Delta 9 Acquires 17 Retail Cannbis Stores, About To Close $32 Million Credit Facilities

Delta 9 Cannabis Inc. DLTNF DN has closed a transaction with Uncle Sam’s Cannabis Ltd. and Wissam El Annan to acquire all or substantially all of Uncle Sam’s assets relating to the operation of seventeen retail cannabis stores in Alberta. The company will also be closing it’s previously announced $32 million in credit facilities from Connect First Credit Union Ltd.

To provide additional funding, the company will also complete a private placement of $10 million in principal amount of senior secured second-lien convertible debentures by Sundial Growers Inc. SNDL. The subscription price of $9.6 million represents an original discount of 4%. The Sundial debenture matures on March 30, 2025 and bears an interest rate of 10% per annum, subject to increase on the occurrence of certain events as set forth in the Sundial debenture, payable monthly.

Additional Details of Uncle Sam Transaction:

"We are pleased to have finalized this transaction to grow our market share in the Canadian retail cannabis market with an additional seventeen-store presence,” stated John Arbuthnot, CEO of Delta 9. "Delta 9 now has 34 retail cannabis stores in operation across Canada and is positioning as one of the countries largest vertically integrated cannabis retailers. The company has an aggressive growth strategy to actively acquire cannabis retail stores that will provide meaningful revenue growth and positive adjusted EBITDA.”

The purchase price paid by Delta 9 Cannabis Store relating to the Uncle Sam Transaction was $12.5 million subject to customary adjustments. The final closing of the Uncle Sam Transaction remains subject to the approval of the TSX.

Additional Details on the Sundial Debenture

The Sundial debenture is convertible by Sundial into at a conversion price of $0.35 per common share. If Delta 9 completes an offering of equity securities in the six months from the closing of the offering at an issuance price that is equal to or less than $0.29 per common share, the conversion price will be adjusted downward to a share price that is equal to a 20.0% premium to the issuance price of such offering of equity securities provided that, until shareholder approval is obtained by Delta 9, such price is not less than the 5-day volume weighted average trading price of the common shares as of the date of the conversion of the Sundial debenture.

Additional Details of the Credit Facilities:

• $23 million commercial mortgage facility (“Facility 1”)

• $5 million acquisition facility (“Facility 2”)

• $4 million authorized overdraft (“Overdraft Facility”)

"We are excited that this new credit facility improves Delta 9’s financial position, lowers our cost of capital and provides funds for the purchase of the 17 Uncle Sam’s cannabis retail store acquisition,” stated Arbuthnot. ”We are pleased that we have lowered our annualized interest costs and principal debt repayments by $1,020,000 a year. The combined interest rate reductions under Facility 1 represent approximately $550,000 in annualized interest savings and an additional $470,000 in annualized principal repayment. To our knowledge, the new 4.55% fixed interest rate we are paying is among the most competitive rates established by any public cannabis company to date.”

The interest rate under Facility 1 and Facility 2 is a 5-year fixed rate of 4.55% per annum and connectFirst prime plus 1.50% per annum for the Overdraft Facility. The company used a portion of the credit facilities to repay its credit facilities with Canadian Western Bank. The company expects to repay the convertible debentures on the maturity date of July 17, 2022.

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Photo: Courtesy of Delta 9 Cannabis Inc.