High Tide closes $30-million loan agreement with Cronos

Executive Summary

• High Tide Inc. has closed a $30 million convertible debt facility with Cronos Group Inc. to fund working capital, future acquisitions, and organic growth, specifically targeting expansion of its domestic store network beyond 300 locations.
• The transaction includes a junior secured loan bearing 4% interest with a five-year term, convertible into common shares at $4.20 per share, alongside a warrant to purchase up to 3,836,317 shares at $3.91 per share.
• TSX-V has conditionally approved the listing of the conversion and warrant shares, subject to standard requirements.

Key Details

• Transaction Structure: Closed loan agreement for $30 million principal amount of convertible debt.
• Lender: Cronos Group Inc. (via a wholly owned subsidiary).
• Use of Proceeds: Working capital for future acquisitions, organic growth, and expanding the domestic store network beyond 300 locations in Canada.
• Loan Terms:
  • Interest rate: 4% per annum.
  • Term: Five years.
  • Security: Junior secured loan with a third-priority lien on certain of High Tide's assets.
  • Repayment: May be repaid in whole or in part at High Tide's option at any time with no penalty.
• Conversion Rights: Cronos may convert the loan (excluding original issuance discount amounts) into High Tide common shares at a price of $4.20 per share.
• Warrant Terms:
  • Quantity: Up to 3,836,317 common shares.
  • Exercise Price: $3.91 per share.
  • Premium: Represents a 25% premium to the 30-day volume weighted average price (VWAP) of High Tide shares on the TSX Venture Exchange ending the day prior to the release.
  • Term: Five years, exercisable at Cronos's option.
• Regulatory Status: TSX-V has conditionally approved the listing of the conversion shares and warrant shares.

Notable Quotes

• Raj Grover, Founder and CEO of High Tide: "Given our strong and proven business model, it's incredibly validating to receive a second vote of confidence in the form of an investment from a major licensed producer in recent months... With this investment, which will serve entirely as growth capital, we're poised to accelerate our expansion both in Canada and internationally."
• Mike Gorenstein, Chairman, President and CEO of Cronos: "Our investment was driven by the belief that a competitive and equitable retail environment benefits the entire industry, including producers, retailers and adult consumers. We remain fully committed to working with and supporting all our retail partners."