HEXO Makes Strategic Investment in Premier Western Canadian Retail Cannabis Operation, Fire & Flower

Kanata, Ontario, CANADA

GATINEAU, Quebec, July 26, 2018 (GLOBE NEWSWIRE) -- The Hydropothecary Corporation (“HEXO” or the “Company”) (TSX:HEXO) is pleased to announce that it has made a strategic $10 million investment into the independent corporate cannabis retailer, Fire & Flower Inc. (“Fire & Flower”). Fire & Flower has submitted 37 retail store licenses in the province of Alberta, and has been awarded one retail store license in the province of Saskatchewan.

Building upon HEXO’s secured distribution of cannabis in the provinces of Quebec and British Columbia, HEXO intends to secure distribution in the provinces of Alberta and Saskatchewan for its innovative oil-based products. These products will include the Company’s award-winning Elixir line of easy-to-use, discreet  sublingual cannabis oil sprays and the newly launched Fleur de Lune intimate cannabis oil. HEXO and Fire & Flower have previously entered into a letter of intent regarding distribution of the HEXO product offering, subject to applicable provincial regulations.

“Fire & Flower is establishing itself as a leading independent Canadian cannabis retailer and welcomes the investment by HEXO, a recognized leader in legal cannabis production,” said Trevor Fencott, Chief Executive Officer of Fire & Flower. “HEXO’s investment reinforces our position as a key strategic partner to many of Canada’s most innovative and leading-edge cannabis producers.”

“Fire & Flower and HEXO are positioned to capture market share in cannabis retail across Western Canada and this investment signifies HEXO’s commitment to this segment of the market,” added Sebastien St-Louis, HEXO’s CEO and co-founder.

“We are proud of this investment and are looking forward to other opportunities to work with Fire & Flower as private retail markets open across Canada, including potential private retail opportunities in Ontario” noted Mr. St-Louis.

Under the transaction, HEXO has invested $10 million into Fire & Flower through the acquisition of $10 million principal amount of unsecured convertible debentures bearing interest at 8% per annum compounded, accrued and paid semi-annually in arrears (the "Debentures"). The Debentures mature on the earlier of a public liquidity event, or on July 31, 2019 at which time the Debentures and any unpaid interest, will automatically convert into common shares of Fire & Flower at the rate of $1.15 per share, subject to certain downside protection on a future dilutive transaction.  The Debentures may also be converted into a loan on July 31, 2019 bearing interest at 12%, at the Company’s option.

About HEXO

HEXO creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market. One of the country’s lowest-cost producers, HEXO is rapidly increasing its production capacity in the lead up to the adult-use cannabis market. The Company currently operates with 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.

About Fire & Flower

Fire & Flower is a leading independent adult-use cannabis retailer poised to capture significant market share in Canadian provinces that allow private retail. The company will provide customers with expertly curated product selection and a best-in-class, education-driven customer experience.

Founded by leading legal cannabis entrepreneurs, Fire & Flower's leadership team carries extensive experience in launching successful businesses and 20 years in the legal cannabis industry. The company is versed in the national legalization of cannabis and is actively influencing the evolution of the new cannabis industry across the country.

Forward-Looking Information
This press release may contain forward-looking information that is based on certain assumptions and involves known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current assumptions and expectations. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. A more complete discussion of the risks and uncertainties facing the Company appears in the Company’s Annual Information Form and continuous disclosure filings, which are available on SEDAR’s website at www.sedar.com. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking statements as a result of new information or future events, or for any other reason.

Investor Relations:
Jennifer Smith
Manager of Financial Reporting and Investor Relations

Media Relations:
Alexandre Poirier

Nathan Mison
Fire & Flower Inc.

Adam Miron