Northern Lights Acquisition Corp. *

Northern Lights Acquisition Corp. *

Jun 2, 2021 by sam.beattie

PROPOSED BUSINESS COMBINATION: SHF Holdings Inc.

ENTERPRISE VALUE: $232.4 million
ANTICIPATED SYMBOL: SHFS

Northern Lights Acquisition Corp. proposes to combine with Safe Harbor Financial (SHF Holdings Inc.), a cannabis-focused financial services provider offering reliable access to banking and financing solutions for the cannabis industry.

Safe Harbor is one of the first financial services providers to offer reliable access to banking solutions for cannabis, hemp, CBD, and ancillary operators, making communities safer, driving growth in local economies, and fostering long-term partnerships. Safe Harbor, through its partners, serves the regulated cannabis industry and implements the highest standard of accountability, transparency, monitoring, reporting, and risk mitigation measures while meeting BSA obligations in line with FinCEN guidance on CRBs. Over the past seven years, Safe Harbor has processed over $11 billion in transactions with operations spanning 20 states with regulated cannabis markets.


SUBSEQUENT EVENT – 9/23/22 – LINK

  • On September 22, 2022, the parties agreed to a Second Amendment to Unit Purchase Agreement providing for the deferral of a total of $50 million of the $70 million due to the Seller at the closing of the Business Combination.
    • The purpose of deferral is to provide the Company with additional cash to support its post-closing activities.
    • The Company will pay the Deferred Cash Consideration in one payment of $15,000,000 on or before December 15, 2022, and the $35,000,000 balance in six equal installments of $6,416,667, payable beginning on the first business day following April 1, 2023 and on the first business day of each of the following five fiscal quarters, for a total of $38,500,002 (which amount includes 5% interest annualized).
    • The Deferred Cash Consideration may be prepaid by the Company, in whole or in part, at any time.
  • Luminous Capital USA Inc., an affiliate of the Sponsor, has agreed to escrow 1,200,000 of the shares of the Company’s Class A Common Stock to be received by Luminous at the closing of the Business Combination, such escrow to be evidenced by an escrow agreement with a third-party escrow agent reasonably acceptable to the parties and Luminous.
    • The Escrowed Shares will be released to Luminous upon payment in full of the Deferred Cash Consideration. Luminous will meanwhile be entitled to vote all such Escrowed Shares.

Anticipated Changes in PIPE Terms

  • Based on further discussions with the PIPE Investors, the Company currently anticipates that the terms of the PIPE Securities Purchase Agreement, the PIPE Registration Rights Agreement, the PIPE Shares, the PIPE Warrants, and the Certificate of Designation to be filed with the Secretary of State of the State of Delaware setting forth the preferences, rights and limitations of the PIPE Shares will be amended as follows:
    • To provide that the Floor Price will be reduced to $1.25 if and only if the Company’s stockholders provide the approval contemplated by Nasdaq Listing Standard Rule 5635(d) with respect to the issuance of the Conversion Shares based on a reduction of the Floor Price to $1.25; provided, however, that no holder of Conversion Shares issued prior to obtaining the Requisite Stockholder Approval will be allowed to vote such Conversion Shares for or against such proposal.
    • To provide that:
      • (i) as soon as practicable after the filing of the PIPE Certificate of Designation, but in any event not later than 120 days after such filing date, the Company will call a special meeting of its stockholders to obtain the Requisite Stockholder Approval for the reduction of the Floor Price to $1.25 and
      • (ii) the Company’s Board of Directors will recommend approval of such proposal; if the Requisite Stockholder Approval is not obtained at such a meeting, the Company will call additional meetings, and the Board of Directors will make such recommendation, at least once every six months thereafter until the Requisite Stockholder Approval is obtained
    • To provide that the Sponsor and the Seller Parent will enter into voting agreements with the Company, pursuant to which the Sponsor and the Seller Parent will each agree to vote the securities of the Company held by such party at the time of each Subsequent Stockholder Meeting in favor of the Requisite Stockholder Approval
    • To provide that if the Requisite Stockholder Approval is received and, on the date that the Requisite Stockholder Approval is received, if a prior scheduled downward adjustment of the Conversion Price would have resulted in a Conversion Price lower than the prior Floor Price, then such Conversion Price shall be downwardly adjusted to the Theoretical Adjustment Price effective, automatically and without further action of the Company or any PIPE Investor, on the trading day immediately following the trading day upon which the Requisite Stockholder Approval is obtained regardless of whether a scheduled downward adjustment of the Conversion Price would have otherwise occurred on such trading day; providedhowever, in no event shall the Theoretical Adjustment Price be less than $1.25
    • The Company has also agreed that 20% of the proceeds of the offering will be held in escrow as liquidated damages in the event that the agreed resale registration statement is not filed or declared effective in accordance with the PIPE Registration Rights Agreement.

SUBSEQUENT EVENT – 9/19/22 – LINK

  • On September 19, 2022, the Company, the Sponsor, the Target, the Seller, and the Seller Parent entered into an amendment to the Unit Purchase Agreement (the “UPA Amendment”) to:
    • (i) further extend the Outside Date from August 31, 2022 until September 28, 2022 and
    • (ii) provide for the deferral of $30 million (the “Deferred Cash Consideration”) of the $70 million due to the Seller at the closing of the Business Combination.
      • The purpose of deferral is to provide the Company with additional cash to support its post-closing activities. Pursuant to the UPA Amendment, the Company will pay the Deferred Cash Consideration in six equal installments of $5,375,000, payable beginning on the first business day following January 1, 2023 and on the first business day of each of the following five fiscal quarters, for a total of $32,250,000 (which amount includes 5% interest annualized). The Deferred Cash Consideration may be prepaid by the Company, in whole or in part, at any time.
  • Luminous Capital USA Inc., an affiliate of the Sponsor, has agreed to escrow 1,200,000 of the shares of the Company’s Class A Common Stock to be received by Luminous at the closing of the Business Combination, such escrow to be evidenced by an escrow agreement with a third-party escrow agent reasonably acceptable to the parties and Luminous.
    • The Escrowed Shares will be released to Luminous upon payment in full of the Deferred Cash Consideration. Luminous will meanwhile be entitled to vote all such Escrowed Shares.
  • Following the delay in the closing of the Business Combination, the Company and its advisors have continued to hold discussions with the PIPE Investors and are in the process of confirming the final pool of investors that will participate in the PIPE Financing.
    • The Company will file a Current Report on Form 8-K with the SEC disclosing any changes to the terms of the PIPE Financing that result from these discussions.
  • Pursuant to our Amended and Restated Certificate of Incorporation, any holders of our public shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account, less franchise and income taxes payable, calculated as of two business days prior to the consummation of the Business Combination. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account that holds the proceeds of the Company’s initial public offering (calculated as of two business days prior to the consummation of the Business Combination, less franchise and income taxes payable).
    • Based on the fair value of investment securities held in the Trust Account of $118,458,452 as of September 19, 2022, the estimated per share redemption price would be approximately $10.30.

EXTENSION – 6/27/22 – LINK

  • The Company has rescheduled the Special Meeting for Tuesday, June 28, 2022.
  • As of June 22, 2022, the Company has received redemption requests for 11,416,205 shares of Class A Stock in connection with the Business Combination.
    • Midtown East had purchased an aggregate of 1,599,496 shares of Class A Stock, Verdun had purchased an aggregate of 1,180,376 shares of Class A Stock, and Vellar had purchased an aggregate of 1,025,000 shares of Class A Stock in the Forward Purchase Transaction at an average purchase price per share of $10.21.
  • The Company issued a press release announcing that it has deposited an aggregate of $1,150,000 into the Company’s trust account to extend the period of time the Company has to consummate a business combination from June 28, 2022, to September 28, 2022, although the Company currently anticipates that the Business Combination will close by June 30, 2022, subject to satisfaction or waiver of the closing conditions.
    • The Sponsor funded the deposit in exchange for a non-interest-bearing, unsecured promissory note.
    • The Extension provides the Company with additional time to complete the Business Combination.

SUBSEQUENT EVENT – 6/30/22 – LINK

  • On June 30, 2022, the Company, the Sponsor, the Target, the Seller, and the Seller Parent agreed to amend the Unit Purchase Agreement to extend the Outside Date until July 29, 2022, with the ability for the deadline to be extended through August 31, 2022, to provide the Company with additional time to complete the Business Combination as it awaits regulatory approval.

SUBSEQUENT EVENT – 6/17/22 – LINK

  • The SPAC and Safe Harbor Financial announced that they have entered into a redemption backstop arrangement in the form of an OTC Equity Prepaid Forward Transaction agreement for up to $50 million with Midtown East Management.
  • The primary purpose of entering into the Forward Purchase Agreement is to help ensure the maximum redemption threshold condition in the Unit Purchase Agreement will be met, increasing the likelihood that the transaction will close
      • The approval of the stockholders of the Company to the Business Combination (with no more than 90% of the stockholders of the Company electing to effect a redemption of their shares of Common Stock in connection therewith and at least $11,731,159 of net proceeds from the Trust Account being released to the Company)
    • Midtown East has agreed to not redeem any public shares it purchases in connection with the planned business combination.
    • The number of Subject Shares shall be no more than the lesser of
      • (i) 5,000,000 and
      • (ii) the maximum number of shares of Class A Common Stock such that Midtown East does not beneficially own greater than 9.9% of the Class A Common Stock on a post-combination pro forma basis. Midtown East will purchase any Additional Shares at the Redemption Price  and has undertaken to purchase all Subject Shares at a price no higher than the Redemption Price
  • The Forward Purchase Agreement provides that:
    • (a) one business day following the closing of the Business Combination, the Company will pay to Midtown East, out of the funds held in the Company’s trust account, an amount equal to the Redemption Price per share multiplied by the aggregate number of Subject Shares and Additional Shares, if any, on the date of such prepayment,
    • (b) on the first business day of each calendar quarter after the closing of the Business Combination, the Company will pay to Midtown Madison Management LLC a structuring fee in the amount of $5,000 per quarter and
    • (c) on the date occurring one settlement cycle following the valuation date
      • Which shall occur on the earlier of
        • (i) the third anniversary of the closing of the Business Combination and
        • (ii) the date specified by Midtown East in a written notice that, during any 30 consecutive scheduled trading day-period following the closing of the Business Combination, the VWAP per share for 20 scheduled trading days during such period shall have been less than $3.00 per share, Midtown East shall deliver to the Company the Number of Shares less any Terminated Shares.
  • From time to time and on any scheduled trading day after the closing of the Business Combination, Midtown East may sell Subject Shares or Additional Shares at its absolute discretion in one or more transactions, publicly or privately, and, in connection with such sales, terminate the Forward Purchase Transaction in whole or in part in an amount corresponding to the number of Subject Shares or Additional Shares sold.
  • At the end of each calendar month during which any such early termination occurs, Midtown East will pay to the Company an amount equal to the product of
    • (x) the number of shares terminated during such calendar month and
    • (y) the Reset Price, where “Reset Price” refers to, initially, the Redemption Price.
  • The Reset Price will be adjusted on the first scheduled trading day of each month commencing on the first calendar month following the closing of the Business Combination to be the lowest of
    • (a) the then-current Reset Price,
    • (b) $10.00 and
    • (c) the VWAP Price of the last 10 scheduled trading days of the prior calendar month, but not lower than $5.00; provided, however, that if the Company offers and sells shares of Class A Common Stock in a follow-on offering, or series of related offerings, at a price lower than, or upon any conversion or exchange price of currently outstanding or future issuances of any securities convertible or exchangeable for shares of Class A Common Stock being equal to a price lower than, the then-current Reset Price, then the Reset Price shall be further reduced to equal the Offering Price.
  • The Company and Safe Harbor have agreed to pay to Midtown East a break-up fee equal to the sum of
    • (i) all quarterly structuring fees and attorney fees and other reasonable expenses related thereto incurred by Midtown East or its affiliates in connection with the Forward Purchase Transaction, plus
    • (ii) $1,000,000, upon the occurrence of an “Additional Termination Event”
      • Additional Termination Event
        • (a) The Business Combination fails to close on or before the Outside Date or
        • (b) the Unit Purchase Agreement is terminated prior to the closing of the Business Combination.

TRANSACTION

  • The estimated post-transaction equity value of the Company will be approximately $327 million, assuming no redemptions by the stockholders of Northern Lights.
  • The transaction will provide up to $107 million of gross proceeds (assuming no redemptions), including $117 million from Northern Lights’ cash-in-trust and a fully committed $60 million PIPE from institutional investors.
  • Expected transaction close is Q2 2022

NEW TRANSACTION OVERVIEW

nlit overview

OLD TRANSACTION OVERVIEW

safe harbor trans overview


PIPE

  • Total PIPE financing is $60 million
    • Consists of 60,000 shares of Series A Convertible Preferred Stock
      • The Series A Convertible Preferred Stock will have a stated value of $1,000 per share and will convert into shares of Class A Common Stock at a price of $10.00 per share of Class A Common Stock.
      • The Conversion Price is subject to downward adjustment on each of the dates that are 10 days, 55 days, 100 days, 145 days and 190 days after the effectiveness of a registration statement registering the shares of Class A Common Stock issuable upon conversion of the PIPE Shares to the lower of the Conversion Price and the greater of
        • (i) 80% of the volume-weighted average price of the Class A Common Stock for the prior five trading days and
        • (ii) $2.00; provided that, so long as the PIPE Investor continues to hold any PIPE Shares, such PIPE Investor will be entitled to receive the aggregate shares of Class A Common Stock that would be issuable based upon its initial purchase of PIPE Shares at the adjusted Conversion Price.
    • Warrants to purchase up to a number of shares of the Class A Common Stock equal to 50% of shares of the Class A Common Stock issuable upon conversion of the PIPE Shares, with an exercise price of $11.50 per share
      • Subject to adjustment to a price equal to the greater of (i) 125% of the Conversion Price if at any time there is an adjustment to the Conversion Price and the exercise price after such adjustment is greater than 125% of the Conversion Price as adjusted and (ii) $5.00.
      • The PIPE Warrants are also subject to adjustment for other customary adjustments for stock dividends, stock splits and similar corporate actions.
      • The PIPE Warrants will be exercisable for a period of five years following the Closing.
    • If the Company fails to register all of the shares of Class A Common Stock issuable upon conversion of the PIPE Shares, at certain times the Conversion Price will be downwardly adjusted to the greater of (i) 80% of the volume-weighted average price of the Class A Common Stock for the prior five trading days and (ii) $2.00.

LOCK-UP

  • Company and Sponsor
    • Six months following the Closing Date

NOTABLE CONDITIONS TO CLOSING

  • The Company having at least $5,000,001 in tangible net assets upon the Closing

NOTABLE CONDITIONS TO TERMINATION

  • Subsequent Event – On June 30, 2022, the Company, the Sponsor, the Target, the Seller, and the Seller Parent agreed to amend the Unit Purchase Agreement to extend the Outside Date until July 29, 2022, with the ability for the deadline to be extended through August 31, 2022, to provide the Company with additional time to complete the Business Combination as it awaits regulatory approval.
  • June 30, 2022 (Outside Date)

ADVISORS

  • EF Hutton, division of Benchmark Investments, LLC, is serving as placement agent and capital markets adviser.
  • Nelson Mullins Riley & Scarborough LLP is serving as legal advisor to Northern Lights.
  • Donald T. Emmi, Esq. and David Waller, Esq. are serving as legal advisors to Safe Harbor and PCCU.
  • KCSA Strategic Communications is serving as public relations and investor relations advisor.

MANAGEMENT & BOARD


Executive Officers

John Darwin, 32
Co-Chief Executive Officer and Director

Mr. Darwin is a co-founder of Luminous Capital Inc. and has served as a Managing Partner of Luminous Capital Inc. since January 2020, where he identifies engagements, guides debt and equity investment strategy, and manages operations of private and public portfolio companies. Previously, from March 2018 to March 2021, Mr. Darwin was co-founder and President of OCG, Inc. (ONE Cannabis), a United States-based cannabis dispensary franchisor. While at OCG, Inc., Mr. Darwin grew the franchise business from inception to operations across multiple states and negotiated a sale to another publicly traded cannabis company, where he maintains the title of VP of Corporate Development since April 2021. Mr. Darwin has over six years of vertically integrated cannabis operational and venture capital experience, with experience managing large scale cultivation, vertically integrated operations, and multi-national brand strategies. Prior to the cannabis industry, Mr. Darwin held various roles in private equity and corporate finance and has a decade of professional and transaction experience.


Joshua Mann, 34
Co-Chief Executive Officer and Director

Mr. Mann is a co-founder of Luminous Capital Inc. and has served as a Managing Partner of Luminous Capital Inc. since January 2020, where he helps guide the firm’s public company engagements, equity financing relationships, and cross border portfolio operations. Since August 2020, Mr. Mann has served as interim CEO of INDVR Brands (CSE: IDVR), a Colorado-based, Canada-listed company focused on the creation and distribution of unique and high-growth brands in the legal United States cannabis market. Mr. Mann has led the restructuring of INDVR Brands and negotiated multi-state transactions, management overhaul, streamlined operations for future expansion. Mr. Mann has over five years of cannabis brand and Canadian operational experience and over 13 years of structured finance and investment banking experience, with prior experience at Wildhorse Capital Partners and Stifel Nicolaus Weisel. Mr. Mann has assisted cannabis companies in structuring multiple reverse takeovers, go-public transactions, and raising over $70.0 million in capital.


Chris Fameree, 40
Chief Financial Officer

Mr. Fameree has served as a Managing Director of Diligence Solutions Group, a comprehensive due diligence and quality of earnings firm, since September 2020. Previously, from 2007 to 2011, Mr. Fameree served as a Senior Manager in the Transaction Advisory Services Group and Audit Group of a large regional CPA firm. During this time, Mr. Fameree participated in numerous business combinations and due diligence assignments. These transactions ranged from $10 million to over $100 million in value. From 2004 to 2006, Mr. Fameree also worked at a Big Four CPA firm, where he served lead roles on engagements from international Fortune 500 companies to closely held private manufacturers. Mr. Fameree has over 15 years of combined public accounting and industry experience and has led and participated in numerous engagements, including due diligence engagements, financial statement audits, and other advisory projects. Mr. Fameree received his Bachelor of Business Administration in Accounting from the University of Wisconsin in 2004. Mr. Fameree is licensed as a Certified Public Accountant in North Carolina and Wisconsin.


Board of Directors

John Burdiga, 58
Director Nominee

Mr. Burdiga has been serving as Managing Partner at Cambio Merchant Capital since 2013. From November 2011 to September 2017, Mr. Burdiga served as a Director of Woodrose Corporation, and, from February 2002 to July 2008, served as the Director of Business Development for Envoy Capital Management Ltd. Mr. Burdiga has led due diligence and advisory work in over $1.0 billion of real estate and M&A transactions along with multi-national Fortune 500 public companies and private entities. In December 2008, Mr. Burdiga completed a mortgage broker course of study at Mount Royal University. Mr. Burdiga’s background in asset-backed lending, mergers and acquisitions, and private and public company forum provides a strong transactional network.


Peter Torres, 59
Director Nominee

Since February 2008, Mr. Torres has been serving as the President of Rex Internet, an ISP provider to the United States hospitality industry, which Mr. Torres founded and later sold in 2006. In 2009, Mr. Torres founded Mills Motors, a web based operation that functioned as a virtual global wholesale vehicle brokerage platform with 200 United States points of pickup, pay and storage in the United States, which Mr. Torres sold in 2016. Since 2018, Mr. Torres has invested in technology-based companies focused on DLT and blockchain. Mr. Torres received his MBA from the American Graduate School of International Management in Arizona.


Jonathan Summers, 49
Director Nominee

Mr. Summers has been serving as the chairman of EXMceuticals Inc., a Canadian-listed medical cannabis company since May 2019. He also serves on the advisory board for Mocha Holdings LLC, a data privacy company. From May 1996 until May 2011, Mr. Summers served in various roles at Goldman Sachs, most recently serving as a Managing Director. Mr. Summers served as the Founding Partner and the Head of Business Development for Everett Capital Advisors, a $700.0 million London-based investment fund from October 2015 to October 2019, and served as the Founding Principal and Head of Business Development for Myriad Asset Management, a $5.0 billion Hong Kong-based multi-strategy asset management firm, from September 2011 to December 2014. Mr. Summers holds a Master in Modern History (1st class) from Oxford University.