Trees Corporation (NEO:TREE.AQN) said it has made amendments to its previously disclosed transaction to acquire five licensed retail cannabis stores on Vancouver Island, British Columbia from 1015712 B.C. Ltd (101).
Among others, the amendments resulted in the immediate acquisition, by the company, of the Trees registered brand trademarks
Trees also clarified certain matters governing the relationship between itself and 101 pending the closing of the acquisition of the remaining assets upon receipt of approval from the British Columbia Liquor and Cannabis Regulation Branch (LCRB).
"With its high barrier of entry, Trees looks forward to soon solidifying its presence in the BC market through the closing of this transaction as a significant milestone to expanding the highly differentiated Trees brand," Jeff Holmgren, president and CFO of Trees, said in a statement.
READ: Trees has emerged as one of Canada’s most highly revered cannabis retail brands
Trees entered into an asset purchase agreement with 101 in October 2019, amended and restated in February 2020 and January 2021, which proposed the purchase by Trees of up to eight retail cannabis stores in British Columbia, subject to the receipt of all requisite licenses and approvals from the LCRB. 101 currently operates four retail cannabis stores in British Columbia, with a fifth store anticipated to open next month in Victoria.
Th purchase was to be satisfied by the issuance of 5,933,333 common shares of Trees.
However, under the latest amendment, Trees said it has agreed with 101 to separate the terms of the transaction into two – a share purchase component and an asset purchase component.
The company said on March 24, 2022, that it acquired TreesAcquireCo, a company holding the "Trees" registered trademarks, including logos (Trees IP) in exchange for 5,933,333 common shares.
Separately, TreesAcquireCo and 101 have entered into a licensing agreement, in which TreesAcquireCo has agreed to license, until the closing of the retail store purchase, the Trees IP to 101 in exchange for an accruing royalty earned on gross retail sales from all of the operating retail cannabis stores subject to the asset purchase completion.
Meanwhile, the asset purchase component “contemplates” that the five retail cannabis stores will be conveyed to TreesAcquireCo upon the satisfaction of all conditions precedent, including the receipt of LCRB licensing approval.
In February last year, 101 issued a secured promissory note in favor of Trees to assist 101 in its ongoing development and operations to launch the initial five store locations while awaiting the closing of the asset purchase. As part of the latest amendment, Trees said the 101 note will now cover all debts owned by 101 to Trees, and additional covenants, guarantees and default provisions will also be added, including that the note is no longer forgivable.
The purchase price paid for the assets will be equal to the amount outstanding under the amended 101 note on the date of closing and will be satisfied by the issuance by TreesAcquireCo of a note in favor of 101.
Trees is an independent retail cannabis operator that is deeply rooted in the cannabis community and has been a respected voice of advocacy that has helped usher in legalization across Canada. Through its trusted reputation, history and passion for the 'plant', the company delivers a differentiated and authentic consumer experience unlike any other.
Contact the author at jon.hopkins@proactiveinvestors.com