SIMPLY SOLVENTLESS ENTERS INTO TRANSFORMATIVE SERVICES AND ACQUISITION AGREEMENTS TO ACQUIRE CANNMART INC. AND ANNOUNCES $3.5 MILLION PRIVATE PLACEMENT OF UNITS
/NOT FOR DISTRIBUTION TO
SSC is also pleased to announce a non-brokered private placement of up to 14,000,000 units ("Units") at a price of
Strategic Rationale of Transaction
__________________________ |
1 Market share data obtained from Headset (www.headset.io) and estimated on an aggregate basis. |
Lifeist and CannMart Profile, Transaction Synergies, Proforma Figures
CannMart is a wholly-owned subsidiary of Lifeist, a
CannMart owns the brands Roilty (www.roiltyconcentrates.com) and Zest Cannabis (https://zestcannabis.ca), and these brands are leaders in hydrocarbon extract products in
CannMart has a
Key Transaction synergies and projected proforma figures are as follows:
- Complimentary Products: SSC does not currently sell hydrocarbon extracts, and the Transactions give SSC a leading position in that category through CannMart.
-
Proforma Concentrates Market Share: Expected to be proforma #2 concentrates market share in
Alberta , #1 inSaskatchewan andManitoba , and #6 in Ontario. -
Proforma 2024 Exit Gross Revenue: 220% increase in gross revenue, from
$12.4 million annualized in Q1 2024 to$40.0 million proforma annualized in Q4 2024. -
Proforma Normalized Net Income: 182% increase in normalized net income, from
$2.2 million annualized in Q1 2024 to$6.2 million proforma annualized in Q4 2024 (normalized net income is a non-IFRS measure. See "Non-IFRS Financial Measures" below). -
Proforma Gross Revenue per Share: A 154% increase in gross revenue per share, from
$0.23 /share annualized in Q1 2024 to$0.59 /share proforma annualized in Q4 2024. -
Proforma Net Income per Share: 124% increase in net income per share, from
$0.04 /share annualized in Q1 2024 to$0.09 /share proforma annualized in Q4 2024. -
Proforma Operating Costs:
$5.0 million proforma annual reduction in operating costs due to significant synergies and the reduction of duplicated resources. - Proforma Inventory Turnover: A 219% improvement in inventory turnover from approximately 0.5x annualized in Q1 2024 to 1.50x proforma annualized in Q4 2024.
- Proforma Current Ratio: A 63% improvement in current ratio from approximately 0.5x annualized in Q1 2024 to 1.50x proforma annualized in Q4 2024.
- SSC Facility Utilization: Expected to increase SSC's current facility utilization from approximately 25% to 50%.
-
CannMart Facility: The CannMart facility will serve as a packaging, storage, and logistics hub for both CannMart and SSC products and brands, allowing more cost-effective shipping to
Ontario ,Manitoba ,Quebec , and the Maritimes. - 2024 Business Plan: Achieves planned exit 2024 provincial product listings, annualized gross revenue, and annualized net income by July, 2024.
-
Hydrocarbon Extraction: SSC plans to commission in-house hydrocarbon extraction by Q4 2024, increasing gross margin by approximately
$1,000,000 per year.
Under the Services Agreement, SSC will help to manage the day-to-day operations of CannMart.
Key terms of the Services Agreement are as follows:
- SCC will receive the benefit of 100% of CannMart's revenue, less a service fee ("Service Fee") of 10% of net revenue. On a net basis, SSC will receive benefit of 90% of CannMart's net revenue.
- SSC will pay 100% of CannMart's operating expenses.
- All Service Fee payments paid by SSC to CannMart during the term of the Services Agreement will be deducted from the purchase price in respect of the acquisition of CannMart.
- SSC will receive the benefit of a further purchase price adjustment to reflect
$500,000 of CannMart inventory at the effective date of the Services Agreement. - The Services Agreement will terminate upon closing of the acquisition of CannMart.
Share Purchase Agreement
SSC will acquire all the issued and outstanding shares of CannMart on the following terms (the "Acquisition"):
-
Purchase Price:
$500,000 cash,$500,000 in Units on the same terms as the Financing, and a vendor takeback note ("VTB") of$1,500,000 on closing of the Acquisition. -
Bonus Payment: A bonus payment equal to 20% of CannMart gross revenue generated over
$3.0 million in each of the quarters following the date of the Services Agreement. The bonus payment will be satisfied by an increase in the principal amount of the VTB. - Working Capital & Debt: SSC will assume zero accounts payable, debt, or working capital.
-
CannMart Assets: Through the Acquisition, SSC will indirectly acquire all of CannMart's provincial product listings, intellectual property (including the brands Roilty and Zest Cannabis), facility equipment and security systems, and
Health Canada licences.
The valuation metrics of the Acquisition are as follows:
- Acquisition valuation of approximately 0.18x estimated 12 month forward gross revenue (net of inventory acquired).
- Assumes approximately
$20 million annual gross revenue.
Closing of the Acquisition is subject to a number of conditions precedent, including but not limited to the approval of the TSXV, notification which is satisfactory to
The Financing is expected to close on or around
All securities issued under the Financing will be subject to a hold period expiring four months and one day from the date of issue.
SSC intends to use the net proceeds of the Financing to facilitate the Services Agreement, to fund the Acquisition, and to commission in-house hydrocarbon extraction equipment.
The Financing is subject to the approval of the TSXV.
On a proforma basis, assuming completion of the maximum Financing, SSC is expected to have approximately 67.8 million common shares outstanding (basic), of which approximately 25% will be held by insiders. Of SSC's outstanding common shares, approximately 17.0 million (26%) are escrowed pursuant to TSXV policies. Further details with respect to SSC's escrowed securities can be found in SSC's filing statement dated
Board and Management Changes
SSC has granted to several employees an aggregate of 575,000 stock options under SSC's equity incentive plan at an exercise price of
About
SSC is a public company incorporated under the Business Corporations Act (
For more information regarding SSC, please see www.simplysolventless.ca.
Third-Party Information
All third-party information contained herein, including information regarding CannMart, has not been independently verified by SSC. While SSC believes such information to be reliable, SSC makes no representation or warranty as to the accuracy of such information.
Notice on Forward Looking Information
This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities laws. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "will", "estimates", "believes", "intends", "expects", "projected", "approximately" and similar expressions which are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements concerning the benefits of the Transactions, including expected market position, financial projections and synergies of the Transaction, the use of proceeds of the Financing, the expected closing date of the Financing, revenue growth, SSC completing opportunistic acquisitions, capitalizing on SSC's business plan and SSC's results of operations and performance. SSC cautions that all forward-looking statements are inherently uncertain, and that actual performance may be affected by a number of material risks, factors, assumptions and expectations, many of which are beyond the control of SSC, including expectations and assumptions concerning SSC, the ability to satisfy conditions precedent to the closing of the Acquisition, including approval of the TSXV, Lifeist's shareholders, and
The forward-looking statements contained in this press release are made as of the date of this press release, and SSC does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.
Future Oriented Financial Information
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about gross revenue, net income, operating costs, current ratio and inventory turnover of SSC, which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this document was approved by management as of the date of this document and was provided for the purpose of providing further information about SSC's future business operations assuming closing of the Acquisition. SSC and its management believe that FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, SSC's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results. SSC disclaims any intention or obligation to update or revise any FOFI contained in this document, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein. Differences in the timing of capital expenditures or revenues and variances in production estimates can have a significant impact on the key performance measures included in SSC's guidance. SSC's actual results may differ materially from these estimates.
Non-IFRS Financial Measures
This press release includes references to "normalized net income", which is not defined under International Financial Reporting Standards (IFRS). The intent of this non-IFRS measure is to provide additional useful information to investors and analysts. This non-IFRS measure does not have a standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other entities. As such, this non-IFRS measure should not be considered in isolation or used as a substitute for measures of performance prepared in accordance with IFRS.
Normalized net income is calculated as income plus share compensation expense. Normalized Net Income is considered as a useful measure by management of SSC to understand the profitability of SSC excluding the effects of certain non-operating items.
The following table reconciles net income (loss) to normalized net income:
|
Three months ended |
|
|
$ |
$ |
|
Actual |
Projected |
Net and comprehensive (loss) |
502,536 |
1,500,000 |
Add (deduct): |
|
|
Gain on disposal |
- |
- |
Acquisition of |
- |
- |
Share compensation expense |
43,969 |
50,000 |
Normalized Net Income |
546,505 |
1,550,000 |
Annualized (x4) |
2,186,020 |
6,200,000 |
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.
Neither
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