Harvest Health Sues Falcon International, Requests Termination of Merger Agreement

Harvest Health & Recreation (CSE: HARV) has sued Falcon International, the California operator that the company announced it was acquiring back on February 14, 2019. Among other items, Harvest has alleged that Falcon has failed to provide the required auditable financial records, and that multiple legal obligations have failed to have been met.

Overall, Harvest Health is looking for court approval for the termination and rescission of the merger agreement that was previously entered among Harvest Health and Falcon International. As a result, Harvest is demanding that previously transferred funds be returned immediately.

The Falcon International merger was viewed favourably by investors at the time of announcement. However, financial details were not released by the firm, aside from the firm being “acquired for equity,” leaving some questioning how good the purchase really was. The assets were focused in the State of California, wherein Falcon has access to distribute products to over 80% of dispensaries, while the firm itself controlled 16 licenses across the cultivation, manufacturing, and distribution verticals in the state.

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The transaction was expected to initially close in the first half of 2019, until it was hit with a second request under the HSR act by the Department of Justice. The required documents were submitted on September 23 for the request, and the required wait period ended October 23, at which point investors expected the arrangement to close.

Within today’s announcement, Harvest Health identified that despite the request to terminate the merger agreement, the firm “remains committed to the long-term potential of California.” However, they also identified that current conditions make profitability very difficult within the state, and should the transaction get approved for rescission, overall 2020 profitability for Harvest Health will improve without Falcon’s contributions.

Harvest Health last traded at $4.14 on the CSE.

Information for this briefing was found via Sedar and Harvest Health and Recreation. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.