48North Cannabis Corp. Announces Transformational Acquisition and $10MM Private Placement

Published: October 31, 2018

48North Cannabis Corp. Announces Transformational Acquisition and $10MM Private Placement

48North Cannabis Corp. and 2599708 Ontario Inc. have entered into a letter agreement that became binding on October 29, 2018, whereby 48North will acquire all of the issued and outstanding common shares of privately-held Good & Green in an all-share transaction valued at $18,000,000. 48North is also pleased to announce a $10,000,000 non-brokered private placement of units, including an approximately $7,000,000 lead order from a leading US-based private investment fund.

With the Acquisition, 48North acquires a second Licensed Producer, as defined under the Cannabis Act, positioning itself as one of the largest and lowest cost producers of dried cannabis, cannabis oil, as well as a leader in next-generation cannabis infused products including cosmetics, topicals, beverages, and edibles.

The Acquisition provides 48North with a total expected 2019 production of at least 45,000 kilograms of high-quality dried cannabis, assuming receipt of applicable regulatory approvals. Good & Green’s cultivation and production facilities include an approximately 46,000 square foot indoor facility situated on five-acres of commercial land in Brantford, Ontario, as well as a 100-acre farm in Southwest Ontario. This significant production footprint includes 48North’s existing 2019 indoor expected production of 2,500 kilograms from DelShen Therapeutics Corp., the Company’s existing wholly-owned Licensed Producer.

“We are excited to acquire Good & Green, a company that shares our corporate values, strong management, and commitment to financial discipline,” said Alison Gordon, Chief Executive Officer of 48North. “With now two licensed facilities, we are optimally positioned for the next phase of cannabis legalization with extensive cultivation experience in large-scale, low-cost production.”

“48North continues to be a leader in developing cannabis brands and products with a future-focus that looks beyond flower and oil,” said Jeannette VanderMarel, co-founder and President of Good & Green. “We look forward to adding our expertise and significant low-cost organic production profile to further develop this dynamic and innovative vertically-integrated cannabis company.”

“We are pleased to be combining forces with 48North, a company that shares our commitment to the highest environmental, social and governance standards, to developing high-quality and consistent products and to achieving best-in-class financial performance,” said Daniel Goldberg, co-founder and Chief Executive Officer of Good & Green.

After closing of the Acquisition, Alison Gordon and Jeannette VanderMarel will become co-CEOs of 48North. Ms. VanderMarel will also join the Board of Directors of 48North. Daniel Goldberg will become Senior Advisor of 48North and will focus on strategy, business and corporate development, strategic partnerships, communications, as well as investor and government relations.

The Acquisition is expected to be completed through a three-cornered amalgamation whereby 48North will acquire 100% of Good & Green’s outstanding common shares from Good & Green’s shareholders in exchange for $18,000,000 of common shares (totalling 24,567,534 common shares) of 48North at a price of $0.73 per common share. 48North and Good & Green have agreed to a mutual break fee of $750,000. The Acquisition is expected to close on or before November 30, 2018 and is subject to, among other conditions, TSX Venture Exchange approval.

Acquisition Highlights

  • Further Strengthens a Values-Based Vertically-Integrated Cannabis Company: 48North is a vertically-integrated cannabis company focused on building strong brands and developing innovative, next-generation cannabis products. The Acquisition provides a significant increase in indoor and low-cost outdoor cannabis production, a substantial expansion into organic cannabis production, and further strengthens 48North’s brand portfolio.
  • Second Licensed Indoor Cultivation and Manufacturing Facility: The Acquisition provides an additional ~46,000 square feet of licensed indoor cultivation and manufacturing facility, situated on five-acres of land in Brantford, Ontario. This site has an initial production area of ~14,000 square feet with another ~25,500 square feet immediately available for additional indoor cultivation, pre and post-production, laboratory, large-scale extraction, as well as next-generation product, research, development and manufacturing. The Brantford indoor facility is expected to produce 2,500 kilograms of dried cannabis in 2019.
  • Low-Cost 100-Acre Outdoor Cultivation Site to Provide an Expected 40,000 Kilograms of Organic Dried Cannabis in 2019: The Acquisition provides 48North with a 100-acre organic farm situated in close proximity to the indoor Brantford, Ontario facility. This is in addition to 48North’s existing licensed facility in Kirkland Lake, Ontario. The farm is expected to produce at least 40,000 kilograms of dried cannabis in 2019. This includes outdoor grow with a targeted per gram production cost of $0.25, at a cost basis which is a fraction of the current, lowest-cost producer. Good & Green submitted a cultivation license application to Health Canada in relation to the farm in October 2018and expects to receive that license by May 2019. The farm will provide 48North with organic, sun-grown cannabis and provides a significant first-mover advantage in the production of low-cost, next-generation, extract-based cannabis products.
  • Enhanced Management Team: Good & Green’s strong management team has best-in-class cultivation, facility development and construction, government relations, marketing, and branding experience, as well as M&A and corporate development capabilities. Good & Green’s senior team have all been involved in the MMPR/ACMPR/Cannabis Act since its inception. Together they have 12-plus years of experience and have developed over a million square feet of federally-licensed cannabis cultivation space.
  • Strong Access to and Immediate Availability of Capital: The concurrent Financing provides capital and liquidity to support the continued expansion of both companies, including the development of Good & Green’s 100-acre farm and large-scale extraction capabilities to significantly increase 2019 production and facilitate the rapid development of innovative, next-generation cannabis products.
  • Complementary Portfolio of Brands: The Acquisition provides 48North and Good & Green with the opportunity to leverage a combined portfolio of authentic, socially responsible, high-quality cannabis brands. The diversity and range of brands will increase access to multiple demographic segments through complimentary values-driven brands including 48North, Good & Green, Latitude and Mother & Clone.
  • Enhanced Liquidity and Continued Participation in Future Growth: Good & Green shareholders, through their ownership of 48North shares, will have the opportunity to participate in the growth of 48North and will benefit from the enhanced prospects of the combined company. The Acquisition will provide substantial infrastructure and operational support to accelerate the growth strategy of both companies with a focus on future product development and innovation.

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