Fire & Flower Holdings Corp. (TSX:FAF) (OTCQX:FFLWF) has amended certain terms of its previously announced option agreement and licensing agreement with Fire & Flower US Holdings Inc., formerly American Acres Managers.
What Happened
Under the agreements, the Toronto-based company has the option to acquire Fire & Flower US, which acquisition is expected to occur upon the federal legalization of adult-use cannabis in the United States or when otherwise permitted by the policies of the Toronto Stock Exchange or any other stock exchange on which the company's securities are listed for trading.
Fire & Flower partnered with American Acres Managers to expand across California, Arizona, and Nevada in February 2021.
Highlights Of Amendments To Strategic Agreement
Fire & Flower will continue to have the option to acquire the licensee.
The company's Hifyre technology and analytics platform will receive a one-time implementation fee and ongoing software and support fees for each Fire & Flower branded store operated by Fire & Flower US.
Fire & Flower also agreed to pay the licensee's shareholders an aggregate amount of $5 million and will have the option to pay additional cash amounts.
Upon payment of additional cash amounts, the company may:
- Extend its option to acquire the licensee to February 2028 upon federal legalization of adult-use cannabis in the United States or when such acquisition would otherwise be permitted by the policies of the TSX or any other stock exchange on which the company trades.
- Expand the number of cannabis retail stores that the licensee may operate utilizing the licensed trademarks/intellectual property and/or
- Expand the territory within which the licensee may operate cannabis retailer stores utilizing the licensed trademarks/intellectual property.
Why It Matters
The transactions will result in a high margin US revenue stream created in the Hifyre digital business segment, as well as more favorable terms for Fire & Flower on its purchase option of Fire & Flower US.
Moreover, the amendments establish a framework for the Fire & Flower US network of cannabis retail stores utilizing Fire & Flower to expand within California and Colorado and into other US states.
What's Next?
Trevor Fencott, the company's CEO, said that the move expands the "ability for the Fire & Flower and Hifyre brands to open in key markets ahead of federal permissibility of adult-use cannabis in the US.
"The technology, software, and support fees create an additional high margin revenue channel in our digital business segment," he explained.
"The amended strategic agreements, along with our relationship with the owner of Circle K, Alimentation Couche-Tard, will help position Fire & Flower to one day be a key player in the US cannabis industry," Fencott added.
More recent news from Fire & Flower:
- Fire & Flower Marijuana Retailer Prepares For NASDAQ Listing, Files 40-F With SEC
- Fire & Flower Borrows $30M From Alimentation Couche-Tard To Bolster Its Consumer Digital Platform
- Fire & Flower To Buy Pineapple Express Delivery For $5.3M, 'Powering Its Asset-Light Retail Strategy'
FFLWF Price Action
Fire & Flower's shares traded 0.29% higher at $3.45 per share at the time of writing on Monday morning.
Photo: Courtesy of Romain Dancre on Unsplash
