Stem Holdings Inc. Enters the Global Cannabis and Industrial Hemp Market With Acquisition of South African Ventures Inc.

The eSwatini facility will be located on 2,500 acres at The Science Park Matsapha for cannabis and industrial hemp cultivation.

March 26, 2019

BOCA RATON, March 25, 2019 (GLOBE NEWSWIRE) -- Stem Holdings Inc. is pleased to announce it has executed a definitive agreement dated March 22, 2019 to acquire South African Ventures Inc. SAV has a joint venture with Profile Solutions Inc. and a working capital surplus of approximately C$11 million. The JV has received preliminary approval to become the only licensed growing farm and processing plant for medical cannabis and industrial hemp in The Kingdom of eSwatini (formerly known as Swaziland) for a minimum of 10 years. The consideration for the acquisition of SAV is expected to be 8,250,000 common shares of Stem, having a value of approximately C$19 million based on Stem’s closing trading price on March 21, 2019. The acquisition of SAV is expected to be completed on or around March 29, 2019.

The JV is a corporate joint venture with its own management team and all of the personnel, expertise, and other resources necessary to construct the Facility. SAV has a 49% interest in the JV, which it purchased for an aggregate purchase price of $5,000,000. PSIQ holds the remaining 51% interest in the JV. Stem expects that the JV will finance the cost of construction of the Facility, estimated at $7,000,000, with the JV’s cash on hand and other non-dilutive sources of financing. Stem expects that the construction of the Facility will begin during the second quarter of 2019 and end during the fourth quarter of 2019.  

Upon issuance of related permits and the construction of the Facility, the JV will: (1) operate an advanced hemp and medical cannabis manufacturing facility to grow and cultivate cannabis in accordance with strict Good Manufacturing Practices (“GMP”) global health standards; (2) distribute hemp and medical cannabis within eSwatini; (3) be the exclusive exporter within eSwatini for hemp and medical cannabis worldwide; (4) operate a medical cannabis research and development lab; and (5) build a training facility to create jobs for local eSwatini citizens.

Adam Berk, CEO of Stem stated “We are very excited to expand our cannabis and industrial hemp operations globally through our partnership with The Kingdom of eSwatini. Products produced at the eSwatini Facility will initially be available for export to countries including but not limited to Australia and the European Union.

“With the experience and success we have accomplished to date growing, cultivating, processing, extracting and distributing hemp and medical cannabis in the United States, this venture in eSwatini will be potentially accretive for our shareholders and rewarding for its citizens,” continued Adam Berk.

The eSwatini Facility will be located on 2,500 acres at The Science Park Matsapha for cannabis and industrial hemp cultivation and will adhere to strict GMP processing including a state-of-the-art research and development lab focused on genetic propagation. The implementation of this project is expected to have a positive impact on this incredible South African country by bringing new jobs and new infrastructure. The eSwatini Facility has the potential to produce over 12,000 KG of product on annual basis. Stem expects production from the Facility to begin during the fourth quarter of 2019.

Unlike many other cannabis businesses and opportunities, the joint venture has already secured access to water rights, electricity, and banking for this project.  All security plans and operations for the eSwatini Facility will be developed and managed by Golan Maimon, former Israeli Chief of Military police from 2013 to 2016.