Mr. John McMullen reports

LGC CAPITAL UPDATES ON THE CONSTRUCTION & EXPANSION PLANS AT TRICHO-MED'S BROWNSBURG, QUEBEC CANNABIS FACILITY

LGC Capital Ltd.'s phase 1 construction of Tricho-Med's 34,000-square-foot cannabis growing facility in Brownsburg, Que., is on track and on schedule.

Phase 1 construction

The roof of the structure is now fully installed. The perimeter walls are now partially installed and will be completed by the end of next week. In addition, the building design has been modified and upgraded to meet the European Union Good Manufacturing Practice (EUGMP) standards.

Phase 1, which will contain the first two grow rooms, is planned for completion by the end of October/early November, 2018. The target to complete the review package for Health Canada is mid-November, 2018, to the end of November, 2018, and the target goal of receiving the cultivation licence is by mid-December, 2018.

Tricho-Med expansion plan

Tricho-Med has acquired 18 acres of additional land in close proximity to its site in Brownsburg, Que. The company now has the potential for a five-fold increase to its production capacity, compared with its original planned capacity at the time of the agreement with LGC in January, 2018. This increase is further supported by the past purchase of approximately 20 acres of land adjacent to the facility currently under construction.

Tricho-Med plans to aggressively expand with a second facility beside its initial 34,000-square-foot indoor growing operation and it will be approximately 600,000 square feet. It will be a fully enclosed one-level building with the potential for 475,000 square feet of flowering space. The combined facilities will have the potential to grow over 60,000 kilograms equivalent per year of dry cannabis and extracted products, based on actual industry observed yields of 30 grams per square foot per cycle when using the same production methods as Tricho-Med. All Tricho-Med products will be produced to strict Health Canada and EUGMP standards for the domestic and international medical cannabis markets.

Location assures low-cost production

LGC specifically chose to invest in Tricho-Med's project because of its strategic location in one of Canada's lowest-electricity-cost regions, with rates below four cents per kilowatt-hour. This low electricity rate compares with other producers in Ontario (as well as in Atlantic and Western Canada) which are paying rates on average in between eight cents to 10 cents per kilowatt-hour (or more). Given that electricity is one of the largest input costs for premium indoor hydroponic cultivation, this will give Tricho-Med a natural cost advantage from its competitors.

John McMullen, chief executive officer of LGC Capital, commented: "We are very impressed with the pace and quality of construction by the team at Tricho-Med as the company completes its phase 1 buildout. The aggressive growth and low electricity costs could make them a category leader in the indoor-grown, GMP-quality, premium medical cannabis market."

LGC's investment into Tricho-Med

LGC invested in Tricho-Med through a four-year secured convertible loan agreement in the amount of $4-million, which is being disbursed in accordance with preagreed milestones and related disbursement schedules. Interest on the loan is fixed at an annual rate of 10 per cent, which will be payable from available operational cash flow. Upon Tricho-Med obtaining a licence to produce medical cannabis from the relevant regulatory authorities, the loan will convert into common shares of Tricho-Med, representing 49 per cent of the issued and outstanding shares (after this conversion). LGC will also receive a 5-per-cent royalty on Tricho-Med's net sales.

About LGC Capital Ltd.

LGC Capital is a leading investment firm with a focus on the legal global cannabis market. Through its portfolio investment companies, LGC is building a world-leading, vertically integrated system of interconnected legal cannabis companies with cultivation, processing and distribution in Australia, Jamaica, Switzerland, Italy and Canada serving domestic and export markets.

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