Mr. Bernie Yeung
reports
ATLAS PROVIDES CALENDAR YEAR END CORPORATE UPDATE
Atlas
Global Brands Inc. has provided a year-end update.
Highlights:
- Atlas is diligently advancing the completion of annual audited statements, together with its Q1 and
Q2 interim financial statements and related MD&A (management discussion and analysis), and continues to be committed to transparent
and accurate financial reporting.
-
Continuing hostilities in Israel have impacted the company's plans for that market, and, to the extent
necessary and appropriate, its plans will be modified.
-
Atlas has realized significant cost and expense reductions and continues to streamline its two
Canadian facilities to optimize its value chain.
-
Strategically, the company is leveraging its EU-GMP (European Union good manufacturing practice) capabilities and the launch of new products
under the global brand D*gg Lbs to increase revenue.
Progress on financial reporting
On Aug. 9, 2023, Atlas announced that, as anticipated, due to the complexity of accounting for the
company's tripartite and multijurisdictional business combination completed on Dec. 30, 2022, and
subsequent acquisitions, it did not file its audited annual consolidated financial statements and related
MD&A and certifications for the financial year ended March 31, 2023, due
July 31, 2023 (collectively, the required annual filings), as required by National Policy 51-102,
Continuous Disclosure Obligations. As a result, effective Aug. 8, 2023, the Ontario
Securities Commission, as the principal regulator, issued a failure-to-file cease trade order
(FFCTO).
Subsequently and also as anticipated, the company: (i) did not file its interim financial report and related
MD&A and certifications for the interim period ended June 30, 2023, due
Aug. 29, 2023 (collectively, the required Q1 interim filings), as required by NI 51-102; and (ii) will not
file its interim financial report and related MD&A and certifications for the
interim period ended Sept. 30, 2023, due Dec. 30, 2023, as required by NI 51-102 (collectively,
the required Q2 interim filings). A revocation of the FFCTO will require the filing of the required annual
filings, required Q1 interim filings and required Q2 interim filings.
The company is diligently progressing the required annual filings, required Q1 interim filings and
required Q2 interim filings and, to that end, has expanded its finance function with additional dedicated
professional expertise. As previously stated, the business combination completed in December, 2022, was
complex and novel from a financial reporting perspective, resulting in this delay.
Despite the delay in filing the required annual filings, required Q1 interim filings and required Q2 interim
filings and the disruptions to its planned expansion into Israel, as described herein, operationally, the company has progressed well.
Year-end corporate strategy update
Since completing the business combination in December, 2022, the company has refined its strategy,
achieved cost reductions, launched new products, and increased its export volume and revenues outside
of Israel.
Key milestones include:
-
Making the difficult decision to place its operations in Gunn, Alta., into receivership, but
nonetheless improving its consolidated balance sheet;
-
Announcing a brand partnership with Calvin Broadus Jr., also known as Snoop Dogg, and launched the first
product of the collaboration, D*gg Lbs, in both Canada and Israel;
-
Establishing its EU-GMP-licensed facility in Chatham, Ont., as a hub, focused on growing,
processing and packaging product for international export to markets such as Australia, Germany,
Denmark, the United Kingdom and Israel, with discussions under way to add other international
markets;
-
Focusing activity at its licensed facility in Stratford, Ont., on growing, processing and packaging
for the domestic Canadian market while continuing to breed unique genetics for both the domestic
and international markets;
-
Enhancing yield and the proportion of Grade A flower at both its Chatham and Stratford facilities;
-
Expanding operations at its Chatham facility to include EU-GMP vape production;
-
Positioning the company as the partner of choice for the export of vape products with custom
formulations designed to meet the regulatory requirements of each specific medical market;
-
Continuing to see returns on its investment in the customer experience associated with its D*gg
Lbs product in the form of high trial-and-repeat purchases;
-
Continuing to see some penetration of the Israel market despite the shipping limitations, channel
disruption and employee departures for military service, all due to the unprecedented level of
hostilities in the region.
Bernie Yeung, chief executive officer, added: "Making the extra time investment to ensure the audit is
completed thoroughly and accurately is my commitment to shareholders and a priority. This investment
will be foundational to the company's ongoing financial reporting. Notwithstanding the challenges
associated with the preparation of its audited financial statements and hostilities in the Middle East, in the
last year, the company has made some significant commercial and operational changes that have allowed
us to define the lane we want to win in -- the international medical cannabis market. Towards that, we will
continue to invest in and expand our resources while developing our position as a go-to partner for the
processing, packaging and export of flower, oils and vapes. Rest assured, we have made significant progress
and are confident we have a solid foundation to drive sustainable and profitable growth long term."
Update on previously announced international acquisitions
Atlas previously announced on Feb. 7, 2023, that its wholly owned subsidiary, Cambrosia Ltd., had entered into a definitive agreement for the acquisition of 51 per cent of the outstanding
securities of one trading house and two additional purpose-built cannabis pharmacies in Israel (the
Harmony acquisition). In anticipation of the completion of the transaction, Cambrosia extended loans
to Harmony and provided (through third parties) the Harmony trade house with product for distribution to
pharmacies. Owing to disputes regarding, among other matters, payment for product, the acquisition
agreement was terminated in accordance with its terms, on the basis that the transaction contemplated
thereby was not completed by the date prescribed for completion in the acquisition agreement.
In addition, on Dec. 20, 2023, Cambrosia filed a lawsuit against Harmony and its four founders in the
District Court of Tel Aviv, seeking the following remedies:
- Repayment of the loan amount (including interest and VAT (value-added tax) on the interest) in the amount of 1,431,838 new Israeli shekels (approximately $524,768);
-
Restitution of the value of the goods transferred by Cambrosia and/or on its behalf and sold by the
respondents, minus a distribution and sales commission at a rate of 10.5 per cent, in the amount of 3,291,764 new Israeli shekels (approximately $1,206,431) plus VAT;
-
Restitution of the value of the goods held by the respondents at a third party trading house, minus a
distribution and sales commission at a rate of 10.5 per cent, in the amount of 1,782,715 new Israeli shekels (approximately $653,365) plus VAT;
-
From these amounts, a total of 1,395,537 new Israeli shekels (approximately $511,464) paid to Cambrosia and/or on its
behalf must be deducted,
for a total net claim of 5,973,442 new Israeli shekels (approximately $2,189,266) (including VAT).
As part of the claim, Cambrosia asked the court for a lien on the bank accounts of Harmony and its four
founders. On Dec. 21, 2023, the court approved Cambrosia's request and issued a lien on those
accounts in an amount of 2,137,226 new Israeli shekels (approximately $783,293), on each of the accounts of all six defendants.
Following a request by Cambrosia, on Dec. 25, 2023, the court issued new liens on the accounts of
all defendants, revising the amount of the liens to 3,291,764 new Israeli shekels (approximately $1,206,431) in each account.
As further announced on May 18, 2023, the company entered into a definitive agreement, signed May 17,
2023, for the acquisition of 51 per cent of the outstanding securities of an Israeli private limited liability company
operating a medical cannabis pharmacy (the High Times transaction). The parties agreed, on Dec. 24, 2023, to extend the final deadline for completing the transaction to Dec. 31, 2024, and made
numerous amendments to the terms of the proposed transaction, including in material part:
-
Ninety per cent of the shares to be purchased will be deposited with a trustee, as soon as a trustee agreement
will be entered into, expected in January, 2024.
-
Following the signing of the trustee agreement, Cambrosia will have the right to appoint two of three board members of the pharmacy, will have effective management of the pharmacy and will have
control of the pharmacy's bank account.
-
Following the signing of the trustee agreement, Cambrosia will indemnify the vendor for 51 per cent of
the pharmacy's existing bank loan, the indemnified amount being approximately 150,000
new Israeli shekels (approximately $54,975).
-
Financing requirements of the pharmacy following the signing of the trustee agreement will be
provided as to 51 per cent by Cambrosia and as to 49 per cent by the vendor.
-
Should all conditions precedent be met by Dec. 31, 2024, Cambrosia will receive 100 per cent of
the shares of the pharmacy, for the same aggregate purchase price as was originally agreed for
the purchase of a 51-per-cent interest.
-
Should all conditions precedent not be met by Dec. 31, 2024, Cambrosia will have the right
to instruct the trustee to sell 100 per cent of the pharmacy, with proceeds allocated as to 650,000
new Israeli shekels (approximately $238,225) to Cambrosia and the balance equally as between Cambrosia and the
vendor.
Finally, the company further announced on May 24, 2023, that it had entered into a definitive agreement
for the acquisition of 51 per cent of the outstanding securities of three Israeli private limited liability companies
operating medical cannabis pharmacies. This agreement was
terminated pursuant to its terms.
Closing remarks
As the company navigates the challenges of a dynamic market, Atlas extends its gratitude to its investors for their
patience and trust. The company is immensely proud of the significant progress achieved in aligning its commercial
strategy, people and processes. Atlas is dedicated to identifying efficient avenues for driving top-line
growth while ensuring profitability. The future is bright, and the company's international cannabis strategy will
continue to define and showcase where Atlas has a well-defined value proposition for investors, customers,
consumers and patients around the world.
About Atlas Global Brands Inc.
Atlas Global is a global cannabis company operating in Canada and Israel with expertise across the cannabis
value chain, including cultivation, manufacturing, marketing, distribution and pharmacy. Atlas currently
distributes to eight countries: Australia, Canada, Denmark, Germany, Israel, Norway, Spain and the United
Kingdom. In addition to a differentiated product mix, Atlas operates two licensed cannabis facilities (one
with EU-GMP) and three medical pharmacies in Israel.
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.