Vancouver, British Columbia and Denver, Colorado–(Newsfile Corp. – December 10, 2019) – Cannabis One Holdings Inc. (CSE: CBIS) (“Cannabis One”, “CBIS” or the “Company”), today announced that it has entered into a business combination agreement (the “Agreement”) whereby its wholly-owned subsidiary, Cannabis One U.S., Inc. will combine with OCG, Inc. (“One Cannabis Group” or “ONE”), one of the first U.S. cannabis franchisors. ONE brings with it a disruptive dispensary franchise model operating under the distinct Unity Rd. brand. To date, there have been agreements signed for 15 Unity Rd. dispensary franchises across five states.
The combination of Cannabis One’s “house of brands” business model with ONE’s unique franchise offering will create a dominant, capital efficient dispensary model and vertical distribution for its brands.
“This Agreement brings together two Colorado born and bred companies that have been in the cannabis industry for over 10 years. CBIS’s expertise in brand development and distribution has allowed it to create over 900 retail partners for its brands across four states. Together with ONE’s franchise model, we are creating an EBITDA positive, highly focused company that has an ability to grow via the use of the national Unity Rd. franchisee network,” said Jeff Mascio, chief executive officer of Cannabis One.
“Franchising is the most agile and proven way to scale in the cannabis industry,” said Mike Weinberger, chief operating officer of One Cannabis Group, which began its franchise program in 2018. “Our franchisees own and operate their own dispensaries, hire locally and keep money in the communities they serve. The ongoing support and resources we provide allows them to scale more quickly than if they were operating independently. Cannabis One shares our vision of inspiring confidence in cannabis for all, and we look forward to working together and elevating our brands across North America and beyond.”
Highlights of the Transaction:
The Agreement is expected to result in a company that is strategically focused on growing its robust dispensary network and allowing its already solid brand portfolio to be distributed into franchise stores and retail partner locations alike.
First True U.S. Cannabis Franchise Opportunity: ONE Cannabis has established itself as a first mover in the U.S. cannabis franchise space. Through the team’s innate understanding of the franchise model, there have been agreements signed for 15 franchises in five states – Colorado, Illinois, Massachusetts, Missouri, and Ohio. This model sees franchisees pay a $USD 100,000 franchise fee upfront with 5 percent gross royalty on top-line revenue and a 2 percent marketing fee.
Creates a Capital Efficient Model to Expand Retail Brands: The combined business will have the unique ability to drive revenue growth across its franchise locations and its distribution platform with limited capital expenditures required for future dispensary locations. This model allows the opportunity to have high capital efficiency as the combined business expands its national footprint.
Creates a Sizeable Distribution Platform for In-House Brands: Through both its existing retail partner network of 900-plus dispensaries and its franchise platform, the combined company will have one of the strongest brand distribution platforms in cannabis with an ability to further develop brands through valuable data gained at its franchised and wholly-owned dispensaries.
Highly Experienced Management Teams: This Agreement combines the operational execution of CBIS’s team in aggregating, distributing and producing top-tier brands with ONE’s decade of corporate cannabis experience and 30-plus years in franchising. ONE’s team boasts 13 Cannabis Cup wins and previously developed and sold a 500-unit franchise business to MTY Food Group.
Strong Economics and Demonstrated Cash Flow: The combined company expects to see solid revenue growth and to be EBITDA positive in 2020 through high-margin franchising, brand distribution and over 85,000 sq. ft. of indoor cultivation capacity.
Transaction Summary:
The Agreement-
Under the Agreement, Cannabis One will purchase all of the issued and outstanding shares of ONE (the “ONE Shares”), through its wholly-owned subsidiary, Cannabis One U.S., Inc., in exchange for Class B Super Voting common shares in the capital of Cannabis One (“CBIS Shares”).
After giving effect to the Agreement, the holders of ONE Shares, will hold approximately 45 percent of CBIS’s issued and outstanding shares on a pro forma basis and the existing shareholders of CBIS will hold approximately 55 percent of CBIS’s issued and outstanding shares on a pro forma basis.
The Agreement is anticipated to close at the end of Q1 2020.
Complete details of the terms of the Agreement are set out in the Business Combination Agreement, which will be filed by Cannabis One and will be available for viewing under Cannabis One’s profile at www.sedar.com.
About Cannabis One-
Cannabis One Holdings Inc. (CSE: CBIS) is focused on aggregating and optimizing popular cannabis brands throughout North America. With its unique, franchise-ready retail brand, The JointTM, and through targeted acquisition and partnership opportunities, Cannabis One intends to become the premier, globally-recognized “House of Brands”, holding a client portfolio of award-winning products with an extensive market footprint. Through the Company’s The JointTM retail concept, Cannabis One intends to leverage the consumer and brand data harvested from its retail locations to bring data-driven analytics to an emerging, branded industry. For consumers, Cannabis One desires to become the definitive source for unparalleled product selection and renowned service in an otherwise fragmented market.
About ONE Cannabis Group-
ONE Cannabis Group is a Colorado-based, vertically integrated cannabis company that’s making a name for itself as the bridge connecting the two previously disconnected worlds of cannabis and franchising. Across its brands, ONE covers several areas of cannabis-related business functions, including franchising, social equity, cultivation, consulting, real estate, retail operations and technology (point of sale). Its award-winning Green Man Cannabis is well-known for its connoisseur-grade craft cannabis and numerous Cannabis Cup wins. Recently, ONE Cannabis became the first cannabis business to earn a Franchise Times Dealmakers award – a recognition presented to the boldest players driving mergers and acquisitions in franchising. For more information, visit ocginc.com.