Heritage Cannabis Announces Balance Sheet Transforming Sale Lease Back Transaction and Third Amendment to its Senior Secured Loan

Heritage Cannabis Holdings Corp. (CSE: CANN) (OTCQX: HERTF) (“Heritage” or the “Company”), a licensed cannabis company with national distribution of its branded product catalogue in Canada and multi-state distribution for its RAD branded cannabis products in Missouri, West Virginia and New York State, is pleased to announce that it has entered into binding agreements to sell the Company’s real estate properties in Ontario (the “Ontario Property”) and British Columbia (the “BC Property”) to BJK Developments Ltd. (the “Purchaser”) for a net purchase price of $9,714,475 (the “Purchase Price”) and lease the Ontario and BC Property back from the Purchaser (the “Sale and Leaseback Transaction”).

Pursuant to the Sale Leaseback Transaction, Heritage has entered into ten (10) year lease agreements with the Purchaser, for each of its Health Canada licensed Ontario Property and BC Property, where the Company will continue to operate its best-in-class manufacturing and processing capabilities for its domestic and international business segments. Further, Heritage is pleased to announce that the lease terms include a 12-month free rent period, representing approximately $1,389,000 of savings during the period, which commences at closing; and, that the Company also retains an option to repurchase the Ontario Property and BC Property for a period of two years, from the Purchaser, pursuant to option agreements.

The Purchase Price will be used to set-off the amount owing by the Company to its lender, BJK Holdings Ltd. (“BJK”), a related entity of the Purchaser, reducing the Company’s remaining term debt by approximately 64% to $5,256,379. The remaining term financing, as amended within a Third Amending Agreement has been extended through to January 31, 2025, with interest calculated at the Royal Bank of Canada prime lending rate (“RBC Prime”) minus 1.75%. In addition, the Company retains its revolving line of credit of up to $5,000,000 (the “LOC”) with BJK, which has also been extended until January 31, 2025.

In connection with the Third Amending Agreement, Heritage has agreed to amend existing warrant certificates held by BJK dated October 8, 2021 which entitled BJK to subscribe for and purchase up to 10,000,000 common shares in the capital of Heritage at an exercise price of $0.25 per common share, and dated September 29, 2022 which entitled BJK to subscribe for and purchase up to 50,000,000 common shares in the capital of Heritage at an exercise price of $0.10 per common share (the “Existing Warrants”). Effective, October 31, 2023, the Company will amend the Existing Warrants so that the expiry date for BJK to exercise the Existing Warrants is extended from February 28, 2025, to February 28, 2026, and so that the exercise price of the Existing Warrants shall be repriced to $0.07 per common share.