8-K: Rubino Ventures to Manage and Acquire Illinois Cannabis Dispensaries in Multi-Million Dollar Deal

Rubino Ventures IL, LLC enters into agreements to manage and acquire NMG IL 1, LLC and NMG IL 4, LLC, Illinois cannabis dispensaries, for a total purchase price exceeding $5 million, plus potential earnout payments.

Summary

• Rubino Ventures IL, LLC has entered into agreements to manage and potentially acquire two Illinois cannabis dispensaries, NMG IL 1, LLC and NMG IL 4, LLC.
• The agreements include Membership Interest Purchase Agreements (MIPAs) and Management Services Agreements (MSAs).
• The total purchase price for NMG IL 1, LLC is $3,333,333, and for NMG IL 4, LLC is $1,666,667.
• An initial payment is due within three business days of the MSA's effective date, with the balance payable at closing, less certain transaction expenses.
• Additional earnout payments are contingent on the EBITDA performance of the dispensaries over two phases.
• Rubino will manage the dispensaries under the MSAs for a monthly fee of $12,500 per dispensary, plus reimbursement of certain expenses.
• The agreements are subject to approval by the Illinois Department of Financial and Professional Regulation (IDFPR).

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The deal represents growth for Rubino Ventures, but is contingent on regulatory approvals and performance.

Positives

• Rubino Ventures gains management control and a path to full ownership of two operating cannabis dispensaries in Illinois.
• The earnout structure aligns the interests of the buyer and seller, incentivizing improved performance of the dispensaries.
• The management services agreement provides immediate revenue for Rubino while awaiting regulatory approval for the acquisitions.

Negatives

• The acquisitions are contingent on regulatory approval, which introduces uncertainty and potential delays.
• The earnout payments are not guaranteed and depend on the future performance of the dispensaries.
• The Company is only obligated to pay the Service Fees and any Expenses provided that the Company has net cash available to pay such Service Fees and Expenses.

Risks

• Failure to obtain IDFPR approval could prevent the acquisitions from closing.
• Changes in Illinois cannabis regulations could negatively impact the profitability of the dispensaries.
• The earnout payments may not materialize if the dispensaries do not meet the EBITDA targets.
• Federal law continues to prohibit cannabis, creating potential legal risks.

Future Outlook

The future outlook depends on obtaining regulatory approvals, successful management of the dispensaries by Rubino Ventures, and the performance of the dispensaries in meeting EBITDA targets for earnout payments.

Industry Context

The announcement reflects the ongoing consolidation and investment activity within the cannabis industry, as companies seek to expand their footprint and market share in states with legal cannabis markets like Illinois.

Comparison to Industry Standards

• Comparable transactions in the cannabis industry often involve similar earnout structures tied to EBITDA performance.
• The valuation multiples (3.2x EBITDA) used for the earnout calculation are within the typical range for cannabis dispensary acquisitions.
• Companies like Curaleaf, Green Thumb Industries, and Trulieve have pursued similar acquisition strategies to expand their presence in key markets.

Stakeholder Impact

• Shareholders of Body and Mind Inc. will see a return on investment through the sale of the dispensaries.
• Employees of the dispensaries may experience changes in management and operational practices.
• Customers should expect a continuation of services under new management.
• Suppliers and vendors will likely continue their relationships with the dispensaries under Rubino Ventures' management.

Next Steps

• Obtain IDFPR approval for the management services agreements and the acquisitions.
• Transition management of the dispensaries to Rubino Ventures.
• Achieve operational and financial targets to maximize earnout payments.

Key Dates