Cu­raleaf to ex­pand pot op­er­a­tions in Mary­land

Cu­raleaf Hold­ings Inc. in­tends to ex­pand its cannabis op­er­a­tions in Mary­land with a $30-mil­lion con­vert­ible fi­nanc­ing and an op­tion to ac­quire El­e­vate Takoma. It has also se­cured an op­tion to pur­chase 100 per cent of El­e­vate’s dis­pen­sary eq­uity.

Stockwatch Daily - - FRONT PAGE - Ms. Chris­tine Rigby re­ports

CU­RALEAF HOLD­INGS Inc., through a se­ries of agree­ments, in­tends to ex­pand its op­er­a­tions, as well as pa­tient ac­cess to med­i­cal cannabis in the state of Mary­land, while fur­ther bring­ing the com­pany’s ex­per­tise to the med­i­cal cannabis com­mu­nity within the state.

The agree­ments in­clude the com­ple­tion of $30-mil­lion in con­vert­ible fi­nanc­ing with the own­ers of HMS Health LLC, HMS Pro­cess­ing LLC, HMS Sales LLC and MI Health LLC, as well as a $2-mil­lion ac­qui­si­tion of an op­tion to ac­quire Town Cen­ter Well­ness LLC (op­er­at­ing as El­e­vate Takoma).

The HMS/MI busi­nesses com­prise a 21,000-square­foot cul­ti­va­tion fa­cil­ity and a 1,000-square-foot pro­cess­ing fa­cil­ity in Fred­er­ick, Md., and two sep­a­rate 1,000-square­foot dis­pen­saries, each in Gaithers­burg, Md. 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, to­gether with ac­crued in­ter­est, is 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. In ad­di­tion to the fi­nanc­ing agree­ments with the HMS/MI own­ers, Cu­raleaf has also com­pleted a sep­a­rate agree­ment with the own­ers of El­e­vate Takoma that se­cures the op­tion to pur­chase 100 per cent 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. El­e­vate Takoma, a 1,500-square-foot dis­pen­sary, which is lo­cated in Takoma, Md., along the Wash­ing­ton, D.C., bor­der, will re­brand and op­er­ate un­der the Cu­raleaf name and re­ceive prod­ucts, ser­vices and other sup­port from Cu­raleaf.

Due to cur­rent re­stric­tions un­der Mary­land state law that pre­vent change of con­trol over cannabis li­cences within the first two years of op­er­a­tions, the loans to HMS/MI are con­vert­ible in parts be-

tween Au­gust, 2019 (for HMS Health, a cannabis cul­ti­va­tion fa­cil­ity), and Oc­to­ber, 2020 (for HMS Pro­cess­ing, a cannabis pro­cess­ing fa­cil­ity), based on the op­er­a­tion start dates of each of the busi­nesses. The pur­chase op­tion for El­e­vate Takoma is ex­er­cis­able af­ter Au­gust, 2020. Fur­ther­more, Cu­raleaf 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.

The re­brand­ing for both HMS/MI and El­e­vate Takoma are ex­pected to take place in the sec­ond quar­ter of 2019. In Mary­land, Cu­raleaf al­ready owns and op­er­ates one dis­pen­sary in Reis­ter­stown and a cul­ti­va­tion fa­cil­ity in Al­le­gany county.

About Cu­raleaf Hold­ings Inc.

Cu­raleaf Hold­ings is the par­ent of Cu­raleaf Inc., a lead­ing ver­ti­cally in­te­grated cannabis op­er­a­tor in the United States. Head­quar­tered in Wake­field, Mass., Cu­raleaf has a pres­ence in 12 states. Cu­raleaf op­er­ates 42 dis­pen­saries, 12 cul­ti­va­tion sites and 10 pro­cess­ing sites, with a fo­cus on highly pop­u­lated, lim­ited li­cence states, in­clud­ing Florida, Mas­sachusetts, New Jersey and New York. Cu­raleaf lever­ages its ex­ten­sive re­search and devel­op­ment ca­pa­bil­i­ties to dis­trib­ute premium cannabis prod­ucts in mul­ti­ple for­mats with the high­est stan­dard for safety, ef­fec­tive­ness, con­sis­tent qual­ity and cus­tomer care.

Ryan Coe, Wil­son Fung, David Go­ertz

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