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Weedmaps to more than double its outstanding shares to raise $224 million

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The parent company of online cannabis advertising giant Weedmaps – California-based WM Technology Inc. (Nasdaq: MAPS) – plans to raise $224.3 million by more than doubling the number of shares issued to date to stockholders, the company said in a pair of prospectus filings with securities regulators this month.

The two prospectuses from Weedmaps would add a total of 112.8 million new shares of stock to the market, on top of the existing 97.7 million shares that are already circulating.

The first prospectus, which proposes to issue 110.8 million new shares of Class A Common Stock, asserts that the move would bring in almost $225 million to the company from exercise of connected warrants, assuming that they’re all exercised in full for cash. The influx of funds will be used for “general corporate purposes,” according to the filing, which was submitted to the U.S. Securities and Exchange Commission on Dec. 9.

The second prospectus, which proposes yet another 1.9 million Class A Common Stock shares be issued, would not raise any funds for the company, according to the document.

The move by Weedmaps suggests that the company is in need of capital in order to continue expanding its footprint, even as the tech business faces at least two shareholder lawsuits – both related to charges that Weedmaps lied to inflate its user numbers –  as well as flattening revenue as the cannabis tech firm struggles to maintain its footing.

At the end of September, Weedmaps had $45 million in the bank and total liabilities of $58.6 million, according to its latest quarterly financial filing.

But Weedmaps has struggled to retain and collect from its cannabis client base, the company said in the prospectuses. That’s directly led to a tougher bottom line for Weedmaps.

“Our revenue declined in 2023 compared with 2022 and remained relatively flat when compared with 2021,” Weedmaps wrote, referring to its net income of $2 million last year, up from a net loss of $4 million in 2022.

“Average monthly paying clients for the nine months ended September 30, 2024 decreased 10% to 5,027 average monthly paying clients from 5,555 average monthly paying clients in the same period in 2023,” the documents stated.

The decline was blamed on the removal of marijuana companies that hadn’t paid their advertising bills, the sunsetting of certain Weedmaps business products, and “expected client churn due to continued industry challenges, such as price deflation and ongoing consolidation.”

The company also faced a warning from the Nasdaq in October this year, the company disclosed, due to its stock price falling below $1 per share.

“We currently do not meet, and may not regain compliance with, the listing standards of the Nasdaq Stock Market LLC … and as a result our Class A Common Stock may be delisted,” Weedmaps stated.

On Oct. 9, Weedmaps said, it was notified by the Nasdaq that its stock trading price for the prior 30 days had been below “the minimum closing bid price required for continued listing on the Nasdaq,” and that Weedmaps had 180 days to get the share price back up above $1 for at least 10 consecutive business days.

Weedmaps appears to have already solved the issue, given that its stock price jumped back above the $1 mark on Nov. 18 and hasn’t fallen below that mark since.

The prospectuses also offer a glimpse into the inner workings of Weedmaps, and notes that there’s been yet another headcount reduction in the past year, to 427 employees as of Sept. 30, down from 440 as of Dec. 31, 2023.

But as cannabis continues gaining mainstream acceptance in the U.S., Weedmaps said its business model will continue evolving as well, with an expected pivot eventually into TV and radio advertising.

“Over the longer term, we expect to shift and accelerate our marketing spend to additional online and traditional channels, such as broadcast television or radio, as they become available to us,” Weedmaps stated.

Weedmaps also confirmed in the prospectuses that its pricing for online cannabis ads for dispensaries and brands often wind up as bidding wars, a practice that has created ill will among a good bit of its California customer base, sources have previously told Green Market Report.

“We have a fixed inventory of featured listing and display advertising in each market, and price is generally determined through a competitive auction process that reflects local market demand,” Weedmaps wrote.

CEO Doug Francis pulled in a base salary last year of just over $1 million, the company disclosed, along with a signing bonus of $700,000 in August 2023. After his appointment as CEO was confirmed this year, his pay package included a new base salary of $750,000 as well as an annual target bonus equal to 100% of his salary, along with $3.9 million worth of Weedmaps stock. Francis currently owns 4.7 million shares of Class A Common Stock.

Also last month, Weedmaps hired a new chief technology officer, Sarah Griffis, at a base salary of $400,000 and with an annual targeted bonus of 50% of her salary, the company disclosed in a separate filing with the SEC.



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Massachusetts regulators order single-lab testing to combat cannabis lab shopping

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Massachusetts regulators will require cannabis businesses to use a single laboratory for all compliance testing in an effort to prevent companies from shopping around for favorable test results.

The state’s Cannabis Control Commission voted 3-0 to require licensed businesses submit testing samples to one independent laboratory starting April 1, 2025, according to an administrative order advanced Thursday. The new rule is meant to close loopholes that some say have allowed companies to shop around for labs to juice their numbers for market share.

“This administrative order continues our mission of being a strong regulator,” Acting Executive Director Debbie Hilton-Creek said in a statement.

Under current rules, companies can split testing among multiple labs. The practice has led some facilities to report suspiciously high THC levels or overlook contamination to attract business.

The commission’s enforcement team said the changes would reduce risks of noncompliant products reaching consumers and improve audit capabilities. The move follows a November listening session in which testing concerns were raised, according to the announcement.

If an original testing lab needs to subcontract work, they must first obtain commission approval and demonstrate they are “incapable of performing certain required tests due to a hardship.” Labs also can only subcontract with one other facility at a time.

“The commission shall only approve subcontracting agreements when the Originating Independent Testing Laboratory is incapable of performing certain required tests due to a hardship relative to its facilities, instrumentation, personnel, or required consumable materials or in the event of an actual or potential conflict of interest,” according to the order.

Results must be uploaded to the state’s tracking system within 72 hours, with all certificates of analysis containing the complete testing results, including any subcontracted work, it said.

The commission will also begin publishing THC test results on its public data platform and establishing regular meetings with licensed laboratories to improve oversight.

The commission thus far has struggled to implement effective testing oversight. Earlier this year, the agency contracted with a private lab for a “secret shopper” program to verify retail products’ test results, Green Market Report previously reported. Unlike other major cannabis markets such as California and Colorado, Massachusetts lacks a state reference lab to independently verify commercial lab results.

Analysis of testing data by MCR Labs found that across multiple states, laboratories reporting higher THC concentrations tend to increase their market share while those reporting average failure rates lose business, according to Chemical & Engineering News.



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Cansortium completes merger with RIV Capital, plans to scale up in New York

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Florida-based Cansortium (CSE: TIUM.U) (OTCQB: CNTMF), which does business as Fluent, has finalized its megamerger with New York-based RIV Capital, (CSE: RIV) (OTC: CNPOF), creating a new multistate operator that has a footprint in four states with 42 operational dispensaries.

The move gives Cansortium immediate access to New York, one of the fastest-growing legal marijuana markets in the nation, along with its existing portfolio of cannabis shops and grows in its home state, Pennsylvania and Texas. The company now owns eight total cultivation and processing facilities, which it said in a press release would allow it to bolster the Fluent brand even more going forward.

The company reportedly has $33 million in the bank with which to finance further acquisitions, it said in a Thursday announcement.

Another major winner in the deal is Scotts Miracle-Gro, which has a sizable stake in RIV Capital through its subsidiary The Hawthorne Collective. Existing shares will be converted into 1.245 shares of the newly formed Fluent, eliminating $160 million in company debt.

Shareholders of Cansortium will own 51.25% of the new Fluent, while shareholders of RIV Capital will own 48.75%, the company said. The company will continue trading under Cansortium’s existing ticker symbols on the Canadian Securities Exchange and the Over-The-Counter markets.

Cansortium CEO Robert Beasley will continue to lead the new company, and RIV Capital interim CEO David Vautrin will serve as the new company’s chief commercial officer.

Beasley said in the release that Fluent intends to scale up wholesale operations in New York to boost its Moods brand of marijuana products and “gain additional shelf space in dispensaries across the state,” which he said has “immense potential.”

The merger could prove key to the long-term prospects for both Cansortium and RIV Capital. Cansortium posted an $11.7 million net loss for the third quarter of 2024, and RIV Capital reported a $63.4 million net loss for the same period.

“Looking ahead, we remain focused on sustainable, long-term growth and will continue to drive efficiencies across all areas of the business to achieve our profitability and cash generation goals,” Beasley said.



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The Daily Hit: December 19, 2024

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News from: US Farm Bill, Fluent Cannabis, Massachusetts and more.

The Daily Hit is a recap of the top financial news stories for Thursday, December 19, 2024.

On the Site

Farm Bill extension leaves hemp industry rules intact for now, including intoxicating products

The farm bill extension would run through March 2025.

Read more here.

Cansortium completes merger with RIV Capital, plans to scale up in New York

Scotts Miracle-Gro, which is a major investor in RIV, also benefits from the deal.

Read more here.

Massachusetts regulators order single-lab testing to combat cannabis lab shopping

The rule change follows growing evidence of inconsistent testing practices in the state’s $7 billion cannabis industry.

Read more here.

Nine New York social equity retailers ask to join lawsuit halting cannabis licensing for 3rd time

A court filing argued that the group of CAURDs are in danger of bankruptcy if the injunction is not removed soon.

Read more here.

In Other News

Greenway Greenhouse Cannabis Corp.

Greenway Greenhouse Cannabis Corp. entered into an asset purchase agreement to acquire all of Choice Growers’ consumer packaged goods brands, SKUs and listings of the brands, trademarks, goodwill and other associated intellectual property. This acquisition encompasses all of Choice Growers’ brands, including Grapefruit God Bud (also known as Grape God), The Jeffrey, Watermelon Pebbles, Pink Lemonade, Duke Nukem, Tangerine Dream and Blackberry Cheesecake.

Read more here.

Innocan Pharma Corp.

Innocan Pharma Corp. intends to complete a non-brokered private placement of up to 3.5 million units of the company at a price of C$0.20 per unit for gross proceeds up to C$700,000 plus 15% overallotment options. The offering is expected to close on or around Dec. 31.

Read more here.



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