Canadian CANNAINVESTOR Magazine April / May 2018 | Page 123

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the parties have agreed that Alliance will be given a right of first refusal on future equity
raises of BC New Co. This will allow Alliance to maintain and/or accrue ownership interest
(and presumably revenue share) in the cannabis botany centre, if they have cash on hand to
purchase the subsidiary’s equity at the time of offering.
Quebec
Cultivator
Acquisition
Alliance Growers acquires late-stage ACMPR applicant in Quebec
On January 2, 2018, the company announced that it had entered into an exclusive agreement
to acquire Biocannatech, a late-stage ACMPR app licant based in Quebec. The acquisition
expands Alliance’s portfolio of cannabis cultivator investments, the other notable position
being Canwe Growers, a late-stage ACMPR applicant based in Ontario. The acquisition of
Biocannatech calls for Alliance to finance the buildout and completion of the Biocannatech
facility in accordance with ACMPR regulations. Alliance and Biocannatech will prepare the
facility for required inspection by Health Canada, who upon satisfaction with the proposed
facility’s successful first crop, are expected to grant a cultivation license. Note that under
Health Canada’s proposed regulations, growers who intend to cultivate, and sell cannabis
seeds, and/ or clones (plantlets), may potentially apply for a nursery license. However, these
regulations are still dependent on a final decision by Health Canada.
Health Canada Proposed Cannabis Cultivation Licensing Model
Source: Health Canada
The facility buildout is envisioned as a two-phase project, with an initial 10,000 square-foot
facility attached to a 120,000 square-foot warehouse that the company expects to incorporate
as cultivation space in the second phase of buildout. This would bring total cultivation space
to 70,000 square-feet. Management expects the initial 10,000 square-foot facility will
produce up to 1,000 kg of cannabis per year. The production capacity of the facility after
expansion has not been disclosed, but we estimate that it may produce 7,000 kg. This is
based on extrapolation of the current production and cultivation space.
The acquisition will require a significant amount of funding, with Alliance to fund an
expected outlay of $8 million total, to be disbursed to Biocannatech in stages. The total
consideration for the Biocannatech acquisition is stipulated to consist of $0.6 million in cash
and $7.4 million in shares (at a price of $1 per share). Alliance disclosed the payment
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PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT