UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
As previously disclosed in the Current Report on Form 8-K filed on July 31, 2024, on July 29, 2024, Verano Holdings Corp. (the “Company”) and subsidiaries of the Company entered into agreements to purchase all of the ownership interests of three subsidiaries of The Cannabist Company Holdings Inc. (“Cannabist”).
For divestiture of Cannabist’s Eastern Virginia operations, the Company entered into an equity purchase agreement (the “Virginia EPA”) with Cannabist, Verano Holdings, LLC, a subsidiary of the Company (“Virginia Buyer”), Columbia Care Eastern Virginia LLC, a subsidiary of Cannabist (“CC East Virginia”) and the members of Columbia Care Eastern Virginia LLC (the “Virginia Members”). For divestiture of the Arizona operations of Cannabist, the Company entered into (1) an equity purchase agreement (the “Organix EPA”) with Cannabist, Verano Arizona, LLC, a subsidiary of the Company (“Arizona Buyer” and together with the Virginia Buyer, the “Buyers”), 203 Organix L.L.C. (“Organix”), CC VA HoldCo LLC and Columbia Care-Arizona, Prescott, L.L.C. (the “Arizona Member”) and (2) an equity purchase agreement (the “SWC EPA” and together with the Virginia EPA and the Organix EPA, the “Agreements”) with Cannabist, the Arizona Buyer, Salubrious Wellness Clinic, Inc. (“SWC”), the members of SWC (the “SWC Members”) and CC VA HoldCo LLC.
On August 16, 2024, (the “AZ Closing Date”) and August 21, 2024 (the “VA Closing Date,” and together with the AZ Closing Date, the “Closing Dates”), and pursuant to the Agreements, the Buyers acquired all issued and outstanding equity of (i) CC East Virginia from the Virginia Members, in the case of the Virginia Buyer, (ii) Organix from the Arizona Member, in the case of the Arizona Buyer, and (iii) SWC from the SWC Members, in the case of the Arizona Member.
Pursuant to the Virginia EPA, the Virginia Buyer purchased all of the issued and outstanding equity interests of CC East Virginia from the Virginia Members for total consideration of $90 million, subject to adjustments as set forth in the Virginia EPA (the “Virginia Closing Consideration”). On the VA Closing Date, the Virginia Members received their pro rata portion of the Virginia Closing Consideration, consisting of: $20 million in cash and $40 million of Class A subordinate voting shares of the Company (the “Shares”). In addition, the Virginia Buyer issued a $30 million promissory, subject to adjustment, to the Virginia Members (the “Promissory Note”). The Promissory Note bears interest at a rate of 7% per annum, beginning on the VA Closing Date, through maturity on the two-year anniversary of the VA Closing Date. The Promissory Note is payable in monthly payments of $1.75 million for the first 12 months, and $750,000 for the remaining months.
The principal amount of the Promissory Note is subject to adjustment for cash, working capital (as compared to a target), indebtedness, and transaction expenses and payments of CC East Virginia. The Promissory Note may be prepaid by the Virginia Buyer at any time, without premium or penalty. The Promissory Note contains customary events of default, upon which Cannabist, on behalf of the Virginia Members, may declare all amounts outstanding under the Promissory Note due.
Pursuant to the Organix EPA, the Arizona Buyer purchased all of the issued and outstanding equity interests of Organix from the Arizona Member for total consideration of $9.9 million, payable in cash, subject to adjustment as described in the Organix EPA. Pursuant to the SWC EPA, the Arizona Buyer purchased all of the issued and outstanding equity interests of SWC from the SWC Members for total consideration of $5.1 million, payable in cash, subject to adjustment as described in the SWC EPA.
Item 2.01 of this Current Report on Form 8-K contains only brief descriptions of the material terms of and does not purport to be a complete description of the rights and obligations of the parties to each of the Virginia EPA, the Promissory Note, the Organix EPA and the SWC EPA. Such descriptions are qualified in their entirety by reference to the full text of the Virginia EPA, the Promissory Note, the Organix EPA and the SWC EPA, which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
As previously disclosed on the Current Report on Form 8-K filed on July 31, 2024, the Virginia EPA contemplated the issuance of the Promissory Note on the VA Closing Date. On the VA Closing Date, the Virginia Buyer issued the Promissory Note to the Virginia Members. The information disclosed under Item 1.01 of this Current Report on Form 8-K as it relates to the Promissory Note is incorporated by reference into this Item 2.03 to the extent required herein.
| Item 3.02 | Unregistered Sales of Equity Securities. |
As previously disclosed on the Current Report on Form 8-K filed on July 31, 2024 the Virginia EPA contemplated the issuance of the Shares to the Virginia Members. On the VA Closing Date, the Company issued $40 million of Shares to certain of the Virginia Members. The information disclosed under Item 1.01 of this Current Report on Form 8-K as it relates to the issuance of Shares is incorporated by reference into this Item 3.02 to the extent required herein.
The Company issued the Shares pursuant to the Virginia EPA in reliance upon the exemptions from the registration requirements of the Securities Act of 1933, as amended, provided by Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D promulgated thereunder. No non-accredited investors received Shares. None of CC East Virginia, Cannabist or the Virginia Members will get registration rights in connection with the issuance of the Shares pursuant to the Virginia EPA.
| Item 8.01 | Other Events |
On August 22, 2024, the Company issued a press release announcing the closing of the transactions pursuant to the Agreements. A copy of such press release is filed as Exhibit 99.1 to this report.
The information furnished under this item 8.01, including Exhibit 99.1 incorporated by reference herein, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
* Certain portions of the exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| VERANO HOLDINGS CORP. | ||
| Date: August 22, 2024 | By: | /s/ Brett Summerer |
| Name: | Brett Summerer | |
| Title: | Chief Financial Officer | |
Exhibit 10.2
VERANO HOLDINGS, LLC
PROMISSORY NOTE
| $26,700,000.00 | August 21, 2024 |
FOR VALUE RECEIVED, Verano Holdings, LLC, a Delaware limited liability company (“Buyer”), promises to pay to the Members party hereto (the “Members”), each in accordance with their respective Pro Rata Shares, in lawful money of the United States of America, the aggregate principal sum of $26,700,000.00 (which amount shall be adjusted in accordance with Section 2.4 of the Purchase Agreement (as defined below), together with all accrued and unpaid interest thereon, as provided herein. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the two-year anniversary of the date hereof (the “Maturity Date”).
This Promissory Note (this “Promissory Note”) is issued pursuant to that certain Equity Purchase Agreement (the “Purchase Agreement”), dated as of July 29, 2024 by and among Buyer, Verano Holdings Corp., a British Columbia corporation (“Parent”), Columbia Care Eastern Virginia LLC, a Virginia limited liability company, the Members, and The Cannabist Company Holdings Inc., a British Columbia corporation (“Cannabist”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement.
The following is a statement of the rights of the Members and Buyer and the conditions to which this Promissory Note is subject, and to which the Members and Buyer agree:
1. Interest. Interest shall accrue with respect to the principal amount loaned hereunder, subject to the reduction of principal pursuant to Section 2 below, from the date hereof until such principal is fully paid, at 7% per annum (computed on the basis of the actual number of days elapsed in a 365-day year) (the “Interest”).
2. Payment; Principal Reduction.
(a) All unpaid principal, together with any then unpaid and accrued Interest, shall be due and payable on the Maturity Date.
(b) Buyer shall make monthly payments of (i) $1,750,000 of principal and interest to the Members (in accordance with their respective Pro Rata Shares) on the first Business Day of each calendar month, commencing on the first Business Day of the calendar month following the one-month anniversary of the Closing Date and ending after twelve $1,750,000 monthly payments shall have been made, and (ii) $750,000 of principal and interest to the Members (in accordance with their respective Pro Rata Shares) on the first Business Day of each calendar month commencing on the first Business Day of the calendar month following the last monthly payment made pursuant to clause (i) and ending at the Maturity Date, which, in each case, shall be applied first to accrued and unpaid Interest on this Promissory Note and second, if the amount exceeds the amount of all such accrued and unpaid Interest, to the payment of principal of this Promissory Note.
(c) Buyer may voluntarily prepay in cash the principal in whole or in part without penalty, premium or additional Interest, together with accrued and unpaid interest on the portion of principal so prepaid. For the avoidance of doubt, any prepayment made by Buyer will be paid to each of the Members in accordance with their respective Pro Rata Shares.
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3. Representations and Warranties.
(a) No contravention. The execution, delivery and performance by the Buyer of this Promissory Note, have been duly authorized by all necessary corporate organizational action, and do not and will not:
| (i) | contravene the terms of the Buyer’s certificate of formation or limited liability company operating agreement; |
| (ii) | conflict with or result in any breach or contravention of any document evidencing any contract or agreement of the Buyer that the breach of which by the Buyer would reasonably be expected to have a material adverse effect. |
(b) Binding Effect. This Promissory Note constitutes the legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability, regardless of whether considered in a proceedings in equity or at law.
4. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Promissory Note:
(a) Failure to Pay. Buyer shall fail to pay when due any principal or Interest payment on the due date hereunder; provided, that (i) Cannabist shall provide written notice to Buyer of any alleged failure to pay by Buyer and (ii) Buyer shall have ten Business Days after receipt of such written notice from Cannabist to make such payment prior to an Event of Default being deemed to have occurred; provided, however, that such Buyer grace period in the foregoing proviso shall not apply to the payment of principal and Interest due on the Maturity Date.
(b) Voluntary Bankruptcy or Insolvency Proceedings. Buyer shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing.
(c) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Buyer or of all or substantially all of the assets of Buyer, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Buyer or the debts of Buyer under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within 60 Business Days of commencement.
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5. Remedies. Upon the occurrence or existence of any Event of Default described in Section 4(a) and at any time thereafter during the continuance of such Event of Default, Cannabist may, by written notice to Buyer declare all outstanding amounts payable by Buyer hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. Upon the occurrence or existence of any Event of Default described in Sections 4(b) and 4(c), immediately and without notice, all outstanding amounts payable by Buyer hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Cannabist may exercise any other right, power or remedy permitted to it by law, either by suit in equity or by action at law, or both. No failure or delay on the part of Cannabist in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other rights, powers or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
6. Successors and Assigns. Subject to the restrictions on transfer described in Section 8, the rights and obligations of Buyer and the Members shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties hereto.
7. Waiver and Amendment. Any provision of this Promissory Note may be amended, waived or modified only upon the written consent of Buyer and Cannabist; provided, that the amount of principal due hereunder shall be adjusted in accordance with Section 2.4 of the Purchase Agreement.
8. Assignment. This Promissory Note may not be transferred or assigned (including by operation of law), in whole or in part, by any of the parties hereto without the prior written consent of, in the case of any Member or Cannabist, Buyer, unless an Event of Default has occurred and is continuing, and in the case of Buyer, Cannabist; provided, that any of the parties may, without the consent of any Person, assign in whole or in part its rights and obligations pursuant to this Promissory Note to (a) one or more of its Affiliates or (b) in the case of Buyer, any purchaser of all or substantially all of Buyer, whether by merger, asset purchase, equity purchase or otherwise.
9. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be provided according to the terms of the Purchase Agreement.
10. Member Representative. Each of the Members hereby acknowledges and agrees that Cannabist shall serve as such Member’s representative and attorney-in-fact to act on behalf of such Member with respect to this Promissory Note and to take any and all actions and make any decisions required or permitted to be taken by Cannabist pursuant to this Promissory Note. The provisions of Section 9.12 of the Purchase Agreement are hereby incorporated herein as if set forth herein mutatis mutandis.
11. Offset. Each of the Members acknowledge and agree that the amount of any payments to be made by Buyer pursuant to this Promissory Note may be reduced in accordance with Section 6.4(e) of the Purchase Agreement.
12. Governing Law. This Promissory Note and all actions arising out of or in connection with this Promissory Note shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware, or of any other state.
(Remainder of Page Intentionally Left Blank)
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Buyer has caused this Promissory Note to be issued as of the date first written above.
BUYER:
| VERANO HOLDINGS, LLC | ||
| By: | /s/ George Archos | |
| Name: | George Archos | |
| Title: | Chief Executive Officer | |
Accepted and agreed to by the Members and Cannabist:
MEMBERS:
| /s/ Adam Goers | |
| Adam Goers | |
| Pro Rata Share: 4.0% |
| /s/ David Hallock | |
| David Hallock | |
| Pro Rata Share: 1.0% |
| /s/ Calvin Butts | |
| Calvin Butts | |
| Pro Rata Share: 0.25% |
| /s/ David Creecy | |
| David Creecy | |
| Pro Rata Share: 0.25% |
| /s/ Basil Gooden | |
| Basil Gooden | |
| Pro Rata Share: 0.25% |
| /s/ Marissa Levine | |
| Marissa Levine | |
| Pro Rata Share: 0.50% |
| /s/ Tim Musselman | |
| Tim Musselman | |
| Pro Rata Share: 0.25% |
| /s/ Terron Sims | |
| Terron Sims | |
| Pro Rata Share: 0.25% |
| /s/ Lisa Smith | |
| Lisa Smith | |
| Pro Rata Share: 0.25% |
| /s/ John Boland | |
| John Boland | |
| Pro Rata Share: 0.25% |
CC VA HOLDCO LLC
| By: | /s/ David Hart | |
| Name: | David Hart | |
| Title: | President | |
| Pro Rate Share: 92.75% | ||
CANNABIST:
| THE CANNABIST COMPANY HOLDINGS INC. | ||
| By: | /s/ David Hart | |
| Name: | David Hart | |
| Title: | President | |
Exhibit 99.1
 |
 |
Verano Announces Closing of Acquisition of Arizona and Virginia Subsidiaries of The Cannabist Company, Becomes Exclusive Cannabis Operator for HSA 5 in Eastern Virginia and Strengthens Arizona Footprint
Acquisitions Expand Verano’s Footprint to 14 States, 15 Cultivation and Production Facilities, and 150 Dispensaries Nationwide
CHICAGO, August 22, 2024 – Verano Holdings Corp. (Cboe CA: VRNO) (OTCQX: VRNOF) (“Verano” or the “Company”), a leading multi-state cannabis company, today announced the closing of acquisitions pursuant to agreements previously announced on July 29, 2024, and acquired all of the ownership interests of three subsidiaries of The Cannabist Company Holdings Inc. (Cboe CA: CBST) (OTCQX: CBSTF) (“The Cannabist Company”), one of the most experienced cultivators, manufacturers and retailers of cannabis products in the U.S. Two subsidiaries, 203 Organix, L.L.C. and Salubrious Wellness Center, Inc. (together, the “Arizona Operations”) operate in Arizona, and the third subsidiary, Columbia Care Eastern Virginia LLC, operates in Virginia (the “Virginia Operations”).
In Virginia, Verano will be the sole vertical cannabis operator in HSA 5 in Eastern Virginia - a region with nearly two million residents and 14 million annual tourists - and gains an active cultivation and production facility and six operational dispensaries in Hampton, Norfolk, Portsmouth, Suffolk, Virginia Beach and Williamsburg. In Arizona, Verano gains an active cultivation and production facility and raises the Company’s retail footprint to eight locations with the addition of stores in Tempe and Prescott, complementing its existing six Zen Leaf dispensaries and multiple cultivation and processing facilities in the state.
Verano Management Commentary
“Our entrance into Virginia provides near-term growth potential within the existing medical program, and adds yet another valuable market to our footprint with a high probability of adult use in the near future,” said George Archos, Verano founder, Chairman and Chief Executive Officer. “Leveraging our extensive M&A history and experience, we are actively integrating these facilities into our network, and will build on our legacy as a top-tier medical operator in preparation for potential adult use in Virginia. Additionally, expanding our Arizona operations allows us to further scale our retail footprint and broaden access to our award-winning brand portfolio with increased cultivation capacity and high-performing dispensaries in attractive locations in Prescott and Tempe. We are thankful for the Cannabist team’s partnership, and thrilled to welcome new colleagues in Virginia and Arizona as we turn the page on an exciting new chapter for Verano.”
The Cannabist Company Management Commentary
“Verano has been a great partner through a very thoughtful transaction, and we are excited for what the future holds for our Eastern Virginia and Arizona teams with Verano. This was a critical move for us as we continue our path of building a better business and reshaping our footprint to improve our financial footing, ultimately bringing us closer to profitability. We look forward to working alongside Verano in Virginia as we continue in the Richmond region to support a growing medical program and look toward the future of adult use. Thank you to everyone involved for making this a success,” said David Hart, CEO, The Cannabist Company.
The Cannabist Company will maintain its Virginia operations in the Richmond region (HSA 4), with approximately 80,000 square feet of cultivation and manufacturing capacity, five retail locations in operation and one in development. With the close of the Arizona transaction, The Cannabist Company now operates in 14 markets, which will be reduced to 12 markets once the exits in Florida and Washington, DC are finalized.
Transaction Highlights
Total consideration for the Arizona Operations was $15 million in the aggregate, subject to adjustment, paid in cash upon signing. Total consideration for the Virginia Operations, subject to adjustment, was $90 million, which was paid upon closing and consisted of $20 million in cash, $40 million in Class A subordinate voting shares, and the issuance of a $30 million promissory note.
About Verano
Verano Holdings Corp. (Cboe CA: VRNO) (OTCQX: VRNOF), one of the U.S. cannabis industry’s leading companies based on historical revenue, geographic scope and brand performance, is a vertically integrated, multi-state operator embracing a mission of saying Yes to plant progress and the bold exploration of cannabis. Verano provides a superior cannabis shopping experience in medical and adult use markets under the Zen Leaf™ and MÜV™ dispensary banners, including Cabbage Club™, an innovative annual membership program offering exclusive benefits for cannabis consumers. Verano produces a comprehensive suite of high-quality, regulated cannabis products sold under its diverse portfolio of trusted consumer brands including Verano™, (the) Essence™, MÜV™, Savvy™, BITS™, Encore™, and Avexia™. Verano’s active operations span 14 U.S. states, comprised of 15 production facilities with over 1,100,000 square feet of cultivation capacity. Learn more at Verano.com.
Media Note: Images and Video are available for download via the Verano Company Newsroom (Credit: “Courtesy of Verano”).
Contacts:
Investors
Verano
Julianna Paterra, CFA
Vice President, Investor Relations
investors@verano.com
Media
Verano
Steve Mazeika
Vice President, Communications
Steve.Mazeika@verano.com
312-348-4430
About The Cannabist Company (f/k/a Columbia Care)
The Cannabist Company, formerly known as Columbia Care, is one of the most experienced cultivators, manufacturers and providers of cannabis products and related services, with licenses in 14 U.S. jurisdictions. The Company operates 95 facilities including 73 dispensaries and 22 cultivation and manufacturing facilities, including those under development and assuming the closure of announced divesture transactions. Columbia Care, now The Cannabist Company, is one of the original multi-state providers of cannabis in the U.S. and now delivers industry-leading products and services to both the medical and adult-use markets. In 2021, the Company launched Cannabist, its retail brand, creating a national dispensary network that leverages proprietary technology platforms. The company offers products spanning flower, edibles, oils and tablets, and manufactures popular brands including Seed & Strain, Triple Seven, Hedy, gLeaf, Classix, Press, and Amber. For more information, please visit www.cannabistcompany.com.
Investors
The Cannabist Company
Lee Ann Evans
SVP, Capital Markets
investor@cannabistcompany.com
Media
The Cannabist Company
Lindsay Wilson
SVP, Communications
media@cannabistcompany.com
Forward Looking Statements
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s and The Cannabist Company’s beliefs regarding future events, plans, strategies, or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s and The Cannabist Company’s control. Generally, such forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “future”, “scheduled”, “estimates”, “forecasts”, “projects,” “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. Forward-looking statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company and The Cannabist Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking statements herein, including, without limitation, the risk factors described in the Company’s and The Cannabist Company’s annual reports on Form 10-K and any subsequent quarterly reports on Form 10-Q, in each case, filed with the U.S. Securities and Exchange Commission at www.sec.gov. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company and The Cannabist Company do not undertake to update any forward-looking information or forward-looking statements that are contained or referenced herein, except as may be required in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to the Company or The Cannabist Company or persons acting on their behalf is expressly qualified in its entirety by this notice regarding forward-looking information and statements.
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