Irwin Naturals Inc. (CSE: IWIN) (OTC: IWINF) said that it no longer plans to buy Braxia Scientific Corp. (CSE: BRAX) (OTC: BRAXF), an unexpected reversal after the two struck a deal to combine forces in January. Closing had been planned for this month.
In a statement on Thursday morning, Irwin CEO Klee Irwin said that the decision was made due to “a lack of a clear business rationale” for the company to close the deal.
The CEO expressed disappointment but added that the decision was necessary for the company’s long-term growth and value creation. The company said it remains committed to exploring opportunities to drive a longer upside.
While unexpected, the backtrack is not as surprising as it would have been a few years ago, considering the latest market environment.
Additionally, the federal government announced last month that it would formally end the public health emergency sometime during the first half of the year, throwing a wrench in virtual psychedelic therapy programs born from pandemic lockdowns. Those had relied on an exception to the Ryan Haight Act that permitted prescribing of controlled substances such as ketamine by telemedicine during the emergency order.
Another psychedelic firm, Field Trip, stated in its own earnings report last month that it would be “evaluating its strategy” around its virtual ketamine therapy program due to the change and apparently stopped enrolling new clients for it.
The acquisition by Irwin could have been a lifeline for Braxia, which is still in the startup stage and has relied on share capital financing to fund research, development, and other expenses.
Despite having $715,820 in working capital, Braxia has yet to turn a profit and has accumulated losses of more than $108 million, according to its latest earnings report released earlier this month.
Braxia management acknowledged that these losses raise concerns about the company’s ability to continue as a going concern, though it still believes that the company’s current working capital is enough to sustain them for at least another year. If the assumption proves incorrect, the company’s assets and liabilities may need to be restated on a liquidation basis, which could have significant consequences down the line.
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