Geyser Brands Inc. (formerly Kanzen Capital Corp.) (TSXV:GYSR) (“Geyser Brands”or the “Company”) is extremely pleased to announce that the Company has closed its previously announced acquisition of Solace Management Group Inc. (“Solace”), a private corporation existing under the laws of British Columbia (the “Transaction”), that owns several brands that are already in market and being sold nationwide.
Geyser Brands CEO, Andreas Thatcher, stated “This is a transformational strategic acquisition for Geyser Brands, which will establish us 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 our expertise in innovation and development with Solace’s expertise and market recognition, we will be well-positioned to capitalize on what is predicted to be a multibillion-dollar industry.”
Solace CEO, Brad Kersch, added, “We see the huge potential in extending our brands further into the cannabis markets. Geyser Brands is the perfect platform to provide manufacturing and distribution with their Licensed Production facilities. Their plans to roll out beverage, cosmetics and edibles capacity matches our determination to be first to market with our already established products.”
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 others, the Apawthecary Pets line of products which are leading all-natural hemp-based pet treats with formulations for pet treats, salves and oral drops. Apawthecary Pets products are currently being sold in pet stores and veterinarian clinics across Canada, including Bosley’s, PetSmart, PetLand, Shoppers Drug Mart, Pharmasave, Bukerfields, 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 growing demand and is also equipped with a specialized lab for the development of new products and formulations.
Pursuant to the definitive agreement dated May 15, 2019 (the “Agreement”), a copy of which can be found on the Company’s SEDAR profile, the Company acquired all of the issued and outstanding shares of Solace (the “PurchasedShares”) from the shareholders of Solace (the “Solace Shareholders”) for an aggregate purchase price of $3,900,000(the “Purchase Price”), subject to customary adjustments as outlined in the Agreement.
The Purchase Price is 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 on closing in proportion to the number of Purchased Shares previously 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 (the “Share Payment”). As with the Cash Payment, the number of Consideration Shares each Solace Shareholder received on closing was in proportion to the number of Purchased Shares such Solace Shareholder previously owned 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 Transaction. The Company has 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 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.
All Consideration shares issued to the Solace Shareholders will be subject to a statutory hold period expiring 4 months and 1 day from the date of closing. No finder’s fees were payable in connection with the Transaction. Solace is now a wholly owned subsidiary of the Company.
As previously announced, the Transaction was not an “arm’s length transaction” as such term is defined in the Exchange’s Policy 1.1 and therefore constituted 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 was also a director and President of Solace. Mr. Kersch owned 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, owned 53.01% of the Purchased Shares.
In respect of the requirements of MI 61-101, the Company relied on the exemptions from the formal valuation and minority approval required under MI 61-101. The Company was 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, prior to the completion of the Transaction, owned 25.96% of the issued and outstanding common shares in the capital of the Company, supported the Transaction and (1) was not an interested party, (2) was at arm’s length to the interested party. Additionally, the Company was exempt from minority shareholder approval of MI 61-101 in reliance of section 5.7(1)(c).
Although the Company was exempt under MI 61-101 in respect of minority shareholder approval and formal valuations, in accordance with the Exchange’s Policy 5.3, the Transaction constituted a “reviewable transaction”, and, as the number of Consideration Shares issuable to “Non-Arm’s Length” parties exceeded 10% of the number of common shares issued and outstanding in the capital of the Company immediately prior to the closing of the Transaction, the Exchange required the Company to seek approval of a simple majority of the Company’s shareholders, excluding certain insiders. The Company is pleased to confirm that the Company received overwhelming support from the Company’s shareholders in the form of written consents from shareholders holding 60.66% of the issued and outstanding shares in the capital of the Company immediately prior to the closing of the Transaction.
Early Warning Report
Pursuant to National Instrument 62 – 103 – The Early Warning System and Related Take Over Bid and Insider Reporting Issues, Mr. Kersch is announcing (i) the direct acquisition of 1,369,861 common shares in the capital of the Company, (ii) the direct acquisition by Mr. Kersch’s spouse, Tammy Lee Kersch of 1,548,263 common shares in the capital of the Company, and (iii) the direct acquisition by Mr. Kersch’s daughter, Cassidy Kersch, of 154,583 common shares in the capital of the Company. Mr. Kersch’s spouse and his daughter are deemed be joint actors with Mr. Kersch (the “DeemedJoint Actors”) under applicable Canadian securities legislation and Exchange policies. Immediately before the closing of the Transaction, Mr. Kersch, together with the Deemed Joint Actors, owned and controlled 2,832,434 common shares in the capital of the Company, which are subject to escrow provisions, representing 11.48% of the 24,662,412 then issued and outstanding shares in the capital of the Company on a non-diluted basis, and 788,217 warrants. Immediately after the closing of the Transaction, Mr. Kersch, together with the Deemed Joint Actors, own and control 5,905,141 common shares in the capital of the Company, representing 19.36% of the current 30,495,745 issued and outstanding shares in the capital of the Company on a non-diluted basis, or 21.39% of the Company’s issued and outstanding common shares on a partially-diluted basis assuming exercise of the 788,217 warrants held by Mr. Kersch only and not taking into account any other exercise of any other warrants or options issued by the Company to other third parties. The common shares owned by Mr. Kersch and the Deemed Joint Actors are for investment purposes, and subject to escrow provisions, depending on market conditions, general economic and industry conditions, trading prices of the Company’s securities, the Company’s business, financial condition and prospects and/or other relevant factors, Mr. Kersch and the Deemed Joint Actors may from time to time acquire additional securities, dispose of some or all of the existing or additional securities or may continue to hold the common shares or other securities of the Company. Notwithstanding the foregoing, Mr. Kersch and the Deemed Joint Actors have provided the Exchange with an undertaking dated August 28, 2019 in which Mr. Kersch and the Deemed Joint Actors will not, within prior Exchange approval, exercise any warrants or other convertible securities if the exercise of which will result in the creation of a new Control Person as such terms is defined by the Exchange. The early warning report, as required under applicable securities laws, contains additional information with respect to the foregoing matters and will be filed by Mr. Kersch on the Company’s SEDAR profile at www.sedar.com.
About Geyser Brands
Geyser Brands builds consumer product brands that use hemp and CBD as a value-added ingredient. These involve next-generation formulas that focus on the mix of cannabinoids for specific conditions such as insomnia, anxiety and pain. Proprietary delivery technologies include all natural nano-technology, slow-release mechanisms and non-molecule degrading baking processes. Geyser Brands owns a Health Canada approved Licensed Production Facility, and operates 15,000 sqft of manufacturing space in two GMP facilities near Vancouver, BC.
For more information, visit Geyser Brands’ website at www.geyserbrands.com.
On Behalf of the Board of Directors
Director and CEO
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.
This news release contains forward‐looking statements and forward‐looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward‐looking statements or information. Forward‐looking statements and information are often, but not always, identified by the use of words such as “appear”, “seek”, “anticipate”, “plan”, “continue”, “estimate”, “approximate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions.
Forward-looking statements and information are provided for the purpose of providing information about the current expectations and plans of management of the Company relating to the future. Readers are cautioned that reliance on such statements and information may not be appropriate for other purposes, such as making investment decisions. Since forward‐looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the marijuana industry in general such as operational risks in growing; competition; incorrect assessment of the value and potential benefits of various transactions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals and changes in legislation, including but not limited to tax laws and government regulations. Accordingly, readers should not place undue reliance on the forward‐looking statements, timelines and information contained in this news release. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information relating to Geyser is available at www.sedar.com.