This is great for NEPT, but they won't see top and bottom line impacts until the year end financials during the spring. That's a long time to hold just to see the impact.
I intend to.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of: October 2019
Commission File Number: 001-33526
NEPTUNE WELLNESS SOLUTIONS INC.
(Translation of Registrant’s name into English)
545 Promenade du Centropolis
Suite 100
Laval, Québec
Canada H7T 0A3
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ? Form 40-F ?
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ?
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ?
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ? No ?
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
INCORPORATION BY REFERENCE
This report on Form 6-K is hereby incorporated by reference into the Registration Statements on Form F-10 (File No. 333-229631) filed with the U.S. Securities and Exchange Commission (“SEC”) on February 13, 2019 and Form S-8 (File No. 333-189884 and No. 333-182617) filed with the SEC on July 10, 2013 and July 10, 2012, respectively.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEPTUNE WELLNESS SOLUTIONS INC.
Date: October 4, 2019
By:
/s/ Mario Paradis
Name
Mario Paradis
Title:
VP & Chief Financial Officer
EXHIBIT INDEX
Exhibit
Description of Exhibit
99.1
Business acquisition report dated October 4, 2019.
99.2
Consent of KPMG LLP.
FORM 51-102F4
BUSINESS ACQUISITION REPORT
ITEM 1 - IDENTITY OF COMPANY
1.1
Name and Address of Company
Neptune Wellness Solutions Inc.
545, Promenade du Centropolis, Suite 100 Laval, Québec H7T 0A3
References to “Neptune” or the “Company” in this business acquisition report (this “Report”) refer to Neptune Wellness Solutions Inc. and its subsidiaries or any one of them, unless the context requires otherwise.
1.2
Executive Officer
The following is the name and business telephone number of an executive officer of Neptune who is knowledgeable about the significant acquisition and this Report:
Mario Paradis
VP & Chief Financial Officer
(450) 687-2262
ITEM 2 - DETAILS OF ACQUISITION
2.1
Nature of Business Acquired
On July 24, 2019, Neptune completed, through an indirect wholly-owned subsidiary, its previously announced acquisition (the “SugarLeaf Acquisition”) of all of the assets of SugarLeaf Labs, LLC and Forest Remedies LLC (collectively, “SugarLeaf”). The SugarLeaf Acquisition was completed pursuant to an asset purchase agreement among Neptune and certain of its subsidiaries, SugarLeaf and Peter M. Galloway, SugarLeaf’s Chief Executive Officer (the “Acquisition Agreement”).
SugarLeaf is a registered North Carolina-based commercial hemp company providing extraction services and formulated products. Through SugarLeaf, Neptune established a U.S.-based hemp extract supply chain, gaining a 24,000 square foot facility located in the U.S. Southeast region. SugarLeaf's cold ethanol processing facility with a processing capacity of 1,500,000 kg uses hemp cultivated by licensed American growers consistent with federal and state regulations to yield high-quality full and broad-spectrum hemp extracts.
SugarLeaf also possesses established, solid relationships with local farmers and consumer product companies looking for high purity hemp extracts to add to their product lines. The existing management team at SugarLeaf consists of experienced operators who will continue to operate the North Carolina extraction facility.
SugarLeaf has highly efficient hemp extraction capabilities in an important cultivation region of the U.S., developed through years of experience in processing and extraction methods. The company has been at the center of an extensive community that supports hemp extract production and refining, and uses the most advanced extraction equipment available – from stainless centrifuges to high capacity filtering and purifying techniques. Additionally, SugarLeaf sources hemp material from local licensed hemp growers who use responsible growing practices, including organic and regenerative farming techniques. SugarLeaf uses non-GMO ethanol at extremely cold temperatures with advanced lab techniques that produce cannabinoid-rich extracts. SugarLeaf also provides private label services for finished packaged hemp oil goods and delivers premium, non-GMO consumer products with impactful health benefits, ranging from tinctures and topicals to liquid soft gel capsules and Evape products. By maintaining strong supplier relationships with farmers and consumer product companies, in addition to licenses and registrations with the relevant governmental bodies, SugarLeaf has solidified its place in the industry as a reliable, efficient and consumer-minded hemp processor. In leveraging SugarLeaf’s unique range of assets, Neptune will be able to play a broader role in the customer value chain and address a rapidly developing U.S. market.
For more information regarding the nature of the business of SugarLeaf, please refer to Neptune’s most recent annual information form (“AIF”) and management’s discussion and analysis, as well as the risk factors included therein, available on SEDAR at www.sedar.com.
2.2
Acquisition Date
July 24, 2019.
2.3
Consideration
Upon closing of the SugarLeaf Acquisition, Neptune paid an initial consideration for SugarLeaf of $28.5 million (US$21.8 million) by way of a combination of $15.7 million (US$12 million) in cash and $12.8 million (US$9.8 million) in common shares of Neptune (“Common Shares”) or 1,587,301 Common Shares. Additionally, pursuant to the Acquisition Agreement and as previously disclosed, by achieving certain annual adjusted EBITDA and other performance targets, earnouts could reach US$132 million as follows: (i) an additional US$6 million in Common Shares would be paid when certain production and revenue milestones are achieved, (ii) an additional US$16 million, 50% in cash and the remainder in Common Shares, would be paid should SugarLeaf's adjusted EBITDA exceed US$8 million for any rolling 12-month period beginning April 1, 2019, and (iii) additional amounts of up to US$110 million may be paid if certain performance-based conditions, based upon a percentage incremental adjusted EBITDA in 2021 and 2022 above a minimum growth level, are met. The earnout payments over the next three years are to be paid with a combination of cash or Common Shares, with at least 50% to be paid in cash.
On July 18, 2019, the Company completed a private placement of 9,415,910 Common Shares with both existing and new institutional investors resulting in gross proceeds to the Company of approximately US$41.4 million ($53.9 million) (the “Private Placement”). A portion of the net proceeds from the Private Placement was used by the Company to fund the initial cash consideration for the SugarLeaf Acquisition.
Unless otherwise noted, all dollar ($) amounts in this Report are in Canadian dollars.
2.4
Effect on Financial Position
Neptune presently does not have any current plans or proposals for material changes to the respective activities of Neptune or SugarLeaf that would have a significant effect on Neptune’s financial performance or financial position.
See the unaudited pro forma consolidated financial statements of Neptune and the accompanying notes thereto included in Schedule C hereto, for information on the effect of the SugarLeaf Acquisition on the financial position of the Company.
2.5
Prior Valuations
To the knowledge of Neptune, there has been no valuation opinion obtained within the last 12 months by Neptune or SugarLeaf required by securities legislation of a Canadian exchange or market to support the consideration paid by Neptune for the SugarLeaf Acquisition.
2.6
Parties to Transaction
The SugarLeaf Acquisition was not a transaction with an informed person, associate or affiliate of Neptune (as such terms are defined in National Instrument 51-102 – Continuous Disclosure Obligations).
2.7
Date of Report
October 4, 2019.
ITEM 3 - FINANCIAL STATEMENTS AND OTHER INFORMATION
The following financial statements, together with the notes thereto, are included as schedules to this Report:
1.
The audited combined financial statements of SugarLeaf for the year ended December 31, 2018, together with the independent auditor’s report thereon, with unaudited comparative information for the year ended December 31, 2017, are included as Schedule A hereto.
2.
The unaudited combined interim financial statements of SugarLeaf for the six-month periods ended June 30, 2019 and 2018, are included as Schedule B hereto.
3.
The unaudited pro forma consolidated financial statements of Neptune that give effect to the acquisition of SugarLeaf are included as Schedule C hereto, and consist of the following:
a.
the unaudited pro forma interim consolidated statement of financial position as at June 30, 2019;
b.
the unaudited pro forma interim consolidated statement of loss for the three months ended June 30, 2019; and
c.
the unaudited pro forma consolidated statement of loss for the year ended March 31, 2019.
Cautionary Note Regarding Unaudited Pro Forma Financial Statements
This Report contains the unaudited pro forma consolidated financial statements of the Company comprised of the pro forma consolidated statement of financial position as at June 30, 2019 and the pro forma consolidated statements of loss for the three months ended June 30, 2019 and the year ended March 31, 2019.
Such unaudited pro forma consolidated financial statements have been prepared using certain of the Company’s and SugarLeaf’s respective historical consolidated financial statements as more particularly described in the notes to such unaudited pro forma consolidated financial statements. In preparing such unaudited pro forma consolidated financial statements, the Company has not independently verified the financial statements of SugarLeaf that were used to prepare the unaudited pro forma consolidated financial statements. The historical unaudited consolidated financial information has been adjusted in the unaudited pro forma consolidated financial statements to give effect to events that are: (i) directly attributable to the pro forma events, for which there are firm commitments and for which the complete financial effects are objectively determinable; and (ii) with respect to the unaudited pro forma consolidated statement of comprehensive loss, expected to have a continuing impact on the combined company’s results. As such, the impact from merger-related expenses is not included in the unaudited pro forma consolidated financial statement of comprehensive loss. The unaudited pro forma consolidated financial statements do not reflect any cost savings from operational efficiencies or synergies that could result from the acquisition or for liabilities that may result from integration planning. The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and do not necessarily reflect what the combined company’s financial condition and results of operations would have been had the acquisition occurred on the dates indicated.
The unaudited pro forma consolidated financial statements also may not be useful in predicting the future financial condition and results of the operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The pro forma adjustments are based on preliminary estimates of the fair value of the consideration paid and the fair value of the assets acquired and liabilities assumed, currently available information and certain assumptions that the Company believes are reasonable in the circumstances, as described in the notes to the unaudited pro forma consolidated financial statements.
As a result of these factors, the actual adjustments will differ from the pro forma adjustments, and the differences may be material.
Cautionary Note Regarding Forward-Looking Statements
This Report may contain certain “forward-looking statements” or “forward-looking information” under applicable securities laws. Statements in this Report that are not statements of historical or current fact constitute “forward-looking statements” within the meaning of the U.S. securities laws and Canadian securities laws. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of Neptune to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes”, “belief”, “expects”, “intends”, “projects”,
“anticipates”, “will”, “should”, or “plans” to be uncertain and forward-looking. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Forward-looking information in this Report includes, but is not limited to, information or statements about Neptune’s outlook, business plans, the expected results or benefits from the SugarLeaf Acquisition, including, but not limited to, its expected extraction capacity and expansion opportunities,the expected quality of extracts and range of products, Neptune’s expected strategic positioning, potential market opportunities and the anticipated growth in the consumer market, the anticipated consideration owed to SugarLeaf as part of the SugarLeaf Acquisition and the assumption by Neptune’s management that the SugarLeaf plant will operate in accordance with its current business plans and without unforeseen delays or issues
The forward-looking statements contained in this Report are expressly qualified in their entirety by this cautionary statement and the “Cautionary Note Regarding Forward-Looking Information” section contained in Neptune’s latest AIF, which also forms part of Neptune’s latest annual report on Form 40-F, and which is available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml and on the Investor section of Neptune’s website at www.neptunecorp.com. All forward-looking statements in this Report are made as of the date of this Report. Neptune does not undertake to update any such forward- looking statements whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in Neptune public securities filings with the Securities and Exchange Commission and the Canadian securities commissions. Additional information about these assumptions and risks and uncertainties is contained in the AIF under “Risk Factors”.
SCHEDULE A – AUDITED COMBINED FINANCIAL STATEMENTS OF SUGARLEAF
See attached.
Combined Financial Statements of (In US dollars)
SUGARLEAF LABS LLC AND FOREST REMEDIES LLC
(collectively known as SugarLeaf Labs LLC.) For the years ended December 31, 2018 and 2017
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