Harborside, a prominent Bay Area dispensary chain, wants to establish itself as the dominant player in Northern California’s cannabis industry. To do that, it’s gone to Canada. Harborside on Monday joined a growing wave of American cannabis companies that have listed shares on the Canadian Securities Exchange as a means of accessing capital to operate and grow businesses still deemed illegal under US federal law. Following a previously announced reverse merger with Lineage Grow Co. Ltd. — a deal initially valued at C$200 million (about $150 million) — the resulting company, known as Harborside Inc., is trading on the CSE under the ticker symbol HBOR. Harborside, one of the oldest licensed cannabis businesses in the United States, also became known for a years-long campaign to prevent a shutdown of its operations by the federal government for allegedly violating US drug laws despite California’s having legalized medical marijuana. Harborside won that fight in 2016, when the US Attorney’s Office for the Northern District of California dropped its case against the company. “I think it marks a very important milestone in the growth of the cannabis industry,” Steve DeAngelo, who co-founded Harborside as a medical cannabis dispensary in 2006 and serves as the firm’s chairman emeritus, told CNN Business last week. “When you have an organization like Harborside that came from deep activist roots and was engaged in that activism in a very intense way, and now has been able to transition into a profit-making cannabis company that’s going to be valued at $300 million Canadian, is a tremendous validation.” Harborside is a vertically integrated operator, meaning it controls businesses that grow, manufacture, process and sell cannabis. The company owns more than two dozen cultivation, manufacturing and retail licenses in California, which is now one of 11 states where the recreational use of cannabis has been legalized. Harborside’s bustling flagship retail store in Oakland is like a rustic Apple Store, where edibles, vaporizers, creams and other forms of cannabis are displayed in sleek cabinetry and shelving made of wood and glass. During the past 12 years, the Oakland dispensary and another Harborside location in San Jose have accumulated more than C$400 million in sales. In 2018, those dispensaries generated C$50 million in revenue, according to regulatory filings. Harborside Inc. owns or manages six dispensaries in California and Oregon and has agreements to purchase two dispensaries and a cultivation operation in northern California. A recently completed C$19.65 million investment capital raise and the public stock currency from the CSE listing will help Harborside achieve those plans, Harborside CEO Andrew Berman told CNN Business. “We’re very much California-focused,” Berman said of the moves the company has planned for the coming 12 to 18 months. “The market’s too big to pass up on now.” Harborside has a letter of intent to acquire Airfield Supply Co., a San Jose, California-based dispensary and cultivation center in an all-stock deal valued at US$41.8 million, securities filings show. The acquisition, which is expected to close within 12 months, also has conditions that Harborside raise $60 million, according to filings made with Canadian securities regulators. Harborside has put considerable time and money into getting its operational house in order in advance of becoming a publicly traded firm. The company reorganized its head office, brought in leadership familiar with meeting regulatory requirements and buttoned up standard operating procedures, Berman said. Harborside officials remain closely attuned to the company’s long-standing brand and role in the cannabis activism movement. “We don’t want to lose what we built in this whole process either,” Berman said. The reverse takeover process that Harborside is using to list on the CSE allows private firms to forgo some of the costlier aspects of a public offering by combining operations with a company that is already public. And unlike a more traditional public offering, Harborside is not generating proceeds from the reverse merger itself, but will be more readily able to raise funds by issuing stock going forward. Cannabis companies that operate under state-regulated programs have limited access to capital in the United States. Large banks and private equity firms have been wary about investing and stock exchanges reluctant to list shares of US companies that directly handle the federally illegal substance. Those companies have as a result migrated to the Canadian Securities Exchange, which has openly welcomed cannabis firms for more than five years. As of Monday, about 170 cannabis companies were trading on the CSE, with roughly 40% of those firms having material operations in the US, said Richard Carleton, CEO of the exchange. US cannabis companies raised $3.2 billion in 2018 and are on track to surpass that total this year, Carleton said, noting close to $1 billion has been raised by CSE cannabis firms to date. Most have come to the CSE as a result of a reverse takeover. Los Angeles-based MedMen made perhaps the biggest of such deals when it listed on the CSE in 2018. At the same time, legal Canadian operators, such as Canopy Growth and Aurora Cannabis, have been able to list on the New York Stock Exchange. In Harborside’s case, technically the firm was acquired by Lineage Grow Company, which operated two cannabis stores in Oregon. Until US federal law allows for cannabis companies to openly bank — and efforts to do so are advancing through the House of Representatives — “plant-touching” American cannabis businesses will continue to look toward options such as reverse takeovers in Canada, said Harrison Phillips, vice president at Viridian Capital Advisors, an investment banking and advisory firm in the cannabis industry. If federal banking laws were to change, the companies on the CSE would likely then move to uplist to larger exchanges such as the Toronto Stock Exchange, the NYSE or the Nasdaq, he said. “It’s hyper-growth, so companies need to be able to raise as much capital and deploy that capital to sustain growth,” Phillips said.