For the year ended December 31, 2019, management of Venom Extracts reports having generated over CDN$16.4 million in revenue and over CDN$2.5 million in EBITDA from its product line of cannabis concentrates and cartridges. Venom Extract’s management also reports a strong start to 2020 and is anticipating record Q1 revenue.
The all-stock purchase price of approximately CDN$20,000,000 represents a transaction multiple of 1.2x 2019 revenue, with approximately 70% of the consideration paid upfront and the approximately 30% balance to be paid upon milestone achievements related to revenue targets for Venom Extracts, or in any event, on December 31, 2021. After conducting normal course due diligence, the Transaction closed effective March 24, 2020 (the “Closing Date“).
KEY TERMS OF THE TRANSACTION:
Pursuant to the terms of the SEA, the Company has acquired Venom Extracts for consideration of CDN$20,000,145.20 which is to be satisfied by the issuance of 70,390,672 Hollister common shares (the “Payment Shares“) on the Closing Date pro rata to the shareholders of Venom Extracts and an additional 29,610,054 common shares (the “Earn-Out Shares“) to certain former shareholders of Venom Extracts on the earlier of (i) Venom Extracts reaching certain revenue milestones (detailed below), or (ii) December 31, 2021.
- The Payment Shares and the Earn-Out Shares will be issued at a deemed value of CDN$0.20 per share;
- The Payment Shares are subject to certain voluntary hold periods with 90% of the Payment Shares being subject to hold periods as follows: 15% until May 25, 2020; and an additional 15% every six months until November 25, 2022;
- The Earn-Out Shares will be issued on the earlier of (i) December 31, 2021, or (ii) when and if the following milestones have been met:
- 19,740,036 Earn-Out Shares will be issued when revenue of Venom Extracts reaches CDN$30,000,000 (calculated in accordance with IFRS from January 1, 2020); and
- An additional 9,870,018 Earn-Out Shares will be issued when revenue of Venom Extracts reaches CDN$40,000,000 (calculated in accordance with IFRS from January 1, 2020).
“We are extremely pleased to complete this transformational and highly accretive acquisition”, shared Carl Saling, Founder and CEO of Hollister Biosciences Inc. “Our acquisition of Venom Extracts bolts on substantial revenue and EBITDA to Hollister, while providing Venom Extracts the ability to expand its offering of premium branded product into the California marketplace. Likewise, our acquisition also allows Hollister to introduce its products into the Arizona and Nevada marketplaces through Venom Extracts’ existing distribution channels.”
“This is an exciting acquisition and we are very pleased to announce closing”, shared Jacob Cohen, Founder of Venom Extracts. “This transaction represents the next step in ensuring the future growth of both Hollister and Venom Extracts. We are looking forward to increasing our geographic presence by expanding into the California marketplace through Hollister’s existing platform, and exploring expansion of our existing product portfolio collectively.”
In association with the acquisition, Hollister will not be assuming any long-term debt, a new control position will be created and there is no change in management, or the board of directors of Hollister being contemplated at this time.
In connection with the Transaction, the Company issued 6,000,000 common shares (the “Finder Shares“) to an arm’s length third party finder at a deemed price of $0.20 per Finder Share. The Finder Shares are subject to a statutory hold period of four months and a day from the Closing Date which expires July 25, 2020.
This press release is available on the Company’s CEO Verified Discussion Forum, a moderated social media platform that enables civilized discussion and Q&A between Management and Shareholders.
None of the securities to be issued pursuant to the Transaction have been or will be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act“), or any state securities laws, and any securities issued pursuant to the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Rule 506(b) of Regulation D and/or Section 4(a)(2) of the U.S. Securities Act and applicable exemptions under state securities laws. In addition, the securities issued under an exemption from the registration requirements of the U.S. Securities Act will be “restricted securities” as defined under Rule 144(a)(3) of the U.S. Securities Act and will contain the appropriate restrictive legend as required under the U.S. Securities Act.
SOURCE Hollister Biosciences Inc.
