U.S. cannabis operator Curaleaf Holdings (CSE: CURA) (OTCBB: CURLF) reported that it signed new financing and purchase option agreements to expand its operations as well as patient access to medical cannabis in the state of Maryland.
The agreements include the completion of $30 million in convertible financing with the owners of HMS Health, HMS Processing, HMS Sales, and MI Health, and a $2 million acquisition of an option to acquire Town Center Wellness which does business as Elevate Takoma.
SEE: Curaleaf Opens New Medical Cannabis Dispensary In New York
HMS/MI Financing
The HMS/MI businesses consist of a 21,000 sq.-ft. cultivation facility and 1,000 sq.-ft. processing facility in Frederick, Maryland, and two separate 1,000 sq.-ft. dispensaries, each in Gaithersburg, Maryland.
As part of the agreement, the HMS/MI businesses will rebrand and operate under the Curaleaf name, and receive products, services, and other support from Curaleaf.
The $30 million in loans from Curaleaf are convertible into equity of each of the HMS/MI businesses upon receipt of all required state and local regulatory approvals. The owners of HMS/MI will receive $2 million in Curaleaf shares at the then-current market price upon completed conversion of the loans.
Purchase Option
In addition to the financing agreements, Curaleaf has also completed a separate agreement with the owners of Elevate Takoma, securing the option to purchase 100% of the equity of the company’s dispensary.
The exercise price of the option is $100,000 and may be exercised upon receipt of all regulatory approvals for the transfer of ownership to Curaleaf, according to a company press statement.
Elevate Takoma, a 1,500-sq.-ft. dispensary in Takoma, Maryland along the Washington, D.C. border, will rebrand and operate under the Curaleaf name, and receive products, services, and other support from Curaleaf.
Conversion of HMS/Elevate Instruments Into Equity Is Subject to Law
Due to current restrictions under Maryland state law that prevent change of control over cannabis licenses within the first two years of operations, the loans to HMS/MI are convertible in parts between August 2019 (for HMS Health cannabis cultivation facility) and October 2020 (for HMS Processing cannabis processing facility), based on the operation start dates of each of the businesses, according to Curaleaf.
Whereas, the purchase option for Elevate Takoma is exercisable after August 2020.
Furthermore, Curaleaf said that it may only own equity in one cannabis business of each category (cultivation, processing and dispensing) under Maryland law as applied by the Maryland Medical Cannabis Commission.
“Therefore, the conversion of the HMS/MI and Elevate Takoma instruments into equity of each underlying business will only occur upon regulatory approval if the conversion will not violate any restriction in force at the time,” Curaleaf said.
The company expects the rebranding for both HMS/MI and Elevate Takoma to take place in the second quarter of 2019.
Curaleaf Stock Performance
Shares of Curaleaf Holdings have been performing well since the beginning of this year. The stock is up 10.00% since Jan. 1. Over the past three months, shares have moved up 28.35%.
