Business Context and Reporting Period
This Form 8-K, filed on May 5, 2022, reports on events occurring on May 1, 2022, involving Reviv3 Procare Company (the "Company"). The Company entered into a Material Definitive Agreement to acquire substantially all assets of the hearing protection and ear bud businesses of Axil & Associated Brands Corp. ("Axil"). The hearing aid line of Axil is excluded from the transaction.
Key Financial Metrics and Transaction Terms
- Consideration: The Company will issue 73,183,893 shares of common stock and 250,000,000 shares of Series A Preferred Stock (convertible 1:1 to common stock).
- Aggregate Value: The negotiated value of the issued shares is $33,318,893.
- Valuation Discount: The transaction value represents a 25.9% discount from the average closing price of the Company's common stock over the 22-day period from March 30, 2022, to April 29, 2022.
- Stock Split: The Company plans to effectuate a 5-to-1 reverse stock split within 90 days following the closing.
- Liquidity Context: The discount was partially attributed to low liquidity, with an average trading volume of 4,819 shares during the valuation period.
Note: This filing does not provide revenue, profit, cash flow, margin, debt, or liquidity metrics for the Company or Axil.
Material Changes and Transaction Structure
The primary material change is the proposed acquisition of Axil's hearing protection business. Key structural terms include:
- Preferred Stock Restrictions: The Series A Preferred Shares have no voting rights and are subject to a two-year lock-up period during which they cannot be converted or transferred.
- Post-Lockup Conversion Limits: After the lock-up period, conversion is restricted to prevent any holder from beneficially owning more than 5% of the Company's common stock.
- Related Party Involvement: Intrepid Global Advisors, a stockholder of Axil (4.68%) and the Company (22.33%), is involved. Jeff Toghraie, the Company's CEO, is the managing director of Intrepid.
- Voting Restrictions: During the lock-up period, Axil may not vote the Common Shares received, and the Company cannot issue additional capital stock without consent from both Intrepid and Axil.
Guidance, Risks, and Contingencies
The filing contains forward-looking statements regarding the proposed acquisition with no assurance of completion. The closing is subject to several material contingencies:
- Approval by Axil stockholders.
- Approval by Company stockholders to amend the Certificate of Incorporation to create Preferred Shares and increase authorized common stock.
- Absence of governmental orders restraining the transaction.
- Absence of a material adverse effect on the Business since the agreement date.
- Accuracy of representations and warranties by both parties.
Risks include unanticipated developments that could prevent, delay, or negatively impact the acquisition.
Investor Verification Checklist
- Verify the status of stockholder approvals required from both Axil and Reviv3 Procare to authorize the issuance of new shares and the Preferred Stock.
- Confirm the final terms of the 5-to-1 reverse stock split and its impact on the share count and price.
- Review the full Asset Purchase Agreement (Exhibit 2.1) for specific definitions of "Excluded Assets" and "Assumed Liabilities."
- Assess the dilution impact of issuing 323,183,893 total shares (common + convertible preferred) relative to the current outstanding share count.
- Monitor the trading volume and liquidity of the Company's stock, given the cited low volume influenced the transaction valuation.