CannaRoyalty Corp. (CNNRF) through its subsidiary, Trichome Yield Corp. will provide up to $2.5 million to 180 Smoke to fund an expansion of its retail footprint in anticipation of Canadian adult-use cannabis legalization.
180 Smoke was co-founded by world-renowned heart surgeon Dr. Gopal Bhatnagar, and is an Ontario-based vape products company. 180smoke.ca is the highest trafficked vaping website in Canada and currently attracts 64% of Canadian vape-related web traffic. The money will support 180 Smoke’s retail and cannabis product offering expansion and help the company open 11 new stores as well as expanding the company’s cannabis hardware offering. 180 Smoke and CannaRoyalty’s subsidiary, CR Advisory, will also work together to bring cannabis products to the Canadian marketplace.
“Forming a relationship with leading Canadian omnichannel retail leader 180 Smoke ahead of adult use legalization represents a compelling and unique first deal for Trichome. It also presents CannaRoyalty shareholders with multiple paths to value creation,” said Marc Lustig, CEO of CannaRoyalty. “180 Smoke’s harm reduction platform has enabled the company to develop an authentic and responsible Canadian retail experience that has served Canadian cannabis consumers for years. This unique model makes them a stand-out – not just in Canada – but also positions them favorably against established cannabis retailers we have seen in the mature California market, where we have benefited from investing in and securing distribution pipelines into retail sales channels.”
According to the statement, 180 Smoke will receive up to $2.5 million from the financing, with an initial investment of $500,000 to be followed by additional investments up to the $2.5 million maximum, subject to satisfactory due diligence and other customary conditions. The Financing will be secured against the assets of 180 Smoke. Further, 180 will issue warrants to acquire shares of 180 Smoke at a pre-determined exercise price for a three-year term.
180 Smoke reported $7.7 million in net sales for 2017 and currently has 16 retail stores in its network. 87% of its net sales come from vape and nicotine related products, while only 12% comes from cannabis vape products.