Geyser Brands Inc. Announces Signing Of Definitive Agreement To Acquire Brands
The Company has entered a definitive agreement in respect of the previously announced acquisition of Solace Management Group Inc. ("Solace")
May 28, 2019 – Vancouver, B.C. – Geyser Brands Inc. (formerly Kanzen Capital Corp.) (TSXV:GYSR) (“Geyser Brands” or the “Company”) is pleased to announce that, further to the Company’s news release dated February 11, 2019, the Company has entered into a definitive agreement (the “Agreement”) in respect of the previously announced acquisition of Solace Management Group Inc. (“Solace”), a private corporation existing under the laws of British Columbia (the “Proposed Transaction”).
The Company’s CEO, Andreas Thatcher states that “[T]his is a transformational strategic acquisition for Geyser, which will establish ourselves as a leading provider of health-focused hemp and CBD wellness products. With the constant evolution of the national and international hemp and CBD landscape, by combining the expertise in innovation and development with Solace’s expertise and market recognition, we will be well placed to capitalize on what is predicted to be a multibillion-dollar industry.”
As reported in previously disseminated news releases, Solace leverages its brands, intellectual property and proprietary formulations in the hemp and CBD markets by licensing distribution and production arrangements. Solace’s brands and assets include among other things, the Apawthecary Pets line of products which are leading all-natural hemp-based pet treats with formulations for human grade, all-natural pet treats, salves and oral drops. Apawthecary Pets products are currently being sold in pet stores and veterinarian clinics across Canada, including Bosley’s, PetLand, Pharmasave, Buckerfields, Shoppers Drug Mart, Global Pet Foods and Pet Planet to name a few. Solace’s product portfolio currently comprises of 23 products and 57 SKU’s of both pet and consumer healthcare goods. All products are currently utilizing organic, unrefined, cold-pressed hemp seed oil extracts. As part of the Solace’s continued growth, it has recently moved to a new 7,500 sq. ft. facility built to Good Manufacturing Practices. The new facility is anticipated to increase Solace’s production capacity significantly in order to meet the growing demand and will allow the development of new products and formulations.
As part of the Proposed Transaction, Solace will be terminating its licensing arrangement with its Canadian manufacturer so as to bring manufacturing and distribution within Solace in order to maximize revenues. Solace’s licensing arrangement with its United States manufacturer is currently on hold with no operations or revenue generated until such time as the manufacturer has obtained all necessary governmental and regulatory approvals in compliance with all applicable laws. Solace generated unaudited licensing revenues of $428,196 for the fiscal year ended September 30, 2018, compared to $591,167 for the fiscal year ended September 30, 2017. Gross margin was 100% and 21% respectively. Net income for Solace was $266,187 and $1,448 respectively. Retained earning were $213,626 and $(261) respectively. Solace’s Canadian manufacturer generated unaudited revenues of $1,478,862 for the fiscal year ended September 30, 2018, compared to $304,109 for the fiscal year ended September 30, 2017. Gross margin was 39% and 21% respectively. Net income was $293,023 and $(6,386) respectively. Retained earnings were $286,637 and $(6,286) respectively.
The Agreement provides that the Company will acquire all of the issued and outstanding shares of Solace (the “Purchased Shares”) from the shareholder of Solace (the “Solace Shareholders”) for an aggregate purchase price of $3,900,000 (the “Purchase Price”), subject to adjustments as outlined in the Agreement.
The Purchase Price will be payable by way of (1) an aggregate cash payment of $400,000 (the “Cash Payment”), payable by way of a promissory note (the “Promissory Notes”) delivered to each of the Solace Shareholders upon closing in proportion to the number of Purchased Shares owned by such Solace Shareholder against the aggregate number of the Purchased Shares (the “Principal Amount”), and (2) in respect of the balance of $3,500,000, by the issuance of 5,833,333 common shares (the “Consideration Shares”) of the Company at a deemed price of $0.60 per common share, subject to Exchange approval (the “Share Payment”). As with the Cash Payment, the number of Consideration Shares each Solace Shareholder shall receive upon closing will be in proportion to the number of Purchased Shares such Solace Shareholder owns against the aggregate number of Purchased Shares.
The terms of the Promissory Notes provide that the Principal Amount will be paid in full, without interest, on or before the first anniversary of the closing of the Proposed Transaction. The Company shall have the right to prepay all or any part of the Principal Amount at any time without notice, bonus or penalty. Furthermore, in the event the Company raises capital after the closing of the Proposed Transaction in the aggregate amount of $5,000,000 by way of one or more private placement financings, or other form of investment from arm’s length third parties, the unpaid balance of the Principal Amount will be immediately due and payable.
Certain Consideration Shares may be subject to escrow in accordance with Exchange policies and all Consideration Shares will be subject to a statutory hold period expiring 4 months and 1 date from the date of issuance. No finder’s fees are payable in connection with the Proposed Transaction. On completion of the Proposed Transaction, Solace will become a wholly owned subsidiary of the Company.
Although the parties have entered into the Agreement, there can be no assurance that the Proposed Transaction will be completed as proposed, or at all. The Agreement may be terminated by the parties in certain circumstances.
The closing of the Proposed Transaction remains subject to, among other things: (1) the Company being satisfied with its due diligence review of Solace; (2) the receipt of all necessary consents, including all necessary third party consents; (3) board approvals of Geyser and Solace, (4) approvals and authorizations including any applicable shareholder approval; (5) TSXV Exchange (the “Exchange”) approval; (6) satisfaction of any Exchange requirements; and (7) the satisfaction or waiver of conditions precedent and other customary closing conditions outlined in the Agreement. Closing of the Proposed Transaction is anticipated to take place within 5 business days after receipt of final acceptance from the Exchange.
The Company currently has 21,184,950 common shares issued and outstanding. Upon completion of the Proposed Transaction, and subject to any warrant or option exercise, the Company anticipates that it will have 27,018,283 common shares issued and outstanding.
The Agreement has been approved by the Disinterested Directors of the Company and recommends to the Company’s shareholders to approve the Proposed Transaction.
As previously announced, the Proposed Transaction is not an “arm’s length transaction” as such term is defined in the Exchange’s Policy 1.1 and therefore constitutes a “related party transaction” as such term is defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). Bradley D. Kersch (“Mr. Kersch”) is a director of the Company and is also a director and President of Solace. Mr. Kersch owns 23.48% of the Purchased Shares. Mr. Kersch along with other members of his family that are deemed to be “associates” of Mr. Kersch as such term is defined in the Exchange’s Policy 1.1, own 53.01% of the Purchased Shares. Mr. Kersch currently owns 1,826,434 common shares of the Company on a non-fully diluted basis, representing 8.62% of the issued and outstanding common shares in the capital of the Company on a non-fully diluted basis. On closing of the Proposed Transaction, Mr. Kersch will own 3,092,152 common shares of the Company on a non-fully diluted basis, representing 11.83% of the issued and outstanding shares in the capital of the Company. Mr. Kersch along with other members of his family that are deemed to be “associates” of Mr. Kersch as such term is defined in the Exchange’s Policy 1.1, will own 4,918,586 common shares of the Company on a non-fully diluted basis, representing 18.20% of the issued and outstanding shares in the capital of the Company. The Proposed Transaction would not result in a “Change of Control” or new “Control Person” as such terms are defined in the Exchange’s Policy 1.1.
In respect of the requirements of MI 61-101, the Company is relying on the exemptions from the formal valuation and minority approval required under MI 61-101. The Company is exempt from the formal valuation requirement of MI 61-101 in reliance of sections 5.5(b) and 5.5(e) as no securities of the Company are listed on the specified markets outlined therein and the current Control Person, as such term is defined in applicable securities laws, who own 25.96% of the current issued and outstanding common shares in the capital of the Company, supports the Proposed Transaction and (1) is not an interested party, (2) is at arm’s length to the interested party, and (3) supports the transaction. Additionally, the Company is exempt from minority shareholder approval of MI 61-101 in reliance of section 5.7(1)(c).
Although the Company is exempt under MI 61-101 in respect of minority shareholder approval and formal valuations, in accordance with the Exchange’s Policy 5.3, the Proposed Transaction constitutes a “reviewable transaction”, and, as the number of Consideration Shares issuable to “Non-Arm’s Length” parties exceeds 10% of the number of common shares issued and outstanding in the capital of the Company, the Exchange may require the Company to seek approval of a simple majority of the Company’s shareholders, excluding certain insiders. The Company will communicate the timing and conduct of such meeting in due course if required, or in the alternative, will seek written consent from the Company’s shareholders approving the Proposed Transaction as may be permitted by the Exchange.
As indicated in previously disseminated news releases, Mr. Kersch has disclosed to the other directors of the Company (the “Disinterested Directors”) his interest in Solace and the Proposed Transaction and as such, only the Disinterested Directors who are “independent” as such term is defined in MI 61-101 will be entitled to vote on any board resolutions, or make any decisions, to approve the Proposed Transaction.
ABOUT GEYSER BRANDS
Geyser Brands Inc builds health-based hemp CBD consumer products in the Nutraceutical, Cosmetics, Food & Beverage and Pet sectors world-wide. R&D investment in NanoFusion, a proprietary all-natural nanotechnology, delivers topical,cream, beverages and baked goods, oil, and tincture formulations with superior bio-availability and water-solubility.
Geyser Brands is a Health Canada approved Licensed Producer (“LP”) in Port Coquitlam, B.C. that holds a cultivation license and is anticipating its processing and sales licenses. The company is exclusively focusing on leveraging these assets to provide the regulatory infrastructure for its global brands and distribution strategy,acquiring hemp- and plant-based brands and infusing them with new CBD product lines in jurisdictions where the therapeutic ingredient is legal. The company’s proprietary NanoFusion technology surrounds oils and solves for the insolubility of CBD. Geyser Brands will utilize its 7,000 sq. ft. licensed facility in British Columbia for the manufacturing and distribution of its hemp and CBD-based products internationally.
For more information, visit the company’s website at www.geyserbrands.com.
On Behalf of the Board of Directors
Director and CEO