Inner Spirit Archives - Green Market Report

Debra BorchardtMay 5, 2021

Sundial Growers Inc. (NASDAQ: SNDL) is buying Inner Spirit Holdings Ltd. (CSE: ISH) (OTCQB: INSHF) in a deal valued at approximately $131 million. Inner Spirit is better known as the retailer and franchisor of Spiritleaf recreational cannabis stores across Canada. The Spiritleaf network includes 86 franchised and corporate-owned locations, all operated with an entrepreneurial spirit and with the goal of creating deep and lasting ties within local communities. The deal is expected to close in the third quarter of 2021.

Spiritleaf’s franchised and corporate stores have served 2.3 million guests in 2020. The retail brand has earned a reputation as a knowledgeable and trusted source of recreational cannabis while offering a premium consumer experience. Spiritleaf opened its 86 ^thstore on April 28, 2021, in Edmonton, Alberta, and is projected to exceed the 100-store milestone in the summer of 2021.

“Sundial is the ideal company to acquire Inner Spirit and support the future development of the Spiritleaf retail cannabis brand,” said Darren Bondar, Founder, President and Chief Executive Officer of Inner Spirit. “The Sundial team has shown a strong commitment to our management team, franchise partners, and employees as well as our growth ambitions. The combination will enable us to further expand our position as the country’s leading retail cannabis brand for customers and communities and will open up new market opportunities to us. We’re also very pleased Inner Spirit shareholders will be able to participate in our future success through an ongoing equity ownership.”

Sundial made noise in January when the company priced an offering in which it would receive approximately $100 million. At the time, the company said it planned on using the money for possible acquisitions of, or investments in, equipment, facilities, assets, equity or debt of other businesses, products or technologies and for working capital and general corporate purposes. In November, Sundial reported that its third-quarter revenue fell 36% to just $15.5 million. The company also delivered a whopping net loss of $71.4 million. This was almost double the net loss of $32.8 million for the three months ending June 30, 2020.

Deal Terms

Inner Spirit’s shareholders will receive, for each Inner Spirit common share held, (i) $0.30 in cash and (ii) 0.0835 of a Sundial common share (representing $0.09 per Inner Spirit common share based on the 10-day volume-weighted average price of Sundial common shares on the Nasdaq Capital Market), for total consideration of $0.39 per Inner Spirit common share. The purchase price of $0.39 per Inner Spirit common share represents a premium of 54.8% to the 10-day VWAP of Inner Spirit common shares on the Canadian Securities Exchange (the “CSE”) and a premium of 62.5% to the closing price of Inner Spirit common shares on the CSE on May 4, 2021.

“Sundial becomes a stronger and more diverse cannabis company by acquiring Inner Spirit and the Spiritleaf retail store network,” said Zach George, Chief Executive Officer of Sundial. “Inner Spirit has successfully created a franchise-based retail network that has grown from coast to coast and offers a differentiated and premium in-store experience to consumers. Our shared Albertan roots and commitment to data-driven consumer insights make for an ideal partnership. Sundial’s capital base will enable us to support continued expansion and deepen the capabilities of the Spiritleaf retail brand.”

The company said the deal is expected to provide modest synergies and economies of scale due to the different business models of Sundial and Inner Spirit.

Debra BorchardtAugust 24, 2020

Canadian-based Inner Spirit Holdings Ltd. (CSE: ISH) (OTC:INSHF)known for its national network of Spiritleaf retail cannabis stores reported system-wide retail sales of $20.5 million in the second quarter of 2020, an increase of 343% compared with $4.6 million in the second quarter of 2019. This was a 19% increase sequentially from the first quarter’s $17.1 million. Total revenue increased 575% to $5.4 million in the second quarter versus $0.8 million in the second quarter of 2019. This increased 31% sequentially from $4.1 million in the first quarter of 2020.

Inner Spirit delivered a total net loss of $1.2 million in the second quarter of 2020, or $0.01 per share, compared with $2.8 million, or $0.02 per share, in the second quarter of 2019.

“The company’s financial results for this year’s second quarter show impressive year over year growth with over $20 million recorded in system-wide retail salesfor the Spiritleaf network. This performance comes at a time when the country is facing ongoing challenges related to the COVID-19 pandemic,” said Darren Bondar, President, and CEO of Inner Spirit. “The retail cannabis sector has been fortunate to be considered an essential service in our operating markets, and we have been able to continue advancing our business strategy this year. For the second quarter and for the first half-year of 2020, we achieved positive Adjusted EDITDA¹ and positive cash flow from operations.”

New Spiritleaf stores opened recently brought the number of locations to 58 across the country – the most cannabis stores being operated under a single retail brand in Canada. Additionally, potential store locations have been conditionally secured in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Newfoundland and Labrador.

Franchise Model

The company touts its revenue-generating business model with more than 100 Spiritleaf store locations planned in local markets across Canada – all supported by franchise agreements with local entrepreneurs entering the business and applying their capital to growing the network. The company charges a $25,000 upfront franchise fee, 5% royalty on gross sales, and 1% of gross sales allocated to Spiritleaf advertising fund.

“We are continuing to expand the Spiritleaf footprint with recent store openings in Alberta, Ontario, and Newfoundland and Labrador. We are able to grow the Spiritleaf network of franchised and corporate-owned stores due to the excellent support and loyalty of our customers, franchise partners, employees, investors, and strategic partners. We have built a strong platform that we will further leverage as we expect to add some 20 additional store locations by the end of the year. We are focused on providing a premium and educational shopping experience to consumers and being the knowledgeable, authentic, and trusted voice for the cannabis experience in our communities,” added Bondar.