Cannabis Company Limited (“DOJA”) and Tokyo Smoke announce merger

• Two Canadian cannabis lifestyle brands join forces in a transformational transaction, bringing together industry leading management teams, British Columbia curated handcrafted cannabis production, a portfolio of visionary brands and a growing nationwide retail footprint.
  
• Provides the first public markets investment opportunity focused on cannabis retail and brand; high-margin verticals with significant growth potential.
  
• A strategic financing of $12.5 million led by Aphria Inc. will bolster the combined company’s cash position to approximately $31 million, which the company plans to invest in scaling up production capacity, expanding its retail footprint and further building-out its portfolio of cannabis brands.

Cannabis  Company  Limited  (“DOJA“)   (CSE:DOJA)  and  TS  Brandco  Holdings  Inc.  (“Tokyo  Smoke “) are pleased to announce that they have entered into a binding Letter of Intent (“LOI “) dated December 20, 2017, setting out the terms pursuant to which DOJA  proposes to acquire (the ” Merger “) all of the issued and outstanding shares in the capital of Tokyo  Smoke  (the ” Tokyo  Smoke  Shares “). The Merger will create a uniquely positioned cannabis company combining a best-in-class craft cannabis producer with an award-winning lifestyle brand and retail-focused cannabis company. It is anticipated that the combined company resulting from the Merger will use the name “Hiku Brands Company Ltd.” (” Hiku ” or the ” Company “) to refer to the brand house containing premium cannabis brands DOJA, Tokyo Smoke, and Van der Pop.

Concurrently, DOJA is pleased to announce it has entered into a binding agreement with Aphria Inc. (” Aphria “) (APH.TO)  (APHQF)  pursuant to which Aphria has committed to make a $10 million strategic equity investment into Hiku. Additionally, the parties have agreed on the terms of a supply agreement, to be entered into in connection with the Merger (the ” Supply  Agreement “), to secure cannabis concentrate supply for Hiku’s premium brand portfolio.

Upon completion of the Merger, the Company will have a robust cash position of approximately $31 million, which it plans to invest in expanding its cannabis production capacity, growing its retail footprint, and adding select brands to its portfolio through highly strategic and complementary acquisitions.

DOJA’s Board of Directors and Tokyo Smoke’s Board of Directors have approved the Merger.

Highlights  of  the  Transformational  Transaction

• Creation  of  the  first  retail-focused,  craft  cannabis  producer  with  a  portfolio  of  leading lifestyle  cannabis  brands:  Hiku will be differentiated as the only Canadian craft cannabis producer with significant national retail presence and a growing portfolio of premium cannabis lifestyle brands including DOJA, Tokyo Smoke, and Van der Pop, appealing to a wide variety of consumers across Canada and globally.
• Well  positioned  to  capitalize  on  Canada’s  recreational  cannabis  market  through  retail:
  Hiku has multiple highly recognizable brands and strategies in place to operate retail cannabis stores across various provinces .  Vertically integrated operations position Hiku to offer exclusive products in Hiku-owned stores and achieve superior margins versus peers.
• Licensed  producer  under  the  Access  to  Cannabis  for  Medical  Purposes  Regulations
  (ACMPR):  7,100 square foot production facility licensed by Health Canada. DOJA’s second facility, a 22,580 sq ft warehouse, will house the FUTURE LAB. The FUTURE LAB is targeting its Phase 1 completion by Q2 2018 and once the facility is fully built-out utilizing an industry leading multi-tier system powered by LED lighting provided by Fluence BioEngineering, DOJA’s annual production capacity is expected to be in excess of 5,000 kgs.
• Retail  locations  from  Eastern  to  Western  Canada,  with  plans  to  expand:  Hiku will have seven operational, legal cannabis accessory stores with locations across Canada (Ontario, Alberta and British Columbia), representing an unprecedented platform to build brand awareness and reach consumers. Hiku will prioritize retail expansion in provinces allowing private cannabis retail and Tokyo Smoke and DOJA will respond to the Government of Manitoba’s Request for Proposals to establish retail cannabis stores throughout the province.
• Strategic  Partnership  with  Aphria:    Aphria’s strategic investment into Hiku marks Aphria’s first venture into British Columbia’s premium cannabis market. Combined with the Supply Agreement, the partnership with Aphria brings unparalleled experience in cannabis production and ensures secured supply for what is expected to be a supply-constrained market at the onset of legalization.
• Led  by  industry  leading  management  and  team : Hiku management has breadth and depth of expertise, with a proven track record of building and scaling businesses, including SAXX Underwear and a $100 million+ business at Google. The supporting team brings expertise from the retail, cannabis, finance, design, marketing and creative fields.
• Well  capitalized  for  local  and  global  growth: Post-Merger, Hiku is expected to have a cash balance of approximately $31 million and to be well positioned to expand within the Canadian market and enter into the emerging global cannabis markets.
• Enhanced  capital  markets  profile:  The combined entity post-financing is anticipated to have a basic market capitalization of approximately $175 million at the transaction price, as well as increased trading liquidity for existing and prospective shareholders.

DOJA operates a cannabis production facility in British Columbia’s Okanagan Valley, and is in the process of building FUTURE LAB, DOJA’s new production facility to be located in Kelowna, British Columbia to support production capacity in excess of 5,000 kg per year. DOJA also operates the Culture Café, a café located on Kelowna’s busiest street serving as a cannabis information centre that generates brand awareness. With the addition of Tokyo Smoke, an award-winning lifestyle brand with six coffee and cannabis accessory shops, Hiku will have a retail presence across Canada with a portfolio of multiple recognized cannabis brands including DOJA, Tokyo Smoke and Van der Pop. The Company’s aggressive growth strategy will be supported by a strong balance sheet, positioning Hiku to be the preeminent craft cannabis brand house in the Canadian adult-use cannabis market.

Trent Kitsch, CEO of DOJA, said, “We have created the leading brand house in Cannabis. Where high quality and design will shape the Cannabis Future. I am confident Hiku will be trusted by consumers to design better customer experiences and products, resulting in greater market share. Tokyo Smoke’s experienced management team has proven its ability to build and acquire respected cannabis brands and create brand awareness in a difficult-to-navigate regulatory environment. We see leveraging those skills and their strong retail operating abilities as highly complementary to our current operations and beneficial to the long-term trajectory of our company. The combination of cannabis production, retail footprint, and a portfolio of cannabis brands gives us the opportunity to realize the significant value of complete vertical integration.”