Australis Capital (CSE: AUSA) (OTC: AUSAF) has signed a deal for certain assets of Green Therapeutics.
Founded in 2014, Green Therapeutics has established three in-house cannabis brands. Under the asset purchase agreement, Australis will acquire the company’s Tsunami, Provisions, and GT Flowers cannabis brands, certain operating assets, intellectual property.
The deal also includes the acquisition of the rights 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 Aurora Cannabis standard.
In addition, the acquisition will include Green Therapeutics’ experienced operating team.
Agreement Terms
Australis will issue up to $8.0 million of its common stock to complete the acquisition. The company 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.
In a separate transaction, Australis acquired from Meridian Companies an 8.9-acre parcel of land in North Las Vegas in exchange for $2.93 million of its common stock or 3,585,521 common shares where the new cultivation and production facility will be located.
The transaction will also establish Australis’ flagship cultivation and manufacturing location in Nevada, a state chosen for its favorable 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 post-production facility.
The deal will also provide Australis with six acres of improvable/vacant land in North Las Vegas which will be held for potential future expansion opportunities. The company will fund the construction of the new facility which it expects will cost approximately $12 million.
Australis expects the transaction to close in late 2019 upon the successful transfer of Green Therapeutics’ cultivation and manufacturing licenses to Australis and the new facility will be completed and operational in mid-2020.
The company expects that the 55,000-square-foot facility will generate approximately $10-12 million in EBITDA in its first full year of operations, respectively, resulting in an adjusted purchase price multiple of approximately 2.0 – 2.3x including the cost of the buildout of the new facility.
Acquisition Significance
Green Therapeutics’s Tsunami is a science-driven recreational extract brand and is the top brand for live resin extracts in Nevada, while Provisions is 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 the company’s flower and concentrates exceeds the company’s current ability to supply it.
Australis plans to grow the brands throughout Nevada with the additional capacity and eventually expand to other US markets.
“Green Therapeutics and Australis’ 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,” Australis CEO Scott Dowty stated.
What Next
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 company’s brands and Australis’ organic brand Mr. Natural, as well as third-party production of pre-rolls utilizing Wagner Dimas technology.
The facility will allow 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.
