Mr. Craig Goodwin reports
NATURALLY SPLENDID SIGNS LETTER OF INTENT TO ACQUIRE CHI HEMP INDUSTRIES INC. AND ENTERS INTO LOAN AGREEMENT
Naturally Splendid Enterprises Ltd. has entered into a letter of intent with Chi Hemp Industries Inc. (CHII) and the shareholders of CHII whereby Naturally Splendid has agreed to negotiate the terms of a definitive agreement to acquire all of the issued and outstanding shares of CHII. The signing of a definitive agreement is expected within the next 30 days.
CHII is an on-line hemp company based in Victoria, B.C. Its existing warehousing operation in Victoria, B.C., that distributes hemp products including seeds, oil and protein, will be replaced by Naturally Splendid's 7,000-square-foot facility in Burnaby, B.C., on closing of the transaction. Naturally Splendid vice-president of operations, Bryan Carson, reported, "Processing and distributing CHII orders out of our existing facilities, optimizes efficiency and translates into a strong bottom line."
Since 1998, CHII has been actively working to promote and educate the Canadian hemp industry throughout North America. CHII and its various content promoting websites are at the hub of hemp content on-line, which drives traffic and customers to CHII's wholesale and on-line sales. All sales are driven through on-line properties. CHII is a well-established brand, operating various multiple on-line sites, which include for instance.
CHII has sold over one million pounds of hemp products since 1998. In fiscal year 2014/2015, CHII generated approximately $300,000 in sales as well as positive earnings. The additional infrastructure and support available from Naturally Splendid creates the opportunity to build upon this revenue base.
Under the proposed terms of the definitive agreement, the CHII shareholders will sell the CHII shares to Naturally Splendid and, in consideration of which, Naturally Splendid will issue $75,000 of common shares of Naturally Splendid to the CHII shareholders and pay $75,000 to the CHII shareholders. The cash payment will be made in three separate tranches: $25,000 within three months of closing, $25,000 within six months of closing and $25,000 within nine months of closing.
On closing of the transaction, the CHII shareholders, being Marco Pimentel and Agnieszka Wojdyla, will enter into a one-year consulting agreement with Naturally Splendid. Their responsibilities will include the development and growth of CHII and associated websites, as well as optimizing revenue on Naturally Splendid's on-line business. Further, the CHII shareholders will receive a 12-per-cent gross sales commission on any lines of business that are directly benefited from their services.
Mr. Pimentel, who is a consultant as well as vice-president of marketing for a performance-based ad tech network, was instrumental in developing and implementing systems that increased sales from $5-million to $30-million within a one-year period. Many of the fundamental optimization strategies as well as search engine marketing and media spend deployed by Mr. Pimentel in his role as vice-president of marketing, will be adapted to optimize the multiple websites of Naturally Splendid.
Ms. Wojdyla is a graduate of the University of British Columbia with over 10 years of business systems and operations experience. She oversees CHII's operations and is the creative director behind the branding that customers see today. Ms. Wojdyla's entrepreneurial and artistic skills have been instrumental to differentiate CHII beyond companies within its niche market.
CHII directors, Mr. Pimentel and Ms. Wojdya, stated: "We are looking forward to working with a larger team which will enable CHII to scale up and optimize all of its on-line properties and branding efforts. Craig Goodwin/Bryan Carson and their team have done an amazing job with growing Naturally Splendid and we are very excited to bring our expertise in the on-line marketing side to help grow and scale all company brands even further."
Naturally Splendid chief executive officer Craig Goodwin stated: "We look forward to bringing CHII into the Naturally Splendid family. CHII has had a strong web presence for over 15 years. Not only are we absorbing a successful and profitable on-line hemp company with strong growth potential, we are most fortunate to have the invaluable experience in e-commerce strategy that Marco brings and the execution by Agnieszka to optimize online sales through the entire Naturally Splendid on-line presence. CHII is leading the market in search engine marketing campaigns for hemp nutrition. This is an opportunity not being capitalized by other companies due to lack of infrastructure and technology.
"Together, we also want to develop a new line of superfood products. The new brand will be a subscription based/on-line ordering e-commerce brand tailored to the same health consumers. Benefits of a subscription-based business are for instance building of longer relationship with customers, generating predictable monthly sales and creating of upselling opportunities," Mr. Goodwin added.
Closing of the transaction is subject to acceptance by the TSX Venture Exchange and completion of satisfactory due diligence by Naturally Splendid.
Naturally Splendid also announces that it has entered into a loan agreement with Coast Mountain Aviation Inc. whereby the lender has agreed to loan Naturally Splendid $300,000 for a period of two years at an interest rate of 12 per cent per annum.
Prior to the maturity date, Naturally Splendid will have the right to repay all of the outstanding balance of the loan by paying the lender the loan plus any accrued and unpaid interest provided that either Naturally Splendid completes financings totalling at least $1.5-million during the term of the loan, or Naturally Splendid exercises this right one year after the exchange acceptance date. Further, the lender will also have the right to have Naturally Splendid repay the loan prior to maturity date at the repayment price provided that Naturally Splendid completes financings totalling at least $1.5-million during the term of the loan.
As additional consideration of the loan, Naturally Splendid has agreed to issue 260,869 common shares to the lender.
The loan will be used for acquisitions and operations.
The loan agreement and the bonus shares are subject to acceptance by the TSX Venture Exchange.
We seek Safe Harbor.
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