Atlas Global Brands Signs Definitive Agreement With A Cannabis Distributor And Two Cannabis Pharmacies In Israel

Atlas Global Brands Inc. ATL announced that on February 6, 2023, the company signed a definitive share purchase agreement for the acquisition, through its wholly owned subsidiary, Cambrosia Ltd., of a 51% interest in an Israeli licensed cannabis “Trading House” and two pharmacies licensed to dispense medical cannabis in Israel, for consideration consisting of up to 2.8 million common shares of Atlas.

The Acquired Businesses

Upon completion of the transaction, the company will acquire 51% of the outstanding securities of the following businesses:

• An Israeli licensed cannabis Trading House, strategically located in Tel Aviv. The company plans to use this Trading House as its hub for the import, storage, and distribution of cannabis in Israel. A Trading House is an entity licensed to purchase, trade and store cannabis.

• Two pharmacies licensed to dispense medical cannabis, one in Tel Aviv and the other in Jerusalem.

The Share Purchase Agreement

Pursuant to the share purchase agreement, Cambrosia, a wholly owned subsidiary of Atlas, will acquire ordinary shares of Harmony AI Holdings Ltd. and Harmony I.L. Management and Escorting Ltd., representing 51% of the issued and outstanding shares of each of Harmony AI and Harmony IL. The purchase price for the purchased shares is the issue of up to 2.8 million common shares of Atlas, at a deemed price of $1.00 per Atlas Share .

Pursuant to the share purchase agreement, the consideration shares will be subject to a lock-up and will only be released to the vendors, as to 15% six months after closing of the transaction and thereafter as to 15% every six months until the 36-month anniversary of the closing of the transaction, at which time the remaining 25% will be released. Also, pursuant to the share purchase agreement, Atlas will loan an aggregate of $196,180 to Harmony immediately, which loan will be guaranteed by the vendors and will be repaid immediately in the event the transaction does not close. After closing, Atlas will make an additional loan in the same amount.

Concurrently, with closing of the transaction the board of directors of Harmony will be reconstituted to consist of five members, three will be nominees of Cambrosia and the articles of association of Harmony will be amended to include pre-emptive rights in favor of all shareholders, a reciprocal right of first refusal and drag-along and tag along provision, in the event of a disposition of a majority interest in Harmony to a third party and as to the distribution of free cash flow as between creditors and shareholders.

The share purchase agreement also grants the vendors a put option in respect of the remaining 49% interest in Harmony, exercisable for 60 days after approval by Harmony of its audited financial statements for the fiscal year ended December 31, 2026, and payable in common shares or cash, at the election of the company.

Approximately $1.38 million in bank debt and $1.98 million in shareholder loans will remain with Harmony post-closing. Shareholder loans are to be repaid from free cash flow.

The transaction is expected to close in Q1 2023.

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Photo: Benzinga edit with photos by jarmoluk and lindsayfox on Pixabay