/EIN News/ — TORONTO, Nov. 22, 2018 (GLOBE NEWSWIRE) — Lineage Grow Company Ltd. (the “Company” or “Lineage”) (CSE:BUDD) is pleased to announce the signing of a definitive agreement (the “Agris Agreement”) to acquire California-based Walnut Oaks, LLC d/b/a Agris Farms (“Agris Farms”) (the “Agris Farms Acquisition”).
Agris Farms operates a fully-licensed and fully-operational 40,500 sq. ft. low-cost greenhouse facility and a 3,000 sq. ft. craft-style indoor facility in Yolo County, California. The Yolo facility is in commercial production with annual production capacity of 6,000 lbs. of premium quality craft cannabis.
Pursuant to the Agris Agreement, Lineage would acquire a 100% ownership interest in Agris Farms based on an implied enterprise value of US$6,600,000. Consideration would be in the form of stock and the assumption of liabilities.
“The acquisition of Agris Farms and the signing of this definitive agreement, are directly aligned with the strategic framework we have outlined to our shareholders,” said Peter Bilodeau, CEO of Lineage. “As one of California’s premium quality low-cost producers, Agris Farms serves as a tremendous building block to launch our California growth initiative.”
“We are very excited to be joining the Lineage team as we believe there are meaningful ways in which we can grow faster together.” said Menna Tesfatsion, CEO of Agris Farms. “We are focused on delivering top quality cannabis products to California’s discerning consumer base and we are confident that Lineage’s platform will provide access to a best-in-class distribution and manufacturing network enabling us to scale more aggressively and more efficiently.”
Pursuant to the Agris Agreement, the purchase price for the Agris Farms Acquisition is US$6,600,000, payable on closing, comprised of: (i) US$2,148,880 payable by the issuance of Lineage common shares at a price of C$0.165 per share; (ii) the assumption of liabilities in the aggregate amount of US$2,951,120; and (iii) the provision of a put option by Lineage in favor of the holder of a US$1,500,000 subordinated note where the note holder can choose to convert the subordinate note into a Lineage convertible note convertible into a unit of one Lineage common share and one half of a warrant with a conversion price of C$0.19 per share and a warrant exercise price of C$0.25 per share. The sellers may also be entitled to receive an earn-out payment equal to six times (6x) of any EBITDA in excess of US$1.1 million during the period of May 1, 2018 to April 30, 2019. In case of consolidation or reclassification of Lineage common shares, the issue price, number of shares issuable and type of shares to be issued in the Agris Farms Acquisition will be adjusted accordingly.
Closing of the Agris Farms Acquisition is subject to various conditions, including the approval of Yolo country for the transfer of Agris Farms membership units to Lineage, closing of the proposed reverse takeover transaction between Lineage and FLRish, Inc. d/b/a Harborside (“Harborside”). There is no assurance that the Agris Farms Acquisition will be completed as proposed or at all.
Bridge Loan from Harborside
On November 13, 2018, Lineage issued a promissory note in favour of Harborside in the principal amount of C$2,000,000 as a bridge loan. The note is unsecured, and bears in interest at 12% per annum, or 18% per annum while the loan is in default. The bridge loan will mature after one year, which may be extended for another year unless Lineage receives a written notice from Harborside prior to 90th day before the expiry of the then current term that Harborside does not wish to extend the term of the loan. However, if the proposed reverse takeover transaction between Lineage and Harborside is terminated, the bridge loan will mature on the date that is six months after the date of termination.
The proceeds of the bridge loan are expected to be used by Lineage to subscribe for Agris Farms membership units as set out below.
Subscription of Agris Farms Membership Units
In connection with the Agris Farms Acquisition, as part of the assumption of liabilities of Agris Farms, Lineage is to subscribe for 698.17 membership units in Agris Farms at US$2,149.47 per unit with a total subscription price of US$1,500,000. Agris Farms will use the subscription proceeds from Lineage to repay and retire a senior secured note in the principal amount of US$1,500,000. Lineage’s subscription of membership units and Agris Farms’ repayment of the senior note are expected to occur on November 23, 2018.
Lux Acquisition Update
The Company also wishes to report that the previously announced acquisition of Lucrum Enterprises Inc., d/b/a LUX Cannabis Dispensary and the proposed reverse takeover transaction with Harborside are advancing with execution of a definitive agreements anticipated in short order.
About Lineage Grow Company Ltd.
Lineage Grow Company Ltd. is a reporting issuer that is listed on the Canadian Securities Exchange (“CSE”). Lineage is currently focused on operating two retail licensed stores located in two prominent cities in Oregon (Portland and Eugene), and on assembling licensed operators with good growth potential and superior management, either through direct acquisition or through joint ventures, with an aim towards building a dominant vertically-integrated cannabis business that leverages best-in-class cultivation, brands, distribution, and retail assets. Lineage has entered into the Agris Agreement with respect to the Agris Farms Acquisition and a binding letter of intent to acquire a dispensary in San Jose, California. In addition, Lineage and Harborside have entered into a binding letter agreement pursuant to which Lineage will acquiring all the issued and outstanding securities of Harborside in a reverse takeover transaction.
For updates on the Company’s activities and highlights of the Company’s press releases, investor deck and other media coverage, please visit Lineage’s web site (under construction) at www.lineagegrow.com