Newstrike Subsidiary UP Cannabis Acquires Facility Capable of Adding 12,000kg of Annual Production Capacity
Acquisition of greenhouse and lands increases potential annual capacity five-fold and provides further expansion opportunitiesTORONTO, Jul 13, 2017 - Newstrike Resources Ltd. (TSX VENTURE:HIP) ("Newstrike" or the "Company") announces that, its wholly-owned subsidiary, Up Cannabis Inc. ("UP"), has agreed to acquire a modern greenhouse facility along with related equipment, chattels and approximately 16.6 acres of land located in Ontario's Niagara region (the "Acquisition") from Westbrook Greenhouses Ltd., for approximately $7.3 million.
"This Acquisition marks the attainment of another strategic milestone by providing a potential five-fold increase over existing cannabis production capacity to an estimated annual total of almost 15,000kg, along with the attendant economies of scale, all in a modern, automated facility that will allow us to reduce production costs while preserving and ensuring the character and quality of our product," noted Jay Wilgar, CEO of Newstrike, UP's parent company.
Proven Production Platform
As a result of the agreement, UP will acquire a proven growing platform situated on the QEW corridor in Beamsville, Ontario that includes:<
- an approximately 200,000 sq. foot facility of which approximately 160,000 sq. feet is dedicated to production with the remaining areas dedicated to packaging, administration and shipping/receiving;
- approximately 16.6 acres of land; and
- expansion potential to add an additional 140,000 sq. feet of production space which UP believes will increase capacity by a further 10,000kg to an aggregate potential capacity of 25,000 kg annually.
The greenhouse itself incorporates an automated Dutch tray system which is immediately applicable to the production of cannabis and which the Company believes will reduce labour costs and improve growing conditions relative to similarly situated greenhouses of comparable size lacking these features. The greenhouse is currently configured to produce orchids and other potted plants and is supported by a skilled workforce with site-specific experience.
The Transaction
(i)Financing
The purchase price of approximately $7.3 million, subject to typical closing adjustments and transaction costs, will be financed in-part through a new $4.0 million secured acquisition facility (the "Secured Facility") which has been committed to the Company by a syndicate of Newstrike officers, directors and shareholders led by Beechhill Capital Corp., a company owned by Mr. Wilhelmus ("Bill") Van Haeren, the father of Nik Van Haeren, a director of Newstrike, with the balance or approximately $3.3 million of the purchase price to be funded from existing capital resources. The Secured Facility is for a term of just under seven (7) months, expiring on February 15, 2018 and includes simple interest at the rate of 15% per year (1.25% per month) with monthly interest-only payments during the term and repayment in-full at the end of term. The Secured Facility may be repaid at any time subject to payment of a cancellation fee equal to 1.0% of all amounts then-outstanding. Security for the Secured Facility shall consist of:
- a general charge over the assets, inventory and undertakings of UP Cannabis Inc.; and
- upon completion of pending first-mortgage financing for the Facility, a subordinated or "second-ranking" charge on the 16.6 acres of land included in the Acquisition.
"The continued support of Beechhill Capital Corp. and fellow Newstrike shareholders, demonstrated in the provision of this flexible $4.0 million facility on favourable terms, further validates our growth strategy and accelerates the execution of our business plan", added Wilgar.
UP plans to develop and apply for licensing of this facility under the Access to Cannabis for Medical Purposes Regulations ("ACMPR") as an adjunct to its existing licensed facility in Brantford, Ontario. The Company expects to complete the Acquisition and all related financing transactions by July 31, 2017.
About Newstrike:
Newstrike is the parent company of UP Cannabis Inc., a licensed producer of medical cannabis based in Brantford, Ontario that received its cultivation license on December 19th, 2016. Newstrike, through its ownership of licensed producers, intends to develop a diverse network of high quality cannabis brands that addresses the needs of medical clients and eventually, as the law allows, adult consumers. For more information visit www.newstrike.ca.
The company's senior management team is composed of seasoned executives with strong experience building companies in complex and highly regulated environments including Jay Wilgar - Chief Executive Officer, Jim Macpherson - Chief Financial Officer, Kevin Epp - Chief Operating Officer and Jennifer Maccarone - Chief Quality Officer.
Forward-Looking Information: This press release contains forward-looking information based on current expectations. Statements about the recently executed purchase and sale agreement, pending closing of the transaction contemplated therein and expansion plans are all forward-looking information. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. Although such statements are based on management's reasonable assumptions, there can be no assurance that the acquisition will have been completed on the terms described above. Newstrike assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contact
Newstrike Resources Ltd.
Allan Rewak, Director of Communications and Stakeholder Relations
647-206-1231
ARewak@Newstrike.ca