In this week's "Rising High," The Fly's recurring series focused on cannabis and psychedelic stock news, The Fly looks back on a business combination, agreement termination and cannabis earnings.
STEM, HEADWATERS ENTER TERM SHEET FOR COMBINATION: Stem Holdings (STMH) announced Monday that it has executed a term sheet for a proposed business combination with Headwaters. Pursuant to the sheet, the transaction will result in a reverse takeover of the company and, subject to the satisfaction of all listing conditions, the listing of the combined entity on the Canadian Securities Exchange and the OTCQB Venture. Following the closing of the transaction, it is expected that the former equity holders of HDWTR will own approximately 80% of the issued and outstanding shares of the company. The transaction is subject to, among other matters, the execution of a mutually agreeable definitive agreement, completion of due diligence and subject to several conditions including, but not limited to, stockholder approval, delivery of acceptable financial statements, board of directors’ approval and satisfaction of all regulatory and stock exchange approvals. The transaction is expected to be completed by way of an amalgamation, merger or other form of business combination to be determined by the parties following receipt of securities, corporate and tax law advice.
“Over the past 12 months, Stem has worked tirelessly to find the right company to transact a business combination with. We could not be more excited about combining forces with Headwaters, LLC,” said CEO Matthew Cohen. “Not only will this transaction bring world-renowned cultivation processes, but by combining with Stem and our existing footprint of brands and retail locations, we instantly become a pre-eminent vertically integrated and profitable cannabis company with a new platform and a vision to bolster on even more accretive transactions in the future.”
INTERCURE TERMINATES CANN ACQUISITION AGREEMENT: InterCure (INCR) announced Wednesday that, further to the merger agreement with Cann Pharmaceutical dba Better, pursuant to which and subject to its terms, InterCure was to acquire 100% of the issued and outstanding shares of Better, and further to the company’s press release regarding the fundamental disagreements between the parties, that the closing conditions contained in the agreement were not met and the agreement was terminated. In accordance with the terms of the agreement, the agreement terminated automatically if the closing conditions and the merger are not completed by 5:00 pm on 31st of January 2023. Accordingly, the agreement was automatically terminated. Intercure is owed significant amounts loaned and advanced to Better and intends to recover said amounts under all legal means available to it.
CANNABIS EARNINGS: On Tuesday, High Tide (HITI) reported fourth quarter loss per share of (C$0.85) on revenue of C$108.2M, which compares to loss per share of (C$0.09) on revenue of C$53.87M for the same period last year. The company's brick-and-mortar locations generated same-store sales growth of 50% year-over-year and 9% sequentially in Q4.
"I am thrilled to share these results, which, once again, deliver record-breaking revenue and adjusted EBITDA which further solidifies High Tide's position as the largest revenue-generating cannabis company in Canada with a current annual run rate of over C$450M. While these numbers demonstrate exponential revenue growth, it's also important to note that we have maintained adjusted EBITDA level profitability for 11 consecutive quarters and that we were cash flow positive from operations during the last fiscal year. In our opinion, this is because we have the strongest retail concept in Canadian cannabis, something that is backed up by the fact that our Cabana Club loyalty program now has approximately 950,000 members across 151 Canadian stores. I am also excited to report that we have already upgraded over 6,000 members into ELITE. As we continue to introduce more ELITE offerings, we anticipate upgrades to continue throughout 2023, providing us with an additional high-margin recurring revenue stream to further boost our bottom line,” said CEO Raj Grover.
The company also announced that it has entered into a non-binding letter of intent Sanity Group.
The company said, “With big progress on legislation expected this spring, the LOI is designed to leverage synergies between both complementary companies and position each to take advantage of potential German adult use legalization within their respective supply chain verticals. With a well-established track record in Germany with respect to medical cannabis, finished pharmaceuticals, and cannabinoid-based consumer goods, High Tide believes that Sanity Group is the best-positioned potential partner in its home market of Germany.”
Additionally on Monday, Flora Growth (FLGC) issued 2023 revenue guidance of $90M-$105M. Analyst consensus, which was $95.62M at the time of the release, has since fallen to $93.12M.
The company said, “Flora’s 2023 revenue guidance reflects expected organic growth in the House of Brands division and expansion of the Commercial & Wholesale division capabilities. This forecasted growth also incorporates Flora’s new German-based business as established through the acquisition of Franchise Global Health. Flora’s German operations solidify a crucial foothold in a growing international cannabis market, providing a unique opportunity for operational synergies and diversified growth. Revenue growth is also expected to reflect the continued successful execution of product development and pricing strategies. It is expected that the House of Brands and Commercial & Wholesale divisions will have roughly equal contributions to the top line, while the Pharmaceutical division is expected to contribute up to 10% of total revenue.”
GREENLANE ENTERS DISTRIBUTION DEAL FOR MEXICO: Greenlane Holdings (GNLN) announced Tuesday that it has entered into distribution agreement with Zhar Capital to distribute its proprietary portfolio of brands in Mexico. Greenlane has partnered with Zhar Capital to promote, market, distribute and sell the Greenlane Brands to retailers for resale in Mexico.
"We look forward to offering our innovative and premium products in the growing Mexico market through our partnership with Zhar Capital," said CEO Craig Snyder. "Their knowledge and expertise of business practices in Mexico allows us to expand into this rapidly growing consumer market in an efficient manner. We are excited to offer our brands in Mexico for many years to come."
AYR WELLNESS DOWNGRADE: Canaccord analyst Matt Bottomley downgraded Ayr Wellness (AYRWF) to Speculative Buy from Buy on Monday with a price target of C$16.50, down from C$21, after the company announced it has terminated its previously disclosed planned acquisition of Gentle Ventures, or "Dispensary 33," an Illinois-based cannabis operator with two retail dispensaries in the Chicago area. Though the firm views the announcement as incrementally positive in the near-term, it has lowered its estimated long-term contribution from the state as a result. However, Canaccord noted that its lower recommendation is not a function of the deal headline, but rather increased concerns over the ability for the company to manage its debt load and the fact that its thinks "the prospect for a material valuation re-rating more speculative in nature" with Ayr's share price down more than 60% since November of last year.
CANNABIS/PSYCHEDELIC STOCKS: Publicly-traded companies in the space include Akerna (KERN), Acreage Holdings (ACRHF), Aleafia (ALEAF), Atai Life Sciences (ATAI), Audacious (AUSAF), Aurora Cannabis (ACB), Avant Brands (AVTBF), Awakn Life Sciences (AWKNF), Body and Mind (BMMJ), Cannara Biotech (LOVFF), Canopy Growth (CGC), Chicago Atlantic (REFI), Clever Leaves (CLVR), Compass Pathways (CMPS), Columbia Care (CCHWF), CordovaCann (LVRLF), Cresco Labs (CRLBF), Cronos (CRON), Curaleaf (CURLF), CURE Pharmaceutical (CURR), CV Sciences (CVSI), Cybin (CYBN), Delic Holdings (DELCF), Delta 9 (DLTNF), Entourage Health (ETRGF), Fire & Flower (FFLWF), Flowr Corporation (FLWPF), General Cannabis (CANN), BZAM (BZAMF), Green Thumb (GTBIF), Goodness Growth (GDNSF), GrowGeneration (GRWG), Hemp (HEMP), HEXO (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), IM Cannabis (IMCC), Wellbeing Digital (KONEF), Khiron Life Sciences (KHRNF), Lowell Farms (LOWLF), Lotus Ventures (LTTSF), MediPharm Labs (MEDIF), MedMen (MMNFF), NewLake Capital (NLCP), Organigram (OGI), Planet 13 (PLNHF), Reunion Neuroscience (REUN), Revitalist (RVLWF), RIV Capital (CNPOF), Relmada (RLMD), RYAH Group (RYAHF), Safe Harbor (SHFS), SLANG Worldwide (SLGWF), Small Pharma (DMTTF), Sproutly (SRUTF), Skye Biosciences (SKYE), SNDL (SNDL), Sunniva (SNNVF), TerrAscend (TRSSF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Tryp Therapeutics (TRYPF), Trulieve (TCNNF), The Valens Company (VLNS), Verano (VRNOF), Village Farms (VFF), Wesana Health (WSNAF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).