ACQUIRES HEALTH CANADA APPROVED LICENSED PRODUCER AND PROCESSOR
Pasha Brands Ltd. (CRFT.C) has acquired Medcann Health Products Ltd., a fully licensed, Health Canada-approved standard facility to process, cultivate and sell medical cannabis under the Cannabis Act regulations. Prior to its acquisition by Broome Capital Inc., the privately held Pasha Brands Ltd. had previously entered into a letter of intent to acquire Medcann, dated effective April 30, 2019.
This acquisition will allow subsidiary company BC Craft Supply Co. Ltd. to accelerate its pace of growth in Canada's new craft cannabis sector. BC Craft acts as a service provider to small farmers under the newly created Health Canada licence category known as microcultivator. In exchange for a cannabis supply agreement with a microcultivator, BC Craft assists the applicant in receiving its licence with Health Canada and provides a whole host of services ranging from quality assurance to the marketing of its cannabis products in Canada's provincial and territorial markets.
With approximately 10,000 square feet of space, on an acre of land on Vancouver Island, Medcann was granted its processing, cultivation and sales licence by Health Canada in March, 2019. Medcann provides Pasha with an immediate pathway to bring craft cannabis products to market under Health Canada's new microcultivation licence category. The Medcann facility will test, process and package high-quality craft flower, and package this flower for distribution throughout Canada. In addition to flower sales, it is expected that Medcann will process cannabis for Canada's emerging oil market through an extraction lab to be developed at the facility. Pasha currently owns nine prohibition-era cannabis brands which Canadians were purchasing in the prelegalization era. As regulations permit, Pasha will distribute product under these leading brands throughout Canada.
There is a growing supply gap for cannabis in Canada as licensed producers are unable to meet consumer demand. Through BC Craft, Pasha will focus on bringing microcultivators into the market. The microcultivation licensing program allows for the processing of approximately 500 kilograms of dried flower per year, per microcultivator. More than just a viable solution for closing the supply gap, this provides consumers with high-quality craft cannabis products that are differentiated from others in the space. Under the microcultivation program, the BC Craft network will look to add and assist hundreds of producers. For every 100 microcultivators BC Craft secures, up to 50,000 kilograms of world-class craft cannabis could be available to the market via Canada's regulated supply chain.
In consideration for the acquisition of all of the outstanding share capital of Medcann, Pasha has completed a cash payment of $3-million and has issued 14,444,445 common shares at a deemed price of 90 cents per share, to the existing shareholders of Medcann.
The consideration shares are subject to a pooling arrangement which restricts the ability of the holders to transfer or trade the shares. The consideration shares will be released from the pooling arrangement over a period of 18 months, with 25 per cent of the shares released immediately upon completion of the acquisition, and the balance released in six equal tranches every three months thereafter. In the event the volume-weighted average closing price of the Pasha common shares is less than 72 cents in the 20 trading days prior to the expiry of the pooling arrangement, the shareholders of Medcann will be entitled to receive additional consideration shares to guarantee the value of the consideration they receive.
Following completion of the acquisition, Medcann will also hold the right to acquire the property on which its facility is located in consideration for a further cash payment of $1.2-million. The property is currently subject to a lease arrangement which permits the operation of the facility.
In connection with completion of the acquisition, Pasha intends to issue 1,066,667 common shares as a finder's fee to certain arm's-length parties who assisted Pasha in facilitating the transaction. All shares issued as a finder's fee will be subject to a four-month-and-one-day statutory hold period in accordance with applicable securities laws.
About Pasha Brands Ltd.
Based in Vancouver, British Columbia, Pasha is a vertically integrated prohibition-era brand house that is firmly rooted in BC's craft cannabis industry, which boasts an international reputation. With proven capabilities in cannabis cultivation, genetic research and development, product processing, and retail, Pasha is uniquely positioned in the new legal cannabis market through its network of hundreds of craft cannabis suppliers under the Pasha umbrella.
Pasha's subsidiary, BC Craft, is also developing a craft cannabis campus, which is dedicated to bringing craft quality into the newly legal cannabis market in Canada. BC Craft is driven to assist craft growers in obtaining security clearance and licensing to grow as micro-cultivators, specializing in education and compliance to bring growers into the regulated cannabis supply market.