The Legal Cannabis Industry – Recent Business Developments and Opportunities

  • United States
  • 07/03/2019
  • Duane Morris LLP: Andrew L. Odell | Miriam O. Hyman | Rodrigo Sadi

We are writing to follow-up on our May 2019 Alert describing opportunities for Brazilian investors in the legal cannabis industry. As described below, opportunities are expanding.

The conflict between state and federal laws continues to create legal challenges for financial institutions and other entities seeking to capitalize on cannabis-related businesses. Duane Morris attorneys have extensive experience with a variety of issues attendant to corporate finance activities in the legal cannabis industry, especially related to regulatory and operational risks. Representative transactions include the following:

• Represented Socati Corporation, a leading producer of THC-free hemp extract, in its acquisition of Blue Marble, a Montana-based hemp extraction and processing company.

• Represented Ilera Therapeutics LLC (a member of the Ilera group of cannabis grower/extractor companies) in a development and commercial supply collaboration with Toronto-based Ethicann Pharmaceuticals to develop and manufacture Botanical THC to treat chemotherapy-induced nausea and vomiting.

• Represented A.G.P./Alliance Global Partners Inc. in a $36 million “registered direct” public offering of common stock and warrants for cannabis company Kush Bottles Inc. The transaction is believed to be the first investment-bank-led public offering for a U.S. cannabis company.

• Handling a $27 million investment opportunity and related loans for an investor in New York initially involved in the construction of a cannabis greenhouse/manufacturing/distribution
operation in California. The matter included the documentation and due diligence for loan transactions, capital formation, operating agreements, security interests, real estate deals, and federal, state and local tax issues, related to his participation in the overall investment and joint venture.

Our firm continues to be very active at every level of the cannabis supply chain. Our clients include investors, state-licensed adult-use marijuana, medical marijuana and hemp cultivators, processors, distributors, and dispensaries, whether vertically integrated or operating as stand-alone businesses. We also represent the full range of business vendors that supply their products and services to the cannabis industry, such as raw materials, technology, advertising, social media, consumption products and security companies. We have advised a wide variety of non-cannabis companies including traditional consumer goods companies, real estate developers, insurance companies, media companies, private equity and venture capital funds in evaluating the regulatory and business considerations pertinent to entering into the cannabis industry.

Andrew L. Odell Miriam O. Hyman Rodrigo Sadi