8-K: Jushi Holdings Secures $5.147 Million Through Second Lien Notes and Warrants Offering

Jushi Holdings Inc. announces the issuance of second lien notes and warrants, raising approximately $5.147 million for general corporate purposes.

Summary

• Jushi Holdings Inc. issued US$3,719,000 and C$2,000,000 principal amount of 12% Second Lien Notes due December 7, 2026, along with warrants to purchase subordinate voting shares.
• The company received net proceeds of US$3,347,100 and C$1,800,000 from the sale of the notes and warrants.
• The warrants entitle subscribers to purchase up to 8,544,666 subordinate voting shares, exercisable for five years.
• The exercise price per share is a 50% premium to the volume-weighted average price over the 20-day period following the filing of the annual report, with a floor of US$0.45 and a ceiling of US$0.50.
• An entity affiliated with CEO James Cacioppo acquired US$3,719,000 of notes and warrants for 6,198,333 shares, while founder Denis Arsenault acquired C$2,000,000 of notes and warrants for 2,346,333 shares.
• The net proceeds from the offering will be used for general corporate purposes, including working capital, capital expenditures, and potential acquisitions.
• Tobi Lebowitz, Chief Legal Officer and Corporate Secretary, resigned effective March 28, 2025.
• Prior to the offering, Mr. Cacioppo held approximately 17.87% of the subordinate voting shares on an as-converted basis.
• Following the offering, Mr. Cacioppo holds between approximately 19.85% and 19.99% of the subordinate voting shares on an as-converted basis.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company successfully raised capital, the terms of the financing (high interest rate, second lien notes) suggest a challenging financial position. The resignation of the Chief Legal Officer adds a slightly negative element.

Positives

• Jushi Holdings successfully raised capital through the issuance of second lien notes and warrants.
• The funds will be used for general corporate purposes, including working capital, capital expenditures, and potential acquisitions, which could support future growth.
• A special committee of the board of directors, consisting of all independent directors, reviewed and approved the transactions.

Negatives

• The notes are second lien, indicating a higher risk for investors compared to senior secured debt.
• The notes carry a 12% interest rate, reflecting the company's perceived risk profile.
• The warrants have an exercise price premium, but also a floor of US$0.45, which could dilute existing shareholders if the share price remains low.
• Tobi Lebowitz, Chief Legal Officer and Corporate Secretary, resigned from the Company.

Risks

• The company's ability to execute its growth strategy depends on its ability to effectively deploy the raised capital.
• The cannabis industry faces regulatory and political risks, including potential changes in laws and enforcement.
• The company's financial performance is subject to various economic, business, regulatory, and competitive factors.
• The company has a history of operating losses and negative operating cash flows.

Future Outlook

The company intends to use the net proceeds from the offering for general corporate purposes, including but not limited to working capital, capital expenditures and potential acquisitions.

Management Comments

• James Cacioppo, Chief Executive Officer, Chairman, and Founder of Jushi Holdings Inc., announced the acquisition of a warrant to purchase subordinate voting shares of the Company.

Industry Context

The capital raise reflects the ongoing need for cannabis companies to secure funding in a challenging regulatory and financial environment. The terms of the financing, including the high interest rate and warrant issuance, are indicative of the risks associated with the industry.

Comparison to Industry Standards

• Compared to companies like Curaleaf, Trulieve, and Green Thumb Industries, Jushi is a smaller player in the cannabis market.
• The 12% interest rate on the second lien notes is higher than typical senior secured debt for larger, more established cannabis companies, reflecting Jushi's higher risk profile.
• The use of warrants is a common tool in the cannabis industry to attract investors, but can lead to dilution if exercised.

Management Changes

Related Party Transactions

• An entity affiliated with James Cacioppo, the Company's Chief Executive Officer, Chairman and Founder, was issued US$3,719,000 principal amount of United States dollar denominated Notes, for a purchase price of US$3,347,100 and received up to 6,198,333 Warrants.
• Denis Arsenault, a Founder and significant equity holder of the Company, was issued C$2,000,000 principal amount of Canadian dollar denominated Notes, for a purchase price of C$1,800,000 and received up to 2,346,333 Warrants.

Stakeholder Impact

• Shareholders may experience dilution if the warrants are exercised.
• Employees may benefit from the company's ability to fund operations and growth.
• Customers may benefit from potential improvements in product quality and availability.
• Creditors face increased risk due to the issuance of second lien notes.

Next Steps

• The company will use the net proceeds from the offering for general corporate purposes, including working capital, capital expenditures, and potential acquisitions.
• The company will file a report on SEDAR+ containing additional information with respect to the acquisition of warrants by James Cacioppo.

Key Dates