CLICK

CLICK is raising capital through preferred equity with a valuation of $20 million and a price of $0.95 per share. With revenue of $274,918 for 2020, this funding round has a revenue-to-valuation multiple of 89x. This figure is higher than industries in the public market, where the average revenue multiple for cannabis companies was 3.9x in 2020. CLICK is also overvalued when compared to the median valuation of crowdfunding companies in the recreational drug industry, which is at $10 million. Overall, this round’s $20 million valuation is not favorable for investors.

In the US, the legal cannabis market size is expected to be at $12.5 billion in 2022, with an annual growth rate of 16.6%. Most sales are contributed by the state of California. In 2021, California’s legal cannabis spending reached $4.6 billion, accounting for 42% of US sales. Additionally, CLICK is also expanding to Canada. In 2022, the Canadian cannabis industry is expected to reach $3.8 billion with an annual growth rate of 13.4%. There are multiple drivers leading to increased growth of the cannabis market. One is the scientific research surrounding CBD showing that it can be used to alleviate symptoms of chronic pain, anxiety, and depression. For recreational cannabis use, consumer sentiment and continued legalization efforts are positive market factors. 

Because of how lucrative the market has been, CVS pharmacy has been selling CBD products in 800 stores in eight states, and Walgreens sells them in 1,500 stores as of 2019. Having major pharmaceutical retailers selling cannabis products like these is a huge win for the industry and makes people have more trust in the market. Besides, these pharmaceutical retailers also have a very good traction, which leads to an increase in sales. 

However, it is also important to keep in mind that the cannabis market isn’t very resilient against economical changes. During COVD-19, a lot of cannabidiol (CBD) companies’ sales declined, especially with the shutdown of retail stores. Recreational cannabis faces even more market woes, as it is still not federally legal. While 18 states, Washington DC, and Guam have all legalized recreational sales, the lack of federal legalization leaves many companies facing complicated regulations and questionable banking practices. Although the market has high potential and is growing rapidly, economic uncertainty that affects consumer behaviors and legality could affect the cannabis market in a negative way. CLICK will need to navigate these concerns as it expands operations into a new state and a new country, which could be a tricky balance for the company.

Aleksey Klempner is the co-founder of CLICK. Klempner has more than 15 years of experience in the tech industry. He was the technical founder at Eaze, a cannabis delivery platform that has managed to raise $35 million. He also served as the CTO of WAYV, a logistics company for the cannabis industry in California. Klempner’s technical expertise in the tech and cannabis industries are very valuable to what CLICK does, and there is no doubt in his abilities. However, right now he is only serving as a board member of CLICK while also serving as CTO of another cannabis company called Ginger Commerce. Ginger Commerce offers direct to consumer delivery solutions to cannabis companies. Although CLICK is using Ginger, having multiple responsibilities still impacts Klempner’s commitment and ability to focus on the success of CLICK. 

Co-founder Omri Casspi is a former professional NBA basketball player. Although he doesn’t have prior entrepreneurial or cannabis experience, his network and popularity can help with marketing the CLICK brand. Casspi has also been a podcaster and founded an organization that sponsors trips for people to Israel. Both of these positions can help with introducing new customers to CLICK.

Roie Edery co-founded Eaze along with Klempner and led the company’s product development. He has also worked as a chief operating officer for a company named Herbology, an herb extraction facility. The company doesn’t exist anymore. However, his roles as a product and operating lead for several companies is helpful for CLICK. Like Kempler, Edery is on CLICK’s board and is involved with Ginger Commerce.

CEO Luke Santon has a law degree from Pepperdine University and more than two years of experience in the cannabis legal industry. He has only been serving as the CEO of CLICK for a few months. Santon was the founding partner of a law firm and an insurance company. He has a good combination of legal skills that is very important to CLICK due to the ambiguity of cannabis regulations. However, as a new team member, it is still hard to judge how his experience will impact CLICK and its future success.

The company has a strong founding team. However, none of the founding members are fully committed, and they only seem to serve in advisory roles to the company. Although the CEO has good legal and entrepreneurial skills, he is still new, and the team is small with only the CEO as the main team player. At this time, CLICK does not seem to have the ideal team for its growth and expansion.

CLICK is not the first company to make gummies and mouth spray cannabis products. There are a lot of companies that make cannabis-based oral sprays that either contain CBD only or CBD and THC. For example, PlusCBD makes CBD spray bottles that vary in strength and flavors. PureKana is also another competitor that has small spray bottles buyers can carry around in their purse or pockets. MÜV is a Florida-based cannabis dispensary that makes THC oral spray in addition to a line of other products.  Aurora Cannabis, a public company with a revenue of more than $100 million, has released a line of sprays with different uses and different concentrations of CBD and THC. 

CLICK’s main differentiator is its patent-pending cannabis spray bottles. The company claims that the bottles create a superior consumer experience through their design. Instead of using regular “mace bottles” which produce focused streams, CLICK bottles use a nano-emulsion technology that gives users a misty feeling instead of oily feeling. The company has proven its product-market fit with 100,000 in sales. However, its products — both the gummies and sprays — have no reviews yet, so it is hard to know if the bottles’ design is truly resonating with customers.

The aesthetic design of CLICK bottles could also be considered different. Its bottle is light and has a keychain that allows customers to carry it or hook it with them whenever they go. But besides its patent-pending technology and the company’s claim of a misty feeling, the product is not highly differentiated on its own. 

However, CLICK is very competitive when it comes to price. For example, while Aurora sells a 15 milliliter (mL) bottle for $45, CLICK sells a 200 mL bottle for $25. MÜV, PureKana, and PlusCBD sell at $39.99 for 13.5 mL ,$19.99 for 30 mL, and $30 for 30 mL respectively. Being price competitive is a big advantage, and it might have contributed to CLICK’s ability to sell a good number of units in a short period of time since its launch in 2020. 

Overall, CLICK’s differentiation is decent. While oral cannabis sprays are nothing new in the market, the company’s new bottle design might help it stand out against competition. It’s unclear if this new design is truly creating a better user experience, but CLICK does have patents to bolster its defensibility. Regardless, the pricing for CLICK’s product is very competitive, and this trait alone is likely to attract customers.

CLICK makes revenue from selling its products directly to consumers through its e-commerce channel and through retail stores. CLICK launched in April 2020, and it generated revenue of $274,918 the same year. It has shown good traction with 100,000 sales and distribution in more than 100 retail stores. These sales came from the state of California alone, and the company has since expanded sales to Massachusetts. CLICK also plans to be in Canada within 2022 Since 2020, the company has also raised more than $3.8 million, which is a huge accomplishment for a company in its early stages.

However, CLICK’s gross margin level was at -118% in 2020. The company also had a net loss of $1.6 million, a high monthly burn of $130,142, and $64,151 cash on hand in 2020. This worrying financial state could be because the company could not manage losses or because it’s new and has spent a lot of time developing its products. 

Nevertheless, things still seem in favor for CLICK to make revenue and potentially reduce its costs. It has partnered with Mike Tyson, a formal professional boxer, to launch a new product, which might help its growth and expansion. CLICK has also received a few awards from organizations in California, including a Clio design award. 

Overall, the company has shown good traction in a short period of time and has been recognized, but its financials need to improve to reduce risk for investors. 

CLICK carries a medium investment risk. Most risk comes from the team, since the founders serve more of an advisory role than leading the company themselves. Even though two of them, Roie Edery and Aleksey Klempner, are working on an e-commerce platform (Ginger Commerce) that helps CLICK to operate its platform and sell directly to consumers, the company is a separate entity. As such, Edery’s and Klempner’s main focus doesn’t seem to be on CLICK. CEO Luke Santon is the only fully committed team member. Although he is qualified, as he holds a law degree and has been a founding partner of a few companies, he has only recently joined CLICK. It’s difficult to say how successful CLICK will be under his leadership.

Another risk is the market. Although the legal cannabis market has been growing fast and becoming more popular, federal laws are still unclear, and it is up to individual states to regulate cannabis. Companies like CLICK have to navigate shifting regulations as it sells in different states. It is also important to mention that it is federally legal to purchase cannabis-derived products with more than 0.3% tetrahydrocannabinol (THC). However, CLICK makes oral sprays that are 100% THC. Until the federal government’s stance on cannabis changes, CLICK will operate in a legally gray zone. Therefore, the lack of clear regulations makes it harder for cannabis businesses such as CLICK to be stable.

CLICK has a high monthly burn of $130,142 as of 2020. With cash on hand of only $64,151, the company can only survive half a month without generating revenue. CLICK’s current operations put it at risk if it experiences sudden losses or inconsistent revenue. Another financial concern is the gross margin of -118%, which indicates the company is spending more on the cost of its products than it is selling for. These unhealthy margins are particularly concerning because CLICK claims that one of its main missions is solving margin compression – when making a product costs more than the sale. But this focus is not reflected in the company’s progress yet. 

Lastly, despite the market having a high growth rate of more than 18% in the US, cannabis’s legality is still new and differs from one state to another. Variation in laws could make it harder for CLICK to expand, and it might need to customize products to each state, which would take time and money. 

CLICK has managed to achieve revenue of more than $274,000 from California in 2020 after launching in the same year. That quick performance is impressive because a lot of startups take years before they can generate this amount of revenue. With the company’s expansion to Massachusetts and Canada, CLICK should see bigger growth in upcoming years, as it has already proved product-market fit and demand for its products. 

Although CLICK’s financials seem unhealthy with a high monthly burn rate, the company has notably managed to raise more than $3.8 million, with about half being raised in 2021. The company also had low short term debt of less than $200,000 and $0 in long-term debt as of 2020, so this might be the best time for CLICK to burn cash in order to develop its products. 

The market is still heavily regulated, and some laws regarding cannabis products are rather unclear. Therefore, having a CEO with a law background is helpful for CLICK. Luke Santon can protect it from potential lawsuits and also help direct the company as it expands to other geographical regions.

CLICK manufactures cannabis-based gummies and patent-pending cannabis mouth spray bottles. The company is operating in a rapidly growing market that has an annual growth of more than 16.6% in the US. With the increase in cannabis demand and uses, the company has seen good traction. It generated more than $274,000 in sales after its launch in 2020 and has so far managed to raise $3.8 million from investors. In addition, it has patent-pending spray bottles, and its prices are more attractive than many competitors’.

Nevertheless, investing in CLICK does come with its risks. The newly regulated market still allows states to put restrictions on the sales of cannabis. Shifting regulations make the market unpredictable, and it can be difficult for cannabis companies such as CLICK to expand. It is also important to keep in mind that CLICK’s current products have high THC concentrations, and so the company can only target states that have legalized cannabis rather than going nationwide. Although CLICK has shown good revenue, it has a high monthly burn rate, and its gross profit margin is negative. The company has lost a lot of capital and might not be sustainable if it doesn’t start generating more revenue in the near future. The team also brings some concerns. Although the CEO brings valuable legal expertise in the cannabis industry, he is the only fully committed member at this time, and CLICK needs other team members to expand and grow. For these reasons, CLICK has been rated as a Neutral Deal by the KingsCrowd investment team. 

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Analysis written by Yasmin Sharbaf on April 14, 2022.