TORONTO, Feb. 26, 2020 (GLOBE NEWSWIRE) -- Nutritional High International Inc. ("Nutritional High" or the "Company") (CSE: EAT, OTCQB: SPLIF) is pleased to announce that it has entered into a non-binding letter of intent (“LOI”) to sell a controlling interest in Calyx Brands Inc (“Calyx”). As part of the purchase, a new strategic partner (“Partner”) will make an investment in Calyx as well as adding significant new business to the Calyx operations, (the “Transaction”). The Partner is a seasoned cannabis entrepreneur and private equity veteran who owns and operates a cannabis flower processing and supply chain management company based in California.
Closing is expected in the second quarter of 2020.
As part of the contemplated Transaction:
- The Partner is to fund all ongoing operating capital requirements of Calyx.
- The Partner is expected to integrate it’s existing flower processing and supply management business into Calyx, whereby adding flower products to the brands Calyx carries through its statewide distribution network.
- Calyx will become part of a new entity in which the Partner will have controlling interest and Nutritional High will retain a minority interest.
- Nutritional High will also receive additional contingent payouts based on operating milestones of Calyx over a period of time.
The Transaction is subject to the negotiation and execution of definitive agreements as well as regulatory approval. Details of the terms of the definitive agreement will be disclosed once finalized.
“Current challenges in the capital markets have been especially acute for distributors, who require working capital to grow their business,” commented Dakota Sullivan, CEO of Calyx. “We see this as an opportunity to combine our distribution reach with our new Partner’s supply chain and flower business to form a powerful, end-to-end brand.”
Adam Szweras, CEO of Nutritional High commented “We expect that access to capital and the addition of new lines of branded flower products will provide Calyx with the opportunity to grow its business under it’s new service model. We are very encouraged by this contemplated transaction and believe it will result in a strong and profitable distribution business.”
Once closed, this contemplated Transaction will complete the first stage of a strategic review process undertaken by Nutritional High in December, 2019. This allows Nutritional High to focus on its core manufacturing footprint and brand development capabilities and leverage these strengths to penetrate existing markets in multiple states and enter emerging opportunities internationally. In California, Nutritional High will be focused towards the manufacturing and commercialization of FLI and other brands whereby this Transaction will enable the Company to distribute these brands through Calyx.
This sale, if completed will result in the Company no longer consolidating Calyx financials in its consolidated financial statements. “We are extremely pleased to have secured this partnership,” commented Robert Wilson, CFO of Nutritional High. “While this transaction will reduce top line revenue for the Company, it will allow for our concentration on higher margin, lower working capital intensive, manufacturing. We believe that strength in manufacturing is essential to grow and develop our FLI brand in the market and achieve positive cash flow.”