Stem Holdings, Inc and Headwaters, LLC Sign Term Sheet for Business Combination


Stem Holdings, Inc.

Stem Holdings, Inc.

2022 consolidated business combination revenue of approximately $75,000,000 and positive adjusted EBITDA

2023 consolidated revenue forecast of $100,000,000 and positive adjusted EBITDA

BOCA RATON, Fla., Jan. 30, 2023 (GLOBE NEWSWIRE) — Stem Holdings, Inc. (OTCQB: STMH, CSE: STEM) (“Stem“or the”Company”) is pleased to announce that it has signed a term sheet (“Term sheet“) for a proposed business combination (the “Transaction”) with Headwaters, LLC, (“HDWTR” or “Upstream”). In accordance with the list of conditions, the transaction will result in a reverse takeover of the company and, subject to the satisfaction of all listing conditions, the listing of the combined entity on the Canadian Securities Exchange (the “CSE”) and the OTCQB Venture. Following the closing of the transaction, former HDWTR shareholders are expected to own approximately 80% of the issued and outstanding shares of the company.

The Transaction is subject to, among other things, the execution of a mutually acceptable definitive agreement (the “Final agreement”), completion of due diligence and subject to several conditions, including, but not limited to, shareholder approval, delivery of acceptable financial statements, board approval and satisfaction of all regulatory and stock exchange approvals. The transaction is expected to be completed through a merger, merger or other form of business combination to be determined by the parties after receiving securities, corporate law and tax advice.

“Over the past 12 months, Stem has worked tirelessly to find the right company to complete a business combination with. We couldn’t be more excited to join forces with Headwaters, LLC,” said Matthew Cohen, CEO of Stem. “Not only will this transaction bring world-class cultivation processes, but by combining with Stem and our existing footprint of brands and outlets, we will instantly become a preeminent vertically integrated and profitable cannabis company with a new platform and a vision to strengthen on even more accretive transactions in the future.

“Currently, Headwaters, located in California, is one of the leading growers, wholesalers and distributors of greenhouses, with an emerging brand called Mr. Zips. We are ready to take our business to the next level, and the Stem team enables us to do so. With access to capital markets and Stem’s valuable network, Headwaters is well positioned to continue to disrupt the world’s largest cannabis market and expand into new territories. We couldn’t think of a better partner to help us achieve our goal of sustaining and continuing to be one of California’s largest and most profitable grow companies,” said Tristan Strauss, Founder and CEO of Headwaters.

About Stem Holdings:

Stem is a leading branded cannabis and hemp products company in the United States with proprietary capabilities in sustainable cultivation, processing, extraction and R&D, as well as retail and distribution operations aligned with state-by-state regulations. Stem’s award-winning owned and partner brands, including TJ’s Gardens™ and Yerba Buena™, are the foundation of the company’s expansion into current and new segments and markets, with exceptional and disruptive brands and products that benefit the world. welfare. Stem’s expertise and scale will drive domestic and international growth with an ongoing commitment to social responsibility and shareholder equity as a leader in the cannabis industry.

About the higher courses:

Headwaters’ origin story is humble and genuine, originating ten years ago in Humboldt County as a small outdoor medical farm. Despite its humble beginnings, Headwaters’ vision is built on executing the core values ​​of community, sustainability and operational excellence. Headwaters owes its entire success to the dedication of our team and management to these values.

Over the past five years, the company has experienced rapid growth in highly volatile market conditions. Headwaters ventured into consumer products in 2017, providing the first white label products on California’s largest e-commerce delivery platform. Two years later, the company launched a new, comprehensive partnership program that supported farmers across the state with nursery, crop management, post-harvest handling and distribution services. Since then, Headwaters has widened its intellectual property gap through genetic selection, SOP optimization and the development of its proprietary technology, Cultivation Grid©. Upstream, it is well positioned to operate at scale effectively and efficiently.

  • Headquarters in Carpinteria, CA

  • CEO and Founder Tristan Strauss is a recognized leader in horticultural agriculture and cannabis. Strauss previously co-founded two California medical cannabis companies: Canigou Inc. and Helios, both known under the brand name State Wellness.

  • Operates four greenhouses in the Carpinteria area totaling over 23 acres of production and nursery canopy

  • The company has 4 distinct sales channels:

    • Bulk Wholesale: Supply and sale of cannabis flower, small, trimmings and derivative products in bulk

    • Agricultural services: Sale of propagated and rooted clones from proprietary genetics and partnerships

    • Branded Products: Development and sale of CPG products in licensed retail channels

    • Technological services: proprietary intellectual property for cultivation and post-harvest processing

  • Sold 230,000 pounds of bulk cannabis and 1,700,000 clones in 2021

Notice to readers

Completion of the transaction is subject to a number of conditions, including but not limited to acceptance of the CSE. There can be no assurance that the transaction will be completed as proposed or at all. The CSE has in no way passed on the merits of the proposed transaction and has neither approved nor disapproved of the contents of this press release.

Caution Regarding Forward-Looking Information

This press release contains statements that constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of Stem management with respect to future business activities. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, ” believes”, “expects” or similar expressions and includes information regarding: (i) the ability of the surviving entity to integrate the combined operations of the parties; (ii) the closing of the Transaction, as well as expectations regarding the accretive nature of the Transaction; (iii) the expansion of the surviving entity’s market following the closing of the Transaction and the ability to scale operations; (iv) cost savings and other efficiencies expected following the closing of the Transaction; and (v) the expected revenue and EBITDA of the combined company. Investors are cautioned that forward-looking information is not based on historical fact but rather reflects the Company’s management expectations, estimates or projections regarding future results or events based on management’s beliefs, assumptions and estimates believed to be reasonable at the date the statements are made. made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on the future results, performance or achievements of the surviving entity. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: changes in general economic, business and political conditions, including changes in financial markets; the ability of the surviving entity to raise debt and equity in the amounts and at the costs it expects; adverse changes in public perception of cannabis; construction delays; declines in the prevailing prices of cannabis and cannabis-based products in the markets in which the surviving entity will continue to operate; adverse changes in applicable laws; adverse changes in the application or enforcement of applicable laws, including those relating to taxation; failure to locate and acquire appropriate companies, properties and assets necessary to execute the surviving entity’s business plans; Political risk; and increased costs of compliance with extensive government regulations. This forward-looking information may be affected by a number of risks and uncertainties affecting the surviving entity’s business and applicable market conditions.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may differ materially from those described herein as anticipated, planned, anticipated, believed, estimated or expected. Although the parties to the Transaction have attempted (and will continue to attempt) to identify the risks, uncertainties and important factors that could cause actual results to differ materially, there may be others that cause the results are not those anticipated, estimated or intended. The Company undertakes no obligation to update this forward-looking information, except as otherwise required by applicable law.

No securities regulatory authority has pronounced in any way on the merits of the proposed transactions described in this press release or has approved or disapproved of the contents of this press release.

Financial outlook

This press release contains financial outlook within the meaning of applicable securities laws. The financial outlook has been prepared by the management of the Company to provide an outlook of the expected revenues and EBITDA of the Company and Headwaters and may not be appropriate for other purposes. The financial outlook has been prepared based on a number of assumptions, including the assumptions described under the heading “Caution Regarding Forward-Looking Statements”. The actual results of the Company’s operations for any period will likely vary from the amounts shown in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading “Caution Regarding Forward-Looking Statements”, it should not be considered as necessarily indicative of future results.

Media Contact:
Regina Costa
Public Relations Director
[email protected]


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