SOL Global Investments Corp (CSE: SOL) announced this morning that it would be spinning out its multi state operator assets related to CannCure. The firm has entered a letter of intent with Goldstream Minerals, which trades on the NEX board as GSX.h. The transaction will consist of a reverse takeover, wherein CannCure will be the resulting operating entity. The firm will then subsequently delist from the junior TSX Venture exchange and relist on the Canadian Securities Exchange under the name “3 Emeralds Corp”.
CannCure is currently a private entity that is operating in the state of Florida through its 100% ownership interest in 3 Boys Farm. 3 Boys is one of the original fourteen licensed entities to cultivate, process and distribute cannabis products within the state. The firm currently operates out of a 40,000 square foot greenhouse in Ruskin, Florida, with two additional facilities set to open later this year to the tune of 54,000 and 64,000 square feet. CannCure, through 3 Boys Farm, anticipates opening six dispensaries by the end of Q4 2019, with a total of 17 currently under construction in the state. All will be branded under the “One Plant” banner.
Outside of Florida, CannCure has entered into an agreement to purchase Northern Emeralds of Humboldt County, California, and six dispensaries within the state. They’ve also announced a binding letter of intent with Merida Capital Partners to acquire MCP Wellness, which is an entity focused on the state of Michigan. They currently hold the rights to acquire two cultivation licenses, a processing license, and 3 licensed provisioning centers within the state.
Upon these deals closing, which is anticipated in August, the multi state operator known as 3 Emeralds Corp will form.
SOL Global, which closed the purchase of CannCure Investments on April 8, 2019, currently owns 97.6% of the entity. It was originally purchased for a total price of US$41,207,519, which was partially satisfied by the issuance of 7,317,500 common shares at a price of CAD$4.00.
While today’s news release indicates that SOL purchased the MCP Wellness and Northern Emeralds entities through CannCure, the news releases related to these acquisitions are a bit murkier on the topic.
Following the closing of the Acquisition, SOL Global intends to combine the acquired Michigan business into CannCure to form a new multi-state operator (the “MSO“). Under the terms of the LOI, the purchase price will be satisfied by way of US$35 million in cash and US$115 million in equity consideration in CannCure, resulting in Merida owning approximately 42% of CannCure (including after giving effect to the proposed CannCure private placement financing described below). In regard to the cash consideration, US$9 million will be sourced from cash on hand and US$24 million will come from a private placement financing of CannCure equity and/or debt on pricing and terms to be determined by management following market assessment.
MCP Wellness, which has the hefty price tag of US$150mm, is a special purpose vehicle that was created for the intention of investing in Michigan cannabis assets. The acquisition was entered into on April 24, 2019.
With regards to the California acquisitions, things are slightly more cut and dry. SOL Global will be acquiring two separate entities for its future multi state operator in this region, the first of which consists of Northern Emeralds of Humboldt County, which holds licenses to cultivate, process, and distribute cannabis products in the state of California. Northern Emeralds will be acquired for US$120 million, which is to be wholly satisfied by the issuance of CannCure shares.
The second acquisition is Three Habitat Consulting Holdco Inc, which will be purchased for US$17mm, of which $5mm is to be paid in cash (although its unclear who’s cash in particular this is) while the remainder is to be through the issuance of CannCure shares. The entity consists of six currently licensed dispensaries in the state, which fall under the “One Plant” brand. It is expected that the brand will be utilized in the states of Florida and Michigan as well, subject to the closing of the proposed CannCure go public transaction.
Upon digging into Three Habitat Consulting Holdco Inc, it was discovered that the Delaware licensed entity has a listed address of 210 Shields Court, Markham Ontario. The address is that of Serruya Private Equity, a firm associated with the Aphria affair that unfolded in December 2018, for which SOL Global was implicated to a certain degree.
The go public transaction of CannCure, or 3 Emeralds Corp, is subject to the firm being able to raise between US$45,000,000 and US$85,000,000 in subscription receipts at a price of $2.50 per security. Assuming the closing of the transaction, SOL Global will hold a 34.9% interest in the entity, with former CannCure shareholders holding a 36.4% interest.
The transaction is expected to close in August 2019.
Information for this briefing was found via The CSE and SOL Global Investments Corp. 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.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.