Alternate Health Corp., (“Alternate Health” or the “Company”) (CNSX:AHG.CN) (OTCQB:AHGIF), an international leader in technology solutions for the regulated cannabis industry, announced that it has today signed an agreement to acquire a majority stake in California cannabis company Kare MMJ. As part of the agreement, Alternate Health will also acquire Bionic Bee, California’s premiere flavoured cannabis extract manufacturer.
The acquisition will give the Company immediate exposure to California’s value-added cannabis market, with Kare MMJ’s 5,000 square foot extraction facility in the Greater Los Angeles area. Located in Sun Valley, part of Greater Los Angeles’s San Fernando Valley, Kare MMJ has operated as a not-for-profit under California’s collective medical marijuana regulations and is currently in the final stages of converting to a for-profit company and obtaining its state cannabis license. Alternate Health expects to begin wholesale and retail sales of its products under California’s new adult-use regulations by late January 2019.
“With Alternate Health’s recent acquisition of distribution, processing and manufacturing licenses in Humboldt County, the Company is taking an aggressive approach to capturing a significant share California’s adult-use cannabis market,” says Dr. Michael Murphy, Chairman and CEO of Alternate Health. “By incorporating Kare MMJ and Bionic Bee into Alternate Health, we immediately gain invaluable market expertise and an established brand to move forward at this exciting time in the industry.”
Founded in 2015, Kare MMJ is a leading producer of cannabis extract products. Through its flagship brand, Bionic Bee, the Company has subsequently established a loyal medical cannabis following, gaining recognition for its creative flavours, ranging from Maui Mango to Orange Diesel. Alternate Health intends to build on the success of the brand, expanding throughout California’s adult-use market, including the profitable business of wholesale extraction for other California-based brands.
Proven Business Model and Revenue
Kare MMJ developed a strong customer base through its dispensary distribution channels. When the agreement closes, following Kare MMJ’s transition into a for profit company, with 66% owned by Alternate Health and 34% owned by partners involved in the City of Los Angeles’s Social Equity Program, Alternate Health will have the ability to distribute Bionic Bee’s top-of-the-line vape products in both medical and adult-use markets. The Company expects robust growth as it continues to establish the brand and develop new products for California’s lucrative cannabis industry.
“Bionic Bee has a proven, market-ready business model,” says Dr. Murphy. “With Alternate Health’s investment into cannabis distribution, processing and manufacturing, we plan on bringing Bionic Bee products to an increasing number of dispensaries across California.”
Alternate Health’s acquisition of Kare MMJ and the Bionic Bee will represent another key step forward into California’s regulated, adult-use cannabis market. Manufactured in Kare MMJ’s Sun Valley extraction facility, Bionic Bee extract products will complement Alternate Health’s recent acquisition of cannabis flower brand, Humboldt Ave. Products from both brands will be distributed through Alternate Health’s licensed distribution companies, with sourcing and processing supported by the Company’s 14,800 square foot licensed facility in Humboldt County, California.
Value Added Products
Consumer demand for extract and vape products in the cannabis industry has been growing rapidly with sales increasing 400% from 2015 to 2016* and industry experts estimate that in 2018, pre-filled vape cartridges will account for 60% of spending on cannabis extract products.** Alternate Health has already developed strong relationships with dispensary operators throughout the state and anticipates swift deployment of its product lines for sale to consumers.
Extract products garner significantly higher profit margins than cannabis flower and comprise a growing share of California’s adult-use cannabis market. Offering extract products allows Alternate Health to build a strong customer base through desirable products and distinctive flavours.
*Gilbert, Ben. "A simple, inexpensive piece of tech is upending the burgeoning marijuana industry" Business Insider. https://www.businessinsider.com/vaping-marijuana-industry-2017-7 **Kovacevich, Nick. " New Cannabis Tech Boosting Industry and Providing A Better User Experience" Forbes. https://www.forbes.com/sites/nickkovacevich/2018/10/08/new-cannabis-tech-boosting-industry-and-providing-a- better-user-experience/#52b46a03fb5c
Terms of the Agreement
Under the agreement, Alternate Health acquires Kare MMJ along with Bionic Bee brand and related assets and intellectual property (“Bionic Bee”). Highlights include Bionic Bee product inventory, equipment and salesforce, in addition to its social media presence and flavour formulas. The transaction will close once Kare MMJ has successfully converted from a not-for-profit to a for-profit entity.
As consideration for the purchase under the agreement, an aggregate of 2,000,000 Alternate Health common shares will be issued at market price at the time of the closing. KareMMJ’s managing member, Stephen Bugbee will receive a USD$550,000 cash payment (payable in six monthly installments) and 1 million common shares of Alternate Health. Stephen recently became a related party to the Company as described below. An additional 1 million common shares of the Company will be paid to other members of KareMMJ who are not related parties to the Company. All shares issued will be subject to a hold period of four months and one day from the date of issuance.
In October 2018, Stephen Bugbee joined Alternate Health as Senior Vice President of Technology. Mr. Bugbee has also signed a 5-year management agreement with the Company to continue to manage the Bionic Bee business. His management fee will be 20% of the monthly net income from the Bionic Bee business. As Mr. Bugbee is a senior officer of the Company, the transaction is deemed to be a non-arm’s length transaction.
About Alternate Health
Alternate Health (CSE: AHG, OTCQB: AHGIF) is an international cannabis company, focusing on technology and value-added services in both medical and adult-use markets. Alternate Health’s industry-leading software systems provide the platform for the company’s diverse operations, including adult-use distribution and the first medial cannabis online shopping portal approved by the Florida Department of Health.
Alternate Health has decades of combined experience in the industry, developing deep relationships with the world’s premiere producers of high-quality cannabis and established retailers with strong customer bases in the Greater Los Angeles area. A licensed cannabis distributor and manufacturer, Alternate Health operates premium flower brand Humboldt Ave and California’s first blockchain-powered, vertically-integrated distribution network, from the Company’s nine-acre facility in Humboldt County, the world’s most famous cultivation region.
Alternate Health’s corporate office is located in Toronto, Canada, with additional offices in Venice and Humboldt County, California and San Antonio, Texas. The Company is well positioned to reinvest internal operating cash flow in its platform and product development over the long term, creating an attractive investment profile for its shareholders.
Alternate Health resides in the cannabis sector along with companies like GW Pharmaceuticals, AXIM Biotechnologies Inc., Canopy Growth Corporation, and Aphria Inc. For more information about Alternate Health Corp., visit www.alternatehealth.ca.
Neither the CSE nor its Regulation Services Provider (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release. Statements included in this announcement, including statements concerning our plans, intentions and expectations, which are not historical in nature are intended to be, and are hereby identified as “forward-looking statements”. Forward-looking statements may be identified by words including “anticipates”, “believes”, “intends”, “estimates”, “expects” and similar expressions. The Company cautions readers that forward-looking statements, including without limitation those relating to the Company’s future operations, business prospects, anticipated growth and potential revenues, derived from the Bionic Bee asset purchase are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements.
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SOURCE Alternate Health Corp.
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SOURCE: Alternate Health Corp.
Investor Contact: George Mull, Director, President, 1.416.607.5757