Harborside to Raise C$20 Million Selling Private Placement Units at C$2.55

Harborside Inc. Announces C$20 Million Private Placement of Equity Units and Provides 2021 Outlook

Strong Institutional Support with Lead Order from Entourage Effect Capital to Support 2021 Financial Targets

OAKLAND, Calif. and TORONTO, Jan. 19, 2021 /CNW/ – Harborside Inc. (“Harborside”, or the “Company”) (CSE: HBOR), (OTCQX: HBORF), a California-focused, vertically-integrated cannabis enterprise, today announced a brokered private placement of units (the “Units”) of the Company (the “Offering”) at a price of C$2.55 per SVS Unit (as defined below) for gross proceeds of approximately C$20 million with approximately C$9.0 million of commitment from Entourage Effect Capital, LLC (“Entourage”), one of the largest shareholders of Harborside.

The Company has granted the Agents (as defined below) an option to sell up to an additional 15% of the Units in the Offering, exercisable in whole or in part at any time prior to closing of the Offering.

Each Unit issued to non-residents of the United States (an “SVS Unit”) will be comprised of one subordinate voting share of the Company (the “Subordinate Voting Shares”) and one Subordinate Voting Share purchase warrant (each a “Warrant”) of the Company. Each Warrant will be exercisable to acquire one Subordinate Voting Share of the Company (a “Warrant Share”) for a period of 36 months following the closing date of the Offering (the “Closing Date”) at an exercise price of C$3.69 per Warrant Share, subject to adjustment and acceleration in certain events.

All investors that are considered residents of the United States under the United States Securities Exchange Act of 1934, will be issued units comprised of multiple voting shares of the Company (the “Multiple Voting Shares”) and Multiple Voting Share purchase warrants of the Company, which will be based on the same economic equivalency of each Multiple Voting Share converting into 100 Subordinate Voting Shares.

We are continuing to expand our footprint in the robust California cannabis market, delivering our best-in-class service and the high-quality product selection that Harborside is known for. California is one of the largest cannabis markets in the world and Harborside has more than a decade of market success for our team to build on.

Matthew Hawkins, Chairman of Harborside

I would like to thank our current and new shareholders for their overwhelming support of our growth strategy. This additional capital will solidify our balance sheet and provide a platform for us to continue to consolidate in the California market through accretive M&A transactions.

The Company expects to use the net proceeds from the Offering for general corporate and working capital purposes.

ATB Capital Markets and Beacon Securities Limited will act as co-lead agents to the Offering (the “Agents”). The Company has agreed to pay the Agents a cash commission payable on the Closing Date equal to 6.0% of the aggregate gross proceeds of the Offering (the “Cash Commission”), and to issue the Agents warrants (the “Broker Warrants”), exercisable to acquire, within 12 months from the Closing Date, in the aggregate, that number of Subordinate Voting Shares (the “Broker Warrant Shares”) that is equal to 6.0% of the aggregate number of Units sold in the Offering, at an exercise price of C$2.55 per Broker Warrant Share. An adjusted commission structure will apply on select president’s list investors coordinated by the Company. Subject to customary closing conditions, including applicable CSE approvals, the Offering is expected close on or about February 9, 2021 (the “Closing Date”), or such other date as the Company and the Agents may agree.

As certain insiders and other related parties of the Company will be participating in the Offering, it is deemed to be a “related party transaction” as defined under Multilateral Instrument 61-101—Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Offering is exempt from the formal valuation and minority shareholder approval requirements of MI 61- 101 (pursuant to subsections 5.5(a) and 5.7(a)) as the fair market value of the securities distributed to, and the consideration received from, related parties will not exceed 25% of the Company’s market capitalization.

2020 Preliminary Results and 2021 Outlook¹ ²

The Company is also pleased to provide the following update of guidance for 2020 along with guidance for 2021.

For the full year ended 2020, the Company is expecting gross revenues in line with previously issued guidance of approximately $61 – 63 million, and positive EBITDA. For the full year ended 2021, the Company expects standalone gross revenues of between $68 – $72 million. The increase in revenues for 2021 is expected to be derived from improved pricing in retail along with continued increases in both flower yields and processing efficiencies in Harborside’s wholesale operations. As well, the Company expects a 2021 full year of Adjusted EBITDA³ in the range of 15 – 17% of revenues, compared to the previously disclosed 2020 expectation of Adjusted EBITDA³ in the range of 8 – 10% of revenues. Management expects to attain this higher level of Adjusted EBITDA³ in 2021 through more efficient procurement of goods sold and stronger cost discipline on overhead spend.

Intention to Divest of Oregon Assets¹

Through a review of the Company’s existing retail portfolio, management has decided to explore the divestiture of its one retail dispensary operating as Terpene Station in Eugene, Oregon (the “Oregon Assets”) as part of the Company’s continued efforts to focus on the California market. The Company has not entered into any agreements, binding or non-binding, to divest of the Oregon Assets as of this date. Further, the Company has not established a definitive timeline to complete such divestiture, and no decisions related to the divestiture have been reached at this time. There can be no assurance as to what, if any, transaction might be pursued by the Company as a result of its intention to divest the Oregon Assets. The Company does not intend to comment further with respect to the divestiture unless and until it determines that additional disclosure is appropriate in the circumstances and in accordance with the requirements of applicable securities laws.

For the latest news, activities, and media coverage, please visit the Harborside corporate website at http://www.investharborside.com or connect with us on LinkedIn, Facebook, and Twitter.

About Harborside:

Harborside Inc. is one of the oldest and most respected cannabis retailers in California, operating three of the major dispensaries in the San Francisco Bay Area, a dispensary in the Palm Springs area outfitted with Southern California’s only cannabis drive-thru window, a dispensary in Oregon and a cultivation/production facility in Salinas, California. Harborside has played an instrumental role in making cannabis safe and accessible to a broad and diverse community of California consumers. In 2006, Harborside was awarded one of the first six medical cannabis licenses granted in the United States and today holds cannabis licenses for retail, distribution, cultivation, nursery and manufacturing. Harborside is currently a publicly listed company on the CSE trading under the ticker symbol “HBOR”. Additional information regarding Harborside is available under Harborside’s SEDAR profile at www.sedar.com.

About Entourage Effect Capital:

Entourage Effect Capital, LLC, formerly known as Cresco Capital Partners, LLC, is a United States private investment firm, dedicated to investing in the cannabis industry. The firm’s mission is to actively leverage its sector and investment experience, networks, and investment process, and to identify, invest and accelerate high quality emerging growth companies. Entourage was formed in 2014 and is based in Dallas, Texas.

Non-IFRS Measures, Reconciliation and Discussion

This press release may contain references to “Adjusted EBITDA”, which is a non-IFRS financial measures.

Adjusted EBITDA is a measure of the Company’s overall financial performance and is used as an alternative to earnings or net income in some circumstances. Adjusted EBITDA is essentially net income (loss) with interest, taxes, depreciation and amortization, non-cash adjustments and other unusual items added back. This measure can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. It is often used in valuation ratios and can be compared to enterprise value and revenue. This measure does not have any standardized meaning according to IFRS and therefore may not be comparable to similar measures presented by other companies.

There are no comparable IFRS financial measures presented in Harborside’s financial statements. Reconciliations of the supplemental non-IFRS measures are presented in the Company’s management’s discussion and analysis for September 30, 2020. These non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believes that the non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. The Company believes that these supplemental measures provide information which is useful to shareholders and investors in understanding our performance and may assist in the evaluation of the Company’s business relative to that of its peers.

These non-IFRS financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the IFRS financial measures presented in the Company’s financial statements. For more information, please see “Use of Non-IFRS Measures” and “Non-IFRS Measures” in the Company’s management’s discussion and analysis for September 30, 2020, which is available under the Company’s profile on www.sedar.com.

Notes:

_{¹This is forward-looking information and based on a number of assumptions. See “Cautionary Note Regarding Forward-Looking Information”.
²These targets, and the related assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. While Harborside believes there is a reasonable basis for these targets, such targets may not be met. These targets represent forward-looking information. Actual results may vary and differ materially from the targets. See “Cautionary Note Regarding Forward-Looking Information” and “Assumptions” below.
³This is a non-IFRS reporting measure. For a reconciliation of this to the nearest IFRS measure, see “Use of Non- IFRS Measures” and “Non-IFRS Measures” in the Company’s management discussion and analysis for September 30, 2020.}

Original press release

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