High Tide Inc., an Alberta-based, retail-focused cannabis corporation enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products, has acquired a 50% interest (the “Transaction”) in the Canna Cabana store in Sudbury, Ontario (the “Sudbury Store”) from Saturninus Partners (the “Partnership”), the holder of a cannabis retail store authorization issued in relation to the first lottery conducted by the Alcohol and Gaming Commission of Ontario (the “AGCO”) on January 11, 2019 (the “First Lottery”). The Sudbury Store has a stable operating history with unaudited gross sales exceeding $6.4 million for the nine months since opening on April 20, 2019, with gross margins of approximately 27%.
The Transaction was completed with the consent of the AGCO following the expiry of certain restrictions on change of control established under the rules applicable to the First Lottery. “High Tide is excited to add the interest in this Sudbury location, with its sustained level of high performance, to its corporately-owned portfolio of stores, especially at the start of the increase in sales expected from edibles, infused beverages and concentrate products that have recently come to market,” said Raj Grover, High Tide’s President & Chief Executive Officer. “This Transaction is High Tide’s second step towards acquiring its ownership interests in all three Canna Cabana stores in Ontario. There is no better time to continue strengthening our presence in the country’s largest consumer market,” Mr. Grover added. An option to acquire the other 50% interest was simultaneously exercised by a privately-held, third-party partner of the Company.
As consideration for the Transaction, the Company issued to a nominee of the partners of the Partnership an aggregate of 5,319,149 common shares of the Company (the “HITI Shares”), which are subject to a four month and one day statutory hold period, as well as common share purchase warrants (“Warrants”) to purchase up to an aggregate of 2,500,000 HITI Shares. Each Warrant entitles the holder to acquire one HITI Share at an exercise price of $0.40 per share for a period of two years from the date of issuance. In addition, for a period of 2 years following the closing date, one of the outgoing partners will be entitled to receive, from the Company, a royalty of 1% of the gross revenues of the Sudbury Store.