Nov 30, 2021
Harborside to Become StateHouse Holdings with New Acquisitions

Harborside Inc., a California-focused, vertically integrated cannabis enterprise, has entered into definitive agreements to acquire UL Holdings Inc. (Urbn Leaf), a top California cannabis retailer with a dominant position in Southern California, and LPF JV Corporation (Loudpack), a leading manufacturer, cultivator and distributor of award-winning cannabis brands in California. Following completion of the transactions, Harborside is expected to be renamed StateHouse Holdings, subject to shareholder and regulatory approval.

Management believes that StateHouse, which is expected to trade under a new symbol (CSE: STHZ), will be the largest and most developed cannabis platform in the state of California with superior retail, brands, processing, manufacturing, distribution and cultivation. Management believes that StateHouse will have the highest estimated annual revenue and brand market share among its current publicly-listed California peers, providing the company with a strong platform for growth as a consolidator of California’s cannabis industry. Through the first nine months of 2021, Harborside, on a pro-forma basis including revenue of Sublimation Inc. (Sublime) for the entire period, had gross revenue of $57.8 million, while Urbn Leaf and Loudpack had revenue of $45.9 million and $61.4 million, respectively. Therefore, on a pro forma basis, management estimates that StateHouse would have generated gross revenue of approximately $165 million for the same period.

Ed Schmults, the current CEO of Urbn Leaf, is expected to be appointed as CEO of StateHouse upon completion of the Urbn Leaf transaction and will be joining the Board of Directors of StateHouse. Marc Ravner, the current CEO of Loudpack, is expected to be appointed as president of StateHouse upon completion of the Loudpack Transaction and will be joining the Board of Directors of StateHouse. Matthew Hawkins, current chairman and interim CEO of Harborside, will remain as chairman of the board of StateHouse.

“Since reconstituting the Company’s board of directors last year, our team embarked upon an ambitious mission to create a unique platform capable of consolidating California and driving significant growth through added scale. With these transactions, we are working to create a west coast cannabis powerhouse,” said Hawkins. “The combination of high-quality assets, increased scale and experienced leadership will drive tremendous value for shareholders. California is one of the world’s largest legal cannabis markets, with sales expected to reach $7.4 billion by 2025. StateHouse will have a unique ability to navigate the operating challenges in the state and capitalize on the combined potential of the businesses we are acquiring. We are building what we believe is the ideal platform to consolidate the California cannabis sector, positioning us for long-term growth in both market share and profitability. Ed Schmults, an experienced leader with a proven retail and cannabis track record, is the right person to lead StateHouse into the future.”

The transaction was structured based upon the relative enterprise values of Harborside, Urbn Leaf and Loudpack. The aggregate consideration for the transactions will be met through the issuance of 151,427,786 subordinate voting shares of Harborside (SVS) and the assumption and restructuring of debts and other obligations as well as the issuance of 2,000,000 warrants at a strike price of $2.50 per SVS (the warrants). Harborside, Urbn Leaf and Loudpack noted that the structure of the transaction and overall consideration contemplates both a return to normalized enterprise valuations for California-focused cannabis companies and the potential for StateHouse to become a leading participant in that market. Based upon the relative enterprise value of each party, following closing of the Transactions, existing Harborside, Loudpack and Urbn Leaf shareholders will own approximately 35%, 39% and 26% of StateHouse, respectively, on a fully diluted basis and assuming conversion of all multiple voting shares of Harborside (“MVS”) to SVS.

In connection with the transactions, management has entered into a letter of intent with Pelorus Equity Group to complete the Real Estate Financing (as defined below) of $77.3 million of non-dilutive real estate debt financing, which unlocks significant value from the StateHouse real estate portfolio and provides significant growth capital for the business.

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