Golden Leaf Holdings favorably restructures deal terms with Tahoe Hydroponics
03 Diciembre 2018 - 7:45AM
Golden Leaf Holdings Ltd. (“Golden Leaf” or the “Company”)
(CSE:GLH) (OTCQB:GLDFF), a cannabis company with cultivation,
production and retail operations built around recognized brands,
today announced that it has favorably restructured the deal terms
in its definitive agreement with Tahoe Hydroponics Company and 11T
Corp. (collectively “
Tahoe”). The deal was
originally announced on August 13, 2018.
Under the terms of the revised agreement, Golden
Leaf will acquire all Nevada and California assets of Tahoe for a
consideration of approximately C$33 million (US$25 million),
consisting of approximately C$5.3 million (US$4 million) in cash at
closing, and the balance in Golden Leaf stock as outined in detail
below. The original agreement had a total consideration of
approximately C$52.4M, consisting of approximately C$11.1 million
(US$8.5 million) in cash at closing plus that number of shares that
equated to a value of C$41.3 million based on Golden Leaf’s 20-day
VWAP of C$0.2050 for the period ending August 10, 2018. Details of
the stock component of the revised agreement is as follows:
- Issuance of that number of shares of Golden Leaf Holdings
common stock equivalent to approximately C$16.2 million (US$12.3
million) calculated using the Company’s 60-day volume weighted
average stock price immediately prior to November 20th, 2018,
payable within 10 calendar days of the completion of Tahoe’s
audited financial statements;
- Issuance of that number of shares of Golden Leaf Holdings
common stock based on a two-part earn-out provision (the “Earn
Out”), in equal parts, of approximately C$11.5 million (US$8.7
million). The first earn-out component will be paid out upon Tahoe
achieving their forecasted revenues and net income for the fourth
quarter of 2018 and the first two quarters of 2019. The second
earn-out component will be paid out upon Tahoe achieving their
forecasted revenue and net income for the third and fourth quarters
of 2019. In the event either one or both earn-out targets are not
met, a sliding scale applies down to a pre-determined threshold,
with a catch-up opportunity measured as far out as December 31,
2020. If actual performance is below the minimum pre-determined
thresholds, no earn-out will be paid. If actual performance exceeds
the pre-determined thresholds, a maximum of an additional C$2.17
million (US$1.65 million) per earn-out component could be
achieved.
- Monthly earn-out payments of approximately C$108,000
(US$82,150) based on production of a minimum of one hundred
finished pounds of production payable within five (5) days of the
end of each calendar month following closing until such time as the
aggregate monthly production earn-out payments made by GLH equal
approximately C$1,650,000 (US$1,257,000).
- The purchase price for any consideration paid by GLH for the
acquisition of 11T in California shall reduce the abovementioned
purchase price on a pro rata basis.
Regulatory approval is in its final stages, and
the Company expects to receive such approval shortly, with a view
to being able to fully close on the transaction before the end of
2018.
“Over the past few months as we were working
through several regulatory requirements needed to close this
transaction, the Golden Leaf and Tahoe teams were assessing the
longer-term market dynamics in Nevada, and new indications surfaced
that could impact the rate of commoditization for cultivation. To
adjust for that, we restructured the definitive agreement to allow
for those indications. For example, we added some variability into
the deal that gives the Tahoe team the opportunity to earn a
targeted value, while also providing incentive for upside as well
as mitigating any downside risk beyond the targeted value. The
willingness of the team at Tahoe to work with us through this
process is a testament to their professionalism, and recognition of
the bigger picture beyond just doing a deal,” said William Simpson,
Chief Executive Officer. “The addition of Tahoe to the Golden team
is not only about adding a premium cultivation operation that is
cash-flow positive, it’s about being able to achieve stronger
retail margins as we open retail locations in Nevada and
California. This is consistent with our strategic goal associated
with vertical integration,” added William.
Ray Schiavone, CEO of Tahoe Hydroponics
Corporation, commented, “In spite of an increasingly competitive
landscape, our current customers are important to us and will
continue to be. Notwithstanding that, we see the value proposition
of being part of a vertically integrated business. GLH’s strategy
to expand its retail presence in Nevada and California creates an
opportunity for even more shareholder value when approvals start
rolling in. We are committed to long-term value creation and
fulfilling an important role in GLH’s west coast strategy. Together
we create a formidable team, and we are delighted to participate in
striving to achieve the highly sought-after aspirations set for
this industry. GLH has some revolutionary things they are working
on, and we are glad to be part of that amazing story.”
To be added to the distribution list please email
ir@goldenxtrx.com with “GLH” in the subject line.
About Golden Leaf
HoldingsGolden Leaf Holdings Ltd. is a Canadian company
with operations in multiple jurisdictions including Oregon, Nevada
and Canada, with cultivation, production and retail operations
built around recognized brands. Golden Leaf distributes its
products through its branded Chalice Farms retail dispensaries, as
well as through third-party dispensaries. Golden Leaf’s cannabis
retail operations and products are designed with the customer in
mind, focused on superlative in-store experience and quality
products. Visit goldenleafholdings.com to learn more.
Investor Relations:Craig EastwoodChief
Financial OfficerGolden Leaf Holdings
Ltd.503-201-0659ir@goldenxtrx.com
Media Relations:Anne Donohoe / Nick OpichKCSA
Strategic Communications
adonohoe@kcsa.com/nopich@kcsa.com 212-896-1265 /
212-896-1206
Disclaimer: This press release contains
"forward-looking information" within the meaning of applicable
securities legislation. Forward-looking information includes, but
is not limited to, statements with respect to the Company’s future
business operations, the establishment of, and the future scope and
scale of, the Chalice Farms retail system, the level of funding
needed to establish the Chalice Farms franchise model, that the
Chalice Farms franchise model will be successful and generate
positive cash flows, the opinions or beliefs of management and
future business goals. Generally, forward looking information can
be identified by the use of forward-looking terminology such as
"plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or
"does not anticipate", or "believes", or variations of such words
and phrases or state that certain actions, events or results "may",
"could", "would", "might" or "will be taken", "occur" or "be
achieved". Forward-looking information is subject to known and
unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, performance or achievements of
the Company to be materially different from those expressed or
implied by such forward-looking information, including but not
limited to general business, economic and competitive
uncertainties, regulatory risks including risks related to the
expected timing of the Company’s participation in the adult use
market, market risks, risks inherent in manufacturing operations,
difficulties of establishing a successful franchise model and other
risks of the cannabis industry. Although the Company has attempted
to identify important factors that could cause actual results to
differ materially from those contained in forward-looking
information, there may be other factors that cause results not to
be as anticipated, estimated or intended. There can be no assurance
that such information will prove to be accurate, as actual results
and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue
reliance on forward looking information. Forward-looking
information is provided herein for the purpose of presenting
information about management’s current expectations relating to the
future and readers are cautioned that such information may not be
appropriate for other purpose. The Company does not undertake to
update any forward-looking information, except in accordance with
applicable securities laws. This press release does not constitute
an offer of securities for sale in the United States, and such
securities may not be offered or sold in the United States absent
registration or an exemption from registration or an exemption from
registration.
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