AAP Finalizes Cannabis Business Acquisition
AAP Inc. announced it has acquired a controlling interest in the Buddha Co., a Los Angeles-based cannabis business. It is a 22,000-square-foot cannabis business in the Arts District of Downtown Los Angeles. The company has licenses that allow for all commercial cannabis activities at one location that include: cultivation, manufacturing, retail delivery, retail storefront and B2B distribution. This allows the company to be fully vertically integrated and source its own products to maximize profit and minimize the tax implications of stringent IRS rules related to cannabis business (Section 280E).
Cultivation — Buddha allocates approximately 9,000 of its 22,000 square foot facility to cultivation. The Company has 300 lights and is able to achieve 5 grow cycles a year at full capacity and yield approximately 2.5 pounds of high end cannabis flower per each light. They are growing high end cannabis strains at their indoor facility that sell wholesale for approximately $1,500 a pound and for several times more to retail customers at their facility.
Distribution — the company distributes to other local cannabis retail stores throughout Los Angeles. Any unused flower that they are unable to extract through their manufacturing plant or sell at their retail location is sold and distributed to other stores that are strategically partnered with Buddha in the LA
Manufacturing — the company is able to manufacture its own products using non-volatile extraction methods, including edibles and cannabis extracts at its facility. This increases the menu offered to customers and enhances profitability.
Retail Delivery — the company is able to do home delivery through its license and location. This was very desirable during the pandemic when stores were closed and the Company is revamping its delivery to take over market share in the competitive LA market.
Retail — The founder of Buddha, Eddie Manolos, is a pioneer in the cannabis industry. He opened the first medical marijuana dispensary in Los Angeles County in 2004 and operated over 35 dispensaries. In 2023, the Company is going to roll-out a brand-new disruptive sales model never used before in the industry.
More about Buddha in the cannabis sector: It is a store-in-store model whereby Buddha will rent floor space to several different cannabis brands to sell at one central location. Buddha will source products, provide the license, space and co-branding opportunities. This superior shopping experience with cannabis-branded boutiques will shift the risk to vendors and provide a continual annuity stream of predictable income to Buddha. Total first year annual projections in 2023 for Buddha for this one revenue vertical are $6.3M.
The company has the licenses available in Los Angeles referred to as a “Pre-ICO.” Pre-ICO refers to medical marijuana dispensaries that were open before Sept. 14, 2007, when the Medical Marijuana Interim Control Ordinance (ICO) went into effect. Under Proposition D and Pre-ICO status, the Company has full immunity and can freely sell the licenses and engage in commercial for-profit activity. There are only 160 pre-ico licenses that were granted in the city. All other licenses have stringent social equity requirements and require that at least 50% of the business be owned by social equity people (i.e., low income, cannabis criminal convictions, etc). The value of a pre-ICO with Buddha’s location and business is a minimum of $6,000,000. The value increases and has a premium based on the profit and top line revenue of the business.
Paul Bakajin, CEO, stated, “I am very excited for the future of AAP, Inc. I believe in making this acquisition has a lot of potential for future development and opportunities that could be very beneficial to the company and to its shareholders. Eddie Manolos’ vast knowledge in the cannabis industry will be instrumental to our success. More updates and news will follow very soon.”