Thoughtful Brands Inc (CSE:TBI) (FRA:1WZ1) (OTCQB:PEMTF) said it has canceled the acquisition of Franchise Cannabis Corp (FCC), previously announced in January, a move it says, which will provide stronger sales and operations networks in North America and Europe by allowing its existing joint venture with FCC to remain in place.
The company, which researches, develops, markets, and distributes natural health products through various brands, said positive changes to the market during the first quarter of 2020 within the cannabis and cannabidiol (CBD) sectors were key factors in the decision not to move ahead with the FCC acquisition.
Thoughtful Brands added that over the past two quarters, it has focused on increasing profitability through improved customer retention rates, which had contributed to higher net margins as customer acquisition costs were front end loaded and initial margins were typically lowered.
The company also said it has commenced integration of the production of distillate and isolate produced by its subsidiary, American CBD Extraction, and that new superior quality CBD products have been formulated and are planned to be introduced to the market in the second quarter of 2021. In addition to the new product lines, the company said it plans to establish a supply chain for its wholesale hemp biomass throughout the US and Europe, which it said will increase topline revenues and contribute to overall net margins.
Additionally, Thoughtful Brands said it has initiated sales in Europe and that its proprietary test-marketing program is currently identifying demand for specific natural health products with the highest net margins. It said the joint venture with FCC will continue to allow it to tailor products to European consumer demands and that FCC will assist with local licensing, regulatory and supply chain matters with a focus on the UK and Germany.
"Franchise has a well-established European medical cannabis, genetics and distribution business. Though we are not proceeding with an acquisition, our ongoing, strong relationship with the management team at Franchise will enable us to fulfill our expansion goals in Europe, allowing both of our businesses to flourish. We look forward to a successful joint venture in Germany and the UK with our CBD eCommerce business," Thoughtful Brands chief executive Ryan Hoggan said in a statement.
"This decision also allows us to spend time pursuing our initiatives with American CBD Extraction and other product extensions in the natural health and beauty sectors for the North American market," he added.
The company also announced that it has issued around 3.5mln shares as repayment to settle a US$150,000 debt to Juan Patricio Villalba Gomez at a deemed price of C$0.055 per share.
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