• Debt accounted for 75% of trailing 8-week capital raises. We expect this ratio to be volatile because of the limited capital raise activity. With cannabis stocks trading at or near their 52-week lows, we expect debt to continue to account for more than 50% of capital raises. Several large MSOs have now come close to maxing out their debt capacity and may be forced to issue equity, even at the cost of dilution.

The Week’s Only Closed Debt Issue:

• On July 17, 2023, Avant Brands (AVNT: TSX)(AVTBF: OTCQX), a $40M market cap Canadian producer of high-quality, handcrafted cannabis products, closed a $2.65M secured credit facility.
• The three-year term facility is priced at 15% with potential increases based on any increases in Prime.
• The facility is secured by the real estate of the company’s non-operational and non-licensed real property owned by subsidiary GreenTec Holdings and guaranteed by certain subsidiaries, including 3PL, Flowr Okanagan, and GreenTech.
• The company also issued 1.75M three-year common share purchase warrants with an exercise price of $.23, an 89.15% premium to the stock’s closing price on the transaction date. Warrant coverage of the facility is approximately 15%. The low warrant coverage and high premium reduce the value of the warrant package to about .45 bond points and only increase the effective yield from 15% to 15.19%
• At first blush, the pricing seems aggressive; however, the Viridian Capital Credit model ranks Avant as the #1 out of the eighteen U.S. and Canadian cannabis companies with between $20M and $100M market caps. Avant has the lowest leverage of the group, strong liquidity, positive Adj EBITDA, and positive cash flow from operations. See the Viridian Capital Chart of the Week for more detail on the credit and valuation metrics of Avant and its peer group.