Cresco Labs Inc. (CSE:CL) (OTCQX: CRLBF) said that it has entered into an equity distribution agreement with Canaccord Genuity Corp. in which the company may sell up to C$55 million of subordinate voting shares. Cresco Labs said that it will use the money “for general corporate purposes (including funding ongoing operations and/or working capital requirements), to repay indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions.”
The deal is called at “At The Market” since the shares will be distributed at trading prices at the time of the sale, prices may vary between purchasers and during the period of distribution. The company said that the volume and timing of sales, if any, will be determined at the sole discretion of the company’s management and in accordance with the terms of the Equity Distribution Agreement.
While such a deal could bring in additional capital, it will also dilute existing shareholders.
Cresco recently released its earnings as the company reported on November 26 that its third-quarter revenues were $36.2 million, up 184% year-over-year and 21% quarter-over-quarter. Still, the company delivered a third-quarter net loss of $8.6 million, compared to net income of $1.2 million in the prior-year period.
With regards to the balance sheet, Cresco said it had total assets of $416.5 million, including cash and cash equivalents of $73.7 million and a working capital position of $144.6 million with zero debt on the balance sheet. The company also announced a sale-and-leaseback agreement for its Marshall, Michigan and Yellow Springs, Ohio facilities for $38 million which is expected to close within 30 days.
“In Q3, our team delivered another quarter of positive adjusted EBITDA while growing top-line revenue 21% over Q2 on an identical asset base, demonstrating the value of our long-term strategy of going deep, in the most populous states, and capturing significant market share through wholesale,” said Charles Bachtell, Co-founder and CEO of Cresco Labs. “Subsequent to the end of Q3, we closed the acquisition of Valley Agriceuticals, giving us four dispensaries in New York, one of the most significant hubs of consumer influence in the world. In California, the other market that has an outsized influence on U.S. and global consumer behavior, our wholesale revenue more than doubled in the quarter. We are making meaningful progress on our objective of creating the first national cannabis brand.”
With Illinois poised to begin recreational sales in 30 days, the company is ready to seize on its market advantage in the state. Bachtell added, ” One of the best short-term opportunities is in Cresco’s backyard, as Illinois transitions to adult-use legalization in January of 2020. We are well-positioned in the state and will continue to rapidly expand our cultivation and processing footprint, to ensure Cresco will have a strong first-mover advantage. Our brand portfolio has already proven to be popular in Illinois, capturing the largest share of the market, and we are well-positioned to maintain our market share and grow it through the adult-use transition and beyond. Illinois is a perfect example of the success of our strategy to get into prospective markets, go deep, build strong brands and capture disproportionate market share. As we move into 2020, we are set to repeat this model across our platform.”