Cannabis technology company brings back CEO

GrowLife, the hydroponic equipment seller, has sold a minority stake to ex-CEO Sterling Scott. The company is likely to need additional funding for expansion soon.

Investment into the cannabis industry is rising as GrowLife, a Seattle-based hydroponic equipment seller, brought back its former chief executive as a minority investor, according to a recent Securities and Exchange Commission filing.

Sterling Scott now owns a 5.3 percent stake, or about 47 million shares, in the company he led from 2012 to 2014. At the current over-the-counter share price, the stake is worth around $1.3 million.

GrowLife indicated in its latest quarterly SEC filing that it will need additional financing in order to continue to fund its operations. In 2014, it is understood that the firm raised around $14 million, according to local reports. The most recent injection was a $500,000 secured credit facility and a secured convertible note from lender Logic Works in June.

With the US medical marijuana industry currently valued at around $1.7 billion with estimates that it will soar to $8.9 billion by the end of 2016, cannabis production has caught the attention of several private investors.

San Francisco venture capital firm Founders Fund, co-founded by PayPal’s Peter Thiel, recently made an undisclosed investment into cannabis-focused private equity firm Privateer Holdings, and other venture capital firms such as High Times Growth Fund in New York have been raising capital to invest into the industry.

GrowLife, founded in 2012, sells hydroponic equipment such as lighting systems, sprayers and pumps. It has seven retail stores across the US. The company reported a 2014 third-quarter revenue of about $2.1 million compared to approximately $1.3 million in revenue it generated for the third quarter of 2013.

GrowLife also pointed out that its future growth will depend on more states legalising the sale of medical marijuana. The company does not grow or sell cannabis plants, but rather the equipment that helps harvest and grow them.

GrowLife formed a joint venture with private investment firm CANX USA in November 2013 that could provide up to $40 million in funding to use primarily on acquisitions and infrastructure technology. CANX provided $1.3 million in funding upfront along with an additional $1 million in growth capital through a convertible note.

GrowLife trades on the Over the Counter exchange holding a $25 million market capitalisation.

GrowLife officials did not respond to requests for comment on Tuesday.

Reporting by Demitri Diakantonis.