CubicFarm Systems Corp. (TSXV:CUB) entered into a binding purchase agreement to acquire HydroGreen, Inc. for $3.7 million on December 10, 2019. CubicFarm Systems will issue 11 million shares to the shareholders of HydroGreen, Inc., subject to adjustment related to working capital. The shareholders shall have the right to receive $0.5 million cash proceeds, based on the performance. Of the consideration shares, 10 million will be issued on closing of the acquisition with the remaining 1 million shares being issued on the six-month anniversary of closing, subject to any set-off relating to indemnification. None of the current shareholders of HydroGreen will hold more than 5% of the common shares of CubicFarm Systems pursuant to the acquisition. Following closing, principals of HydroGreen holding in excess of 80% of the consideration shares will enter into a pooling agreement with respect to their consideration shares. Under the terms of the pooling agreement, 25% of their consideration shares will be released on the closing of the acquisition and an additional 25% will be released on each of the dates which are 6 months, 12 months and 18 months following closing of the acquisition. Post-acquisition HydroGreen will be renamed as CubicFeed Systems U.S. Corp and will become the indirect wholly-owned subsidiary of CubicFarm Systems. The new CubicFarms subsidiary will operate the existing business of HydroGreen moving forward.

In 2018, HydroGreen recorded unaudited sales revenues of approximately $1.2 million and an unaudited gross profit of approximately $0.7 million.

The acquisition will require the approval of HydroGreen's Board of Directors and shareholders at a special meeting expected to take place in late December. HydroGreen shall have obtained the Pooling Agreement duly completed and executed by the shareholders that are a party thereto as well as the duly completed and executed Shareholder Consent Agreements. Dihl Grohs shall have resigned all positions with HydroGreen. CubicFeed Systems shall have received the approval for the listing of new shares on the TSX-V. The Consultant Earn-Out Agreement shall have been delivered to the HydroGreen and the Shareholder's Agent for execution. In order to become effective, the acquisition must be approved at the HydroGreen meeting by HydroGreen shareholders holding greater than 50% of the HydroGreen shares entitled to vote at the HydroGreen meeting. HydroGreen shareholders holding approximately 75% of the issued and outstanding HydroGreen shares have entered into voting and support agreements with CubicFarm Systems in support of the acquisition. The board of directors of HydroGreen has unanimously approved the acquisition and will recommend that HydroGreen shareholders to vote for the acquisition. In addition to approval of HydroGreen shareholders, the acquisition is subject to approval of the TSX Venture Exchange and other customary closing conditions. It is not anticipated that the acquisition will be classified as a reviewable transaction under TSX Venture Exchange Policies. Dihl Grohs and Chris Campbell have executed lock-up agreements pursuant to which they have agreed to vote their Common Shares in favour of the acquisition. The shareholders of HydroGreen has approved the transaction. The acquisition is expected to close in December 2019 following the HydroGreen meeting.

Andrew Bond from Davis Wright Tremaine LLP and Ling Wong and Steve Saville from Fasken Martineau DuMoulin LLP acted as legal advisors to CubicFarm Systems and Daniel Doyle from Cutler Law Firm, LLP acted as legal advisor to HydroGreen in the transaction.

CubicFarm Systems Corp. (TSXV:CUB) completed the acquisition of HydroGreen, Inc. on January 1, 2020.