 1, 2021, without any action on the part of the holders thereof (including the surrender of Subscription Receipt certificates). In such event, the holder will be entitled to receive, and the Subscription Receipt Agent and the Company will pay to the holder, the aggregate amount of $0.50 per Subscription Receipt (together with the subscription receipt interest earned thereon less any withholding tax required to be withheld in respect thereof), all as more particularly set out in the Subscription Receipt Agreement. There is no assurance that the Extraordinary Resolution will be approved by the requisite number of Subscription Receiptholders before the Extension Deadline.
If any Subscription Receiptholder elects to vote against or withhold consent in the form of proxy then the Subscription Receipts held by such holder will be cancelled by the Subscription Receipt Agent as of September 30, 2021, without any action on the part of the holder thereof, and such holder will thereafter have no rights under the Subscription Receipt Agreement except to receive from the escrowed funds, an amount equal to the aggregate purchase price of the Subscription Receipts then held, plus a pro rata share of subscription receipt interest earned thereon (less any withholding tax required to be withheld in respect thereof). Such amount (less any withholding tax required to be withheld in respect thereof), will be returned to each holder of a Subscription Receipt by the Subscription Receipt Agent in accordance with the Subscription Receipt Agreement.
Upon satisfaction or waiver of the Escrow Release Conditions or such other date as determined in accordance with the terms of the Subscription Receipt Agreement (the “Termination Date”), each Subscription Receipt will be automatically exchanged for one Cerro common share and one half of a Warrant and the escrowed funds will be released from escrow by the Escrow Agent to Cerro. If the Escrow Release Conditions have not been satisfied or waived by the Termination Date, the escrowed funds will be returned to the holders of the Subscription Receipts and the Subscription Receipts will be cancelled in accordance with the terms of the Subscription Receipt Agreement. The Subscription Receipts, and the common shares and warrants of the Company issuable upon exchange, are subject to a statutory hold period of four months and one day following the closing date of the Concurrent Financing in accordance with applicable securities law.
The Proceeds of the Concurrent Financing are intended to be used by the Company following closing of the Transaction for the following purposes: tooling for both bottles and over caps, bottles and over cap production, bottle filling and cost of materials, asset production for marketing, packaging and packaging design work, ongoing marketing and inventory costs for roll out of SKU’s, website development and marketing costs, transaction expenses, listing fees and general working capital expenses.
Resulting Issuer Board of Directors and Officers
On completion of the Transaction, the board of the Resulting Issuer will be comprised of five directors. It is anticipated that the directors and officers of the Resulting Issuer will be the following persons:
Richard Scheiner, Chief Executive Officer
Richard Scheiner has served in senior management positions for Time Incorporated, The Walt Disney Company, Kingworld, and The Guthy-Renker Corporation. Mr. Scheiner has utilized his expertise in strategic management, marketing, media, business operations, and finance to grow multiple business start-ups to in excess of $250 million in annual sales. The author of over 30 strategic business plans, he has utilized his knowledge of the direct response marketing industry to build brands through electronic media, digital advertising, televised shopping, and retail synergy. The companies that Mr. Scheiner has directed have generated close to $1 billion in lifetime sales. Since 2001, he has used his experiences to develop and grow companies in multiple consumer product categories including health, wellness, beauty, and household products. He is widely considered as a direct response industry expert in the use of strategic planning, media, corporate entity development, continuity marketing, and customer retention. He has served as a COO, CFO, and CMO for both private and public companies, and specializes in building and growing businesses to their full potential.
Brian Ast, Chief Financial Officer
Brian Ast has an extensive finance, investment banking, engineering and mining background, and also worked with several early-stage companies as a CFO and board member, developing and implementing business plans and financial models. Mr. Ast’s engineering experience included positions at Cominco Engineering Services Ltd. (mining) and Ballard Power. His finance and investment banking experience includes positions at RBC Capital Markets and Babcock & Brown, an Australian infrastructure investment bank. He also has extensive public private partnership (P3) experience from both a government and private-sector perspective, with direct involvement in over 40 infrastructure investment projects. Mr. Ast has a bachelor of applied science (engineering physics) from the University of British Columbia and an MBA from Simon Fraser University.
Andrew Bowering, Director
Andrew Bowering is currently the Chief Executive Officer and a director of Cerro and a director of FDI. He is a venture capitalist with 30 years of operational experience and leadership in mineral exploration and development. He has been involved in several companies engaged in the pursuit of precious, base, and industrial metals from early exploration through to production. He is an owner and founder of Sunrise Drilling Ltd. and has owned and operated drilling companies for the past 20 years. Mr. Bowering has served as an officer or director of public companies on the TSX Venture Exchange, the TSX main board and the American Stock Exchange including the Company, Millennial Lithium Corp, and Prime Mining Corp. He earned his BA from the University of British Columbia. Mr. Bowering has held senior management positions in a variety of capacities. He has been responsible for the acquisition and sale of several assets and raising of upwards
of $250 million investment capital.
David Velisek, Director
Mr. Velisek, a director of FDI, has been involved in the capital markets for over 25 years. He has been a licensed trader of equities, options and futures, as well as Investment Adviser. He has also held roles in investor relations, as well as providing consulting services to public companies. He is currently a director of Trillium Gold Mines Inc., Datinvest International Ltd., Evolving Gold Corp. and Cognetivity Neurosciences Ltd. He has previously acted as director of Lifestyle Delivery Systems Inc., Amador Gold Corp., Novo Resources Corp., Finore Mining Inc. and Delon Resources Corp. Mr Velisek is currently employed with Baron Global Financial Canada Ltd.
Anthony Paterson, Director
Mr. Paterson has significant experience in the venture capital and private equity markets as a strategic investor, builder and operator. Mr. Paterson has participated in financing and is instrumental in seed financings for numerous public companies in the mining and resource sector. Mr. Paterson has directly participated in raising over $50-million of growth capital in the private sector. His recent successes include being a significant partner in the bridge loan and go-public financing for Prime Mining Corp. (PRYM). In addition to Mr. Paterson’s current director position with Cerro. Mr. Paterson has significant experience in the plant-based pet care and food industry, including his involvement with Cair by David; co-founder of Healthy Hippo — a line of plant-based, low-sugar confectionary that is launching in late spring; and adviser at Big Mountain Foods — a line of common allergen-free meat alternatives, that is in a rapid state of growth.
Ravinder Kang, Director
Ravinder Kang, a director of FDI, is a results-driven leader with comprehensive Canadian securities market and business background. Mr. Kang has a combined 27 years of public practice and company management advising corporations and their executives on financing, mergers and acquisitions, going public transactions, continuous disclosure obligations, and corporate governance. Ravinder Kang brings over 20 years of experience as the former
Director of TSX Venture, Listed Issuer Services.
Michael Kobler, Director
Mr. Kobler is an Independent Director at Cerro Mining Corp. and a General Manager-US Operations at American Lithium Corp. He is on the Board of Directors at Volatus Capital Corp. and Cerro Mining Corp. Mr. Kobler was previously employed as a Chairman, President & Chief Executive Officer by Underground Energy Corp., a Chief Executive Officer by Osum Oil Sands Corp., and a Founder by Underground Construction Managers, Inc. He also served on the board at ePower Metals, Inc., Accend Capital Corp. and ArcScan, Inc. He received his undergraduate
degree from Montana Tech of the University of Montana.
Kelly Willett, Chief Operating Officer
Mr. Willett has over 30 years in televised production experience in both the entertainment and product marketing worlds. Kelly was the co-founder and Director of International Sales for ICTV Brands (QVC, HSN, Evine and HSE). for 18 years and was the company’s Director of Televised Home Shopping for 17 years. His expertise in managing all aspects of live televised shopping, including introducing products to the channel buyers, hiring and training hosts and presenters, writing live scripts, and coordinating the relationship between the marketing company and shopping channel management. Kelly has extensive experience in international marketing, having successfully penetrated and managed retail relationships in over 65 countries around the world as well as worldwide logistics and fulfillment management. At present Kelly is the President and CEO of Strategic Media Marketing 2016 Corp (SM2), which specializes in televised home shopping, International sales of direct response products, and product development.
Ariel Foxman, Chief Branding Officer
Ariel Foxman is a consultant working with luxury retail and direct-to-consumer brands, directing strategy, content, and consumer experience. Over the course of his career, Foxman has received accolades for his work in media, fashion, beauty, culture, and advertising. He has worked in various capacities with Crown Publishers, Details and The New Yorker. Subsequently he held various positions at fashion media brand InStyle and StyleWatch where was responsible for all print and digital content, consumer and client strategy, and new revenue streams beyond advertising and circulation. Mr. Foxman was included in Out’s annual Power List three times and was named one of Forbes magazine’s most powerful U.S. fashion editors. In addition to his role as a contributing editor at Vanity Fair, Foxman writes about culture, style, beauty and travel for Architectural Digest, Fortune, L’Officiel, New York, Time, and The New York Times, among others.
Steve Elston, Chief Creative Officer
Steve Elston is an award-winning creative director with over 25 years of experience working on numerous global accounts on behalf of top-ten advertising agencies such as Grey London and MullenLowe. His strategic and creative thinking has helped transform brands into market leaders and their products have quickly become the top-selling items in their categories – bringing in significant amounts of revenue. Mr. Elston specializes in luxury and prestige brands – having previously worked as the Creative Lead for Hugo Boss Fragrances’ ATL advertising and as the Executive Creative Director for Swarovski’s BTL advertising.
Related Party Transaction
Andrew Bowering, director and Chief Executive Officer of the Company, is also a shareholder and director of FDI. Mr. Bowering currently owns 1,450,000 FDI Shares. Anthony Paterson, director of the Company, is also a shareholder of FDI and currently owns, directly or indirectly, 575,000 FDI Shares and convertible debentures convertible into an aggregate 2,476,663 FDI Shares. The Transaction is therefore considered a ‘related party transaction’ for the purposes of Multilateral Instrument 61- 101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company is relying on the exemptions from the formal valuation and minority shareholder approval requirements provided under MI 61-101 in sections 5.5(a) and 5.7(1)(a) of MI 61-101, which are available because the fair market value of the Resulting Issuer Shares to be issued to the directors and officers pursuant to the Transaction does not exceed 25% of the Company’s market capitalization, as determined in accordance with MI 61-101.
Further updates of the Transaction will be provided as the Transaction progresses and upon Cerro receiving shareholder and Exchange approval. Investors are cautioned that, except as disclosed in the Management 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 Cerro should be considered highly speculative. There can be no assurance that the Transaction will be completed as proposed or at all.
About Friday’s Dog
FDI is a consumer brand company that is commercializing a science-driven formulation portfolio of pet care products which use natural, non-toxic ingredients and cruelty-free testing. The first products to be rolled out as part of FDI’s high margin, diversified product portfolio will be its pet care merchandise targeting a diversity of dog breeds. The entire pet care product portfolio consists of 9 SKUs in total which are focused on several product categories: wash and care products, high-quality medicated aids, premium calming treats and grooming tools. The majority of the products are for pet wash and care/grooming.
In 2022, FDI intends to introduce and launch six SKUs in the wash and care product category, 3 SKUs in the treats category, and one SKU in grooming tools. All products, both the pet grooming and pet treats, will be free of additives and toxins, with cruelty-free testing. Following a careful review and assessment of all competitors’ pet care products that are currently available in the same categories, product briefs were prepared, and FDI engaged Synergy Labs, Inc. of Fort Lauderdale, Florida (“Synergy”) to develop the formulas with ingredients that would produce the desired attributes. While there are no regulations that hold manufacturers to standards for ingredient purity, all of FDI’s dog grooming products have non-toxic ingredients.
The pet care products will be packaged in plastic bottles, or food safe, resealable, flexible packaging. Generic containers which come in a variety of shapes, and volumes and functional tops (pour, spray, pump, dropper) provide the base to which distinctive details are then added to customize the packaging. FDI’s containers are topped with distinctive, iconic bottlecaps. Individual colors identify various products. The Friday’s Dog logo is playful and communicates a wholesome “family” appeal.
FDI is focusing its marketing strategy and sales efforts on direct-to-consumer channels, representing high-margin revenue. Primary sales are expected to be driven through the corporate website fridaysdog.com, and televised home shopping channels (i.e., QVC). The in-house sales force will leverage long standing relationships for targeted social media and influencer marketing. FDI management will leverage prior business relationships with contract manufacturers who will develop product formulations and manufacture the pet wash and care products for the initial 6 SKUs, and the 3 SKU for treats in the portfolio.
FDI has entered into a Private Label and Manufacturing Supply Agreement with Synergy. Synergy is in the business of manufacturing specialty consumer products and associated packaging materials and will be the contract manufacturer for the pet wash and care products formulation and packaging. Synergy follows a rigorous series of rules and procedures to meet its standards for quality control. The company’s laboratory, manufacturing practices and systems in place are compliant with good manufacturing practices (GMP), EPA and FDA, HAZMAT, NASC, as well as OSHA regulations. Synergy has an expansive, state of the art facility. Should sales volume require an increase in production, it is expected it could be accommodated.
Completion of the Transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance and if applicable pursuant to TSX Venture Exchange requirements, disinterested 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 Filing Statement or Management 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 Cerro should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this news release.
On Behalf of the Board of Cerro Mining Corp.
Michael Kobler, Director
For further information, please contact:
Cerro Mining Corp. Tel: +1-604-428-6128
Neither the 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. The securities of Cerro have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward-looking statements relate to information that is based on assumptions of management, forecasts of future results, and estimates of amounts not yet determinable. Any statements that express predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be “forward-looking statements.” Readers are cautioned not to place undue reliance on forward-looking statements. Statements about, among other things, the expected timing and terms of the Transaction, the proposed amendments to the Subscription Receipt Agreement and consent solicitation of the subscription receiptholders of Cerro, the number of securities of Cerro that may be issued in connection with the Transaction, the ownership ratio of the Resulting Issuer post-closing, the required shareholder approvals or the ability to obtain such approvals, the Company’s strategic plans and the parties’ ability to satisfy closing conditions and receive necessary approvals are all forward-looking information. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements.
Although such statements are based on management’s reasonable assumptions, there can be no assurance that the Transaction will occur or that, if the Transaction does occur, it will be completed on the terms described above. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation: risks related to the Transaction, approval of the amendments to the Transaction and the listing of the Resulting Issuer common shares on the TSXV or such other recognized stock exchange in Canada, risk related to the failure to obtain adequate financing on a timely basis and on acceptable terms; risks related to the outcome of legal proceedings; risk related to the protection of intellectual property; general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; political and regulatory risks associated with the cosmetics and pet care industry; and risks related to the maintenance of stock exchange listings. These forward-looking statements are made as of the date hereof and the Company does not assume any obligation to update or revise them to reflect new events or circumstances, except in accordance with applicable securities laws. Actual events or results could differ materially from the Company’s expectations or projections.