“Harvest One“) is pleased to announce today that it has acquired an initial 52% interest in Greenbelt Greenhouse Ltd. (“Greenbelt“), an Ontarioprivate company located in Hamilton, Ontario (herein, the “Transaction“).

This strategic acquisition will supply Harvest One with high quality greenhouse grown cannabis from Greenbelt’s 152,000 sq. ft. facility which will primarily be dedicated to Harvest One’s expanding cannabis-infused health, wellness, and self-care products under the Dream Water and Satipharm brands, and expanding products resulting from the recently announced acquisition of Delivra, following the closing of that transaction.  The Transaction ensures that Harvest One remains a vertically integrated house of brands by controlling the production of cannabis through cultivation and extraction, and ultimately to packaged good for consumers.

In addition to the greenhouse, the Greenbelt facility also has a 42,000 sq. ft. headhouse which is an ideal location for future extraction and processing capabilities. Greenbelt has an application pending with Health Canada for a standard cultivation license and a standard processor license under the Cannabis Regulations.

Strategic Rationale

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• Harvest One will now control significant production to supply new infused formulations of existing brands already controlled by the company.
• Harvest One secures a location to build out extraction capabilities for its infused products.
• The Transaction ensures good value for shareholders and provides economical access to a potential 15,000 kgs. or more of flower per year, once licensed.
• Offtake agreement ensures access to additional supply without further significant capital investment.

“We are excited to acquire a majority interest in Greenbelt which significantly increases Harvest One’s cannabis supply, as we continue our formulations on cannabinoid infused health, wellness, and self-care products across our house of brands” said Grant Froese, CEO of Harvest One. “In addition to the exceptional greenhouse facility, this acquisition also gives Harvest One space to build out its own extraction capabilities upon licensing which fulfills our goal of vertical integration from cultivation, to processing, extraction and, ultimately, premium infused products.”

Ian Adamson, President of Greenbelt commented, “We are delighted to be partnering with Harvest One and look forward to completing the final retrofit of our greenhouse facility and securing our licensing approvals from Health Canada. With Harvest One’s expanding portfolio of brands and their experience in licensing, coupled with our larger grow facility and space for extraction, we see tremendous upside for Greenbelt, its shareholders, and its professional team of operators, as we work together to provide cannabis and cannabis infused products that consumers will come to know and trust.”

TERMS OF THE TRANSACTION

In connection with the Transaction, Harvest One entered into a securities purchase agreement dated March 29, 2019, with Greenbelt pursuant to which Harvest One acquired $3,250,000 of treasury common shares of Greenbelt (the “Treasury Shares”).  In addition, pursuant to a share purchase agreement dated March 29, 2019, between Harvest One and certain existing shareholders of Greenbelt, Harvest One acquired additional common shares of Greenbelt (the “Shareholder Shares”), giving Harvest One an aggregate 52% controlling interest in Greenbelt.  In consideration for the Shareholder Shares, Harvest One issued 3,521,600 common shares (each share being issued at $0.923 per Harvest One share based on Harvest One’s 30-day VWAP ending two days prior to the closing of the transaction), representing approximately 1.9% of the issued and outstanding shares of Harvest One (on a non-diluted basis).

Contemporaneous with Harvest One’s investment, Greenbelt raised an additional $1,000,000 of equity from outside investors.  The proceeds from Harvest One’s investment ($3,250,000) and from the outside investors ($1,000,000) has been used to retire indebtedness in full owing to existing lenders to Greenbelt and to payout certain equipment leases, with the balance of proceeds being used for working capital purposes. After completion of the Transaction, Harvest One now holds 52% of the outstanding shares of Greenbelt. In limited circumstances, Harvest One’s interest may be diluted down to 50.1%.

In addition to the foregoing, Harvest One entered into a loan facility agreement with Greenbelt dated March 29, 2019, pursuant to which Harvest One has agreed to provide a secured bridge loan facility to Greenbelt – in an amount of up to $3,500,000 bearing interest of 4.5% over a 1-year term – pursuant to which Greenbelt may draw down funds for the purpose of completing the planned retrofit of Greenbelt’s greenhouse facility.

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In connection with the Transaction, Harvest One’s wholly-owned subsidiary, United Greeneries Ltd. (“United Greeneries”) and Greenbelt have also entered into an offtake agreement dated March 29, 2019, pursuant to which United Greeneries will be entitled to purchase a minimum of 50% of the offtake from Greenbelt’s harvest production following Greenbelt’s licensing.  The offtake agreement is perpetual in nature and provides United Greeneries with agreed minimum volumes at preferential pricing for the first five years of production and, thereafter, at the then current market rates.

The Transaction is subject to final approval of the TSX Venture Exchange.

SOURCE Harvest One Cannabis Inc.