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Sproutly Canada Inc
Symbol SPR
Shares Issued 180,336,775
Close 2019-04-29 C$ 0.94
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Sproutly, OCC to form JV to launch pot drinks in Canada

2019-04-30 11:53 ET - News Release

Mr. Keith Dolo reports

SPROUTLY ANNOUNCES JOINT VENTURE WITH MOOSEHEAD BREWERIES TO LAUNCH CANNABIS-INFUSED BEVERAGES IN CANADA

Sproutly Canada Inc. and OCC Holdings Ltd., an affiliate of Moosehead Breweries Ltd., have entered into a definitive agreement to form an exclusive joint venture (JV) to develop, produce and market non-alcoholic cannabis-infused beverages in Canada, using Sproutly's proprietary, naturally produced water-soluble cannabinoids, known as Infuz2O. Both companies will bring their respective strengths to the joint venture to develop a line of great tasting cannabis beverages featuring a rapid onset and offset effect, unique to the category. Sproutly will host a conference call with Keith Dolo, chief executive officer of Sproutly Canada, and Matthew Oland, Moosehead executive and incoming CEO of the JV, at 9:30 a.m. ET on May 1, 2019.

Joint venture highlights:

  • Partnership with the oldest and largest independent brewery in Canada:
    • Moosehead has over 152 years of brewing experience through six generations of family ownership.
    • Moosehead has more than 140 million cans/bottles of beer sold annually throughout Canada, the United States and in 15 other countries around the world.
    • The Oland family has proven ability in building, marketing and selling industry-leading beers, such as Moosehead Lager, Moosehead Radler, Alpine and Hop City Barking Squirrel.

  • Competitive advantage driven by Infuz2O:
    • The JV beverages can deliver the cannabis effect as early as five minutes and last up to 90 minutes, providing an edible cannabis experience similar to traditional flower cannabis without the need to inhale smoke.
    • It has the ability to address the industry challenges of overconsumption of oil-based edibles and beverages.
    • It has the capability to produce a clear cannabis beverage that is much easier and faster to formulate than its competitors who will be using emulsifiers, encapsulation or chemical modification techniques.
    • It has the ability to deliver functional beverages that address a need state by producing cannabis strain specific experiences.
    • Natural Infuz2O process allows for a premium consumption experience and taste profile.

  • JV well positioned to enter cannabis beverages upon legalization:
    • Moosehead's beverage experience and research and development formulation capabilities will ensure that the cannabis beverages produced will be premium in quality and have a great taste profile.
    • Moosehead's established operational infrastructure will allow the joint venture to fast-track its go-to-market strategy.
    • Sproutly's cultivation facility and processing licence will advance the formulation work that has been completed to date, as well as production scale-up.

  • Alignment of interests:
    • The joint venture is structured as a 50/50 equity ownership.
    • Matthew Oland, one of Moosehead's senior executives and Oland family member, will lead the joint venture as chief executive officer.
    • Moosehead will provide infrastructure support, such as research and development, operations, procurement, finance, and distribution.
    • Sproutly will provide proprietary custom compositions using Infuz2O for cannabis beverages in Canada.
    • JV will have exclusive rights to utilize Infuz2O for cannabis beverages for a period of five years with a possible two-year extension.
    • The JV will have the ability to enter the European market once recreational cannabis use is legalized.

"With the anticipated legalization of edibles in Canada later this year, Moosehead has made the strategic decision to enter the cannabis beverage market. As one of the oldest brands in Canada and a leader in the beer category, we believe we are uniquely positioned to be a leader in the cannabis beverage category," said Andrew Oland, chief executive officer of Moosehead. "As a 152-year-old company spanning six generations, we are very selective about new business opportunities. After a significant amount of due diligence on Sproutly's APP technology and Infuz2O water-soluble cannabinoids versus other competitive technologies, we are excited to announce this joint venture. With their advanced technology and our long-standing product development experience, we expect to bring to Canadian consumers cannabis beverages that address the major issues currently limiting appeal of this category in other markets, a beverage that 1) actually tastes good and 2) provides an immediate and controllable cannabis experience lasting up to 90 minutes."

"Moosehead is a truly iconic brand and we are very excited to partner with a company that possesses such deep-rooted Canadian heritage and over 152 years of history in the beer industry. Partnering with a company of this caliber is a strong validation of APP technology and Infuz2O," commented Keith Dolo, CEO and a director of Sproutly. "This partnership with Moosehead marks an important milestone in Sproutly's mission of delivering a safe and consistent whole plant experience from cannabis, with a lead position in the beverage market. We have developed a relationship with Moosehead built on trust and our shared vision of creating safe, responsible and high-quality cannabis beverages and we look forward to making this a reality for Canadian consumers," added Mr. Dolo.

"After careful analysis of the cannabis industry and the cannabis beverage opportunity in Canada, we believe that Moosehead and Sproutly together are well positioned to become a significant player in the category," said Matthew Oland, incoming CEO of the joint venture. "The JV's ability to leverage Moosehead's rich history of building adult beverage brands and its established R&D and operational infrastructure will enable the JV to bring great tasting cannabis beverages to Canadian consumers. The Infuz2O technology delivers a natural cannabis beverage experience, with an onset and offset time similar to traditional flower cannabis, without the need for chemical modification. We believe this will be a game changer for the sector."

Terms of the joint venture

The joint venture will be structured as a standalone company with its own board of directors and management team. Sproutly and Moosehead will each hold a 50-per-cent interest in the JV and have the right to nominate three directors. Moosehead shall appoint the CEO and Sproutly shall appoint the chairperson of the board of directors of the JV.

Sproutly will provide Infuz2O exclusively to the joint venture in canada for the purpose of producing cannabis beverages (excluding hemp) for a period of five years, such exclusivity period being subject to a potential extension based on the joint venture reaching certain revenue targets.

The formation of the joint venture is subject to the satisfaction of certain conditions, including the execution and delivery of various transaction agreements, governance documents and supply agreements. The parties expect to form the joint venture on or before May 31, 2019.

Financial adviser

Novus Merchant Partners Inc. acted as the exclusive financial adviser to Sproutly in connection with the joint venture.

Conference call information

Sproutly will host a conference call with Keith Dolo, CEO of Sproutly Canada, and Matthew Oland, Moosehead executive and incoming CEO of the JV, at 9:30 a.m. ET on May 1, 2019. Please dial in five minutes to 10 minutes prior to the scheduled start time.

Calling information

Canada/United States toll-free:  1-800-319-4610

International toll:  1-604-638-5340

Presentation

A presentation related to the joint venture is available on Sproutly's website.

About Infuz2O

Infuz2O is a naturally water-soluble cannabis solution, which fully dissolves in water and can be directly added in beverage formulations to deliver the effects of the cannabis plant. Infuz2O's features include the following:

  • Rapid onset of less than five minutes to feel the effects of cannabis:
    • Fast offset/clearing of the cannabis effect within 90 minutes of consumption, allowing for more usage occasions;
    • No added chemicals like those used in emulsifiers or encapsulation;
    • Delivers the cannabis strain experience through a beverage, that currently can only be experienced through smoking;
    • Produced using all GRAS-certified (generally recognized as safe) ingredients without the use of organic solvents of carbon dioxide, thereby preserving the full plant experience.

About Sproutly Canada Inc.

Sproutly's core mission is to become the leading supplier to the cannabis beverage and edibles market. The company's Toronto-based facility, licensed under the Cannabis Act, was built to cultivate pharmaceutical-grade cannabis to supply a technological breakthrough in producing and formulating the first natural, truly water-soluble cannabis solution. The company's water-soluble ingredients and its bio-natural oils will deliver revolutionary brands to international markets that are clamouring for well-defined commercial products. Sproutly's business focus is to execute on partnerships with local and globally established consumer brands to leverage their existing customer bases, further expand brand loyalty, assist with marketing and support distribution networks to deliver this scientific breakthrough with speed and efficiency worldwide.

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