Cannex moves into California via acquisition of Jetty Extracts
Cannex to enter rapidly growing California market with an important and strategic acquisition of a manufacturing, branding and distribution platform in California.
News Release, Vancouver, BC – April 9, 2018. Cannex Capital Holdings Inc. (CSE:CNNX) (“Cannex” or the “Company”) is pleased to announce that it has signed a binding letter agreement (the “Agreement”) to acquire 100% of Oakland, California based Ametrine Wellness Inc. dba Jetty Extracts (“Jetty”) (the “Transaction”).
Jetty was founded in 2013 and operates a leading cannabis extraction and processing facility in Oakland, California, producing one of the most trusted cannabis extract brands, distributed to over 600 California dispensaries in 2017. Jetty has a licensed 12,000 ft² facility in Oakland, California’s “Green Zone” incorporating extraction, manufacturing, product development and administration. Jetty also, through its cannabis distribution license, distributes its own, and others, products throughout the state without a need for a third-party distributor. Founded in San Diego prior to moving to Oakland, Jetty has wide distribution and strong brand recognition throughout the Golden State. According to ArcView Research, California is expected to be one of the world’s largest cannabis markets with up to US$6.5 billion in annual sales by 2020.
Jetty has more than 60 employees, established distribution throughout the state, and marketing and strategic partnerships with PAX, MedMen and Eaze. Since launching PAX era pods in August 2017, Jetty has become the leading PAX supplier, having six of the top ten PAX SKUs sold in California according to the latest BDS Analytics reports. Jetty continues to bring new ideas to the market in both products and outreach. In 2016 Jetty designed and launched the patent-pending Dablicator™, a direct dabbing apparatus with broader applications for micro-dosing in edibles and beverages. With their existing products, and others in development, Jetty is well positioned to expand further into California, as well as nationally and overseas.
Jetty developed, distributes and has a 50% ownership in MindTricks™, a popular artisan toffee edibles brand, recently featured in Rolling Stone magazine. Additionally, Jetty has innovative collaborations with Stone Brewing Company and Thorn Brewing to develop proprietary cannabis-derived terpene-infused beverages. The Jetty Sushi partnership, brainchild of acclaimed Medi-Chefs Brandon Greenwell and Daniel Robles, is pushing boundaries and perceptions in the recreational cannabis industry.
Jetty also operates the Jetty Shelter Project which provides free cannabis oils to cancer patients and currently serves more than 500 patients across California. Jetty has an apprenticeship program with the Hood Incubator, a community-centered non-profit organization committed to building economic and political power for Black and Brown communities.
“We are excited by this partnership with Cannex, which also has a strong operations and branding background. This transaction will allow Jetty to capitalize on its first-mover advantage in California and to rapidly expand our brands and operations across the state and beyond,” said Ron Gershoni, Jetty CEO and co-founder. “Cannex and Jetty share common values as innovators, ethical business operators and community members. We are eager to work closely with Cannex to drive Jetty’s aggressive California expansion plans,” continued Gershoni, “and see a wide range of synergies including co-branding, more efficient distribution and opportunities to consolidate the fragmented California market.”
Ron Gershoni is politically active throughout California and is a founding board member of both the California Cannabis Manufacturers Association (CCMA) and Oakland Citizens for Equity and Prosperity (OCEP). Gershoni is a frequent speaker and panellist at industry events including the 2017 MJBiz Conference and will be a panelist at the 2018 Cowen and Company Cannabis Summit on the 9th of April in Los Angeles.
“Cannex is actively engaged in identifying and evaluating a number of strategic acquisitions in California and elsewhere as a part of advancing our multi-state strategy, and we knew immediately that Jetty was the ideal entry point into the large California market,” said Leo Gontmakher, Cannex’s COO. “Our companies share a common vision, have a core focus on extraction and brands with many strategic and operational synergies,” continued Gontmakher. “We look forward to working with Jetty to leverage their California brands and operations, to introducing our leading Washington brands into California and to establishing a dominant position in the rapidly growing California market.”
“The Jetty acquisition is an excellent first step for Cannex as we implement our multi-state strategy,” said Anthony Dutton, CEO of Cannex. “We looked at a wide range of acquisition targets in California but Jetty stood head and shoulders above the rest with its strong operational track record, its core focus on brands and product development, as well as its strong market position in both northern and southern California. We were especially impressed with the Jetty team,” continued Dutton, “and their long term vision and look forward to working closely with them to position the Cannex platform as a leading competitor in the US and California market.”
Pursuant to the Interim Agreement, the Company will pay to Jetty shareholders total consideration of US$22.5 million in cash and stock, with additional consideration of US$7,500,000 being awarded upon the completion of certain mutually-agreed upon performance targets by Jetty. The initial US$22.5 million consideration will be satisfied by the issuance of US$20 million in Cannex’s shares (being a combination of common shares and Class A convertible restricted shares) at a price of $1.00 per share and the payment of US$2.5 million in cash upon closing. Upon Jetty meeting the performance milestones, Jetty shareholders will be entitled to additional consideration of US$2.5m in cash and US$5 million in a combination of common and Class A convertible restricted shares. All shares issued in the Transaction will be subject to a statutory Canadian hold-period of four months and a day from the date of issuance.
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