BevCanna Enterprises Inc (CSE:BEV) (OTCMKTS:BVNNF), a manufacturer of cannabis-infused beverages, revealed Thursday, that it has expanded its previously signed agreement with leading cannabis cultivator Clearwater Canngrow Ltd.
BevCanna and Clearwater have struck an amendment agreement dated February 12 to the consultant agreement they signed on September 16, 2019. Under the new pact, Joey Bedard-Brunet, the principal of Clearwater, has agreed to become a director at BevCanna.
"The exclusive agreement with Clearwater CannGrow will assist BevCanna to more than double its potential cannabis biomass output," said John Campbell, who is the chief strategy officer at BevCanna.
"At the same time, we will recoup our original capital expenditures and eliminate all future cash outlays for farm related capital expenditures and operating costs," he added.
Campbell pointed out that the economics of the amended agreement are compelling.
“The prior agreement would have net BevCanna an 85% pre-tax profit participation on potential revenues from 130-acres of cannabis production, with all capital and operating expenses on BevCanna's account. The amended agreement gives BevCanna a 50% net revenue participation on 292-acres of cannabis production with no cash outlays whatsoever," said Campbell.
Under the terms of the amendment agreement, Clearwater has agreed to:
• Provide its services in outdoor cultivation of cannabis exclusively to BevCanna;
• Pay for all future capital and operational expenses incurred in connection with the performance of the services under the consultant agreement;
• Permit BevCanna to retain $2 million from potential revenue from cannabis cultivated at the company's outdoor cultivation site prior to the payment of Clearwater's share of potential revenue; and
• Remove all cash fees and potential cash bonuses previously payable to Clearwater under the original consultant agreement.
In exchange, BevCanna has agreed to:
• Issue 1 million shares to Clearwater at a deemed price of $0.50 per share in consideration for the amendments to the consultant agreement;
• One time reimbursement to Clearwater for certain expenses up to $3,400,000 incurred in connection with the performance of the services under the consultant agreement, including initial expected debt settlements in the amount of $500,000 at a deemed price of $0.50 per share and $362,000 at a deemed price of $0.425 per share, subject to the approval of the Canadian Securities Exchange;
• Pay Clearwater an operational cost of $10,000 per acre of outdoor cultivation site, payable only from potential revenue from cannabis cultivated at the company's outdoor cultivation site, instead of the cash fees previously payable under the consultant agreement;
• Increase the share of potential revenue from cannabis cultivated at the company's outdoor cultivation site payable to Clearwater, from 15% to 50%;
• Reimburse Clearwater for certain expenses in the event of a change of control of the company; and
• Pay Clearwater the previously mentioned operational fee and 50% revenue share in the event of a change of control, for any current year in which the change of control occurs and for the subsequent year.
All securities issued in connection with the amendment agreement will be subject to a statutory hold period of four months and one day from the date of issuance in accordance with applicable securities legislation.
BevCanna has doubled the size of its outdoor cannabis cultivation site to 292 acres, from 130 acres in its prime location in British Columbia's fertile Okanagan Valley, which also includes a 40,000 square foot manufacturing facility in Osoyoos, as well as a spring water aquifer. It has access to a world-class 40,000-square-foot manufacturing facility, with a bottling capacity of up to 210 million bottles per year.
The Vancouver-headquartered company has multiple revenue streams, including house brands, white label bottling, and is actively pursuing joint ventures, licensing and acquisitions of technology and brands. The firm utilizes patented technology to produce premium tasting, water-soluble cannabinoid infusions using THC and CBD from both cannabis and hemp.
Contact the author Uttara Choudhury at [email protected]
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