CAN (ON): Peter Quiring to build 1.4 million sq.ft. MJ greenhouse

Auxly has entered into a definitive joint venture agreement with Peter Quiring, one of Canada’s largest greenhouse builders and operators, via a newly formed subsidiary, to develop, construct and operate a fully-automated, state-of-the-art, purpose-built greenhouse for cannabis cultivation in Leamington, Ontario.

Pursuant to the agreement, Mr. Quiring, through South Essex Fabricating, will be responsible for the design, construction and operation of the Facility, and the Company will be responsible for funding the project and assisting JVCo in obtaining its ACMPR license for the cultivation and sale of cannabis by providing JVCo with all of the resources and expertise necessary to achieve the License. The company expects to finance the multiple phases of construction of the facility with cash on hand and alternative sources of non-dilutive financing, where available.

The facility will be designed as a hybrid greenhouse with a supplemental indoor facility to optimize operational efficiencies. The initial phase of the project has been designed with a footprint of 1,400,000 square feet while additional phases of the project contemplate an expansion of up to a total of 2,800,000 square feet. JVCo has acquired 100 acres of land for the development of the facility which is fully powered with sufficient electricity for Phase I and the future expansions.

The parties are actively working to finalize the construction budget and timeline associated with the development of Phase I. At this time the company expects that, subject to necessary approvals, the construction of the facility will commence during the summer of 2018, with completion and commissioning occurring by the end of Q3 2019 and planting commencing shortly thereafter.

Hugo Alves, President of Auxly, stated: “The combination of being the largest builder of greenhouses in Canada and the experience of operating 175 acres of greenhouses in Canada and the United States, truly places Peter in a league of his own. As a cornerstone partnership in the Auxly platform, JVco is a unique opportunity to achieve large-scale, low cost production of cannabis with one of North America’s premier greenhouse operators. Upon completion, this upstream project will be a significant source of product into our midstream value-add and downstream distribution channels. We look forward to building a state-of-the art facility with Peter and his team and a long and successful business partnership.”

Peter Quiring, Founder and President of Nature Fresh Farms and South Essex Fabricating, and CEO of JVCo, commented "We could not be more pleased to have reached a definitive agreement on this project. The depth of knowledge, execution capabilities and work ethic possessed by the Auxly team is unique to anything else we have seen in the industry. We are excited to move this project into the execution phase to build out a truly world-class cannabis cultivation project that will benefit both the community of Leamington and the broader Canadian cannabis industry.”

In consideration for the agreement, the company will issue 5,250,000 common shares to Mr. Quiring at a price of $1.12 per share, with 1,250,000 common shares to be issued upon the closing of the transaction, and the remainder to be held in escrow and released in tranches corresponding to the achievement of certain operational and performance milestones. The company will also issue 10,000,000 common share purchase warrants, where 2,000,000 warrants will vest upon the closing of the transaction and the remainder will vest in tranches corresponding to the achievement of certain operational and performance milestones. The warrants are exercisable at a price of $1.57 per share and have a term of five years from issuance.