Lowell Stock Down On LOI To Sell Some Of Its Brands And Intellectual Property To Settle Debt

Lowell Farms Inc. LOWLLOWLF has entered into a binding letter of intent with the its existing noteholders. The cannabis company has agreed to sell its “Lowell Smokes” and “35s” brands and associated intellectual property to Lowell Brands LLC, a newly formed Delaware limited liability company and to assign the related license agreements and material contracts. In return, the noteholders have agreed to forgive all indebtedness owing under the Debentures

Transaction Details

The letter of itent sets out the general terms of the Transaction and the parties have agreed to negotiate the precise terms and conditions of the Transaction in good faith and to enter into definitive agreements on the closing of the transaction which is expected to occur on ‎or before March 31, 2023; provided however, the Company is not subject to an exclusivity provision and may solicit, initiate, entertain, or accept other offers. ‎

Details of the transaction are set forth below:

• The company will be relieved of all amounts outstanding under the Debentures which includes the warrants to acquire an aggregate of approximately 212 million subordinate voting shares of the company.

• The company will sell BrandCo all intellectual property arising out of or relating to the “Lowell Smokes” and “35s” brands and assign any existing, out-of-state license agreements relating to the “Lowell” brand to BrandCo.

• BrandCo will acquire approximately 100 million shares of the company’s subordinate voting shares representing in the aggregate shares of the company equal to no more than 49% of the then issued and outstanding number of subordinate voting shares.

• The company will receive future payments equal to 15% of net revenue received by BrandCo in connection with the Assigned Contracts for a period of six months following the Closing Date.

• The company will receive a 42-month exclusive license agreement for use of the “Lowell Smokes” and “35s” brands within the State of California.

• Closing of the proposed transaction will be subject to satisfaction of customary closing conditions with transactions of this nature.

“Throughout this process, our goal has been to reach the best outcome for the benefit of the Company, our team of employees, and our shareholders,” says Lowell Farms’ newly elected chairperson of the board, Ann Lawrence. “When this transaction closes, I believe Lowell Farms will be uniquely positioned to capitalize on market opportunities in the industry. I look forward to working with our team to maximize the potential of the Company, drive shareholder value, and move forward on the path of longevity.”

Board Changes

Effective Thursday George Allen has resigned from the board and Ann Lawrence has been appointed chair of the board. The company extends its thanks to Mr. Allen for his service and wishes him well on his future endeavors.

Price Action

Lowell shares were trading 7.53% lower at $0.04 per share at the time of writing Thursday morning.

Photo: Courtesy of Tim Foster on Unsplash