Heritage Cannabis Announces Balance Sheet Transforming Sale Lease Back Transaction and Third Amendment to its Senior Secured Loan

Rhea-AI Summary

Heritage Cannabis Holdings Corp. has entered into binding agreements to sell its real estate properties in Ontario and British Columbia for a net purchase price of $9,714,475 and lease them back. The lease terms include a 12-month free rent period, representing approximately $1,389,000 of savings. The purchase price will be used to reduce the company's remaining term debt by approximately 64% to $5,256,379. The remaining term financing has been extended until January 31, 2025, and the company retains its revolving line of credit of up to $5,000,000. The existing warrant certificates held by BJK will be amended to extend the expiry date and reprice the exercise price. CEO David Schwede is thrilled with the agreement as it reduces the company's debt and positions Heritage for further growth.

Positive

• Heritage Cannabis Holdings Corp. has sold its real estate properties in Ontario and British Columbia for a net purchase price of $9,714,475.
• The lease terms include a 12-month free rent period, resulting in approximately $1,389,000 of savings.
• The purchase price will be used to reduce the company's remaining term debt by approximately 64% to $5,256,379.
• The remaining term financing has been extended until January 31, 2025, with an attractive interest rate.
• The company retains its revolving line of credit of up to $5,000,000, which has also been extended.
• Existing warrant certificates held by BJK will be amended to extend the expiry date and reprice the exercise price.

Negative

• None.

TORONTO--(BUSINESS WIRE)-- Heritage Cannabis Holdings Corp. (CSE: CANN) (OTCQX: HERTF) (“Heritage” or the “Company”), a licensed cannabis company with national distribution of its branded product catalogue in Canada and multi-state distribution for its RAD™ branded cannabis products in Missouri, West Virginia and New York State, is pleased to announce that it has entered into binding agreements to sell the Company’s real estate properties in Ontario (the “Ontario Property”) and British Columbia (the “BC Property”) to BJK Developments Ltd. (the “Purchaser”) for a net purchase price of $9,714,475 (the “Purchase Price”) and lease the Ontario and BC Property back from the Purchaser (the “Sale and Leaseback Transaction”).

Pursuant to the Sale Leaseback Transaction, Heritage has entered into ten (10) year lease agreements with the Purchaser, for each of its Health Canada licensed Ontario Property and BC Property, where the Company will continue to operate its best-in-class manufacturing and processing capabilities for its domestic and international business segments. Further, Heritage is pleased to announce that the lease terms include a 12-month free rent period, representing approximately $1,389,000 of savings during the period, which commences at closing; and, that the Company also retains an option to repurchase the Ontario Property and BC Property for a period of two years, from the Purchaser, pursuant to option agreements.

The Purchase Price will be used to set-off the amount owing by the Company to its lender, BJK Holdings Ltd. (“BJK”), a related entity of the Purchaser, reducing the Company’s remaining term debt by approximately 64% to $5,256,379. The remaining term financing, as amended within a Third Amending Agreement has been extended through to January 31, 2025, with interest calculated at the Royal Bank of Canada prime lending rate (“RBC Prime”) minus 1.75%. In addition, the Company retains its revolving line of credit of up to $5,000,000 (the “LOC”) with BJK, which has also been extended until January 31, 2025.

In connection with the Third Amending Agreement, Heritage has agreed to amend existing warrant certificates held by BJK dated October 8, 2021 which entitled BJK to subscribe for and purchase up to 10,000,000 common shares in the capital of Heritage at an exercise price of $0.25 per common share, and dated September 29, 2022 which entitled BJK to subscribe for and purchase up to 50,000,000 common shares in the capital of Heritage at an exercise price of $0.10 per common share (the “Existing Warrants”). Effective, October 31, 2023, the Company will amend the Existing Warrants so that the expiry date for BJK to exercise the Existing Warrants is extended from February 28, 2025, to February 28, 2026, and so that the exercise price of the Existing Warrants shall be repriced to $0.07 per common share.

David Schwede, CEO of Heritage said, “We are thrilled to have secured this agreement with BJK as it reduces the Company’s debt materially and positions Heritage within a model that compounds our ability to continue growing our revenues in Canada, the United States and other international marketplaces.” He continued, “The transaction extends Heritage’s remaining long-term debt at a very attractive, industry leading interest rate and allows our team to continue to focus on executing transactions which will further increase our revenues, expand distribution of our product offerings (including in additional US marketplaces), and continue to delight our customers with new and high-quality product formats while the industry matures and consolidates further.”

Assisting Heritage with the closing of the Sale Leaseback Transaction was, Ryan McDonald of Prairie Commercial Mortgage Corp. Mr Schwede said, “Ryan understands the pressures and high pace of the cannabis industry and his debt advisory services were highly valued to Heritage as we worked towards closing of this significant transaction for the Company.”

About Heritage Cannabis Holdings Corp.

Heritage is a leading cannabis company offering innovative products to both the medical and recreational legal cannabis markets in Canada and the U.S., operating two licensed manufacturing facilities in Canada. The company has an extensive portfolio of high-quality cannabis products under the brands Purefarma, Pura Vida, RAD, Premium 5, feelgood., CB4, Thrifty, Adults Only, feelgood., the CB4 suite of medical products in Canada and ArthroCBD in the U.S.

ON BEHALF OF THE BOARD OF DIRECTORS OF HERITAGE CANNABIS HOLDINGS CORP.

“David Schwede”

David Schwede 
CEO

The Canadian Securities Exchange does not accept responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”.

By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.

An investment in securities of the Company is speculative and subject to several risks including, without limitation, the risks discussed under the heading “Risks and Uncertainties” in the Company’s annual management discussion and analysis for the year ended October 31, 2022 and dated February 28, 2023. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.

In connection with the forward-looking information and forward-looking statements contained in this press release, the Company has made certain assumptions. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231030026969/en/

Kelly Castledine

Tel: 647-660-2560

kcastledine@heritagecann.com

Source: Heritage Cannabis Holdings Corp.

FAQ

What did Heritage Cannabis Holdings Corp. sell?

Heritage Cannabis Holdings Corp. sold its real estate properties in Ontario and British Columbia.

What is the net purchase price?

The net purchase price is $9,714,475.

What are the lease terms?

The lease terms include a 12-month free rent period.

How much debt will be reduced?

The company's remaining term debt will be reduced by approximately 64% to $5,256,379.

What is the interest rate on the remaining term financing?

The interest rate is calculated at the Royal Bank of Canada prime lending rate minus 1.75%.

What is the maximum amount of the revolving line of credit?

The maximum amount of the revolving line of credit is $5,000,000.

What will happen to the existing warrant certificates held by BJK?

The existing warrant certificates will be amended to extend the expiry date and reprice the exercise price.