ALJ REGIONAL HOLDINGS, INC. ACQUIRES RANEW'S COMPANIES, COMPLETES REPURCHASES AND CERTAIN INVESTMENTS

NEW YORK, Sept. 29, 2022 /PRNewswire/ -- ALJ Regional Holdings, Inc. (OTC PINK: ALJJ) ("ALJ") announced today that it has acquired the outstanding equity interests of certain operating companies doing business as Ranew's Companies from Lester and Susan Ranew. Ranew's Companies, headquartered in Milner, Georgia, are leading suppliers of industrial coating services to multinational manufacturers of equipment and a provider of precision fabrication and assembly and logistics services. The transaction was completed pursuant to a Securities Purchase Agreement, dated September 28, 2022 (the "Purchase Agreement"). Consideration paid by ALJ for the acquisition at closing was $20.8 million, subject to certain purchase price adjustments and certain earn-out payments set forth in the Purchase Agreement and described below.  The acquisition was consummated through Resin Acquisition Corp. (the "Purchaser"), a subsidiary of ALJ.

As a result of the transactions, Purchaser acquired 100% of the equity interests of Ranew's Truck & Equipment Company, LLC, Ranew's Outdoor Equipment, Inc., Ranew's Management Company, Inc., Ranew's Well Services Division, LLC, Ranew's Companies, LLC and Ranew's of Texas, Incorporated.  At the closing, Purchaser issued Mr. Ranew 19.99% of the equity interests in Purchaser in consideration of the rollover of certain of Mr. Ranew's equity interests.  ALJ and the Purchaser have entered into a stockholders' agreement with Mr. Ranew providing for certain customary rights, as well as a purchase/sale right commencing on the fifth (5^th) anniversary of the closing date to cause ALJ to either, at ALJ's election, (i) purchase all of the common stock of Purchaser held by Lester Ranew or (ii) sell to Lester Ranew all of the common stock of Purchaser held by ALJ, in each case, at a value determined by Lester Ranew.

The unaudited consolidated revenue for Ranew's Companies for 2021 was approximately $42 million, with net income of approximately $5.5 million, and for the six months ended June 30, the unaudited consolidated revenue for Ranew's Companies was approximately $32.5 million with net income of approximately $2.7 million.  These results were not audited, were not prepared in accordance with GAAP and are subject to adjustment.

The Purchase Agreement includes two (2) earn-out payments in favor of Lester Ranew. Each earn-out payment is equal to the product of the increase in the adjusted EBITDA over  EBITDA in the trailing twelve (12) month ("TTM") period prior to the applicable earn-out payment date multiplied by 3.25.

Effective as of the closing date, ALJ has entered into employment agreements with each of (i) Robert Brock, as Chief Executive Officer, (ii) Clay Harmon, as Chief Financial Officer and (iii) Blake Reeves, as Director of Operations. The employment agreements include customary terms, including annual bonuses based upon increases in EBITDA.

Repurchase Transactions

Between August 31, 2022, and September 12, 2022, ALJ completed additional repurchases of approximately 1.5 million shares of its common stock for aggregate gross proceeds of approximately $2.9 million with a per share repurchase price range of $1.84 – $1.94. The stock repurchases were completed through unsolicited private transactions.

Investment in A-Mark Precious Metals

On September 16, 2022, ALJ purchased in the open market a total of 350,000 shares of A-Mark Precious Metals, Inc (NASDAQ: AMRK) ("A-Mark"). Mr. Ravich is a member of the board of directors of A-Mark, and this related party transaction was approved by a majority of the disinterested directors of ALJ's board of directors. A-Mark is a leading fully integrated precious metals trading company.

Investment in Hallador Energy

On August 12, 2022, ALJ purchased an unsecured convertible promissory note (the "Note") from Hallador Energy Company (NASDAQ: HNRG) ("Hallador") for a principal sum of $10 million. The Note bears interest at 8% per annum paid, at Hallador's discretion, in cash or in shares of Hallador common stock at the lower of 30-day volume weighted average price ("VWAP") or $6.15 (the trailing VWAP on closing). The principal balance and all accrued and unpaid interest shall be paid on the Note's maturity date of December 31, 2026, and no prepayment of such amounts are permitted. The Note also contains a right to convert the principal and accrued interest amounts outstanding on the Note (in whole and not in part) into shares of Hallador common stock at a fixed conversion price of $6.15 (the trailing VWAP on closing). In connection with the foregoing, ALJ and Hallador have entered into a registration rights agreement which provides ALJ with customary shelf, demand and piggyback registration rights with respect to shares issuable upon conversion of the Note.

Investment in Qualified Opportunity Zone

As a result of the sale of Phoenix Color Corp. and certain verticals of Faneuil, Inc. (the "Prior Sale Transactions"), ALJ exhausted its Net Operating Loss Carryforward.  On September 26, 2022, ALJ invested approximately $20 million into its 99% owned subsidiary ALJ Qualified Opportunity Fund LLC ("QOF"). QOF expects to invest such proceeds in a Qualified Opportunity Zone Business, which, under certain conditions, may be eligible for preferential tax treatment, including allowing ALJ to defer capital gains generated from the Prior Sale Transactions.

About ALJ

ALJ Regional Holdings, Inc. is the (i) 100% owner of Faneuil, Inc., a leading provider of call center services, back office operations, staffing services, and toll collection services to commercial and governmental clients across the United States; (ii) 100% owner of Realtime Digital Innovations, Inc. d/b/a Vistio, a provider of workflow automation and business intelligence services to Faneuil and other unrelated companies; (iii) 99% owner of QOF; and (iv) 80.01% owner of Ranew's Companies a leading supplier of industrial coating services to multinational manufacturers of equipment and a provider of precision fabrication and assembly and logistics services.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the U.S. federal securities laws about ALJ and Ranew's Companies and the transaction, including but not limited to all statements about the amount of earn-out payments to be paid to Lester Ranew, if any; future operations; future business performance of ALJ and Ranew's Companies; all outcomes of the Ranew's transaction; investments to be made in a Qualified Opportunity Zone, if any; and any preferential tax treatment in connection with investments in Qualified Opportunity Zones, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "expect," "likely," "outlook," "forecast," "preliminary," "would," "could," "should," "can," "will," "project," "intend," "plan," "goal," "guidance," "target," "continue," "sustain, "synergy," "on track," "believe," "seek," "estimate," "anticipate," "may," "possible," "assume," and variations of such words and similar expressions are intended to identify such forward-looking statements. You should not place undue reliance on these statements, as they involve certain risks and uncertainties, and actual results or performance may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially include but are not limited to general economic and capital markets conditions; unexpected costs, charges or expenses; failure to obtain the results anticipated; and other risks and uncertainties. Although forward-looking statements contained in this presentation are based upon what management of the Company believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. All forward-looking statements in this release are made as of the date hereof and we assume no obligation to update any forward-looking statement.

Non-GAAP Financial Measures and Related Information

This press release includes certain financial measures not presented in accordance with generally accepted accounting principles ("GAAP"), including Adjusted EBITDA. These are not measures of financial performance calculated in accordance with GAAP and may exclude items that are significant in understanding and assessing Ranew's Companies' financial results. Therefore, the measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP, and should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that Ranew's Companies' presentation of these measures may not be comparable to similarly-titled measures used by other companies.

SOURCE ALJ Regional Holdings, Inc