AGORACOM Small-cap Investor Relations Blog

• Entered into a binding letter of intent to acquire all the issued and outstanding shares of Eureka Vapor LLC. and all of its subsidiaries , a U.S. multi-state cannabis operator, and arm’s length to the Company, in a transaction valued at CAD$20 million. 
• In 2018, Eureka recognized revenue of approximately CAD$11.5 million* with a net profit margin of 16%* from its California and Colorado operations.
• Eureka anticipates further growth in revenue due to anticipated changes to retail regulation of adult cannabis use in California.

TORONTO, March 06, 2019 – North Bud Farms Inc. (CSE: NBUD) (OTCQB: NOBDF) (“NORTHBUD” or the “Company”) is pleased to announce that effective March 3, 2019 it entered into a binding letter of intent (“LOI”) to acquire all the issued and outstanding shares of Eureka Vapor LLC. and all of its subsidiaries (“Eureka”), a U.S. multi-state cannabis operator, and arm’s length to the Company, in a transaction valued at CAD$20 million. 

Eureka, through its wholly-owned subsidiaries holds Manufacturing and Distribution licenses in the states of California and Colorado. Eureka manufactures and sells a premium line of disposable vapor pens as well as multi-use cartridge-style vapor pens and hardware. Eureka has been operating in California and Colorado since 2011 and 2015, respectively, showing significant organic growth year over year. In 2018, Eureka recognized revenue of approximately CAD$11.5 million* with a net profit margin of 16%* from its California and Colorado operations. Eureka anticipates further growth in revenue due to anticipated changes to retail regulation of adult cannabis use in California. Eureka products are currently available in over 100 retail stores. (*all figures are unaudited).  For more information about Eureka Vapor, visit: www.eurekavapor.com.
                                   
Transaction Terms
The proposed transaction (the “Transaction”) is structured as a share purchase agreement whereby in exchange for the purchase of all of the shares of Eureka, NORTHBUD will issue CAD$20 million in common shares (“Common Shares”) to the shareholders of Eureka (the “Eureka Shareholders”) with the price per Common Share to be determined based on a formula of the higher of (a) CAD$0.35 per Common Share and (b) the 30-day volume weighted average price (“VWAP”) calculated on the closing date (the “Closing Date”) of a definitive agreement in respect of the transaction (the “Definitive Agreement”). NORTHBUD and Eureka expect to enter into the Definitive Agreement by May 30, 2019. 10% of the Common Shares issued pursuant to the Definitive Agreement will be issued to the Eureka Shareholders on the Closing Date, with the remainder of Common Shares issued in equal tranches of six, twelve, eighteen, and twenty-four months from the Closing Date (the “Escrow Period”). The Transaction will be considered a “Fundamental Change” pursuant to the policies of the CSE and will accordingly require a new listing statement (the “Listing Statement”). Given that effective as of the Closing Date the Company will have United States cannabis operations, the Listing Statement will provide disclosure of the risks associated with cannabis operations in the United States. Closing of the Transaction is subject to applicable corporate and regulatory approvals as well as shareholder and CSE approval.

In addition, Eureka Shareholders will be eligible to receive up to an additional CAD$25 million of Common Shares (“Revenue Milestone Shares”) based on the achievement of USD$25 million of revenue derived from existing Eureka California and Colorado operations. Eureka Shareholders will receive Revenue Milestone Shares pro rata, on a quarterly basis, based on the percentage of USD$25 million of revenue generated in that quarter. All Revenue Milestone Shares will continue to be subject to the remainder of the Escrow Period at the time of issuance and will only be releasable in accordance with the Escrow Period. The Revenue Milestone Shares will be issued at the 10-day VWAP at the time of issuance.

“The opportunity to partner with a recognized brand in some of the most developed retail markets in North America is an exciting development for NORTHBUD,” says Ryan Brown, CEO of NORTHBUD. “We believe that vape cartridges represent a high margin and high-growth product segment of the market. The Eureka team are proven operators and possess an unmatched product knowledge which is evidenced by the strong brand loyalty that they have established.”

“Aligning ourselves with NORTHBUD provides Eureka with both exposure to the Canadian public markets as well as the largest federally legal adult-use market in the world,” says Justin Braune, CEO of Eureka Vapor. “We will be working with the NORTHBUD team to introduce our product line into the Canadian market for the fourth quarter of 2019 when vape pens will be permitted.”

Granting of Stock Options
The Company also announces the granting of 150,000 stock options to a consultant and employee. Each option entitles the holder to acquire one Common Share for a period of five years at an exercise price of CAD$0.35 per Common Share.  The options all vest immediately.

About Eureka Vapor LLC.
Headquartered in Los Angeles, California, EUREKA Vapor was founded in 2011 and holds licenses in both California and Colorado.  EUREKA Vapor’s multi state operation manufactures and sells a premium line of vaporizer cartridges, disposable vapor pens and proprietary vaporizer batteries designed to work with their highly sought-after CO2 extracted oil.  Using their refined extraction processes and techniques developed over almost a decade of extracting, EUREKA Vapor is committed to providing the cleanest and safest natural oil cartridges in the industry.  Long referred to as one of the leaders in the industry, EUREKA has one of the most loyal customer bases in the category which reflects their commitment to honesty and transparency above all else. EUREKA continually looks for innovative ways to improve and refine their product offerings in order to deliver the best, most consistent vaping experience in the industry. 

For more information, visit: www.eurekavapor.com

About North Bud Farms Inc.
North Bud Farms Inc., through its wholly-owned subsidiary GrowPros MMP Inc., is pursuing a licence under The Cannabis Act.  The Company is constructing a state-of-the-art purpose-built cannabis production facility located on 95 acres of Agricultural Land in Low, Quebec. North Bud Farms Inc. will be focused on Pharmaceutical and Food Grade cannabinoid production in preparation for the legalization of edibles and ingestible products scheduled for October 2019.

For more information, visit: www.northbud.com

Neither the Canadian Securities Exchange (the “CSE”) nor its Regulation Services Provider (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.

Forward-looking statements
Certain statements included in this press release constitute forward-looking information or statements (collectively, “forward-looking statements”), including those identified by the expressions “anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend”, “may”, “should” and similar expressions to the extent they relate to the Company or its management. The forward-looking statements are not historical facts but reflect current expectations regarding future results or events. This press release contains forward- looking statements including those relating to the projected growth of Eureka in 2019, the entering into of the Definitive Agreement, closing of the Transaction and associated approvals, Eureka’s ability to achieve milestones under the Definitive Agreement and associated Common Share issuances, the growth of the vape industry and its profitability, the timing of the introduction of Eureka vape pens into the Canadian market, and the projected legalization of edibles and ingestible products scheduled for October 2019. These forward-looking statements are based on current expectations and various estimates, factors and assumptions and involve known and unknown risks, uncertainties and other factors. Such risks and uncertainties include, among others, the risk factors included in North Bud Farms Inc.’s final long form prospectus dated August 21, 2018 which is available under the issuer’s SEDAR profile at www.sedar.com. 

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
North Bud Farms Inc.
Edward Miller
VP, IR & Communications
Office: (855) 628-3420 ext. 3
[email protected]