KBL Merger Corp. IV (KBLM), announced this morning that they have now signed a definitive agreement with CannBioRx Life Sciences Corp. (“CannBioRx”), with which they had previously announced an LOI agreement. Post closing of the transaction, Dr. Marlene Krauss, the CEO of KBLM, will also assume the role of CEO of the combined company.

CannBioRx is a drug development company focused on treating inflammatory diseases, of which, they have three programs:

• A clinical-stage program focused on the discovery and development of novel therapies to treat fibrosis. This fully enrolled Phase 2b program expects results in Dupuytren’s disease during the fourth quarter of 2020.
• A preclinical cannabinoid program focused on the development and commercialization of unique pharmaceutical-grade cannabinoids for arthritis, pain, diabetes and obesity.
• A preclinical program developing innovative, orally available therapies harnessing the brain’s nicotinic receptors to treat inflammatory diseases, such as ulcerative colitis, gout and multiple sclerosis.

Important to note, KBLM states these opportunities are non-plant-touching, pharmaceutical-grade, non-psychoactive cannabis and drug development programs.

TRANSACTION

The stockholders of CannBioRx will receive, in the aggregate, a number of shares of KBLM based on a pre-money valuation of $175 million (with deductions for liabilities existing at the closing of the transaction in excess of $5 million divided by 10). The definitive agreement contains a closing condition requiring KBLM to have net tangible assets of at least $5 million after giving effect to any redemptions.

PIPE and BACKSTOP

In order to make sure KBLM meets that $5 million closing condition, they have entered into a guarantee and commitment agreement with Tyche Capital LLC, as a backstop.  Per the “Tyche Backstop Agreement”, KBLM agrees to “use its reasonable efforts to raise at least $10,000,000.00 through the sale of common stock of KBL (the “PIPE Shares”).“  However, if they can’t, Tyche has agreed to purchase a to-be-determined number of KBLM shares so that at the Closing, KBLM will have at least $5,000,001 of net tangible assets.  The price per share to be purchased by Tyche will be equal to the closing price KBLM’s common stock on the date prior to the Closing, BUT, the purchase price will not be less than $4.23 nor greater than $10.00.

BOARD OF DIRECTORS

Post-closing, the combined company’s board of directors will consist of eight directors, two of which will be designated by KBLM, three of which will be designated by the Company and three of which will be mutually agreed by KBLM and the Company.

Quick Takes:  Dr. Marlene Krauss has been the CEO and Chairman of four KLB Merger SPACs, so it would appear that KBL Merger Corp. #5, is not in the immediate future since she will now be running CannBioRx as CEO.  Either Dr. Krauss strongly believes in the potential of CannBioRx and that’s why she wants to run it, or she has “SPAC fatigue”.  Maybe both?  Additionally, KBLM has four months until their deadline of December 7, 2019, to close this transaction.  As a result, they have plenty of runway to get this deal done before then.  Furthermore, KBLM stated that it currently has approximately $50,065,226 in its trust account, but they didn’t say as of what date, but we’ll need to keep an eye on any news regarding the anticipated $10.0 million PIPE and at what price they will be selling those PIPE shares, so stay tuned.