Decriminalization of the Cannabis Market Aides Growth

Friday, April 27, 2018 Drug News
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NEW YORK, April 27, 2018 /PRNewswire/ --

According to a report by

Ameri Research Inc., the global legal cannabis market was valued at $14.3 billion in 2016 and is projected to grow at a CAGR of 21.1% between 2017 to 2024, while reaching a value of $63.5 billion
by 2024. The market is going through a period of robust growth because of increasing legalization and decriminalization of cannabis products across North America. The report specifies that legalization trends are moving beyond the U.S. region. Data by Arcview Market Research clarifies that growth of the legal cannabis industry are expected reaccelerate in 2018, as adult use sales ramp up in Canada, California, and Massachusetts along with medical sales in Florida. WeedMD Inc. (OTC: WDDMF), ABcann Global Corporation (OTC: ABCCF), CannaRoyalty Corp. (OTC: CNNRF), Invictus MD Strategies Corp. (OTC: IVITF), Hiku Brands Company Ltd. (OTC: DJACF)

As a result of decriminalization and favorable public opinion, the cannabis market has started to attract a broader range of investors. Viridian Capital President Scott Greiper told Benzinga that the cannabis industry received $1.23 billion investments in the first five weeks of 2018, up from $178 million a year earlier. Viridian Capital Advisors' Vice President Harrison Phillips said: "Investments in cultivation and retail this year have been driven predominantly by the Canadian player. This has been happening pretty consistently from late 2016 through 2017. This reflects the necessity to scale cannabis businesses, to get some kind of advantage, and to explore strategic opportunities, both through acquisitions and international expansion."

WeedMD Inc. (OTC: WDDMF) is also listed on the TSX Venture Exchange under the ticker symbol (TSX-V: WMD). Last week the company announced breaking news together with Hiku Brands Company Ltd. (CSE: HIKU) that, "they have entered into a definitive agreement (the "Arrangement Agreement") to merge both companies, creating an industry leader (the "Transaction"). The Transaction combines two highly-complementary businesses and creates a unique and market differentiating vertically integrated company. Upon completion of the Transaction, existing Hiku and WeedMD shareholders will own approximately 51.75% and 48.25% of the combined company, respectively, on a fully-diluted basis. Upon closing of the Transaction, it is anticipated that the common shares of the pro forma resulting entity will be listed on the TSX Venture Exchange ("TSX-V"), subject to regulatory approvals. Joint management will be hosting a conference call on Friday, April 20, 2018 beginning at 10:00AM EST. See end of the press release for details.

The combination of Hiku and WeedMD creates a premium cannabis brand house with fully vertically integrated operations, an expanding network of retail stores, a growing medical business and four scalable cannabis production facilities, two of which are currently licensed. As a result of the Transaction, Hiku will operate a diverse cannabis supply chain that includes a large portfolio of unique genetics for its growing brand portfolio and emerging nationwide retail sales channels. The entity combines Hiku's strength in retail and branding - ensuring a high quality, consistent and educational consumer experience in the adult-use cannabis market - with WeedMD's existing service and quality in the medical market.

"Our vision at Hiku has always been that cannabis is a consumer product - in which brands, retail and customer experience will ultimately win," said Alan Gertner, Chief Executive Officer of Hiku. "The combination of Hiku and WeedMD creates a cannabis company capable of fulfilling the vision of delivering the best in class experiences from in-store to product, from medical to adult-use, but also capturing full retail and wholesale margins. Our combined offerings create a company that is insulated from potential wholesale margin compression and is ready to scale its offering globally."

Bruce Dawson-Scully, Chief Executive Officer of WeedMD, said, "WeedMD was founded on the principles of product and patients first. Our goal since inception has been on procuring world class genetics, cultivating premium medical cannabis, and delivering it with best-in-class service to our valued patient base. We look forward to the next step in WeedMD's journey by merging with Hiku, a complimentary group that furthers our mission by bringing our focus and passion into a more robust platform. Having access to iconic brands and a growing retail footprint to execute on our growth plan together with our cultivation and existing medical expertise is intended to ensure significant benefits to our shareholders and expected to present significant upside as Canada marches towards legalization."

Hiku has built a portfolio of iconic, engaging cannabis brands, immersive retail experiences and handcrafted cannabis production. Hiku is recognized as an early leader in Canada's emerging adult-use market, with the Tokyo Smoke retail banner awarded Brand of the Year at the 2017 Lift Cannabis Awards. In February 2018, Tokyo Smoke, Hiku's wholly owned subsidiary, was awarded one of only four conditional master licenses for cannabis retail in Manitoba, an important milestone in Hiku's Canada-wide cannabis retail expansion plans.

With a retail footprint led by Tokyo Smoke, cannabis production through DOJA's ACMPR licensed facility, and Van der Pop's female-focused educational platforms, Hiku houses an industry-leading portfolio for cannabis in Canada's adult-use market. WeedMD operates a 26,000 square foot indoor facility with over 1,500 kg of current production capacity and is fully funded for a large-scale production expansion of a 14-acre greenhouse on a 98-acre property representing an increase to more than 50,000 kg of capacity. The combined companies create a brand-focused retail business with the ability to provide product quality and selection on par with the retail experience itself.

Highlights of the Transaction:

  • Vertically Integrated Operations Secure Control Over Entire Cannabis Value Chain: The combined entity will leverage Hiku's growing retail operations as sales channels for premium cannabis supply, allowing for the realization of superior wholesale and retail margins. The Transaction ensures Hiku's control over both upstream and downstream components of the cannabis value chain
  • Highly Complementary Strengths: The Transaction combines Hiku's portfolio of iconic brands, visionary marketing and experiential retail stores with WeedMD's scalable cannabis production capabilities, deep genetics library, and innovative research and development initiatives
  • Visionary Leadership with Significant Experience: Experienced management team with leading capabilities in branding, marketing, retail and cannabis production
  • Dynamic Retail Growth Across Canada: The combined company plans to aggressively pursue the expansion of its existing retail store network, including the addition of legal retail cannabis stores and online cannabis sales channels where permitted in British Columbia, Alberta, Saskatchewan and Manitoba where Tokyo Smoke was conditionally awarded one of four master licenses for retail cannabis sales
  • Superior and Diversified Cannabis Cultivation: This combination brings together four indoor and greenhouse growing facilities in Ontario and British Columbia, with the option for future expansion on more than 100 acres of property at the existing sites. Current planned capacity will exceed 56,000 kg by mid-2019
  • Extensive and Unique Genetics: Deep library of unique cannabis genetics is the basis for premium cannabis products in both the adult-use and medical markets
  • Enhanced Capital Markets Profile: Increased scale of the combined company will enhance its capital markets profile and trading liquidity, in addition, the combined entity will be listed on TSX-V, subject to regulatory approvals
  • Expanded Platform for Future Growth: Together, the combined company will have substantial and burgeoning infrastructure to support the acceleration of future product development and expansion
  • Synergies from being Vertically Integrated: Having branded stores, cannabis dispensing stores, and owned production facilities ensures a vertically integrated company that can best drive greater margins in the wholesale and retail markets of the new cannabis sector"

ABcann Global Corporation (OTCQB: ABCCF) holds production and sales licenses from Health Canada. Last month, the company announced that the Company has completed a financing of subscription receipts for gross proceeds of $7.0 million including a $4.0 million lead order from ABcann. Further to Choom's news release of March 19, 2018, the Company announced that it has completed a strategic private placement of Subscription Receipts concurrent with the execution of a definitive agreement relating to the acquisition of International Tungsten Inc. Additionally, Choom™ has entered into a binding agreement with ABcann whereby ABcann, one of Canada's premier growers, will supply Choom™ with premium cannabis products, subject to regulatory approval.

CannaRoyalty Corp. (OTCQX: CNNRF) is an active investor and operator in the legal cannabis industry. Recently, the company announced that it has entered into a binding term sheet to acquire 100% of FloraCal® Farms, a licensed ultra-premium craft cannabis producer located in Sonoma County, California for total purchase considerations of US$1 million in cash and 3,508,772 CannaRoyalty shares on close, as well as up to an additional US$3 million in cash and 3,508,772 shares to be paid over 3 years, based on completion of certain milestones. FloraCal adds branded premium cannabis flower and pre-roll products to CannaRoyalty's diverse portfolio. FloraCal is building its Sonoma County facility in three Phases and has been designed to comply with cGMP* (Current Good Manufacturing Process) standards. Phase I is licensed and in commercial production, with 15,000 square feet of purpose-built indoor growing in a 64,200 square foot facility. Phase II has been licensed and will increase the facility size to 42,200 square feet and targeted annual production of 3,700 kg, with construction expected to commence in Q2 2018 and be completed by Q1 2019. Phase III is under option and would allow further expansion to the full facility size of 64,200 square feet facility with targeted annual production of 5,500 kg. FloraCal has a temporary medium indoor cultivation license from the state of California, as well a Type 6 non-volatile manufacturing permit in Sonoma County.

Invictus MD Strategies Corp. (OTC: IVITF) owns and operates cannabis companies in Canada with the vision of producing a variety of high quality and low cost cannabis products and strains to the global market place as regulations permit. Invictus operates two cannabis production sites under the Access to Cannabis for Medical Purposes Regulations ("ACMPR") in Canada and has over 95,000 square feet of cannabis production capacity at the licensed production sites. Earlier this month, the company announced that Acreage Pharms Ltd ("Acreage Pharms") has received 23 new strains, providing the Company with a broad cannabis cultivation profile including: strains that are high in CBD; strains that offer especially elevated concentrations of THC; and strains that capture a wide variety of terpenes and cannabinoids, increasingly sought after by cannabis consumers.

Hiku Brands Company Ltd. (OTC: DJACF) is focused on building a portfolio of engaging cannabis brands, unsurpassed retail experiences and handcrafted cannabis production. Earlier this month, the company announced its wholly owned subsidiary DOJA Cannabis Ltd. ("DOJA"), a licensed cannabis producer under the Access to Cannabis for Medical Purposes Regulations (the "ACMPR"), received an amendment to its license from Health Canada to include the sale of dried cannabis, cannabis plants and seeds, effective April 6, 2018. With over $27 million of available cash and cash equivalents, Hiku is well capitalized to complete its next phase of cannabis production capacity growth. The build-out of Hiku's second site facility, the "FUTURE LAB", is well underway and expected to be completed in the summer of 2018, expanding Hiku's annual production capacity to over 5,000 kg of dried cannabis flower ahead of Canada's legal adult-use cannabis market.

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