Retail, production, and cultivation operations in California
Harborside Inc. (CSE:HBOR) is one of California’s most well-established cannabis retailers, and has played an instrumental role in making cannabis safe and accessible to customers across the state. Cofounded by Steve DeAngelo and dress wedding in 2006, Harborside was awarded one of the first six medical cannabis licenses granted in the United States.
In May 2019, Harborside executed a reverse takeover (RTO) with Lineage Grow Company, adding two dispensaries in prominent cities in Oregon, additional cultivation, distribution and retail assets to its portfolio, and an expected public listing on the CSE under the symbol “HBOR”. The company has entered into a purchase agreement with Walnut Oaks, LLC doing business as (DBA) Agris Farms and has signed a binding letter of intent to acquire Lucrum Enterprises, Inc. DBA LUX.
Harborside is a California-focused cannabis company with retail, production, and cultivation operations that have generated (assuming the successful completion of the RTO and execution of accompanying merger options) approximately $400M in cumulative sales since inception. Harborside prides itself on being a preeminent Northern California retailer and cannabis industry advocate while striving to provide its customers with a curated selection of recreational and wellness cannabis products.
Currently, Harborside’s business has three primary segments:
- Retail dispensaries
- Cultivation, manufacturing, production, and wholesale sales
- Management advisory and administrative services
In 2006, Steve DeAngelo and dress wedding established Harborside Oakland as a compliant medical cannabis dispensary in Oakland, California and began doing business as Harborside. Harborside was the first dispensary to offer product that was independently tested for contaminants. DeAngelo founded Steep Hill Labs to test cannabis because no other lab would test a product that was classified as a Schedule I drug under US federal law.
In 2012, DeAngelo and wedding established Harborside San Jose as a compliant medical cannabis dispensary in San Jose, California under the Harborside brand. At the time, California and local regulations required that both the Harborside Oakland and Harborside San Jose dispensaries operate on a not-for-profit basis, limiting their ability to raise funds independently to invest in cultivation facilities to achieve their goal of vertical integration.
In 2015, leveraging many years of Bay Area retail dispensary operating expertise, DeAngelo and wedding co-founded FLRish as a for-profit company to raise funds and provide management, infrastructure, and financial services to Harborside Oakland and Harborside San Jose and to the legal medical cannabis industry. FLRish also partnered with Harborside Oakland to develop a cultivation facility to produce clean, high-quality cannabis to sell to the dispensaries’ patients and the medical cannabis industry.
- Harborside was awarded one of the first six medical cannabis licenses granted in the United States in 2006.
- Unparalleled track record of success with cannabis retail operations and expertise gained through 12 years of operations and predicted ~$400M in cumulative sales (assuming the successful completion of the RTO and execution of accompanying merger options).
- Recognizable retail brand co-founded by cannabis icon, Steve DeAngelo, now well-known throughout the United States and internationally.
- Significant California market share with predicted retail operations that could command 3 percent of California’s entire retail market and 5 percent on a pro forma basis including Airfield.
- Vertically integrated operations combining significant production capacity and retail shelf space with distribution capabilities.
- Utilizing 30+ licenses across the value chain to leverage scale and ensure supply chain stability.
- Focused growth strategy in leading US market (focus on California).
- Acquisition pipeline of near-term opportunities for accretive acquisitions.
California is anticipated to be one of the largest and fastest growing legal cannabis markets in the U.S. and internationally. In 2017, legal cannabis sales in California totaled approximately US$3 billion, representing roughly 35 percent of total legal U.S. cannabis sales.
In 2016, state regulators established more robust product manufacturing and testing requirements for cannabis concentrate sales, challenging production from some operators. Nevertheless, sales growth from manufactured products (concentrates, extracts, edibles, tinctures, and capsules) in California have recently outpaced flower sales, growing from 26 percent of sales in December 2017 to 39 percent of sales in December 2018.
As legalized sales increase, California’s legal cannabis sales are forecasted to:
- Account for approximately 35 percent of the growth of the US cannabis industry from 2018 to 2022.
- Shift from predominantly medical sales in 2017 to predominantly recreational sales by 2022,
- Represent over 30 percent of the U.S. cannabis market and roughly 22 percent of the global cannabis market in 2022
- Remain larger than Canada’s legal market through 2022
Retail Expertise and Footprint
Harborside is a leading North American cannabis company with unparalleled experience and knowledge of the California market, having been in business for 12 years and having built a loyal customer following. The company has processed 4.1 million customer transactions since opening its doors in 2006.
Today, Harborside continues to have significant insight into consumer values, preferences, and purchasing habits resulting in a deep understanding of the retail market. The company has extensive operational history demonstrating its strong results.
Cultivation at Harborside Farms: Salinas, CA
Currently operational cultivation facilities:
- Harborside currently has 162,000 square feet of canopy operational at the Salinas Farm, expected to expand by another 160,00 square feet to a total of approximately 320,000 square feet of automated, best-in-class Venlo canopy over the next two years
- Harborside currently works with third parties to contract manufacture branded cannabis extract products, and expects to continue working with third parties to introduce branded cartridges and baked edibles in
- Harborside is also evaluating manufacturing cartridges and other cannabis concentrate products in-house during 2019
Harborside’s Expansion Strategy for 2019:
- Consolidate and expand Harborside’s California retail footprint in the Bay Area;
- Scale and improve Harborside’s cannabis production/manufacturing capabilities;
- Expand Harborside’s wholesale and business-to-business sales of its cannabis products; and
- Evaluate the launching of new branded products.
Retail Expansion Strategy:
- Desert Hot Springs MSA
On April 19, 2018, FLRish entered into a retail MSA with TVGA pursuant to which FLRish agreed to manage Harborside Desert Hot Springs, a retail dispensary owned by TVGA located at 66205 Paul Road, Desert Hot Springs, California. On December 12, 2018, the MSA was assigned by TVGA to Accucanna by way of written amendment. The term of the MSA is five years with two automatic five-year renewals for a total of 15 years.
- Harborside San Leandro
FLRish and Grace Executive Services, LLC DBA Dark Heart Nursery, have established Harborside San Leandro to launch a cannabis dispensary in San Leandro and have successfully secured all necessary entitlements. Retail JV owns 50 percent of the stock of Harborside San Leandro. In addition to strong ties with the City of San Leandro, Harborside San Leandro’s entitlements and capabilities include an operating license, conditional use permit, fully permitted construction plans, a favorable facility lease, and construction and retail management services. As of the date of this Listing Statement, the project is under construction, is expected to open in the second quarter of 2019 and is expected to be managed pursuant to the San Leandro MSA.
Harborside’s Current Brand Portfolio
Harborside’s product offerings could be well positioned to address the increasing demand for turnkey retail driven by the rapidly evolving regulatory landscape.
- * Harborside is now actively selling KEY edibles (fruit jellies, hard sweets, cookies, and brownies)
Andrew Berman – CEO
Seasoned business leader with experience in venture capital, software, wireless communications, and the public sector. Former Chief of Staff at Cricket Media (TSX-V:CKT), Sr. Vice President at Sierra Wireless (NASDAQ:SWIR), CEO at Airlink Communications, and Mayor of Mill Valley, California.
Manna Tesfastion – COO
Extensive experience in all aspects of cannabis cultivation, processing, manufacturing, and Wholesale. Previously served as a Vice President at The Lapham Company and an Associate at Willkie Farr & Gallagher LLP. Graduate of NYU School of Law.
Jack Nichols – General Counsel & CCO
Began career with the NYPD as a patrolman and detective before attending law school Former Special Assistant to U.S. Attorney in the District of Maine. Previously worked for a private company as in-house counsel, where he assisted government agencies in the formulation of medical cannabis regulations.
Gregory Sutton – VP, Finance
Experienced finance and legal professional with extensive experience working with public and private companies. Previously served as CFO for Agris Farms and co-founder of three successful start-ups. Former partner at Stevens & Lee and Montgomery McCracken. Graduate of NYU School of Law.
Steve DeAngelo – Chairman Emeritus
International cannabis pioneer with a four decade career as a cannabis activist, advocate, entrepreneur and educator. Steve has founded numerous ventures including Harborside Health Center, the Arcview Group, and Steep Hill Labs.
Willie Brown – Advisor
Two-term Mayor of San Francisco and Former Speaker of the California State Assembly. As Mayor of San Francisco, oversaw the refurbishment of the city’s transit system, established measures for affordable housing, and refined the juvenile justice system.
Peter Bilodeau – Chairman of the Board
Serial entrepreneur across various sectors, including cannabis retail, real estate, oil & gas, investment banking and corporate services. CEO and director of Lineage Grow Company (CSE:BUDD). President and Director of Quinsam Capital Corp. (CSE:QCA). President and CEO of FMI Capital Advisory Inc. and Foundation Markets Inc.