Choom™ Cuts a Deal with ABcann to Jumpstart Retail
March 20th, 2018
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Canada’s cannabis industry is projected to reach C$22.6 billion over the coming years, according to Deloitte, driven by the legalization of adult-use cannabis later this year. Adult-use, or recreational cannabis is a very different market than medical, both in terms of the products used and the consumers involved. Identifying consumer brands that may have success in the upcoming market is a puzzle that existing licensed producers are frantically trying to solve as they transition to the larger opportunity presented by adult-use legalization.
Choom Holdings Inc. (CSE: CHOO) (OTCQB: CHOOF), inspired by the Choom Gang in the 1970s, are building out a premier recreational brand across Canada. As part of this strategy, the company recently acquired a third late-stage cultivation applicant in British Columbia and signed a supply and financing agreement with one of the country’s largest licensed producers, ABcann Global. Investors may want to take a closer look at the deal given the potential to unlock long-term value in the recreational cannabis market.
Acquiring a Cultivation License
Choom™ recently entered into a definitive agreement to acquire International Tungsten Inc., which has an agreement in place to acquire Medijuana Specialty Products Inc. (MSP), which is an applicant under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) that has submitted its Affirmation of Readiness evidence package to Health Canada. The company expects to receive a cultivation license from Health Canada within the next several weeks.
Management believes that the acquisition will create significant synergies in operational infrastructure and rapidly accelerate the company’s timeline toward achieving a sales license, as well as improve and advance its operational scale with increased production capacity. The move marks a key milestone in Choom’s long-term plan to become a fully-integrated cannabis company representing a premier lifestyle brand across Canada, focused on the upcoming recreational market.
MSP plans to execute its plan in three phases:
- Phase 1: Current Facility – The company is in the process of obtaining a cultivation license at the facility where the buildings are at operational readiness. A positive review of an Affirmation of Readiness (already submitted by MSP) usually leads in short order to an ACMPR cultivation license. Management expects to receive a sales license during the third quarter of this year.
- Phase 2: Second Facility – The company plans to expand the existing production capacity by building an additional 19,629 sq. ft. facility that would bring the total footprint to over 29,000 sq. ft. of production capacity.
- Phase 3: Third Facility – The company plans to expand production by building two additional facilities with 700,000 sq. ft. of production capacity. The new facility will be a hybrid model of indoor and greenhouse production, and bring total production to 751,600 sq. ft. The building expansion fits within zoning regulations and planning is underway.
MSP’s team also brings a wealth of experience in the Choom™ family. Michael Forbes has over 14 years of experience in pharmaceuticals and healthcare, having created and operated a chain of nine pharmacies and eight medical clinics. Ian Laing has over 20 years of experience in real estate and construction managing multi-million dollar projects. And, Neil Michael MacLean has over 20 years of experience in defense and electronics.
ABcann’s Strategic Investment
Choom™ also announced that it has completed a subscription receipt financing for $7.0 million in gross proceeds, including $4 million from ABcann Global Inc. (TSX-V: ABCN) (OTCQB: ABCCF). The move was concurrent with the execution of the aforementioned definitive agreement to acquire Medijuana Specialty Products Inc. The two companies also entered into a supply agreement in conjunction with the financing deal.
“ABcann remains committed to becoming a global leader in the cannabis sector. With our strategic investment in Choom, we are signaling a strong move into the recreational market with one of the premium recreation brands in Canada,” stated Barry Fishman, CEO of ABcann. “With our strong cash position of approximately $135,000,000, ABcann intends to pursue other accretive opportunities to diversify our industry presence. We look forward to working with and assisting the Choom team with the supply of our premium grown products.”
The supply agreement will help Choom™ immediately roll out its products across a wide range of retail outlets, while enabling ABcann to rapidly expedite the development of recreational products. The win-win partnership could help both companies enhance their market position and ultimately generate more value for shareholders over the long run.
Choom™ Is Putting It All Together
With a plan for sophisticated yet relaxed, high-end retail stores that welcome even the curious cannabis consumer, and an investment group already laying the groundwork for stores in British Columbia, Choom™ is proceeding full throttle with the goal of becoming a dominant consumer brand. While the company develops its own supply through its three licensed producer applicants, agreements like the one with ABcann provide assurance of product and capital to further expand Choom’s operations. Keep an eye out as Choom™ brings the good vibes and relaxed lifestyle from the Hawaiian Islands directly to Canadian cannabis consumers.
For more information, visit the company’s website at www.choom.ca.
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