- Solo enters licence agreement with Red Deer cannabis store
- Company adjusts strategy amid retail licence freeze in Alberta, lottery in Ontario
- Solo able to withstand licence moratorium but looks for cash flow opportunities
A Calgary-based company hindered by Alberta’s retail cannabis licence moratorium and Ontario’s limited lottery process will finally see its YSS brand name on an open store five months into recreational pot legalization – and receive a cash flow – after it shifted its business strategy in the face of Canada’s supply shortage.
Solo Growth Corp. entered a licensing agreement with Green Town, a licensed retail cannabis store in downtown Red Deer, Alberta. The deal includes the right to buy all voting shares for $2.6-million in cash, as well as to re-brand and operate the store under Solo’s YSS banner.
Solo, which trades on Toronto Stock Exchange Venture and plans to change its name to YSS Corp., will receive 100 per cent of the store’s net cash flow, said Theo Zunich, who was promoted to Solo’s president and chief executive earlier this month.
Solo had three cannabis stores built in the province by late November, when Alberta Gaming, Liquor and Cannabis (AGLC) placed a moratorium on new retail licences due to a supply shortage. Plans to open 20 to 30 stores in Ontario, Canada’s biggest market, were put on hold when that province offered only 25 initial retail licences through a lottery process, Mr. Zunich said.
“With the suspension of licensing, it became more of a strategic quality-over-quantity and we adjusted our strategy with that,” Mr. Zunich said.
“Without having a clear line on revenue, we had to rethink it. You can’t sit around and bleed cash forever.”
The company has constructed stores in Alberta as it awaits the resumption of retail licensing and is currently paying rent on about 10 locations, but has a strong balance sheet, he said.
In a March 12 news release, Solo said it had an estimated working capital position of $18.5-million.
“Our corporate G and A (general and administrative expenses) is about $2.2-million a year so we can withstand a longer licensing suspension,” Mr. Zunich said.
Two-thirds of the company’s money came from friends and family, with the rest coming from institutional investors. Solo has six corporate employees, he said.
As the company shifts its strategy, it looks to retail opportunities that will provide a clear line of cash flow as well as being open to entering other parts of the supply chain, such as extraction, edibles infusion, distribution or branding, Mr. Zunich said.
Though the cannabis retail scene is only months old, it has already seen larger companies buying smaller stores. Last month, Choom Holdings Inc. said it will buy Clarity Cannabis stores in Alberta.