- Entering into two conditional asset purchase agreements to acquire a total of six retail cannabis locations in Ontario, which will be operated under the “Value Buds” banner;
- Acquiring the Queen Street West “Nova Cannabis” store and converting it to the “Value Buds” banner;
- Opening two additional “Value Buds” stores in Toronto;
- Is in the process of applying to graduate to the Toronto Stock Exchange from the TSX Venture Exchange;
- Adopting an equity incentive plan to tie management compensation to the performance of the common shares of Nova; and
- Retaining new investor relations and marketing advisory firms.
Growth in Ontario: On Track to open at least 30 Value Buds stores in 2021
Nova has entered into 21 lease agreements for new retail locations across Ontario that will serve the communities where the value-conscious cannabis consumer works, shops, and lives. Nova anticipates all of these locations will be built and ready to open by the end of 2021 (with stores operating as soon as Retail Store Authorizationsand approvals have been obtained from the Alcohol and Gaming Commission of Ontario. An additional 30 plus locations in Ontario are in various stages of due diligence and negotiation with landlords.
Nova has also signed two asset purchase agreements to acquire a total of six retail store locations in Ontario from two separate entities. All six of these stores have received RSAs from the AGCO and will open to the public upon receiving approval to open from the AGCO.
“We are aggressively executing against our plan to expand the Value Buds banner this year and the acquisition of these six locations in Ontario provides us greater speed to market and compliments our organic expansion plans,” said Darren Karasiuk, CEO of Nova. “Each of the six locations has been issued a conditional RSA and work will begin immediately upon closing the Transactions to convert the stores to the Value Buds banner, and to obtain approval to open from the AGCO, just in time to take full advantage of the anticipated summer demand.”
Total consideration payable on closing, for all six locations, will be $0.8 million in cash and $1.1 million in Shares, based on the 10-day volume weighted average price (VWAP) of the Shares on June 1, 2021. Completion of the transactions are conditional upon Nova’s satisfaction of its due diligence review, obtaining all necessary third-party approvals and consents, including TSXV approval of the Transactions and listing of the Shares, and other customary conditions for transactions of this nature.
Acquisition of Queen Street West “Nova Cannabis” and Conversion to “Value Buds”
On May 11, 2021, the Company completed the acquisition of the “Nova Cannabis” store located at 499 Queen Street West, Toronto, which was previously operated under an agreement between a subsidiary of the Company and the license holder who obtained one of the first 25 retail store authorizations in Ontario via the Ontario lottery process (the “Applicant“). On November 29, 2020, the Applicant exercised its option under the agreement to require Nova to purchase the assets of the store for $1.0 million, plus customary adjustments. On May 14, 2021, the Company converted the store to the “Value Buds” banner.
Two New Value Buds Stores Opened in Toronto
On May 14, 2021, the Company opened Value Buds Lansdowne, at 1287 Bloor Street West, Toronto, and, on May 19th, opened Value Buds Queen Street East, at 728 Queen Street East, Toronto.
“As previously announced, the conversion of our Nova Cannabis stores in Alberta to the Value Buds banner is proceeding at or better than expectations, and early results are proving out our thesis that there is significant demand for a value-focused cannabis retailer”, noted Karasiuk. “Between our acquisition of six soon to open locations, the three Toronto locations we opened in May and our robust pipeline of stores under development, we are well on track to have a minimum of 30 Value Buds stores open in Ontario, and a minimum 60 cannabis retail stores operating in Alberta and Saskatchewan by year end 2021.”
Application for Graduation to TSX
The Company is pleased to announce that it is in the process of applying for graduation from the TSXV to the TSX. Listing on the TSX is subject to the Company fulfilling all requirements of the TSX. The TSX is currently in the process of reviewing the Company’s initial application documents.
Adoption of 2021 Equity Incentive Plan
On May 17, 2021, the Company’s board of directors (the “Board“) adopted a new equity incentive plan (the “2021 Equity Incentive Plan“). The purpose of the 2021 Equity Incentive Plan is to develop senior management’s interests in the Company’s growth by providing them with an opportunity to acquire proprietary interests in Nova, to attract and retain valuable individuals to the Company using a competitive method of compensation, and to align the interests of senior management with the interests of shareholders by applying a compensation mechanism which will promote maximized distributions to shareholders and long-term growth.
The maximum number of Shares available for issuance from treasury pursuant to the exercise or redemption, as applicable, of awards granted under the 2021 Equity Incentive Plan, together with Shares issuable pursuant to all other security-based compensation arrangements of the Company, shall not exceed 10% of the total issued and outstanding Shares (calculated on a non-diluted basis). In accordance with the foregoing, for so long as the Shares remain listed on the TSXV, the number of Shares available for issuance from treasury pursuant to the exercise or redemption, as applicable, of awards granted under the 2021 Equity Incentive Plan, together with Shares issuable pursuant to all other security-based compensation arrangements of the Company, shall be 5,668,568. The types of awards available under the 2021 Equity Incentive Plan include options, restricted share units, performance share units, deferred share units, and dividend-equivalent rights.
The TSXV has conditionally approved the 2021 Equity Incentive Plan subject to, among other things, the receipt of disinterested Shareholder approval at the next annual and special meeting of the shareholders of the Company to be held on June 22, 2021 (the “Meeting“). Further details regarding the 2021 Equity Incentive Plan are included in the management information circular of the Company which has been delivered to shareholders and filed on SEDAR in connection with the Meeting.
Retention of Investor Relations and Marketing Firms
Nova has also announced that it has retained the services of Loderock Advisors Inc. (“Loderock Advisors“) to provide strategic investor relations and capital markets communication services to the Company, and have retained Hybrid Financial Ltd. (“Hybrid Financial“) to provide marketing services to the Company.
LodeRock Advisors is a group of senior capital markets communications executives who develop and execute communications programs in order to help companies achieve their capital markets objectives and capture the full potential of their public listing. The engagement of LodeRock Advisors remains subject to the approval of the TSXV. Under the terms of the agreement with LodeRock Advisors, which will continue until either party has terminated the agreement upon thirty days’ notice, Nova will pay LodeRock Advisors a monthly fee of $12,000 for ongoing strategic communication services. At the time of this agreement neither LodeRock Advisors, nor its principals, have any direct or indirect interest in any Shares.
Hybrid Financial is a sales and distribution company that has been engaged to heighten market and brand awareness for Nova and to broaden the Company’s reach within the investment community. Using a data driven approach, Hybrid Financial provides its clients with comprehensive coverage of both American and Canadian markets. Hybrid Financial has agreed to comply with all applicable securities laws and policies of the TSXV, and any other exchange upon which the Shares are traded, in providing its services. Hybrid Financial has been engaged by the Company for an initial period of six months (the “Initial Term“), which Initial Term shall be renewed automatically for successive periods thereafter, unless terminated by the Company in accordance with the agreement. Hybrid Financial will be paid a monthly fee of $15,000, plus applicable taxes, during the Initial Term.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements or information (collectively “forward-looking statements“) within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “continue”, “anticipate”, “will”, “should”, “plan”, “intention”, and similar words suggesting future events or future performance. All statements and information other than statements of historical fact contained in this news release are forward-looking statements. In particular, this news release contains forward-looking statements pertaining to: Nova’s retail cannabis business strategy, including organic growth and strategic acquisitions; Nova’s discount pricing model; the conversion of Nova Cannabis stores to the Value Buds banner and the timing thereof; the Company’s 2021 objectives, including planned construction of new stores, timing of new store openings, evaluation of potential sites and sales growth, particularly in the Value Buds banner; the ability of the Company to obtain government licenses for its new stores; and expectations as to consumer demands.
With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things: the Company’s ability to identify locations for, construct and open, new stores and the cost related thereto; the availability of hardware and equipment for those stores; government regulation and applicable laws will not change in a manner adverse to the Company; receipt of necessary regulatory approvals to open new stores; the Company’s ability to obtain leases for new sites and attract the necessary personnel to operate new stores; the cost of converting existing stores to the Value Buds banner; demand for the products the Company sells; other factors that will drive sales growth in the Value Buds banner; availability of acquisition opportunities; sustainability of competitors’ businesses and competition in the retail cannabis industry, including from the illicit cannabis market; consumer demands; and factors that influence consumer behavior.
Although the Company believes that the expectations reflected in the forward-looking statements, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations and assumptions will prove to be correct, especially given the unprecedented uncertainty of the full extent and impact of COVID-19. Readers should not place undue reliance on forward-looking statements included in this news release. Forward looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause actual performance and financial results to differ materially from any estimates, forecasts or projections. These risks and uncertainties include, among other things, the duration and severity of the COVID-19 pandemic on the business, operations and financial condition of the Company; the risk that Nova will be unable to execute its strategic plan and growth strategy, as planned, without significant adverse impacts from various factors beyond its control; dependence on suppliers; potential delays or changes in plans with respect to capital expenditures and the availability of capital on acceptable terms; risks inherent in the retail cannabis industry; competition for, among other things, customers, supply, capital and skilled personnel; changes in labour costs and markets; incorrect assessments of the value of acquisitions; general economic and political conditions in Canada (including Alberta and Ontario), and globally; industry conditions, including changes in government regulations; fluctuations in foreign exchange or interest rates; unanticipated operating events; failure to obtain regulatory and third–party consents and approvals when required; changes in tax and other laws that affect us and our shareholders; the potential failure of counterparties to honour their contractual obligations; stock market volatility; and the other factors described in the Company’s public filings available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this news release are made as of the date hereof. Except as expressly required by applicable securities legislation, Nova does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.