Benzinga | Feb 26, 2021 10:06AM EST

Item 9 Labs and Why Franchising is the Growth Vehicle to Propel the Cannabis Industry

Item 9 Labs Corp. is a sponsor and will speak at the Benzinga Cannabis Capital Conference set to take place on February 25-26, 2021. The information contained in this article in no way represents investment advice or opinion on the part of Benzinga or its writers and is intended for informational purposes only.

The cannabis industry is having a prime moment and a promising horizon ahead. After a transformative 2020, the market is experiencing policy changes worldwide, rising cannabis stocks and a high demand that positions the industry for exponential growth in the coming years.

Additionally, Mergers and Acquisitions (M&A) activity is expected to increase as cannabis stock valuations are becoming more realistic. In fact, many M&As are taking place all over the industry, reinforcing this trend. For example, Jazz Pharmaceuticals (NASDAQ:JAZZ) has inked a deal to acquire GW Pharmaceuticals (NASDAQ:GWPH), Cresco Labs (OTC:CRLBF) acquired Origin House, and Canopy Growth Corp. (NASDAQ:CGC) and Acreage Holdings (OTC:ACRHF) are en route to merge.

Item 9 Labs Corp. (OTCQX:INLB) is also experiencing positive shifts in the industry with its upcoming merger with ONE Cannabis Group (OCG Inc.), parent company of dispensary franchise brand Unity Rd. As investors prepare for another round of public transactions, Item 9 Labs is ready for the next chapter of cannabis history. This is what you need to know.

Franchising the Next Growth Driver

According to New Frontier Data, cannabis industry sales are foreseen to reach $41 billion by 2025, with a CAGR of 21% compared to 2019. Many want to make the most out of this boom and enter the space. However, to thrive in such a regulated market, it is essential to have a knowledgeable team with real-world legal cannabis industry experience across multiple areas to ensure a profitable future. Thus, franchising is a new option to compliantly and successfully operate a cannabis business to mitigate the hurdles.

Headquartered in Phoenix, Arizona, Item 9 Labs producesaward-winning andbest-in-class productsfrom itslarge-scale cultivationsiteand production facilities.The company's upcoming merger with OCG Inc. is expected to create the first vertically integrated, franchise company in the U.S. Theasset-lightandlow capital expenditure(CapEx)franchise modelprovides accelerated scale for Item 9 LabsandUnity Rd.,whilekeepingdispensaries locally ownedandoperated.

"The cannabis industry is ripe for the next growth driver to bring it to new heights, and that vehicle is franchising," said Andrew Bowden, CEO of Item 9 Labs. "Franchising significantly reduces barriers to entry for prospective entrepreneurs and dispensary brands seeking national scale. It's the most viable expansion method due to greatly reduced capital expenditures, resulting in accelerated scale. For example, traditional multistate operators need to fund all business development, whereas franchise brands can scale at a more rapid rate and a reduced cost."

Item 9 Labs brings best industry practices to markets nationwide through distinctive retailexperience, cultivationcapabilities, and production innovation. The company's asset portfolio includes the Item 9 Labs flagship cannabis product brand as well as Dispensary Permits and Dispensary Templates. These assets provide services specific to various stakeholder groups. For example, Dispensary Permits and Dispensary Templates are leading online platforms forinformation surroundingcannabisbusinessapplications, regulations and state updates.

Corporate Highlights

Item 9 Labs is advancing the industry with its dynamic product suites under the Item 9 Labs brand. Proprietary delivery platforms include the Apollo 710 pod a next-generationvape system that provides a full-spectrum flower experience on the go. The company has received multiple accolades for its vaporization devices, high-quality flower, and premium concentrates. These are few highlights to take into account:

* Revenue increased 65% to $8.1 million during its 2020 fiscal year

* Has seen approximately 20% sequential quarter-over-quarter growth for the past five consecutive quarters

* Award-winning CPG brand and a team that has won plant-touching business licenses in 15 states

* Earned three 1st place and two 3rd place awards in the 2021 ERRL Cup, Arizona's largest cannabis competitions

* Finalized the merger agreement with ONE Cannabis Group to add unique franchising capabilities and significantly enhance the company's retail distribution network in December 2020; expected to close in early 2021

* Received approval for 45-acre marijuana cultivation site expansion in Coolidge, Arizona in November 2020

* Arizona's Proposition 207 Adult-Use Cannabis Initiative successfully passed in November 2020

"We are still in the early stages of our growth and are already seeing an acceleration with Arizona's adult-use marijuana market opening in the first half of 2021, which we estimate will increase our consumer base by 500%," stated Bowden. He added, "We're prepared to meet this demand through our streamlined production process and by expanding our operational cultivation footprint by more than 300% in the year ahead."

For more information, please visit the company's website.