Highmark Marketing Inc. has entered into a non-binding letter of intent with a corporation to acquire 51 per cent of its authorized share capital.
The Corporation is the final stages of their application to Health Canada to become a licensed producer of marijuana under the Marihuana for Medical Purposes Regulations (the “MMPR”). The intended facility is 16,000 square feet and the Corporation has been granted approval from Health Canada to build out the facility (“Ready to Build Letter”). After completing the construction of the facility as per the Ready to Build Letter the Corporation will schedule an inspection by Health Canada, and upon receiving approval the Corporation would then be granted a License to Produce.
Highmark and the Corporation are now negotiating the terms of the long form agreement, and pursuant to the Letter Highmark will issue 30,000 common shares to the Corporation.
The estimated cost of upgrading the facility to comply with the requirements set out in Health Canada’s Ready to Build letter is $2,000,000. The long form agreement will contain a payment schedule whereby Highmark will provide the necessary financing by way of a convertible loan which will convert, at Highmark’s option, into stock of the Corporation that will be equal to 51{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of the total issued and outstanding shares of every class of the Corporation. Highmark intends to fund its commitments under the long form agreement with Corporation by way of an equity financing in the amount of $2,000,000.
The Corporation cannot legally become a producer under the MMPR until it has been granted a license, and it is not known if and when the Corporation will obtain a license. The key milestones to obtaining a license include the completion of upgrades to the facility as per the Ready to Build letter, approval from Health Canada to produce marijuana upon inspection of the facility, and finally approval to distribute the product to patients.
The Corporation has a management team well suited to the production of marijuana. One Co-Founder holds a Master Grower designation and was a producer of marijuana in the U.S.A. under a state sanctioned program, and he has more than 20 years’ experience working in the agricultural sector. Another Co-Founder has been a Health Canada designated grower of marijuana for 3 years, and another key member of the management team holds a Bachelor’s Degree in Economics and has a successful track record of managing a labour force of up to 40 employees.
The Corporation has presented Highmark a comprehensive five-year business plan in which it forecasts to reach profitability in the second year of operations after receiving Health Canada approval to become Licensed Producer. In that second year of operations, the Corporation is planning on sales of up to $472,000 per month, and obtaining $4,720,000 in annual sales, with a corresponding net income of $2,225,000.
Highmark intends on providing new information about the Corporation, and its assets when Due Dilligence permits, and will additionally update the status of the long form agreement when possible.
We seek Safe Harbor.
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