Shares of 48North Cannabis Corp (TSXV:NRTH) are up 9 cents to $0.54, up 18% from Friday’s close and bucking the overall downward trend of North American cannabis stocks this morning on the major exchanges, following the announcement of two developments. First, the company announced today that it has entered into two agreements with Canopy Growth Corporation (“Canopy Growth”) (TSX:WEED, NYSE: CGC), a strategic investment financing (“Financing Agreement”) and partnership and supply agreement (“Supply Agreement”).
Under the Supply Agreement, 48North will supply Canopy Growth with dried cannabis produced from high-grade, unique genetics, grown at 48North’s wholly-owned facility, DelShen Therapeutics Corp. (“DelShen”). The total volume of the Supply Agreement is estimated to be a minimum of 1,200 kilograms and deliverable over the course of 12 months. The first 100-kilogram transfer under the Supply Agreement is expected to ship from 48North’s DelShen facility to Canopy Growth by December 5, 2018.
Under the Financing Agreement, Canopy will invest $3 million into 48North and receive 4,000,000 Common Units (“Units”) at $0.75 per Unit. 48North will issue each Unit at $0.75 to Canopy Growth for $3 million, representing approximately 3.4% of the issued and outstanding shares. Each Unit will be comprised of one Common Share and one quarter Common Share Purchase Warrant (each whole Common Share Purchase Warrant, a “Warrant”). Each full Warrant will entitle the holder to acquire an additional Common Share of 48North for a period of 12 months from the date of issue at a strike price of $1.15, provided that, the expiry of the warrants can be accelerated if the closing price of 48North’s common shares on the TSX Venture Exchange (“TSXV”) is at least $1.50 for a minimum of 10 consecutive trading days and a notice of acceleration is provided, in accordance with the terms of the warrant, to a date 30 days after the date of the notice.
The Supply Agreement further states that Canopy Growth will work with 48North on a non-binding but best-effort basis to establish a national retail presence for its products in Tokyo Smoke and Tweed stores.
In the second major development, the company announced today that it has completed the previously announced transformational acquisition of 2599708 Ontario Inc. (“Good & Green”) (“Acquisition”), acquiring a second Licensed Producer.
“Both of today’s announcements mark a significant transformation of 48North. This strategic acquisition of Good & Green, Private Placement and partnership with Canopy Growth work to strengthen and accelerate 48North’s ability to deliver on its business plan,” said Alison Gordon, Co-Chief Executive Officer at 48North. “48North is now well capitalized, fully in control of its supply chain, a truly vertically-integrated company, and well positioned to continue to develop next-generation cannabis products,” continued Ms. Gordon.
The company also announced the granting of additional stock options to various directors, officers, and employees. The Options vest through the passage of time or the achievement of specific goals. Each Option is exercisable into one common share (“Share”) of the Company at a price of $0.47 per Share for a period of 3 years from the date of grant, being November 30, 2021.
Last spring when CD heard Bruce Linton speak at #MJBizConIntl, he said he would be was going to be aggressively buying surplus capacity and one may be left to wonder if this is just another 7-11 on the Canopy’s cannabis super-highway. Similarly, the acquisition of the smaller grower may be more indication of the industry consolidation expected as sales and earnings start to hit or miss. To be sure, 48North is establishing or reinforcing a new type of bond between cannabis and women, and as such has a unique attitude and perspective in the market. CD will continue to monitor the company’s ongoing development. Readers can follow the company stock movements at https://cannabisdaily.today/stock-watchlist-page/
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