- Simply Solventless Concentrates (TSXV:HASH) is giving a hand to help Lifeist Wellness (TSXV:LFST) and its CannMart business
- The two companies have signed a services agreement for the operations of CannMart Inc. and a share purchase agreement where Simply Solventless will acquire all of CannMart shares
- Simply Solventless plans to leverage CannMart’s Ontario facility for packaging, storage, and logistics, enhancing cost-effective shipping across several provinces
- Simply Solventless Concentrates Ltd. last traded at $0.25 per share and Lifeist Wellness Inc. last traded at $0.065 per share
Simply Solventless Concentrates (TSXV:HASH) is giving a hand to help Lifeist Wellness (TSXV:LFST) and its CannMart business.
The two companies have signed a services agreement for the operations of CannMart Inc. and a share purchase agreement for the acquisition of all CannMart shares from Lifeist. CannMart Labs Inc., another subsidiary of Lifeist currently under Companies’ Creditors Arrangement Act proceedings, is not involved in the transactions. The transactions still require approval from the TSXV and Lifeist’s shareholders.
Transaction rationale
“Lifeist has done an exceptional job building the Roilty and Zest Cannabis brands through CannMart, achieving national reach and substantial revenue potential. This acquisition aligns with Simply Solventless Concentrates’ strategic objective of making opportunistic acquisitions,” Jeff Swainson, Simply Solventless’ president and CEO, said in a news release. “The transactions establish Simply Solventless Concentrates as a leader in hydrocarbon concentrates, complementing our existing leadership in solventless concentrates. By the end of 2024, we project to double our annualized gross revenue to C$40.0 million and net income to C$6.2 million. The financing is intended to support these initiatives and enhance our balance sheet with additional working capital. Our focus will be the integration of CannMart, continued profitable organic revenue growth, and further opportunistic acquisitions to add value for our shareholders.”
Lifeist and CannMart profiles
CannMart, a wholly owned subsidiary of Lifeist, operates under Health Canada licenses, producing hydrocarbon extract products with national reach in Canada. The transactions offer significant synergies, including complementary product lines, substantial market share in key provinces, and improved financial metrics. Simply Solventless plans to leverage CannMart’s Ontario facility for packaging, storage, and logistics, enhancing cost-effective shipping across several provinces.
Key pro forma figures:
- Pro forma concentrates market share: Expected No. 2 in Alberta, No. 1 in Saskatchewan and Manitoba, No. 6 in Ontario.
- Pro forma 2024 exit gross revenue: Projected increase to C$40.0 million from C$12.4 million in Q1 2024.
- Pro forma net income: Increase to C$6.2 million from C$2.2 million in Q1 2024.
- Operating costs: Annual reduction of C$5.0 million because of synergies.
- Inventory turnover: Improvement from 0.5x to 1.50x.
- Facility utilization: Increase from 25 per cent to 50 per cent.
- Hydrocarbon extraction: Commissioning by Q4 2024, improving gross margin by approximately C$1 million annually.
CannMart services agreement
Under the services agreement, Simply Solventless will manage CannMart’s operations, receiving 90 per cent of CannMart’s net revenue, while Simply Solventless will pay CannMart’s operating expenses.
Via its own news release, Lifeist management explained that this arrangement would allow the company to immediately enjoy positive cash flow from the CannMart asset.
Share purchase agreement
Simply Solventless will acquire all CannMart shares for C$500,000 in cash, C$500,000 in shares, and a C$1.5 million vendor takeback note. The purchase price will include adjustments based on inventory value and future revenue performance.
Simply Solventless Concentrates’ operational experience and goals
Simply Solventless has successfully maintained positive EBITDA for six consecutive quarters, leveraging advanced operational and sales management systems. Lifeist’s CEO, Meni Morim, praised the company’s profitability and efficiency, noting that the partnership will yield operational synergies and scale benefits for both companies.
Simply Solventless Concentrates Ltd. is out to provide pure, potent, terpene-rich, ready-to-consume cannabis products to discerning cannabis consumers.
Lifeist Wellness Inc. is a health-tech company whose portfolio of wellness companies leverages advancements in science and technology to enable consumers to find their individual path to wellness.
Simply Solventless Concentrates Ltd. (TSXV:HASH) last traded at $0.25 per share.
Lifeist Wellness Inc. (TSXV:LFST) last traded at $0.065 per share.
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(Top image: Simply Solventless Concentrates Ltd.)