Combined entity will create one of the most significant companies in the extract and extract derivatives market in Canada

Heritage Cannabis Holdings Corp. (CSE: CANN) (OTCQX: HERTF) (“Heritage” or the “Company”), today announced that it has entered into a definitive agreement (the “Agreement”) to acquire all of the issued and outstanding securities of Premium 5 Ltd. (“Premium 5”), a Canada-based recreational and medical cannabis company that creates high-quality full spectrum concentrates under the brand Premium 5.

Premium 5 is a leader in developing and launching products, proven by successfully introducing one of the first hydrocarbon products in the Canadian recreational and medical markets as well as becoming the first to launch live resin vapes. It currently offers two sought-after brands in eight provinces across Canada, as well as Shelter Market and Shoppers Drug Mart.

Premium 5 offers a wide range of high-quality products that encompass premium, core, and value priced brands in both the recreational and medical markets, creating a leading portfolio of products in the Cannabis 2.0 space focused on derivative concentrates. It is best known for its namesake brand – Premium 5 which is first in the premium hydrocarbon and solventless concentrates category, as well as the newly launched RAD value brand which is first in the value hydrocarbon concentrate, flower and distillate vape categories.

Currently, Premium 5 has entered eight of the 13 provincial and territorial recreational markets including the three largest, British Columbia, Alberta, and Ontario and have strong product listings on the two leading medical platforms; Shelter Market (13 listed products) and Shoppers Drug Mart’s online cannabis platform (11 listed products). In total, Premium 5 has 66 SKU offerings and a strong product development pipeline with a focus on innovation and quality.

High demand for Premium 5 products has resulted in provincial purchase orders nearing $10 million since launching sales in June 2020 and growing each month to an annualized run-rate of approximately $20 million. The launch has been met with strong consumer acceptance as highlighted by sustained re-order rates across Canada including over $2 million in the month of December.

For Heritage, this transaction delivers on several key critical strategic objectives:

  • Immediate coast to coast sales
  • Strong margins with an emphasis to drive additional synergies
  • Increased focus on execution and speed-to-market
  • Strong product development pipeline

Under the terms of the Agreement, Premium 5 will receive initial consideration of CDN$21.0 million of common shares of Heritage, plus additional Heritage common shares to compensate the shareholders of Premium 5 for the Net Working Capital of Premium 5 as of the closing date.. The Agreement additionally includes a series of revenue growth and gross margin milestones over the next 24 months to earn potential consideration of up to an additional CDN$20.0 million payable in common shares of Heritage.

“The acquisition of Premium 5 brings a strong team with proven brands and products to Heritage’s platform. The combination of Premium 5’s portfolio and our successful line-up of sought-after products creates an impressive catalog of products for both the provincial boards and consumers across Canada,” stated Clint Sharples, CEO of Heritage. “The Premium 5 approach of offering high quality products aligns well with our strategy, and also caters to multiple consumer categories and price points. As a result of these product listings, Heritage will have significant product choice for consumers across the country. This is a significant step in growing our platform both domestically and internationally.”

As part of the transaction, Premium 5 CEO David Schwede will become the President of Heritage’s recreational cannabis division. Prior to his role as CEO of Premium 5, he was Senior Manager of Product Development and Project Management for one of Canada’s largest revenue producing cannabis companies. With a history as CEO of tech start-ups, he is an entrepreneur who has successfully operated and scaled multiple businesses that have won several start-up awards with his most recent being one of Forbes start-ups to watch for 2019.

“We have built a strong brand in a core part of the market that continues to grow. Our focus is to combine our innovation and execution with the Heritage infrastructure to leverage our combined team and further expand our reach both domestically and abroad. We look forward to building on past successes as part of the Heritage family,” said David Schwede.

The transaction is subject to customary closing conditions and is expected to be completed before the end of January 2021. Hillcrest Merchant Partners is acting as the exclusive financial advisor to Premium 5.