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Australis Capital Inc
Symbol AUSA
Shares Issued 113,149,755
Close 2019-05-21 C$ 1.18
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Australis to buy assets of Green Therapeutics

2019-05-21 10:38 ET - News Release

Mr. Scott Dowty reports


Australis Capital Inc. has entered into an asset purchase agreement with Green Therapeutics LLC and affiliated companies to acquire its Tsunami, Provisions, and GT Flowers cannabis brands, certain operating assets, intellectual property, and the right to assume, complete and expand the construction of a state-of-the-art 55,000-square-foot cultivation and production facility in North Las Vegas, Nev. The 8.9-acre parcel of land in North Las Vegas has the potential to support a 400,000-square-foot cultivation and production facility which will be built to the industry-recognized Aurora Cannabis standard. The acquisition will include Green Therapeutics' experienced operating team.

Australis will issue up to $8-million (U.S.) of its common stock to complete this acquisition. Australis issued 7,831,855 shares valued at $6.4-million upon the signing of a definitive agreement. An additional $800,000 will be issued when the new cultivation and production facility in North Las Vegas is fully licensed and operational, and an additional $800,000 in shares will be issued if certain performance goals are reached utilizing the acquired assets within specified time frames per the definitive agreement. In a separate transaction, Australis acquired from Meridian Companies LLC an 8.9-acre parcel of land in North Las Vegas, in exchange for $2.93-million (U.S.) of its common stock or 3,585,521 Australis common shares, where the new cultivation and production facility will be located.

The transaction will also establish Australis's flagship cultivation and manufacturing location in Nevada, a state chosen for its favourable cannabis regulations, tremendous tourism and accelerated growth. The new production and cultivation facility will feature indoor greenhouses, state-of-the-art control systems, and a modern manufacturing, production and postproduction facility. This industry-leading, precision-level control will allow for superior cannabis flower to be produced utilizing the Mr. Natural methodology, setting a new standard for specialized organic horticulture and cultivation.

The transaction will also provide Australis with six acres of improvable/vacant land in North Las Vegas, which will be held for potential future expansion opportunities. Australis will finance the construction of the new facility, which it expects will cost approximately $12-million (U.S.). Australis expects the transaction to close in late 2019 upon the successful transfer of Green Therapeutics' cultivation and manufacturing licences to Australis, and the new facility will be completed and operational in mid-2020. Australis expects the 55,000-square-foot facility will generate approximately $10-million (U.S.) to $12-million (U.S.) in earnings before interest, taxes, depreciation and amortization in its first full year of operations, respectively, resulting in an adjusted purchase price multiple of approximately two times to 2.3 times including the cost of the buildout of the new facility.

"We are excited to be working with Australis's top-tier management team and leveraging their strategic relationship with Aurora Cannabis," said Dr. Duke Fu, chief executive officer of Green Therapeutics. "This gives us a fantastic opportunity to scale our current brands inside and outside Nevada while maximizing Australis's portfolio assets and vast cultivation experience."

Founded in 2014, Green Therapeutics has established three prominent in-house cannabis brands, each designed through a subtle and complex scientific process. Tsunami, a science-driven recreational extract brand, is the top brand for live resin extracts in Nevada, while Provisions is well known for premium distillate cartridges and cutting-edge sublingual sprays. GT Flowers provides consumers selections from over 150 different strains, ranging from classics to the newest crosses, with many exclusive cuts. With a wide array of phenotypes and broad distribution through some of the largest dispensaries in Nevada, including Planet 13 and Essence, Green Therapeutics' brands have gained a swift and loyal following. The demand for Green Therapeutics' high-quality flower and concentrates exceeds the company's current ability to supply it. Australis intends to grow the brands throughout Nevada with the additional capacity and eventually expand to other United States markets.

"Green Therapeutics and Australis's combined assets, expertise and network positions our company for tremendous growth and is uniquely positioned with products spanning verticals where long-term margins will be insulated," said Scott Dowty, CEO of Australis. "Introducing Mr. Natural's Veteran Affairs-registered premium organic strains and proprietary cultivation methodologies to Nevada through a purpose-built facility will serve as the launching ground for a nationally recognized cannabis brand."

The cultivation and production of Green Therapeutics' brands will continue at its existing facilities while the new facility is completed. Once licensed and operational, the new and expandable facility will produce the Green Therapeutics brands and Australis's award-winning organic brand, Mr. Natural, as well as third party production of prerolls, utilizing Wagner Dimas technology. This high-tech and diversified facility allows Australis to commercialize Mr. Natural, bringing a 30-year-old integrated organic cannabis brand to address an underserved vertical with the very best quality products.

About Australis Capital Inc.

A spinout of Aurora Cannabis in September, 2018, Australis identifies and invests in the cannabis industry predominantly in the U.S., a highly regulated, fragmented, rapidly expanding and evolving industry. Investments may include, but are not limited to, equity, debt or other securities of both public and private companies, financings in exchange for royalties or other distribution streams, and control stake acquisitions. Australis adheres to stringent investment criteria and focuses on significant near and midterm high-quality opportunities with strong return potentials while maintaining a steadfast commitment to governance and community. Australis's board and management team have material experience with, and knowledge of, the cannabis space in the U.S., extensive backgrounds in highly regulated industries, experience adhering to stringent regulatory compliance, and public company and operational expertise.

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