/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

CALGARY, AB, June 25, 2024 /CNW/ – Simply Solventless Concentrates Ltd. (TSXV: HASH) (“SSC“) is pleased to announce that it has entered into a services agreement in respect of the operations of CannMart Inc. (“CannMart“) (the “Services Agreement“) and a share purchase agreement with Lifeist Wellness Inc. (“Lifeist“) for the acquisition of all of the shares of CannMart, a wholly owned subsidiary of Lifeist (collectively, the “Transactions“). The agreements related to the Transactions are dated June 25, 2024. CannMart Labs Inc., another of Lifeist’s subsidiaries, which is currently in Companies’ Creditors Arrangement Act (Canada) proceedings, is not involved in the Transactions.

SSC is also pleased to announce a non-brokered private placement of up to 14,000,000 units (“Units“) at a price of $0.25 per Unit for aggregate gross proceeds of up to $3,500,000 (the “Financing“).  Each Unit consists of one common share (“Common Share“) and one-half of one common share purchase warrant (“Warrant“) of SSC, each whole warrant being exercisable for one common share of SSC at a price of $0.40 per share for a period of two years from the date of issue. All securities issued under the Financing will be subject to a hold period expiring four months and one day from the date of issue.

Strategic Rationale of Transaction

Jeff Swainson, SSC’s President & CEO, stated: “Through CannMart, Lifeist has done a fantastic job of building two great brands, Roilty and Zest Cannabis, and achieving national reach and substantial revenue capability. Continuing SSC’s strategic objective of opportunistic acquisitions, these Transactions establish SSC as one of the leaders in hydrocarbon concentrates, taking the baton from Lifeist, and building strongly upon SSC’s leadership position in solventless concentrates. On a proforma basis, we expect to hold the #2 concentrates market share position in Alberta, #1 in Saskatchewan and Manitoba, and #6 in Ontario, and by 2024 year end we project to more than double our current annualized gross revenue to $40.0 million and our net income to $6.2 million, representing post money per share growth rates of 154% and 124%, respectively. The Financing is intended to fund these initiatives and the commissioning of in-house hydrocarbon extraction, while significantly strengthening our balance sheet with additional working capital. Moving forward, the focus of our talented team will be the integration of CannMart, continued profitable organic branded revenue growth and opportunistic acquisitions such that we provide continued value to our shareholders.”¹

Lifeist and CannMart Profile, Transaction Synergies, Proforma Figures

CannMart is a wholly-owned subsidiary of Lifeist, a TSX Venture Exchange (“TSXV“) listed issuer trading under the symbol “LFST”. Lifeist is a health-tech company that leverages advancements in science and technology to build breakthrough ventures that transform human wellness. For more information regarding Lifeist and CannMart, including financial information, see Lifeist’s SEDAR+ profile at www.sedarplus.ca.

CannMart owns the brands Roilty (www.roiltyconcentrates.com) and Zest Cannabis (https://zestcannabis.ca), and these brands are leaders in hydrocarbon extract products in Alberta, Ontario, Saskatchewan, and Manitoba, and with a presence in Quebec, the Maritimes, and the Territories.

CannMart has a Health Canada licensed facility in Ontario near the Ontario Cannabis Store warehouse.

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 in Saskatchewan and Manitoba, 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. 

CannMart Inc. Services Agreement

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 Health Canada and approval of the shareholders of Lifeist.  There is no guarantee that the Acquisition will close on the terms set forth herein or at all.

$3,500,000 Private Placement of Units

The Financing is expected to close on or around July 5, 2024. Each Unit is priced at $0.25 per Unit. Each Unit consists of one Common Share and one-half of one Warrant, with each whole Warrant being exercisable for one Common Share at a price of $0.40 per share for a period of two years from the date of issue. If, at any time prior to the expiry date of the Warrants, the closing price of the Common Shares on the TSXV is greater than $0.40 for any 10 consecutive trading days, SSC may, at SSC’s discretion, and at any time going forward, deliver a notice to the holders of Warrants accelerating the expiry date of the Warrants to the date that is 30 days following the date of such notice (the “Accelerated Exercise Period“). Any unexercised Warrants shall automatically expire at the end of the Accelerated Exercise Period.

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 October 31, 2023 which is available on SSC’s SEDAR+ profile at www.sedarplus.ca.

Board and Management Changes

Jeff Lawrence, SSC’s Vice President, Sales & Marketing, has been promoted to the position of Chief Commercial Officer. 

SSC has granted to several employees an aggregate of 575,000 stock options under SSC’s equity incentive plan at an exercise price of $0.25 per share and expiring on June 20, 2027. The option grants and appointment of Jeff Lawrence remains subject to the final approval of the TSX Venture Exchange.

Colin Davison, a member of SSC’s board of directors, and Randeep Gill, SSC’s Vice President, Commercial, have resigned due to personal reasons.  SSC thanks Colin and Randeep for their contributions. 

About Simply Solventless Concentrates Ltd.

SSC is a public company incorporated under the Business Corporations Act (Alberta). SSC’s mission is to provide pure, potent, terpene-rich ready to consume cannabis products to discerning cannabis consumers.

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 Health Canada, the ability to realize expected revenue and cost synergies of the Transactions on the timelines expected, the risk that the businesses will not be integrated successfully, the ability to maintain relationships with customers, employees and suppliers, the timing and market acceptance of products, competition in SSC’s markets, SSC’s reliance on customers, fluctuations in interest rates, SSC’s ability to maintain good relations with its customers, employees  and other stakeholders, changes in law or regulations, SSC’s ability to protect its intellectual property, as well as other risks and uncertainties, including those described in SSC’s filings available on SEDAR+ at www.sedarplus.ca. The reader is cautioned that assumptions used in the preparation of any forward-looking statements may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties and other factors, many of which are beyond the control of SSC. The reader is cautioned not to place undue reliance on any forward-looking statements. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

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:

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Simply Solventless Concentrates Ltd.

Featured image: Megapixl © Saletomic

Disclaimer