Kiaro Holdings Acquires Hemisphere Cannabis, Expects Annual Revenue Of $42.7M

Canadian cannabis retailer Kiaro Holdings Corp. KO has wrapped up a transaction with Aegis Brands Inc. to acquire its subsidiary, 2734524 Ontario Inc., which is doing business as Hemisphere Cannabis Co.

The Deal Details

The acquisition includes a portfolio of seven Ontario-based retail locations and an additional two locations, subject to potential future development.

Under the terms of the agreement, Kiaro issued to Aegis 61.3 million of its common shares and 6.7 million common share purchase warrants. Each warrant gives holders the right to acquire one additional share of Kiaro at 16 cents per share, subject to customary adjustments.

Aegis is also entitled to receive a further 6.7 million of Kiaro's shares once it achieves certain commercial milestones in relation to the existing locations within the first year following the deal's closing.

Moreover, as part of the transaction, Kiaro issued Aegis a secured, non-interest bearing, and non-convertible promissory note in the amount of $104,628.90, which is secured against the assets of the Vancouver-based company and is repayable on or before September 24, 2022.

In addition, Steven Pelton, CEO of Aegis Brands, has been appointed as a director of Kiaro.

Haywood Securities acted as financial advisor to Kiaro Holdings Corp., while MLT Aikens LLP provided legal counsel for the transaction. Aegis Brands tapped Kronos Capital Partners and Goodmans LLP to serve as financial and legal advisors, respectively.

What It Means For Kiaro

The deal has doubled Kiaro's retail footprint and allows it to establish its presence in the Ontario cannabis retail market, bringing to 16 the number of operational licensed cannabis retail stores nationwide. With the two Hemisphere potential development locations, the operational footprint would be bolstered to 18 stores.

Kiaro expects forecasted annual revenue to increase to $42.7 million with a gross margin of $13.7million immediately following the closing.

According to its earnings report published in May, the company recorded revenues of CA$17.1 million ($13.5 million) in 2021, representing a year-over-year increase of 230%.

What's Next

Daniel Petrov, CEO of Kiaro, explained that boosting the company's retail footprint to a potential of 18 stores by the end of the fiscal year will be "beneficial for shareholders as we drive towards $50 million in target revenue."

"Kiaro's past operational successes combined with our objective of exponential revenue and EBITDA growth demonstrate our performance advantage within the Cannabis Industry," Petrov added.

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