Cannabis One Holdings Inc (CSE:CBIS) (OTCMKTS:CAAOF) said Friday that, through its wholly owned subsidiary, it has executed a share purchase agreement to acquire all the securities of Green Lady IP Inc.
The Denver-based cannabis company said Green Lady provides infrastructure services to three dispensaries operated by Green Lady Inc and Green Lady Westside Inc with two locations in Olympia and one in Lynnwood in Washington State.
Green Lady IP management estimates the dispensaries to collectively contribute more than US$9 million in unaudited annual revenue, inclusive of Washington State cannabis taxes.
"Given the restrictive regulatory environment in Washington State, it appears most cannabis industry participants, particularly those operating in the public sphere are hesitant to entertain expansion in this established Pacific Northwest market,” said Cannabis One CEO Jeffery Mascio.
Mascio said this is an “unfortunate situation” for Washington State operators since there are a host of license holders that can benefit from ancillary services.
“By coupling our progressive infrastructure services program with an option to purchase the underlying licensed assets upon a change in Washington State Liquor and Cannabis Board (WSLCB) regulations, Cannabis One has developed a creative and accretive framework through which it may continue to pursue its exciting Pacific Northwest expansion program as Washington law allows," said Mascio.
Terms of the deal
Under the terms of the agreement, Cannabis One and its subsidiary shall not acquire any interest in or control over regulated inventory or licenses in connection with the proposed transaction.
Gross consideration payable to Green Lady IP shall be US$3,050,000 comprised of US$300,000 in cash and US$1,350,000 in Class B voting shares in Cannabis One and US$1,400,000 in deferred consideration, payable in monthly instalments of US$50,000 per month.
Deal offers big adavntages
Following the closing of the proposed transactions detailed in the definitive agreement, Cannabis One expects the acquisition of Green Lady IP will:
• Provide Cannabis One with diversified exposure — adjacent to the direct sale of cannabis or cannabis-related products — to the highly regulated Washington State cannabis industry, which currently prohibits out-of-state ownership of licensed assets
• Allow the company to explore new relationships and potential collaborations within Washington State's vibrant, yet relatively isolated, cannabis market, as jurisdictional regulations and legislations may permit, by expanding its infrastructure services program within the state
• Bolster Cannabis One's management team with introduction of experienced cannabis industry member and Green Lady IP owner, Michael Redman, and former investment banker and M&A professional Gavin Watson
• Build on the company's Pacific Northwest expansion program
"Washington State is perhaps one of the most compelling, but often-overlooked, cannabis markets for out-of-state industry participants, due in no small part to the restrictive permissions around cannabis licensure in our home state," said Michael Redman, President of Green Lady IP. "Green Lady believes Cannabis One's forward-thinking approach to the diversification of its operations — away from simply focusing on licensed ownership — to additionally focus on intellectual property management, brand power, and now infrastructure services, breaks the Washington mould to provide the competitive advantage necessary to challenge local incumbents."
Cannabis One Holdings is focused on aggregating popular cannabis brands throughout North America. With its unique, franchise-ready retail brand, The Joint, and through targeted acquisition and partnership opportunities, Cannabis One holds a client portfolio of award-winning products with an extensive market footprint.
—(Updates with financial terms of the deal)—
Contact Uttara Choudhury at [email protected]