Minimum Investment: $100
Over 1,330 businesses registered on the platform
Full-feature platform officially launched in January 2020
Platform has facilitated 1,100 supply contracts
Partnered with Square Pay to provide merchant processing
CannTrade is an eCommerce platform for hemp, cannabis, and related businesses. Its platform aims to connect wholesale buyers and sellers of hemp, CBD, cannabis, and related products and equipment. Since 2018, over 1,330 businesses – and 1,900 representatives of those businesses – are registered on CannTrade’s platform. Through CannTrade’s platform, businesses have completed 1,100 supply contracts.
In January 2020, the company officially launched its full-feature platform. It was previously operating in beta mode with limited features for users. With the proceeds from this raise, the company plans to scale operations, bring on additional staff, and invest in marketing functions to drive growth.
Security Type: Crowd Note
Round Size: Min: $50,000 Max: $1,070,000
Discount Rate: 20%
Valuation Cap: $6 million or $5 million
Conversion Provisions: In connection with equity financing of at least $1,000,000, the Company has the option to convert the Crowd Note into non-voting preferred shares (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per share paid for Preferred Shares by investors in the Qualified Equity Financing or (B) the price per share based on a $5,000,000 or $6,000,000 valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.
Investors that purchase the first 50,000 Crowd Notes, and thereby fund the first $50,000, will receive Crowd Notes with a conversion provision based on a $5 million valuation cap instead of a $6 million valuation cap. That means, in connection with equity financing of at least $1,000,000, the company has the option to convert the Crowd Note into non-voting preferred shares (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price per unit paid for Preferred Shares by investors in the Qualified Equity Financing or (B) the price per share based on a $5 million valuation cap (instead of $6 million).
Over the past few years, many states have legalized marijuana usage in some form. As of November 2019, cannabis is legal for medical use in 33 states. 11 states have also legalized cannabis for recreational use by adults over the age of 21.i At the end of 2017, approximately 97% of the U.S. population lived in a state with laws permitting the medicinal or recreational use of marijuana.ii
As more states legalize marijuana in varying capacities (recreational or medicinal), demand and supply for cannabis products is expected to increase. However, due to the infancy of the legal cannabis industry, the presence of independent wholesalers – i.e. crop to consumer operations – has yet to fully materialize, as the industry is segmented from cultivation to distribution to sale.iii This means that in order to get cannabis products into the hands of consumers, dispensaries and other purchasers must supply their cannabis from third party sources.
Founded in 2016, CannTrade is a central eCommerce platform for businesses in the cannabis industry. The platform was engineered to combine a compliant wholesale marketplace with supply chain management and an industry database to help businesses in the cannabis industry grow. Businesses on the platform can purchase and sell CBD, hemp, cannabis, and related products. Since inception, more than 1,330 verified business have registered on its platform and completed 1,100 supply contracts. With the proceeds from this raise, the company is planning to add staff to grow the business, add additional features to the platform, and invest in marketing efforts to drive more traction.
CannTrade’s platform aims to connect wholesale buyers and sellers of hemp, CBD, cannabis, and related products and equipment. Businesses can list products and track their sales using CannTrade’s wholesale management tools. The platform also provides businesses with the ability to manage accounts, orders, leads, fulfillment, and shipping. Buyers on the platform can submit requests for products and receive proposals from vendors.
CannTrade provides a wholesale platform for hemp, CBD, cannabis, and related industry products. CannTrade verifies businesses by reviewing business and operator information, such as EIN numbers, seller permits, state IDs, and cross referencing any applicable license documents with state databases of legal cannabis and hemp businesses. The wholesale platform enables businesses to:
On both the CBD/hemp and cannabis marketplaces, buyers and sellers can transact for items such as:
On the industry marketplace, buyers and sellers can transact items such as:
Buyers on the platform can submit supply requests. Once a request has been made specifying the material needed, amount, and price range, verified suppliers can respond to the request with their quote. Retailors can then review offers and communicate with potential vendors directly through the platform and make their purchase. Throughout the transaction process, buyers can receive order status updates and shipping notifications. Buyers can also create a “supply watch” where they will be notified by the platform anytime new product listings match their “watch” criteria.
When a supplier lists an item for sale on a marketplace, they can see how many buyers match their product description and can contact them directly. Contacting buyers is a simple process completed by selecting a product, entering the price and quantity that can be supplied, and adding a message to the offer.
CannTrade offers wholesale management tools for sellers on its platform. The wholesale management tools aim to provide businesses with greater insight into their transactions, partners, supply chain, and internal sales communication. Businesses can access wholesale management tools from any device (i.e. phone, laptop, or tablet).
Management tools available to businesses on the CannTrade platform include:
CannTrade maintains a business directory to help businesses on the platform to identify new opportunities and sourcing across the country. CannTrade cross references licensing information with applicable state regulatory bodies with the goal of providing current licensing details for all of the businesses listed in the directory.
CannTrade intends to raise a minimum of $50,000 and up to $1.07 million in this crowdfunding raise. It anticipates using the funds on tech development (35%), sales and support (25%), marketing (25%), working capital (10%), and operations (5%).
The company anticipates hiring three or four new developers to work on product design, functionality, and usability.
CannTrade intends to hire a vice president of sales to build out a sales department, as well as make regional account manager hires in strategic areas of the country. Eventually, CannTrade would like to have centralized customer success agents that support regional account managers to assist in platform adoption and continued engagement.
CannTrade plans to blend several low-cost marketing strategies including targeted business-to-business (B2B) ads, participation in industry specific podcasts and tradeshows, increased social media presence, and cooperative ventures with partners. Additionally, the company plans to hire one in-house marketer and work with an outside marketing group.
Throughout 2020, CannTrade intends to increase platform functionality. Features the company plans on adding include:
Beyond 2020, CannTrade would like develop a mobile app in order to expand into direct-to-consumer (B2C) opportunities. While still in the concept stage, the app would facilitate B2C sales of hemp and CBD products, and, if the appropriate regulatory changes materialize, THC products.
CannTrade aims to position itself as an eCommerce platform that can service businesses of any category within the hemp, cannabis, and cannabis support industries. This includes cultivators, manufacturers, distributors, brands, retail operations, and suppliers of ancillary products such as lighting, nutrient and soil companies, and hardware and equipment manufacturers.
CannTrade utilizes several methods of generating revenue:
Additionally, CannTrade can generate revenue on merchant processing commissions, advertisement, and promotional packages.
CannTrade initially released a pilot program to California-based companies in 2018. Since the release of its pilot program, over 1,330 businesses have registered on the platform and the company has executed letters of intent to secure partnerships with businesses such as Square and Pineapple Express. It has processed over 1,100 supply contracts on its request marketplace.
Each business that signs up on the CannTrade platform adds one or more users. Users can manage the businesses’ operations on the platform (e.g. buying and selling). Through January 9th, 2020, more than 1,900 users have signed up on the platform, up from 1,216 users in January 2019.
CannTrade officially launched its platform in January 2020; the company was previously operating in beta mode with only certain features available to users. In 2019, CannTrade generated $102,500 in revenue, up by 117.6% year-over-year. Revenue in 2019 was primarily generated through processing transactions on the CannTrade platform. In 2018, CannTrade generated $47,110 in revenue, down by 52.4% year-over-year. Revenue decreased in 2018 when compared to 2017 due to a payment from an external partner to implement its software into the CannTrade platform. In 2017, CannTrade generated $99,256 in revenue, attributable to the partial payment received in connection with the grant from the Dash Network to integrate their digital currency platform with the CannTrade platform. Revenue spiked in Q4 2017 due to the partnership agreement.
In 2019, CannTrade incurred $96,388 in total expenses, a decrease of 26.27% year-over-year. Expenses have decreased year-over-year, in part, due to a 48% decrease in salary and wage expenses. In 2018, CannTrade incurred $130,729 in total expenses for the year, a 56.1% year-over-year increase. Expenses increased in 2018 when compared to 2017, in part, due to the introduction of salaries and wages for employees. In 2017, CannTrade incurred $83,752 in total expenses for the year.
Expenses incurred in 2019 largely came from salaries and wages, and general and administrative costs. Salaries and wages accounted for a large portion of expenses in 2019 due to the company paying its staff members as it achieves profitability and optimized operations lowering costs elsewhere. Expenses related to salaries and wages decreased 48% when compared to the same period in 2018. A full expense breakout is as follows:
In 2018, expenses incurred largely came as a result of salaries and wages. Salary and wage expenses were introduced in 2018 as the company began to ramp up its operations. The company began to reduce salary and wage expenses in the final two months of the year. A full expenses breakout is as follows:
A full breakdown for expenses incurred in 2017 is as follows:
In 2019, CannTrade generated a net income of $6,112, compared to a net loss of $83,619 in 2018. CannTrade attributes profitability in 2019 to increased traction on its platform and the reduction of certain expense items, notably salary and wages. In 2018, CannTrade incurred a net loss of $83,619 for the year, compared to a net income of $15,504 in 2017. CannTrade incurred a net loss in 2018 when compared to 2017 largely due to increased expenses and a decrease in revenue. CannTrade achieved profitability in 2017 due to the $98,189 payment from Dash.
As of December 31, 2019, CannTrade had approximately $14,581 in cash on hand. Through December, the company has been averaging a positive cash flow of $1,312 per month. Moving forward, the company believes it will begin burning cash on a monthly basis as it re-introduces certain expense line items, such as salaries and wages, and begins to focus on building out and expanding its platform. The company’s platform officially launched in January 2020 with all of its features. With the proceeds from this raise, and its current cash-on-hand, CannTrade estimates having approximately 12 – 18 months of runway, depending on how quickly the company can scale operations and bring on additional staff.
The legal U.S. marijuana industry was estimated to be worth $10.4 billion in 2018, reflecting $4.4 billion in legal medical marijuana sales and $5.9 billion in legal recreational use. In 2019, there is estimated to be a 30.7% increase in annual legal cannabis sales, with the market reaching $13.6 billion in total. By 2025, the total market size is expected to reach $29.7 billion, reflecting a compound annual growth rate (CAGR) of 14%. In 2025, it is estimated that approximately 44% of the market will come from medical sales and the remaining 56% from recreational use.iv
A total of 33 states in the U.S. have legalized marijuana for medical use,v of which 11, and Washington D.C., currently allow adults to legally use the drug for recreational use.vi A further rise in the number of states legalizing cannabis consumption (whether recreationally or medically) is possible in the event that legislative updates are made as more people become accepting of, or legally working with marijuana. In 2018, the marijuana industry employed 250,000 people. States where recreational use is currently legal include:vii
According to a poll by Pew Research, 62% of Americans believe the use of marijuana should be legalized, reflecting a steady increase over the past decade. However, there are wide generational differences on views of marijuana legalization. A majority of millennials (74%), Generation X (63%), and baby boomers (54%) believe marijuana use should be legal. However, the silent generation has continued to be largely against legalization, with only 39% approving.viii
According to New Frontier Data, the CBD market was estimated to be valued at $390 million in 2018. Through 2022, the market is expected to grow at a CAGR of 27.2% a year, reaching $1.3 billion. The market is expected to exhibit strong growth, in part, due to the restoration of industrial hemp to nationwide legal production in 2018. Additionally, legalization may help CBD companies gain access to mass-market retailers such as Walmart, Whole Foods, and Target.ix A December 2019 announcement from federal and state bank regulators may provide another boost to the industry. Banks are no longer required to treat hemp customers as suspicious, which could broaden both banking and lending opportunities for such customers.x
In 2018, the U.S. Farm Bill designated hemp as an agricultural crop and made it legal to farm nationwide.xi Increasing consumer interest in hemp and CBD is driving new market entrants to fill shelves with hemp-derived products to meet the growing demand in an evolving regulatory environment.xii Hemp and marijuana are derived from different varieties of the Cannabis sativa species. Marijuana is grown by selectively breeding for high concentrations of the psychoactive tetrahydrocannabinol (THC), whereas hemp is cultivated for high concentrations of cannabidiol (CBD). According to the Farm Bill, hemp is legal provided that it contains no more than 0.3% THC.xiii According to an article posted at Harvard Health, CBD is anecdotally used to address health issues such as anxiety, insomnia, and chronic pain, but additional studies are needed to support efficacy. The strongest scientific evidence for CBD’s treatment of health issues is its effectiveness in fighting childhood epilepsy syndromes such as Dravet Syndrome and Lennox-Gastaut syndrome (LGS).xiv
In 2018, venture capital financings in cannabis companies surpassed $1.6 billion, a record high, and a 193% increase from 2017. Deal count in 2018 was also record-setting, with 225 venture financings. 2017 also saw significant growth in funding towards cannabis companies, with nearly $555 million invested, a 143% year-over-year increase, across 173 total deals. Deal count surpassed 100 total deals for the first time in 2015, with 123 such venture financings, a 124% increase from 2014. Between 2008 and 2018, there has been $2.97 billion invested across 722 venture capital deals in cannabis companies. Over 70% of capital invested from 2008 to 2018 occurred in 2017 and 2018.
Founded in 2018, Apex Trading seeks to make wholesale cannabis transactions easier for both sellers and buyers by providing a connected marketplace equipped with industry-specific features to help streamline the buying and selling process. Apex Trading’s platform offers a suite of features tailored to each party of the transaction. Features include inventory management, order management, buyer management, automated compliance, integration with third-party software, and user permissions. Additionally, users can generate sales reports, manage client relationships, and manage orders. MicroVentures participated in Apex Trading’s 2019 seed round.
Founded in 2016, Cannaly is a wholesale cannabis marketplace for dispensaries and brands. For dispensaries, Cannaly aims to help streamline the purchasing process by bringing vendor relationships into one platform. Dispensaries can discover new brands and order from existing partners. For brands, Cannaly provides in-app messaging and order management. Additionally, the company provides its partners with online tools to coordinate and schedule deliveries. All partners on the Cannaly platform are screened to ensure they are licensed and compliant.
Founded in 2013, Dauntless provides an enterprise platform for companies in the cannabis industry. It aims to provide solutions for all business units in the cannabis industry including growers, retailers, manufacturers, distributors, and laboratories. The company currently offers three product options: TraceWeed, Korona, and GIANT. TraceWeed provides production management tools that automate daily tasks and keep customers compliant with state regulations. Customers can manage plants, schedule harvests, and track manufacturing through TraceWeed. Korona provides point-of-sale (POS), inventory, and cash management tools. Korona can integrate with online menu, customer loyalty, and digital signage technology. GIANT is an open platform allowing businesses to connect with service providers, such as analytic and accounting providers, and regulators through a universal API.xvi In March 2019, Dauntless acquired SORO, an analytics and customer relationship management (CRM) platform.xvii
Founded in 2014, Helix TCS is a provider of integrated operating environments to the cannabis industry. Helix currently has three product offerings: BioTrackTHC, Cannabase, and Helix Security. BioTrackTHC provides seed-to-sale supply chain management tools for licensed cannabis businesses and tracking solutions for state and local governments. BioTrackTHC serves 2,200 customers in 32 states and 5 countries. Cannabase is a wholesale marketplace for licensed cannabis businesses. The product generates proprietary market data through comprehensive marketing and sales tools. Helix Security provides a range of digital and physical security services and consulting packages to protect cannabis assets.xviii The company generated $7.2 million in revenue and incurred a net loss of $6 million through Q2 in 2019.xix
Founded in 2014, Kush Marketplace is a wholesale marketplace for the cannabis industry. On the Kush platform, users can research and compare wholesale prices from vendors, and sell cannabis to a network of verified buyers. All buyers in the Kush Marketplace network have been vetted by the company to ensure they’re licensed and meet the proper regulations. Kush provides members with features such as contract templates, compliance support, price negotiation tools, and third-party sampling. Additionally, premium members receive features such as transportation services, dispute resolution, product seizure support, and consultation services. Pricing for a premium membership is quote-based. Additionally, Kush Marketplace charges a service fee for each transaction on the platform ranging from $6 to $2.64 million, depending on the size of the sale through the platform.xx
Founded in 2015, Leaflink is a wholesale management platform for the cannabis industry. The company provides solutions for brands, distributors, and retailers. Solutions include an online marketplace, a customer relationship management (CRM) dashboard, order management tools, and a payment and credit management solution. Through the LeafLink platform, retailers can create orders, request samples, and send messages. Retailers can then track order statuses in real time. LeafLink charges a $299 per month subscription fee for the software. The company has facilitated more than $1 billion in annualized wholesale cannabis orders. In August 2019, LeafLink announced it had raised $35 million in its series B round, bringing its total amount raised since inception to $51 million.xxi
Mark is a former professional football player who turned to cannabis as an alternative to opioid-derived painkillers to treat career ending injuries. During his four-year career in the NFL and CFL, Mark worked in the wine industry, creating a small production distribution company called Glasshouse Wines. After leaving the wine industry and retiring from football, Mark spent three years researching and developing medical cannabis products for several brands and established Plant 2 Products Collective, a California-licensed manufacturing and distribution company that designs and manufactures products for emerging brands. He earned a degree in Agricultural Business with a minor in Viticulture from California Polytechnic State University.
Adam has a composite professional background with roots in both technology and academia. His love of literature and education led him to teach eight years of high school English in New York City. Prior to teaching, Adam was the Senior Deployment Manager for Foundstone, Inc., a vulnerability management and strategic security professional services company acquired by McAfee in 2004.xxii Adam managed the operational logistics for deployment of the Foundstone FS1000 Appliance at dozens of Fortune 100 clients, including large-scale security platform customization for one of the largest banks on the eastern seaboard, and spearheaded the manufacturing of the security appliance for the U.S. Department of Justice. Adam earned an undergraduate degree in English Language and Literature from the University of Massachusetts at Amherst and has a postgraduate degree in Education from Pace University.
Drew joined QVidian (Formerly Kadient) in 2005, building a distributed job processing architecture for an enterprise level customer relationship management (CRM) product. He took that expertise to Digital Results Group in 2009 where he was one of the lead developers on Ageon ISR, a cutting-edge software product used to provide real time intelligence data from cameras, RADAR, and gunfire detection systems to US Army and Navy forces. Ageon ISR continues to be deployed throughout the world to reduce US troop deaths by IEDs. Andrew earned his undergraduate degree in computer science from Stonehill College in 2005.
Brian began his career in the software security industry working for Foundstone, then MacAfee and Intel. Over the course of eight years he ascended to a lead development position serving clients including major financial institutions, government departments, military divisions, and some of the world’s largest corporations. In 2010 he decided to scratch his entrepreneurial itch, starting WODTogether, Inc. a SaaS company focused on financial and business management for CrossFit affiliate facilities. Brian continues to serve as CEO at WODTogether.
To date, CannTrade has been largely self-funded by the founders. In 2017, the company received a grant totaling $217,000 from the Dash Network for an integration with the Dash digital currency platform, Alt Thirty Six. Payments from the grant were spread out over 2017, 2018, and 2019.
An investment in the company is speculative, and as such is not suitable for anyone without a high tolerance for risk and a low need for liquidity. You should invest only if you are able to bear the risk of losing your entire investment. There can be no assurance that that investors will receive any return of capital or profit. Investors should have the financial ability and willingness to accept the risks (including, among other things, the risk of loss of their entire investment and the risks of lack of liquidity) that are characteristic of private placement investments. There will be no public market for the securities being offered, applicable securities laws will restrict any transfer of the securities, and the securities will not be transferable without the company’s consent.
The information provided herein is not intended to be, nor should it be construed or used as, investment, tax or legal advice, a recommendation to purchase, or an offer to sell securities of the company. You should rely on the offering statement and documents attached as exhibits to the offering statement when making any investment decision. An investment in the company is not suitable for all investors.
The company’s industry is highly competitive, and the company may not be able to compete effectively against the other businesses in its industry. The company is subject to a number of significant risks that could result in a reduction in its value and the value of the company securities, potentially including, but not limited to: