Cannex Signs Agreement To Acquire California Based Pure Ratios

Strategic acquisition by Cannex to add innovative California wellness brand combining cannabis and holistic medicine including a premium hemp-derived CBD product portfolio

VANCOUVER, BC, February 25, 2019 – Cannex Capital Holdings Inc. (CSE: CNNX) (OTCQX: CNXXF) (“Cannex” or the “Company”) is pleased to announce that it has signed a binding letter agreement (the “Agreement”) to acquire 100% of San Diego, California based Pure Ratios Holdings, Inc. (“Pure Ratios”), (the “Transaction”) in a cash and stock transaction. 

Highlights

  • Pure Ratios augments Cannex’s brand portfolio with strong positioning in the CBD and cannabis wellness category;
  • Pure Ratios has expertise integrating CBD into a variety of form factors including a 96-hour transdermal patch;
  • Pure Ratios CEO, Chad Conner, is an experienced practitioner of holistic medicine and a recognized public speaker on integrating cannabis into alternative approaches to wellness;
  • Cannex reviewed a number of CBD product opportunities and Pure Ratios’ products, formulations and growth prospects stood out, particularly when supported by Cannex’s manufacturing and distribution capabilities;
  • Adding Pure Ratios to the multi-state production and retail footprint of the Cannex/4Front platform is expected to quickly expand overall reach and enhance growth; 
  • The Cannex 4Front business combination is progressing with definitive documents anticipated to be executed imminently.

Pure Ratios was founded in 2015 with a focus on holistic wellness oriented products in the California medical marijuana market. It’s first products were created by combining traditional Chinese medicines with cannabis, including the integration of hemp derived CBD. Pure Ratios’ hemp derived CBD products are sold and distributed through a network of holistic and naturopathic medicine practitioners and in over 300 health food stores as well as online throughout the US from Pure Ratios’ expanding e-commerce platform.

“We are excited by this new partnership with Cannex, and soon 4Front as well. Pure Ratios has been preparing for rapid growth and we look forward benefiting from the Cannex/4Front platform. This transaction will allow Pure Ratios to capitalize on its early advantage in the California CBD market and to re-launch our expanded product portfolio, including our range of THC enhanced products,” said Chad Conner. “Cannex, 4Front and Pure Ratios share common values and we are thrilled to be working together to expand our holistic wellness brand,” continued Conner. “We see many synergies including consolidated production, co-branding, better distribution and significant opportunities to take our brands into new markets with Cannex and 4Front.

“Pure Ratios has proven competence in the wellness focused products market that leverage Chad’s experience of utilizing Eastern therapies to enhance the lives of his patients. The Pure Ratios product line is broad and well developed which will only improve with additional support from Cannex,” said Anthony Dutton, Cannex CEO. “As we look at potential acquisitions, Pure Ratios instantly struck us as a unique opportunity with a core and complementary product focus. We look forward to utilizing Cannex’s existing competencies to helping Pure Ratios scale and to drive further growth the closing of our pending transaction with 4Front Holdings.”

“One of the fundamental and guiding principles of 4Front’s Mission dispensaries is utilizing cannabis and CBD products to promote wellness and to experience cannabis in the best way possible,” said Josh Rosen, 4Front Holding LLC’s CEO. “Pure Ratios is built on exactly the same principles and we fully support this acquisition and look forward to it being an important element of our combined company upon the closing of our transaction with Cannex. We’ve reviewed a lot of wellness products in this sector but Pure Ratios and Chad’s focus on product integrity, quality control and improving lives truly differentiate them from others and we are enormously excited by this opportunity.” 

Pursuant to the Agreement, the Company will pay Pure Ratios’ shareholders total consideration of up US$2,000,000 in cash, 3,500,000 shares of Cannex stock, US$2,500,000 of contingent cash consideration and the assumption of US$500,000 of Pure Ratios’ existing debt for total maximum consideration of US$8,000,000. Upon closing of the Transaction Cannex will pay the Pure Ratios’ shareholders US$1,4000,000 in cash with an additional US$100,000 per month for 6 months for total cash consideration of US$2,000,000 and will issue 3,500,000 shares of Cannex. 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. 

The Transaction is subject to a number of conditions, including but not limited to, final due diligence by the respective parties, execution of a definitive acquisition agreement (the “Definitive Agreement”) which shall supersede the Agreement, receipt of applicable corporate approvals, and other regulatory and/or governmental approval. There can be no assurance that the Transaction will be completed as proposed herein or at all. 

In addition to the Transaction, Cannex will extend Accucanna LLC, a 90% owned subsidiary of Pure Ratios which owns a soon to be opened cannabis dispensary in Desert Hot Springs, California, a loan of up to US$1,500,000 by way of a secured convertible promissory note (the “Note”). Such Note will bear interest at ten percent for six months, and subsequently bear eighteen percent interest until it matures one year from issuance. Cannex intends to fund US$1,000,000 immediately. The use of proceeds of the Note are repayment of other debt, working capital, construction costs, and general corporate purposes.