Hollister Biosciences (HOLL.C) is normally a cannabis company. They have products in 220 dispensaries throughout California, and now they have caught wind that mushrooms might be the next big thing.
In this case, they’re talking about therapeutic mushrooms, and their recent agreement with AlphaMind Brands, a growth stage company, is hoping to leverage their portfolio of certified legal mushroom health products.
“It is our continual objective to broaden our product scope and Alphamind, with its experienced management team, is a perfect foothold for us in the fast-growing market for medicinal mushrooms and complements our existing cannabis and hemp-based product offering. We are excited to bring another promising brand under the Hollister umbrella, especially in such a fast growing and exciting sector,” said Carl Saling, founder and CEO of Hollister.
In addition to their legal mushroom offerings, they’ve hired Dr. Nikos C. Apostolopoulous to explore psilocybin based pharmaceutical treatments. What they have on tap are product SKU’s including cordyceps, lion’s mane, shiitake, oyster and reishi mushroom based liquid tinctures, concentrated mushroom powers, teas and chocolate.
Hollister acquired AlphaMind for CDN$1,200,000, all in shares and more when certain milestones are met:
- The Payment Shares and the Earn-Out Shares will be issued at a deemed value of $0.20 per share;
- The Payment Shares are subject to certain voluntary hold periods as follows: 331/3% until May 30th, 2020; an additional 331/3% until June 30th, 2020; and the remaining 331/3% until August 30th, 2020;
- The Earn-Out Shares will be issued on the earlier of (i) December 31st, 2020, or (ii) upon AlphaMind’s first production run or its first sales of product.
This way, the company incurs no long-term debt, and there’s no need to shuffle the board to add another place.
“We have medicinal mushroom based product SKUs ready to ship and R&D is under way to develop an exciting IP portfolio surrounding psilocybin-based pharmaceutical treatments. Being under the Hollister umbrella will allow us to access additional markets and leverage their existing manufacturing and distribution infrastructure and will be a fundamental part of the future growth of our business,” said Robert Birmingham, chief executive officer of AphaMind Brands.
Earlier this year, they acquired medical cannabis distillate and extraction brand, Venom Extracts, a similar all stock deal worth CAD$20 million, obviously stretching out their paper to see how far it will go.
The biggest draw there was clearly the offered revenue as Venom had reported over $16.4 million in revenue with $2.48 million in EBIDTA from its cannabis concentrates product line, P.H.O concentrates and cartridges.
At the time, the company sported a $15 million market cap, which has now since jumped to $24 million based on the acquisition, but that happens when you acquire a company that made more last year than your company is worth.
And while they’re down 11% today, they’re up more than double since their low at the bottom of COVID-19’s market drop. We can’t say much about the tendency to print paper to cover acquisitions, except that it’s not like anyone’s really offering any fundraising opportunities for cannabis, especially during the age of the coronavirus, but we’ll have to see how this one pays off in the next few months.