The cannabis industry is the fastest growing market in the world and is a sector that is constantly changing. During the last year, the sector has been in the middle of a major transformation and we believe that our readers need to be aware of this.
Over the course of a year, our team attends more than 10 cannabis conferences that are located in major markets across North America. On a year-over-year basis, we tend to see changes in the type of companies that are exhibiting or presenting as well as changes in the type of attendees.
Although we have recognized changes almost every year, the change from 2019 to 2020 has been the most significant. Previously, the market was primarily interested in companies that were cultivating massive amounts of cannabis or that were considered to be a leading brand. Fast forward to today and we have noticed a substantial shift in the amount of interest in technology focused businesses that are levered to the cannabis industry.
One of the reasons to explain the transition is related to the state of the US cannabis industry. Cannabis is still considered to be illegal at the federal level in the US and this has created a major roadblock for broker-dealers and investment banks. Due to this, these types of firms have been highly focused on companies that do not touch the plant but are levered to the cannabis sector. Today, we want to highlight 3 leading cannabis technology companies that have come across our radar and that our readers should be aware of.
Helix Technologies: A Global Growth Story
Another technology platform that we have been following is Helix Technologies (OTCQB:HLIX), a leading provider of critical infrastructure services to the legal cannabis industry. During the last quarter, Helix has been under considerable pressure and is an opportunity that we have been closely following. At current levels, the company has a favorable risk-reward profile and we are favorable on how the story has evolved.
Through its proprietary technology suite and security services, Helix Technologies provides comprehensive supply chain management, compliance tools, and asset protection for all types of licenses in any regulated cannabis market. The company has a substantial footprint and reaches over 2,000 customer locations in 38 states. Although we are favorable on the leverage to the US market, we are most excited about the work that is being accomplished in international markets and find this to be an attractive aspect of the story.
A few weeks ago, Helix reported a major milestone and expanded its international footprint across two continents, Europe and Africa. This development significantly strengthened the company’s existing position in Europe and marked the beginning of operations in Africa. During the last year, we have seen a significant increase in the amount of interest in these two markets and are favorable on the leverage that Helix has to them.
The announcement comes less than a year after Helix began European operations with growers and processors in the United Kingdom (UK). Currently, the company is operating in 8 countries and has established itself as a trusted name in cannabis technology space. Since inception, Helix has tracked more than $20 billion of transactions and is well positioned to capitalize on the global opportunity.
Fyllo: A Leading Cannabis Ad Tech Platform
Fyllo has been one of the most active companies in the cannabis industry and is an opportunity that we have become increasingly excited about. We believe that Fyllo is led by one of the most impressive management teams in the cannabis space and find this to be an important aspect of the story.
The strength of the management team has played an important role in its ability to raise capital and make accretive acquisitions. During a time where capital is hard to come by in the cannabis space, Fyllo has been nothing short of an execution story and raised $18 million in funding last year.
Earlier this year, Fyllo acquired CannaRegs, a website that offers subscription access to state and municipal cannabis regulation. The terms of the acquisition were favorable for the business (paid $10 million in cash and stock) and we are bullish on the growth prospects of the combined company.
Last week, we met with Fyllo founder and CEO Chad Bronstein and left the conversation feeling confident with the acquisition. He told us that the amount of synergies that could be found between the two businesses is substantial and that the two companies are very complementary. Since cannabis is illegal at the federal level in the US, the compliance side of the business creates challenges for companies that are wanting to advertise cannabis products.
The combined company looks like a one stop shop for companies that are looking to market products to consumers and we are bullish on the growth prospects associated with the opportunity. Fyllo has raised capital from what we would consider to be “smart money” and believe that this is an opportunity to be watching.
Akerna: Increases Market Share via a Transformational Acquisition
Although we have seen a decrease in the amount of interest in Canadian cannabis companies, we remain bullish on the market due to the growth prospects associated with the domestic and the international opportunity. Akerna Corp. (KERN) has been a beneficiary of the decreased interest in the Canadian market and announced a transformational acquisition and purchased Ample Organics, the leading seed-to-sale company in Canada, in late 2019.
Ample Organics works with pretty much all of the largest producers in the cannabis sector and offers a platform that is second to none in Canada. We believe that the combined company has substantial growth prospects and expect the management team to find substantial synergies between the businesses.
Over the next year, we expect Akerna to report impressive growth and expect the acquisition of Ample Organics to play an important role in this. Last week, we met with Akerna CEO Jessica Billingsley and continue to be impressed with the way she has been able to drive the business forward.
Last month, the cannabis compliance software maker was under massive pressure after it reported nearly double its prior-quarter losses. Akerna logged a fiscal fourth-quarter net loss of $4.3 million on $3.3 million of revenue and reported to have approx. $18.8 million of cash on the balance sheet at the end of the fiscal second quarter. The market responded negatively to these numbers and we believe that Akerna is in the early innings of a major growth cycle.
During the last year, Akerna has been highly focused on forming strategic relationships with leading operators and brands. We believe that the management team has done a great job at executing on this strategy and are especially excited about the relationship that it has with Pax Labs. The companies will work to help deliver supply chain analytics that prioritize transparency and customer safety. We find this focus to be significant and this is an opportunity that we will continue to be watching.
Published at Fri, 28 Feb 2020 12:36:10 +0000