North Bud Farms Enters U.S. Market with the Signing of the Definitive Agreement to Acquire Nevada Botanical Science Located in Reno, Nevada

Published: November 20, 2019

North Bud Farms Enters U.S. Market with the Signing of the Definitive Agreement to Acquire Nevada Botanical Science Located in Reno, Nevada

North Bud Farms Inc. announced that Bonfire Brands USA, a wholly owned subsidiary of NORTHBUD, has signed a definitive asset purchase agreement to acquire all assets of Nevada Botanical Science, Inc. in a transaction valued at USD$7.5 million.

Nevada Botanical Science (NBS) is located in Reno, Nevada. NBS holds Nevada State medical and adult use licenses for cultivation, extraction and distribution. NBS operates an integrated cannabis operation located on 3.2 acres of land within the Reno green zone industrial park. NBS currently operates a 5,000 sq. ft. indoor cultivation facility and has been approved for expansion of up to 60,000 sq. ft of greenhouse space. The property also includes an operating extraction facility and licensed and approved commercial kitchen. This infrastructure is capable of manufacturing and bottling beverages and edibles and is currently used by NBS for both white label and branded product manufacturing. Operated by healthcare professionals, NBS has been primarily focused on the Nevada State medical cannabis market. NBS currently manufactures and sells award winning (Jack Herer Cup 2018) topical pain creams, balms and lotions under the Trichomic medical brand.

This past year NBS launched a trial release of cannabis infused cocktails under the brand “Happiest Hour”. Collaborating with local craft beverage manufactures NBS released a variety of beverages including Margarita, Pina Colada, Bloody Mary, Long Island Ice Tea and Lemonade to select retailers in the state. To date retailer adoption and reordering has been 100% and based on customer feedback, NBS will increase production and distribution including additional retailers in Las Vegas in 2020. NBS has also finished a successful trial launch of its energy shot 1oz beverage containing 25mg of THC and 50mg of Caffeine. The Company plans to run a second branded trial in early 2020. Over the past three months NBS and NORTHBUD have been working together in preparation for the release of NORTHBUD branded dried flower products in Q4 2019 and a variety of infused and non-infused pre rolls.

“Subject to the finalizing of the previously announced acquisition of the Qlora Group in California, the Company plans to establish a unified product manufacturing and distribution platform within these two important states,” said Justin Braune, President of Bonfire Brands USA. “The license classes in California and Nevada allow for identical activities and the Company has been in negotiation with multiple potential JV partners who wish to leverage this unique platform. Being one of the few multi state operators with operations in both states will allow us to offer turnkey solutions to prospective partners moving forward.”

Transaction Terms

The transaction (the “Transaction”) is structured as an asset purchase agreement whereby in exchange for the purchase of all of the securities and assets of NBS, NORTHBUD is paying a total of USD$7,500,000 as follows:

  • Cash payment of USD$500,000 (paid in full);
  • Approximately USD$1 million in convertible shares of Bonfire Brands USA (6,500,000 “convertible shares”); and
  • A USD$6,000,000 interest bearing promissory note.

The convertible shares may be exchanged on a 1-1 basis with common shares of NBUD at the discretion of the shareholder. At the time of signing, the converted value of these securities was equal to USD$1,000,000. All applicable U.S. and Canadian regulatory holds shall apply upon conversion.

As per the terms of the agreement NBS will allocate pro rated ownership of assets in NBS and all associated licenses to Bonfire Brands USA throughout the re-payment period, subject to state approval.

Bonfire Brands and NBS have agreed to an operations and management arrangement allowing Bonfire to assume operational control, begin integration and driving revenue immediately.

“The NORTHBUD and Bonfire Brands USA team are extremely proud to have finalized this agreement making the state of Nevada our strategic entry point into the U.S. legal cannabis market,” said Ryan Brown, CEO of NORTHBUD. “We are equally proud of the structure of the deal and how it minimizes shareholder dilution while allowing our team to begin integration and operations with a focus on immediate revenue growth in one of the most sought-after adult use markets in North America. Our team has been looking at acquisitions in Nevada for over two years before finding the right fit.  The Nevada market is considered one of the largest and most profitable in North America with recreational sales of USD$580 million in the first full year of legalization* (2017 Nevada Dept. of Taxation).”

Founded by a group of northern Nevada physicians and healthcare professionals who believe in the promise of medical cannabis, Nevada Botanical Science has developed a world class cannabis production, research and development facility in Reno’s Washoe County. Its work and commitment are fully in compliance with the Hippocratic Oath as well as Nevada statute. Nevada Botanical Science is dedicated to ensuring the highest measure of safety, governance and stewardship for its patients, employees and the community it serves.

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