Key Takeaways; Cannabis Sector

• Vireo Growth raised $81M in oversubscribed funding round; the company aims to expand operations across seven states
• iAnthus acquired premium vape brand Cheetah in $1.5M all-stock deal
• Entourage Health to go private in union pension fund deal.
• Cansortium and RIV Capital finalized merger to create a multistate cannabis powerhouse

Key Takeaways; Psychedelic Sector

• Graft Polymer to acquire Awakn Life Sciences in all-stock deal.

Below is a weekly roundup of what happened this week in the cannabis and psychedelic sectors. In this ever-evolving landscape, we explore the major developments and groundbreaking initiatives happening among companies operating in these industries; from advancements in medical research, therapeutic applications to shifts in legal frameworks and current market trends.

Top Marijuana Companies for the Week

#1: Vireo Growth

Minnesota-based cannabis multistate operator Vireo Growth Inc. (CSE: VREO) (OTCQX: VREOF) successfully raised $81 million in an oversubscribed funding round, surpassing its initial target of $75 million. The funding round, which concluded on December 30, involved the issuance of 129.5 million new shares priced at $0.625 each.

According to the company, the proceeds from the raise will be directed toward business development, including organic and acquisitive growth, working capital, and general corporate purposes. Vireo’s newly appointed CEO, John Mazarakis, who also co-founded Chicago Atlantic, described the raise as “the beginning of a new chapter for Vireo.”

As part of its aggressive expansion strategy, Vireo recently announced four major acquisitions valued at nearly $400 million, executed entirely as stock-based deals. These acquisitions included Deep Roots Harvest in Nevada, Proper Brands in Missouri, WholesomeCo Cannabis in Utah, and The Flowery in Florida. Additionally, the company also acquired Arches, a delivery and analytics platform that it developed and spun out in 2023. This platform will be exclusively licensed to Vireo’s portfolio of companies as regulations evolve.

Once these deals close, which is expected within six months, Vireo’s operational footprint will expand to seven states, featuring nine cultivation facilities, 48 retail outlets, and over 1 million square feet of cultivation canopy.

Chicago Atlantic, which is a cannabis-focused investment firm and Vireo’s largest shareholder, played a crucial role in structuring the funding round and acquisition deals. “This partnership strengthens our ability to execute strategic investments and position ourselves as a leader in the cannabis industry,” Mazarakis stated.

The company also announced significant leadership changes, including Mazarakis stepping into the CEO role and additional C-suite adjustments designed to align with Vireo’s growth and integration objectives.

#2: iAnthus

iAnthus Capital Holdings, Inc. (CSE: IAN) (OTCQB: ITHUF), a multistate cannabis operator, recently announced the acquisition of Cheetah Enterprises Inc., an Illinois-based vape brand known for its premium live-resin products. The all-stock deal is valued at $1.5 million, with additional non-material cash payments tied to performance benchmarks extending through April 2028.

According to iAnthus, the acquisition aligns with the company’s strategy to expand its portfolio of marijuana brands and drive long-term growth. By integrating Cheetah, iAnthus will enhance its presence in the Illinois and Pennsylvania cannabis markets, with plans for further expansion through 2025. 

“We are building a platform where bold brands can thrive, and Cheetah fits that mold perfectly,” said Richard Proud, CEO of iAnthus. He added, “Cheetah’s innovative approach to the vape market mirrors the agility, precision, and speed with which we’re building iAnthus. This acquisition gives us the momentum to win with consumers, expand into new markets, and bring top-industry talent into our organization.”

Cheetah is recognized for its innovative and high-quality live resin vapes, which are often sourced from various cultivator strains. A unique aspect of the brand is its commitment to donating a portion of its proceeds to the Cheetah Conservation Fund. Under terms of the deal, Cheetah co-founder and CEO Michael Piermont will join iAnthus as Chief Commercial Officer.

Piermont also expressed excitement about the partnership, stating, “From day one, Cheetah’s mission has been about being fearless, fast, and innovative to our consumers – qualities that clearly align with iAnthus’ vision for the future of cannabis.” 

This acquisition is expected to boost iAnthus’ revenue growth and provide Cheetah with the resources and distribution network needed to expand its market penetration in Illinois and other key regions. Despite its growth initiatives, iAnthus continues to face financial challenges, last month the company reported a working capital deficit of $31.4 million and an accumulated deficit of $1.3 billion as of the third quarter of last year. The company also reported a 6.3% revenue drop in the same quarter. Nonetheless, iAnthus continues to navigate financial hurdles as it builds a more robust brand portfolio.

#3: Entourage Health

Canadian cannabis producer Entourage Health Corp. (TSXV: ENTG) (OTCQX: ETRGF), formerly known as WeedMD, recently announced a definitive agreement to go private. Under the agreement, LiUNA Pension Fund of Central and Eastern Canada (LPFCEC) will acquire all outstanding shares of Entourage for C$0.005 per share, marking a critical step in resolving the company’s ongoing financial struggles.

Entourage has been facing significant financial challenges, including C$167.6 million in debt under credit agreements with LPFCEC. The company breached debt covenants in April 2024 and has since relied on multiple forbearance extensions, with the latest waiver set to expire on January 15, 2025. Jason Alexander, Chair of Entourage’s special committee, emphasized that the transaction offers “the most favorable outcome for the company and its shareholders in light of the current challenges.”

The company’s financial instability was further highlighted in the third quarter 2024 financial results, when the company reported a C$171.4 million working capital deficit and C$390.5 million in accumulated losses as of September 30, 2024. Despite a modest 11% increase in third-quarter revenue to C$13.6 million, Entourage reported C$8.3 million in quarterly losses, highlighting the urgent need for financial intervention.

The transaction requires approval from two-thirds of shareholders at a special meeting, which is scheduled for February 2025. Insiders, who collectively hold 27% of the shares, have already committed their support to the deal through voting agreements.

Upon completion, Entourage’s shares will be delisted from the TSX Venture Exchange, and the company will cease being a reporting issuer under Canadian securities law.

Entourage operates a 26,000-square-foot medical cannabis processing facility in Aylmer, Ontario, through its Starseed brand, which maintains an exclusive partnership with LiUNA. By going private, the company aims to stabilize its operations and address its substantial debt load while providing shareholders with immediate liquidity.

#4: Cansortium

Florida-based Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF), which operates under the Fluent brand, recently announced that it had completed its merger with New York-based RIV Capital Inc., marking a significant milestone in the cannabis industry. This merger expanded Fluent’s footprint to include 42 dispensaries across four states; Florida, Pennsylvania, Texas, and New York along with eight cultivation and processing facilities. The combined company aims to capitalize on the rapidly growing cannabis market in New York and enhance its overall operational capabilities. 

As part of the merger, shareholders of Cansortium now hold 51.25% of the new entity, while RIV Capital shareholders own 48.75%. The merger also eliminated $160 million in company debt, which was aided by the conversion of shares and the $33 million in liquidity brought in by RIV Capital. Additionally, Cansortium’s CEO since 2020, Robert Beasley, will lead the combined company, while RIV Capital’s interim CEO, David Vautrin, will serve as chief commercial officer.

The merger granted Fluent immediate access to New York’s fast-growing adult-use cannabis market, where RIV Capital operates the Etain marijuana brand, which was acquired from Etain Health for $247 million in 2022. 

Beasley emphasized the importance of this expansion, stating, “Not only does this move accelerate Fluent’s entry into one of the largest and fastest-growing cannabis markets in the world, but it expands our retail door count to 42, adding our first wholesale division and expanding our house of brands.”

Financially, the merger positions Fluent for sustainable growth. The company secured a $96.5 million senior credit agreement in November, and plans to use these funds, along with RIV’s cash reserves, to explore strategic acquisitions in key markets such as New York and Pennsylvania. And despite both companies reporting significant losses in the third quarter of 2024; $11.7 million for Cansortium and $63.4 million for RIV Capital, their combined resources and operational expertise are expected to drive long-term profitability and cash generation.

This merger also highlighted the ongoing trend of consolidation within the cannabis industry, as companies join forces to pool resources and remain competitive in an increasingly regulated and crowded market. A notable beneficiary of this deal is The Scotts Miracle-Gro Company (NYSE: SMG), which has been expanding its influence in the cannabis sector. Through its subsidiary, The Hawthorne Collective, Scotts Miracle-Gro holds a significant stake in the newly formed Fluent, further solidifying its position in this evolving industry.

Top Psychedelic Company for Week

#1: Awakn

Awakn Life Sciences Corp. (CSE: AWKN) (OTC: AWKNF), a biotechnology company developing therapeutics for substance use and mental health disorders, recently announced it had entered into a binding letter of intent with Graft Polymer (UK) PLC, under which Graft will acquire all of Awakn’s outstanding shares in an all-stock deal valued at C$8.8 million. Graft, which is a UK-based biotechnology company, is also focused on developing therapeutics for mental health and substance use disorders. The acquisition comes after a commercial collaboration between the two companies earlier in 2024, which paved the way for the deal.

Under the terms of the agreement, Awakn shareholders will receive 46.67 ordinary shares of Graft for each share they hold. Additionally, outstanding restricted share units and deferred share units will also be converted into Graft shares. The deal is expected to close by June 2025, pending approval from both companies’ boards, shareholders, and regulators.

Awakn’s research and clinical programs, particularly in substance use and mental health, are expected to enhance Graft’s therapeutic pipeline. And therefore, this acquisition is seen as a strategic move to expand Graft’s focus on addressing global mental health and addiction challenges. 

Graft’s Chairman, Dennis Purcell, emphasized the significance of this deal saying; “This proposed acquisition marks an important milestone for Graft Polymer as we broaden our focus to address the pressing global challenges of addiction and mental health disorders. Awakn’s advanced research and clinical programs offer the potential to develop more effective and accessible treatments for these critical areas of need. We believe this strategic move will not only drive value for our shareholders but also contribute meaningfully to improving the lives of millions impacted by these conditions.”

George Scorsis, Chairman of Awakn’s Board of Directors, also expressed his enthusiasm for the deal, stating, “This proposed acquisition by Graft Polymer marks a significant milestone for Awakn Life Sciences and our mission to provide breakthrough therapeutics for substance use and other mental health disorders. We have had a significant portion of our operations in the UK for the entire life of our business, and following completion of the Proposed Transaction, Awakn will have access to the UK’s deep pool of liquidity as well as the international investor base positioned in London. We believe this transaction will create long-term value for our shareholders and provide new opportunities for growth and collaboration.”

Anthony Tennyson, CEO of Awakn, also weighed in, stating, “I’m excited about the opportunity for Awakn to join forces with Graft Polymer. This acquisition positions us to better leverage our resources and expertise in the UK, expanding our capacity to deliver new therapeutics for addiction and mental health challenges.”

Awakn’s recent financial performance has been challenging, with the company reporting a net loss of C$376,126 for the most recent quarter. Despite this, the acquisition is viewed as a step toward long-term value creation.