HIP INCREASES capacity FIVE-FOLD but is still valued at 30 cents by market?
Is market ASLEEP at the wheel?
"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 opportunities
TORONTO, ONTARIO--(Marketwired - July 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."
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