COURTNEY DORNE AND J SMOKE WALLIN JOIN VERTICAL COMPANIES EXECUTIVE LEADERSHIP TEAM

COURTNEY DORNE AND J SMOKE WALLIN JOIN VERTICAL COMPANIES EXECUTIVE LEADERSHIP TEAM

VERTICAL EXPANDS EXECUTIVE TEAM; CEMENTS LEADERSHIP IN LEGAL CANNABIS INDUSTRY

Courtney Dorne, J. Smoke Wallin bring significant executive experience in Food and Alcohol Beverages to one of country’s leading medical cannabis companies

Los Angeles, CA (January 25, 2018) – Vertical, one of the country’s leading vertically integrated medical cannabis companies, announced today the addition of Courtney Dorne and J. Smoke Wallin to their leadership team.  Dorne is an entrepreneur and food industry leader who joins Vertical as a partner and President of Vertical Brands Co.  Wallin is a serial entrepreneur and thought leader in the beverage alcohol industry and has joined as a partner, Chief Marketing Officer and President of Vertical Distribution Co.

Vertical was founded in 2014 by entrepreneurs who saw the potential created by the transition of cannabis to a legitimate and legal business. Drawing from results-driven expertise in a variety of industries, the Vertical team has a synergistic energy that offers proven experience from seed to sale.

“I’m thrilled to welcome Courtney and Smoke to our executive team,” said Todd Kaplan, Founder & CEO of Vertical.  “Smoke’s deep knowledge of alcohol distribution and scaling new businesses in highly regulated industries, combined with Courtney’s perishable food distribution and extensive network strengthen our competitive advantage in the rapidly evolving legal medical cannabis industry.”

According to The Arcview Group, the U.S. legal cannabis industry represented over $6.7 billion 2016 and is expected to grow to between $22 and $50 billion over the next 10 years. Legalization of the medical cannabis industry began in 1996 with California’s passage of the Compassionate Use Act.  Since then it has operated in a quasi-legal environment with conflicting laws throughout the land, while growing exponentially.  2014 marked the beginning of adult recreational cannabis legalization with Colorado and Washington leading the way.  Today there are 29 states that have legalized either medical only or medical and adult recreational cannabis production, distribution, retail and consumption.  Gallop recently reported 64 percent of Americans support cannabis legalization nationally. In this vibrant space, Vertical is a pioneer and is the first to offer fully integrated services from legal compliance and operation of cultivation to extraction, product development and marketing.

Dorne brings literally a lifetime of experience in food services and the restaurant industry to Vertical. From her family’s restaurant to founding the giant Fresh and Ready Foods, Dorne has a proven track record in food manufacturing and perishable packaged food distribution and has built an extensive network of customers ranging from airlines and hospitals to convention centers, the military and convenience stores, all the while working under the rigorous scrutiny of FDA and USDA regulations.  She is a member of the YPO Global One chapter and is the current Chair of the Women’s Network (WYN).

“After years of suffering from debilitating pain and crippling migraines as a result of extensive surgical procedures, I learned first hand about the efficacy of cannabis on pain management,” said Dorne. “All too often our culture is quick to treat pain with a pill and we’ve all seen what that has gotten us. I believe that legal cannabis can be a part of a legal, safer and healthier alternative and I’m thrilled to join the team that can help make this happen.”

Wallin comes to Vertical by way of Taliera, a company he founded in 2005 to create, acquire, manage and advise brands in the beverage space. His career in beverage alcohol has included serving as Chairman & President of the Wine & Spirits Wholesalers of America (WSWA) and EVP and CFO for National Wine & Spirits (now part of RNDC/Breakthru). He is also active in YPO as Chair of the Beer, Wine and Spirits Network and has been active in legislative and regulatory affairs.

“I have always loved innovating, doing deals and building enterprises to scale, particularly in the beverage alcohol space,” Wallin said.  “I’ve been studying high potential growth brands and companies, and Vertical and is at the forefront of the rapidly growing legal medical cannabis industry. Both industries are highly regulated and for some time I have been expecting them to converge. The recent investment by Constellation Brands[STZ] in Canada’s Canopy Growth [WEED] validated my premise, and I couldn’t be more excited to be part of the team building brands and distribution in a market worth $100s of billions globally.”

Wallin continued, “I can’t help but think of Sam Bronfman in 1933 at the Repeal of Prohibition who went on to build Seagram into the alcohol industry leader it became before selling to Diageo and Pernod Ricard. Vertical is positioned to achieve that level of success.”

About Verticalâ„¢

Vertical is one of the first and largest vertically integrated companies in the legal medical cannabis industry. It’s operations in CA, AZ and OR combined with strategic partnerships in CO, MI, and NV position it well to take advantage of the rapid legalization and normalization of cannabis globally. Vertical is led by an executive team of entrepreneurs and business leaders from the alcohol beverage, agriculture, CPG, distribution, entertainment, food and medical industries. Vertical’s operations include planning, permitting, development and operation of cultivation, extraction, manufacturing, distribution and retail facilities.  It has world class capabilities in product development, co-packing, branding, marketing, education, and legal compliance, Vertical does Everything Pertaining to Green. For more information visit www.vertcos.com.

Cannabis, Crypto — Craft Beverages & DOT.Com Observations

Cannabis, Crypto — Craft Beverages & DOT.Com Observations

[ALSO PUBLISHED ON: LinkedIN, MEDIUM]

I spent a fascinating week learning about two of the hottest investment and business opportunity spaces right now. The block chain, crypto and initial coin offerings (ICOs), and the cannabis industry are literally on fire. Given this, I wanted to get an understanding of what’s really happening. I’ve been following the development of the block chain/coin movement along with the emergence of the legal cannabis business as these both are displaying signs of developments that may cause massive disruption (and therefore potentially big opportunities). Venture capitalist Tim Draper has been an outspoken proponent of the block chain and crypto offerings (see Exclusive: Billionaire investor Draper to participate in blockchain token sale for first time), while Jamie Dimon of JP Morgan Chase has been dismissive (see CNBC).

Constellation Brands (STZ-B) announced recently that it had agreed to take a 9.9% minority stake in the $2 billion Canadian medical marijuana company Canopy Growth. The stake is worth about $191 million, though Constellation will have the option of purchasing additional stakes in the future. This aggressive move marks a significant milestone with the first publicly traded US company making a material investment in the cannabis space. For the industry in which I have spent much of my business career — beverage alcohol (beer, spirits and wine), it’s also a taboo shattering wake up call. The financial community apparently agrees with the financial analysts, giving high marks for Constellation’s vision and the market supported it with a gain of over $1 billion in STZ’s market cap (essentially more than paying for the investment). Visiting Colorado frequently, I’ve seen how quickly the legal use of medical and recreational marijuana has ramped up with the state of CO taking in over $550 million in tax revenue as of July 2017.

To learn more about each of these rapidly developing industries and to test my hypothesis of potential disruption, I attended the StartEngine ICO 2.0 Summitin Santa Monica followed by the MJBizCon in Las Vegas which together gave me an interesting perspective. Here I will share some of my observations.

General Observations

First, I met a number of really smart people pursuing these industries with a wide range of business and investment strategies. I had the good fortune to join up at YPO meeting-in-meetings at both events and, as usual, learned a great deal from these informal gatherings and met some of the people leading the way in both industries. I cannot say enough good things about the YPO network and the ability to quickly get to the movers and shakers in any industry or geography, globally.

The hype around these industries surpasses the craft alcohol craze and matches Dot.com in 1997–2000. I know both of these booms well having participated by investing and starting my own DOT.Com eSkye.com raising over $55 million (Tim Draper’s Dad, Bill Draper, invested see Forbes) and my multiple ventures in the craft beverage space. The bright light inevitably attracts all kinds of people and as in both of these examples, there are a ton of people who have limited or no business skills coupled with business ideas/plans/ventures with little to no chance of scaling to success. The cannabis side has more similarities to craft beverages in that it appears that 95% of businesses currently in or entering the space are really “mom and pop” operations that are more lifestyle businesses than scalable enterprises. However, what is absolutely clear to me is that, this is changing rapidly with the addition of serious investors and business operators.

Block Chain — ICO What is it?

The technology of the block chain is real and big. I’m convinced over time, it will fundamentally change the financial side of all industries. This MIT Sloan article does a pretty good job of discussing the potential. Its potential is hard to overestimate but not without controversy. See John Battelle’s discussion of it here Alien, Dismissible, Dangerous, Greedy, True and the fights going on inside Venture Capital firms here CRYPTOCURRENCY MANIA FUELS HYPE AND FEAR AT VENTURE FIRMS .

For my non-technical friends, I’ll try to define it here in my own way. For my expert friends, let me know what I get wrong as I’m still learning. The best simple explanation I’ve found so far is A Blockchain Explanation Your Parents Could Understand. Essentially, instead of a central party (think a bank) keeping track of everyone’s money and transactions with each other, the record keeping takes place in public (without revealing names) with 1,000s or more independent operators verifying the information and agreeing on its accuracy before securing it. While banking and financial transactions are the first use, there are many other uses being worked on and many more to come.

The ICO “Initial Coin Offering” market is booming with new business ideas for the application of this technology. Over $2.8 billion has been raised using ICOs thus far in 2017. These have been unregulated and range from real businesses to potential frauds. The ICO 2.0 Summit put on by StartEngine was really about bringing the ICO market into the regulated security market in the US. It is clear to me, from the many presentations, that an offering for a coin to fund a venture is an offer for a security, and therefore falls under the SEC. There are many in the crypto world who dislike this and will fight it, but governments are not going to simply sit back and allow investments outside their mandated oversight just because they are called “coins”. Given that, I agree with StartEngine’s CEO Howard Marks that the crowd funding Regulation A and also traditional Regulation D exemptions are the proper way to issue an ICO in the US.

Lou Kerner gave an excellent presentation based on his article, Is Crypto (Like) A Religion? & 6 Other Crypto Thoughts .

He followed this with a very interesting fireside chat with Michael Jones CEO of Science who is serious about the space and currently has an ICO in the works.

We heard from 17 companies planning to do ICOs of some kind. Again, I can’t help but compare this to DOT.Com days as there were clearly real business ideas and teams and others that are simply slapping the ICO label on something that is really not well thought out. What was true back in 1997–2000 in DOT.Com is true today — there are and will be billions of dollars invested in the block chain space, some of it will go into real business ventures and some of it will go into not-so-serious business ventures. Sorting these out will not guarantee your investment is the next Google or Amazon, but is absolutely the key to avoiding almost certain failure.

Cannabis — Marijuana Industry — Where is it now and where is it going?

From a story in Fortune Magazine regarding Constellation’s investment — “The wines and spirits conglomerate has no intention of selling cannabis products in the U.S. until it is legal nationwide. But the company is betting that legalization is just a matter of time, according to the  Journal . However, Constellation may soon sell the marijuana drink product in Canada, where legalization of edible and drinkable cannabis products is expected by 2019.

The move comes amid signs that suggest some consumers are reducing alcohol usage in favor of cannabis . “We believe alcohol could be under pressure for the next decade,” Cowen analysts led by Viven Azer wrote in an April note. “Consumer survey work suggests [about] 80% of consumers reduce their alcohol consumption with cannabis in the mix.”’

Given the above, what is the current state of the legal cannabis industry and where is it going?

The legal industry today is estimated at $5–6 billion and expected to grow to $12–17 billion by 2021. While this is only a fraction of the US alcohol market which stands at $200+ billion today, it could take some of that business (especially in beer in my opinion). So it’s big already and its going to get much bigger quickly. State legalization started with medical use and they are rapidly adding recreational. Cassandra Farrington, CEO and Co-founder of Marijuana Business Daily who put on the conference gave a great presentation on the history of the industry. Basically, the timeline she presented is as follows:

· 1996 California passes first medical marijuana law

· 1998–2008 other states follow

· 2012 Colorado, Washington pass recreational cannabis laws

· 2014 OR, AK add recreational. Canada liberalization takes root.

· 2016 11 legalization ‘wins’ in the US — 4 medical and 4 recreational via ballots and 3 medical via legislative action. Importantly, CA adds recreational in January 2018

Here is a map showing the current state status:

Over ½ the US population lives in states with legal marijuana use — with 30 states + Washington DC allowing legal medical use and 8 states plus Washington DC allowing recreational use. That being said, it is still 100% illegal at the US federal level. This means there are significant risks and hurdles for investors and businesses who enter the space. Banking is very difficult as the national banks cannot conduct business in the space. Anyone contemplating investing in the space needs to be aware of these issues. In spite of these challenges and an uncertain regulatory environment, many investors and business owners are jumping in with both feet.

One of the best presentations I heard was by Patrick Rea, the managing director of Canopy, an early stage fund that has made more than 100 investments in the space. He breaks the business down into four investment buckets:

  1. Public Stocks — these are the Canadian companies like the one Constellation invested in.

2. Real Estate — this is the buildings for dispensaries and the land for farms

3. Touch the Plant — these are the actual growing, processing and selling businesses

4. Ancillary Products & Services — these are all the things around the business from software to equipment to banking to marketing.

Canopy is focused on #4 exclusively but there are certainly opportunities in all of these.

From a branding and stage of industry development perspective this is literally a “green field”. I saw some interesting but nascent offerings given the time businesses have had to think about and try to develop brands. With new entrants, this will of course change, but right now I can’t help but think it is like the days when Sam Bronfman and Lewis Rosenteil were at the cusp of the repeal of Prohibition ready to launch Seagram’s and Shenley’s whiskies into the US respectively.

Where is this headed? It’s hard not to believe there will be continued legalization on a state by state basis. With the overwhelming majority of American’s viewing legal cannabis favorably, and importantly with the amount of tax revenue legal markets are bringing, other states will certainly follow to not get left out. Federally it will likely take longer, but like alcohol and the repeal of Prohibition, it will probably only happen if it is left up to the states to decide how their citizens want to allow cannabis regulation.

What’s clear to me is that there are huge opportunities in both these new industries. What is unclear is who will emerge as the big winners. I know from personal experience what being ahead of the market is like. The next few years will be like settling the wild west and a lot of entrepreneurial ventures will be created to try out different ideas in both cannabis and blockchain. I will come back to these topics as I learn more on both and please share any thoughts you may have. Cheers!

included in this article Howard Marks Tim Draper John Battelle Lou Kerner Patrick Rea StartEngine Constellation Brands Canopy Growth Corporation MJbizwire Jamie Skella WIRED Erin Griffith Phyllis Berman YPO Michael Jones Cassandra Farrington Seagram Fortune Magazine Jamie Dimon

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