INLB - Item 9 Labs (INLB) - Begins Capital Raise Closes on First Dispensary Acquisition
Capital Raise. Yesterday, Item 9 Labs announced the launch of its global, streamlined Regulation A, Tier 2 public offering for unaccredited and accredited investors. The Company is offering 28 million units, each comprised of one share and one-half of one warrant. Upon the exercise of all warrants, the offering has maximum proceeds of $67.2 million. The offering price is $1.40 per unit and the exercise price is $2.00 per warrant share.To Fuel Growth. The net proceeds of the offering will be used to fuel growth. Proceeds will be used to fund the Company's retail dispensary acquisition strategy, for the potential acquisition of additional cultivation properties, and for working capital purposes. Assuming funds are raised, we believe this would be a net positive for Item 9 Labs as the additional capital would enable an acceleration of the growth strategy, especially on the Unity Rd. front.Dispensaries A Priority. According to the offering circular, if 100% of the offering is sold resulting in $37.5 million raised (before any warrant exercise), Item 9 Labs would allocate about $24 million for dispensary acquisitions and $8.5 million to expand production, with $5 million set aside for working capital purposes.Dispensary Acquisition. As expected, Item 9 Labs closed its acquisition of an existing dispensary license and storefront in Adams County, Colorado. The acquisition is part of an overarching strategy to accelerate national development by creating turnkey investment opportunities for Unity Rd. franchise partners. Item 9 paid $2 million. The Company expects the shop to be operational in the first half of 2022.Maintaining Outperform and $4.00 PT. We are maintaining our Outperform rating and $4.00 12-month price target on INLB shares. Item 9 is combining a traditional cannabis cultivation operation with an asset light franchise dispensary model to expand across the nation. We believe the combination creates a differentiated business model that offers premium products and distribution through an expanding network of dispensary franchises. Read More >>