Flora Growth Invests In Hoshi Aiming To Reach Important European Markets Faster

Flora Growth Corp. FLGC revealed Tuesday it has closed the previously announced €2 million ($2.35 million) investment in Hoshi International Inc. while also increasing its fully-diluted ownership in Hoshi through a securities swap. Hoshi is a European-focused, fully integrated medical cannabis company led by a team of renowned cannabis entrepreneurs.

Terms Of The Agreement

Further, Flora Growth and Hoshi have agreed to strengthen the terms under which Flora Growth is investing in Hoshi pursuant to a binding memorandum of agreement, including the following terms:

• Flora is entitled to nominate one director to Hoshi’s Board of Directors, namely Luis Merchan, Flora Growth’s president and CEO
• Flora will be Hoshi’s preferred supplier of genetic material and finished cannabis derivative products at its cultivation and processing facility in Portugal, subject to the parties entering into a definitive agreement by October 1, 2021
• Flora will hold a right of first refusal to supply any cannabis oil or derivative products acquired by Hoshi or any of its affiliates at its processing facility in Malta, subject to the parties entering into a definitive agreement by October 1, 2021
• Hoshi will use commercially reasonable efforts to grant Flora access to its European Union Good Manufacturing Practices (“EU-GMP”) auditors for the purposes of assisting Flora to obtain EU-GMP certification at its Cosechemos cultivation and extraction facility in Colombia

“The Hoshi team has developed a strong presence in Europe, and our high-quality, low-cost, medical-grade cannabis products and well-known global brands give both our companies a competitive advantage in one of the fastest-growing cannabis markets in the world,” stated Luis Merchan, president and CEO of Flora. “We are excited to increase our alignment with the Hoshi management team and believe the partnership will be much greater in scope than only using their Portugal and Malta facilities as a European importation gateway for our Colombian cannabis flower and derivatives.”

Merchan added that teaming up with Hoshi will help Flora reach the European market faster.

Flora will receive 2,000,000 warrants from Hoshi management to acquire 2,000,000 common shares of Hoshi in exchange for 225,000 Flora common shares. This exchange will strengthen the long-term strategic alignment between Hoshi management and Flora Growth as well as increasing Flora’s stake in Hoshi.

As a component of the securities swap, Hoshi management will be subject to a share lock-up. The lock-up period will be the lesser of 9 months or the listing of Hoshi’s shares on a stock exchange.

Price Action
Flora Growth’s shares were trading 1.75% lower at $10.95 per share at the time of writing Tuesday morning.

Photo: Courtesy of Jeff W on Unsplash