Simply Solventless Concentrates Ltd. has launched a non-brokered private placement financing for gross proceeds of up to $5 million. The proceeds are expected to fund the purchase price of the previously announced acquisition of all Delta 9 Bio-Tech Inc.’s issued and outstanding shares.  

The private placement is planned to come from the financing of up to 5,000 secured convertible debenture units at $1,000 per debenture unit. It includes a $3 million lead order from institutional investor Plaza Capital. 

However, no binding definitive agreement has been entered into regarding the financing, and there is no guarantee that it will be completed on the disclosed terms or at all. 

At the end of 2024, Simply Solventless Concentrates Ltd. entered into a share purchase agreement with Delta 9 Cannabis Inc. to acquire all of Delta 9 Bio-Tech Inc.’s issued and outstanding shares.

When it was first announced, the deal was expected to add around $12 million in revenue. 

The acquisition of all the issued and outstanding shares of Delta 9 Bio-Tech Inc. is anticipated to close in early February. Simply Solventless Concentrates (SSC) also announced what they said was record expected monthly revenue in January 2025 of approximately $4.5 million. This did not include revenue from Delta 9 Bio-Tech. 

SSC, which does not produce flower itself, says that the acquisition of Delta 9 will help the company continue to make inroads in the dried flower market following its recent acquisition of pre-roll manufacturer ANC Inc. for $10 million. SSC expects that the all-in cash cost to cultivate cannabis through Delta 9 will be approximately $0.60-$0.70 per gram, among the lowest for indoor cannabis in Canada.

“It was important to fund the Bio-Tech acquisition in a manner that limited dilution such that we could maximize earnings per share,” said SSC president & CEO Jeff Swainson. “This financing is expected to accomplish that goal, with a $1.00/share conversion price and a $1.20/share warrant exercise price, reflecting 30% and 56% premiums to SSC’s ten-day volume weighted average price, respectively. 

“These premiums are indicative of the confidence that high-quality institutional investors such as Plaza Capital have in SSC’s equity value, and such confidence will be a core facilitator of continued explosive growth for SSC,” Swainson added. “SSC continues to post monthly record revenue due to both organic growth and acquisitions, and SSC’s near-term product launches are a testament to SSC’s vigilant focus on providing a suite of cannabis products that are among the highest quality available in Canada today.”

Each Debenture Unit consists of one $1,000 principal value convertible debenture of SSC and 1,000 common share purchase warrants of SSC. The units mature 48 months from the date of issuance and have an interest rate of 11% per annum. They are payable quarterly in cash or in SSC common shares at the conversion price, at the option of each holder.

The Debentures are convertible into SSC common shares at $1.00 per SSC common share, representing a 30% premium to SSC’s 10-day VWAP trading price of $0.77, at any time during the term of the debentures at the option of each holder.

Each debenture will be secured by all of SSC’s property, both currently owned and expected to be acquired. This will be evidenced by a general security agreement and a pledge of shares of SSC’s subsidiaries.

At maturity, the principal amount outstanding on the debentures will be repaid by SSC in cash. SSC will have a right to prepay or redeem a part of the entire principal amount of the Debentures at any time prior to maturity by providing a minimum of 10 days’ notice.

Each warrant is exercisable into one SSC common share at $1.20 per common share for a period of four years from the date of issuance. If the maximum financing is completed, a total of 5,000,000 Warrants will be issued. The warrant exercise price of $1.20 per common share represents a 56% premium to SSC’s 10-day VWAP trading price of $0.77.

SSC also announced the launch of 25 new products in the recreational markets of Alberta and Ontario under its existing brands, Astrolab, Frootyhooty, Lamplighter, and Zest.

SSC reports that Bio-Tech currently produces approximately 9,000 kilograms of cannabis per year. The cannabis processor believes that with roughly $4 million in capital investment, production could potentially increase to 15,000-18,000 kilograms per year, but this is not planned at this time.

As Bio-Tech is being acquired through CCAA proceedings, SSC also says it assumes no debt or liabilities from the acquisition and believes that Bio-Tech will contribute meaningfully to further expanded revenue and adjusted EBITDA in Q1 2025. SSC will provide Q1 2025 guidance in the weeks after the closing of the acquisition.

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