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Toronto, Ontario – Lineage Grow Company Ltd. (the "Company" or "Lineage") (CSE:BUDD), is pleased to announce that the Company has entered into a letter of intent (“LOI”) with Quinsam Capital Corp. (“Quinsam”) to acquire Quinsam’s 35% interest in Herbiculture Inc. (“Herbiculture”), a medical marijuana dispensary located in Burtonsville, Maryland (the “Transaction”).

 

Transaction Overview

Herbiculture is a fully-licensed medical marijuana dispensary which opened its doors to patients in February 2018 and has achieved sales of approximately USD$91,000 and USD$100,000 for the months of March 2018 and April 2018, respectively. The dispensary is one of the few licensed medical marijuana retailers operating in the state of Maryland and is one of only two license holders permitted to operate in Maryland’s 14th Senatorial District. Herbiculture is strategically located in the epicenter of Montgomery County – the most populous county in Maryland and is situated in close proximity to two major metropolitan areas: Baltimore and Bethesda.

 

Management Commentary

Peter Bilodeau, CEO of Lineage, commented – “Herbiculture is a best-of- breed dispensary located in a market with high barriers to entry and a thriving medical marijuana patient community. We see significant value and upside in this transaction as we’re investing in a high- value license attached to an operator who is achieving impressive performance on the ground. This strategic investment marks another important milestone in our aggressive U.S. growth strategy and we look forward to pursuing additional near-term growth initiatives.”

 

Maryland Medical Marijuana Market

In 2012, a State law was enacted in Maryland to establish a state-regulated medical marijuana program. Legislation was signed in May 2013 and the program became operational on December 1, 2017. Under Maryland regulations, there is a cap of 102 dispensary licenses (only 46 of which are currently licensed as of April 13, 2018), limited to two per state senatorial district. According to cannabis market research firm New Frontier Data, with over 8,500 patients currently certified for use of medical marijuana (over 12,000 signed up to become eligible) and over 550 medical practitioners registered to certify patients as eligible, the market in Maryland is expected to be worth US$221 million by 2021.

 

Transaction Details

Pursuant to the LOI, Lineage will acquire Quinsam’s 35% equity interest in Herbiculture for total consideration of US$720,000, to be satisfied by Lineage issuing to Quinsam 3,900,000 common shares of Lineage upon closing of the Transaction at a price of US$0.1846 per share. On closing, Lineage will also enter into an agreement with Herbiculture and its shareholders for Lineage to be granted a right of refusal to purchase 35% of securities offered by Herbiculture and a tag along right in case the majority shareholders of Herbiculture sell their stake. The Transaction is subject to a number of conditions, including but not limited to, final due diligence by the respective parties, execution of a definitive acquisition agreement (the "Definitive Agreement") which shall supersede the LOI, receipt of applicable corporate approvals, and other regulatory and/or governmental approval. There can be no assurance that the Transaction will be completed as proposed or at all.

 

FMI Capital Advisory Inc. is acting as exclusive financial advisor to Lineage in connection with the Transaction.