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☠️ Ascend Wellness Calls Off MedMen NY Acquisition
NJ pulls in $80M in first 10 weeks of sales. Harvest of Pasadena closes. AWH acquires Ohio Patient Access. Earnings - Verano, Cresco, Columbia Care, AWH, Ayr, Planet 13, TILT, 4Front, TPCO, Springbig.
After resolving a monthslong legal battle over a definitive acquisition agreement with MedMen New York (MMNY) in May—with the two companies finally agreeing to an $88M deal—Ascend founder and CEO Abner Kurtin said this week his company is no longer interested in closing the transaction. Kurtin told investors during a second quarter 2022 earnings call Aug. 15 that due to concerns about the status of MMNY’s assets, “which have deteriorated materially” since Dec. 31, Ascend is no longer moving forward with the transaction. “We have been engaged in negotiations with MedMen for 17 months and because of the state of MedMen’s assets, it is time for all of us to move on,” Kurtin said. “Because we will not be moving forward with the MedMen transaction, we have $70 million of unencumbered cash at a time when cash is dear.” Ascend had already paid $4 million to MMNY as a deposit toward the $74-million closing consideration at the time of the settlement in May. According to Ascend’s financial results, the company ended the second quarter (June 30, 2022) with $140.6 million in cash and cash equivalents—which includes the unspent $70 million from the canceled MMNY deal—enough to fuel its near-term initiatives as business operations are now geared toward generating cash flow, Kurtin said.
MedMen CEO Ed Record said in a statement to MJBizDaily that the company’s “New York-based assets and trademark have never been more valuable” in light of the state’s pending adult-use market. “We are considering all options to ensure strong shareholder return; this includes the potential sale of assets and/or licensing of the MedMen trademark,” Record added.
N.J. is sparking up, bringing in millions in tax revenue from cannabis. New Jersey raked in $4.6 million in tax revenue in the first 10 weeks since recreational cannabis sales launched. The tax revenue came from nearly $80 million customers spent on legal recreational marijuana between April 21 and June 30, the state Cannabis Regulatory Commission announced. It includes more than $219,000 in social equity excise fees. Adult users now can buy from 18 dispensaries scattered around the state that also serve medical patients. The CRC has issued 140 conditional legal weed dispensary licenses, but none have opened. The social equity fees, which are due on each sale of an ounce of recreational cannabis, is at the rate of $1.10 per ounce, according to the CRC and state Treasury Department.
Harvest of Pasadena, the city’s first dispensary apparently closes on Colorado Boulevard. Harvest of Pasadena, one of the city’s first licensed cannabis dispensaries, has apparently closed, less than six months after opening — though the reason it shuttered wasn’t clear. “The city was not aware they we were closing and we were not contacted about the circumstances,” Pasadena said in a statement, noting the business has no obligation to inform city leaders if so. “They followed all the city permits to open earlier this year.” But the apparent closure would mark the latest and perhaps final twist in Harvest’s tumultuous era in Pasadena, with the national dispensary chain opening its high-profile store in March after years of hiccups stalled its rollout, as well as the premieres of multiple other cannabis companies in the city. Tim Dodd, CEO of Sweet Flower, previously described Pasadena’s cannabis licensing process as the most competitive merit-based process undertaken by any municipality in California, evident by the hundreds who applied for an application at the opening of Pasadena’s licensing process. As a result, Dodd said Wednesday, “successful operators in this market need to be customer and community focused, locally operated and financially prudent.”
Regulating Cannabis Interstate Commerce: Perspectives on How the Federal Government Should Respond. Much has been written and debated about why the US federal government should or should not legalize cannabis for adults to consume. Now that nineteen states have legalized recreational or adult-use cannabis and thirty-eight states in total have legalized medical cannabis, the conversation has shifted into a nuanced discussion of how to legalize cannabis, not whether to. And the framework that consumers, industry participants, researchers, doctors, patients, and anyone else impacted by the rapidly shifting regulatory structure of state-legal cannabis operate under is not working. Established companies with multibillion-dollar market caps are frozen out of the US financial system. Many prospective small business owners are locked out of checking accounts, getting loans at favorable rates, and the other nuts-and-bolts of creating sustainable businesses. These problems differentially affect minorities and other entrepreneurs from communities harmed by the near half-century old War on Drugs. On top of that, some well-capitalized firms have taken advantage of this patchwork system, creating near-monopolies in some states that have been shown to be detrimental to consumers and the stated goals of the legalization movement. Creating a legal, sensible cannabis industry from the ground up is difficult work. One of the key challenges is how the federal government should rectify the ongoing conflict between state and federal law by regulating the interstate commerce of cannabis. This paper presents different perspectives on how the federal government should respond. The authors (Jeremy Berke, Shaleen Title, Scott Bloomberg, Geoffrey Lawrence, and Adam J. Smith) agree that federal legalization is perhaps inevitable. They also agree that the current patchwork of state legalization isn’t tenable. Some disagree on nuances and what mechanisms should be tweaked to ensure that the industry is built in a way that’s both fair and competitive for everyone.
Inside Grass Lands, The Largest Cannabis Experience In A U.s. Music Festival To Date. Grass Lands celebrated its fourth year at the Bay Area fest. In that time, the experience has expanded with more partners and offerings, but the best part is festival-goers are able to purchase and enjoy their cannabis freely in a fully compliant zone for smoking. Now in its 14th iteration, Outside Lands Festival is no stranger to pushing the envelope, but few can assemble the cavalcade of top-shelf cannabis partners who make Grass Lands such a potent festival experience. Behind the curtain of Grass Lands' pioneering success are Embarc’s co-founders, Dustin Moore and Laura Carpenter. Five years ago these opportunities didn’t even exist, but today Embarc is leading the charge. In the nascent world of cannabis events, they serve as the operational glue that holds all these blending experiences, brand activations and dynamic collaborations together. In 2019, for instance, they helped Grass Lands secure its permits for sales of cannabis. Then in 2021 and 2022, they started running concessions at the festival.
NYPD seizes 19 'illegal' cannabis trucks. Mayor Eric Adams said selling marijuana on the streets is “not acceptable” two days after the NYPD took 19 “illegal" cannabis trucks off city streets. “This is not going to be a city where we snub our noses and break the law,” Adams said at a press conference on Thursday. “This is not acceptable.” On Tuesday, the NYPD Chief of Patrol announced on Twitter that 19 vehicles without permits were seized from city streets on Tuesday following complaints from community members. The confiscation of those vehicles came during the same week Weed World said that three of its vehicles were towed while it paid parking fines, the company said in a statement. Weed World added it has paid more than $200,000 of fines owned to the city.
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AWH —Enters Definitive Agreement Providing the Option to Acquire Ohio Patient Access. Ohio Patient Access (OPA), owns and will operate three provisionally licensed dispensaries that are in the process of being built in Cincinnati, Piqua, and Sandusky. Exercising this option would increase AWH's footprint in Ohio to five, the maximum permitted in the state. AWH's current Ohio footprint includes two dispensaries, one in each of Coshocton and Carroll, as well as a Tier 2 cultivation facility with 2,000 square feet of canopy.
XS Financial — Closes $24M Credit Line With Needham Bank. XS Financial has entered into a new $24M Credit Facility with Needham Bank committing $20M and acting as the administrative agent. XS Financials' existing $4M line of credit with an FDIC-insured bank will be retired, and the same bank will participate $4M in the new Credit Facility. In addition, XSF fully retired its previously announced $15M line of credit with the Garrington Group concurrently with the closing of this Credit Facility. The Credit Facility has a term of two (2) years, expiring August 2024. Loans made under the line of credit will bear interest at an annual rate equal to the Prime rate plus one percent (1.0%), with a floor of six percent (6%), and may be prepaid with no penalty at any time.
📄 Company Updates / Earnings
Verano — Q2 2022 Financial Results. Revenue increased 12% Y/Y to $224M. Gross profit was $98M or 44% of revenue, compared to $69M or 35% of revenue in the Q2 2021. EBITDA on an unadjusted basis was $48M or 22% of revenue, and Adjusted EBITDA was $76M or 34% of revenue. Cash of $93M.
Cresco Labs — Q2 2022 Results. Revenue of $218M, up 4% Y/Y. Adjusted EBITDA of $51M (23% margin), up 11% Y/Y. Wholesale revenue of $95M, which maintained the Company's position as no. 1 U.S. seller of branded cannabis products with leading share positions in the flower, concentrates and vape categories. $90M of cash.
Columbia Care — Q2 2022 Results. Quarterly Revenue of $129.6M, up 5% QoQ and 18% YoY. Adjusted EBITDA of $12.0M and YTD Adjusted EBITDA Margin of 11%. Expected to Be Last Quarterly Results before announcing divestitures related to combination with Cresco. Top 5 Markets by Revenue in Q2: California, Colorado, Massachusetts, Pennsylvania, Virginia. Top 5 Markets by Adjusted EBITDA in Q2: Maryland, Massachusetts, Ohio, Pennsylvania, Virginia. $81.4M in Cash.
AWH — Q2 2022 Results. Gross Revenue increased 16.2% Q/Q and increased 20.7% Y/Y, to $117.7M. Net revenue, which excludes intercompany sale of wholesale products, increased 14.6% Q/Q and 17.0% Y/Y, to $97.5M. Adjusted EBITDA was $20.9M, representing a 21.4% margin, a ~220 basis point margin expansion Q/Q. Cash of $140.6M and net debt was $152.7M.
Ayr Wellness — Q2 2022 Results. $91.3M Revenue, down (1.0%) sequentially. $27.4M Adjusted EBITDA (30.0% margin), up 0.5% sequentially. Cash balance of $116.7M. The Company expects Revenue, Adjusted EBITDA and Operating Income to grow approximately 10% sequentially from Q2 2022 to Q3 2022, and an acceleration in the pace of sequential growth in Q4 2022.
Planet 13 — Q2 2022 Financial Results. Q2 2022 revenue of $28.4M, up 10.6% compared to Q1 2022. Gross profit was $13.8M, or 48.7% as compared to $19.0M, or 57.9% Y/Y. Q2 2022 Adjusted EBITDA of $3.0M. Cash of $52.6M.
TILT Holdings — Q2 2022 Results. Revenue was $47.1M compared to $48.5M in the prior year. The decrease in revenue was driven by lower sales volume and pricing for certain products in the Company’s inhalation business, partially offset by more than 20% growth in the Company’s cannabis operations. Adjusted EBITDA was $1.1M compared to $7.1M in the prior year. The decrease was driven by the lower sales volume and pricing contractions within the Company’s inhalation business, similar contractions in the wholesale cannabis operations, as well as higher operating expenses. Cash of was $34.7M. Due to the evolving macroeconomic environment, inflationary impacts on consumer spending, and lower cannabis wholesale pricing in MA & PA, TILT is revising its 2022 financial outlook and now expects revenue to range between $205–$210M, with Adjusted EBITDA ranging between $10–$15M.
4Front Ventures — Q2 2022 Financial Results. Q2 2022 Systemwide Pro Forma Revenue of $34.5M, an increase of 6% from Q1 2022. Q2 2022 Adjusted EBITDA of $9.2M, an increase of 2% from Q1 2022. Signed a definitive agreement to acquire the Bloom Farms and Bloom Farms Wellness (collectively, "Bloom Farms") brands. Cash of $6.0M and $49.5M of related-party long-term debt not due until May 2024.
The Parent Company — Q2 2022 Financial Results. Net sales for Q2 2022 were $27.4M, down (49%) Y/Y. Gross profit for Q2 2022 was $6.6M, or 24% GM. Adjusted EBITDA loss was ($18.4M). Unrestricted Cash and cash equivalents totaled $126M.
Springbig — Q2 2022 Financial Results. Total revenue of $6.6M, up 13% Y/Y and up 3% Q/Q. Net dollar retention rate was 114%, versus 93% in the year ago period and 110% at the end of 2021. Added 509 new retail locations, bringing total to more than 2,800. Adjusted EBITDA loss was $(3.6M) as compared to a loss of $(1.3M) from the prior year period. Cash and cash equivalents of $14M.
Flora Growth — Reports H1 2022 Financial Results. H1 2022 revenue increased to ~$15.0M, up 604% from H1 2021 and 117% from H2 2021, driven by House of Brands. Gross Profit increased to ~$7.0M, up 547% compared to H1 2021 and 363% compared to H2 2021. Company reaffirms its 2022 revenue guidance to range between $35.0 million - $45.0M, indicating ~300%-400% projected revenue growth from 2021.
Greenlane — Q2 2022 Results. Revenue of $39.9M, up 15% Y/Y. Gross margins were 20.3%. Adjusted EBITDA loss for Q2 2022 was ($5.8M). Announces plans to sell its packaging division. $9.1M in cash.
Treez — Enters Massachusetts Market With Cannabis Dispensary Green4All As Their Exclusive Retail Technology Solutions Provider. Treez’s expansion strategy strives to repeat the success achieved in the state of California, where the company holds the largest gross merchandise value in the largest retail cannabis market. Treez is also offered in several other key cannabis retail markets including Arizona, Colorado, Michigan and Missouri, with plans to expand into several more states by the end of 2022.
Metrc — New Track-And-Trace Government Contract with the State of Alabama. This marks Metrc’s 23rd government contract to date and sixth so far in 2022. Metrc now holds exclusive government contracts in every region of the U.S, including Washington, D.C., and has a particularly strong presence in the South, where it holds contracts with Louisiana, Maryland, Mississippi, Oklahoma, West Virginia, and now Alabama.
Pure Sunfarms — Extends partnership with Simon Fraser University. As part of the partnership, SFU researchers and students have access to Pure Sunfarms on-site laboratory and 65,000-square-foot state-of-the-art processing center to research ways to mitigate threats to cannabis plant health. Teams use a variety of methods to follow the complete life cycle of plants, looking at environmental conditions, strains and production practices to address and promote the quality of post-harvest cannabis.
Verano — Opens MÜV Hollywood, the Company’s 56th Florida Location and 110th Nationwide. The dispensary is located on high-traffic Taft Road, a thoroughfare with an average daily traffic count of over 16,000 cars.
Verano — Introduces New Flower and Extract Brand, Savvy, in Seven Core Cannabis Markets. Savvy will launch in September 2022 in Arizona, Florida, Illinois, Massachusetts, Maryland, Nevada and Ohio, with additional launches planned in the future for New Jersey and Pennsylvania. Across the Company’s national retail footprint, Savvy products will initially be distributed to approximately 85 Zen Leaf and MÜV dispensaries across seven states. Savvy products will be available in 7 grams or 14 grams of cannabis flower and one-gram oil cartridges, with expanded product offerings of disposable vaporizers and pre-rolls in select markets shortly after.
Ayr Wellness — Expands LEVIA to New Markets via Water Soluble Tinctures. The launch of LEVIA tinctures in Nevada and Arizona signifies a major milestone for Ayr as it continues to expand its national branded product portfolio into new markets across the country. LEVIA tinctures come in three unique offerings: the indica Dream; the hybrid Celebrate; and the sativa Achieve. Featuring high bioavailability and 300 mg of THC per bottle, LEVIA tinctures are water-soluble, allowing for flexible dosing and easy mixing with water and other beverages based on consumers’ preference. The tinctures are fast-acting, providing a unique intended effect for the consumer within minutes.
Weedmaps — Cuts 10% of its Workforce. The company had 606 full-time workers at the end of 2021. In an email dated August 4 that was obtained by Insider, CEO Chris Beals cited a slowdown in legal cannabis sales in states like Colorado and California, the rising price of gas, and broader economic conditions that point to a coming recession.
XS Financial — Appoints Stephen Christoffersen as CFO. Christoffersen has held executive officer positions with several exchange-listed issuers, including Western Acquisition Ventures (NASDAQ WAVS) as CEO and Board Member of the SPAC. Previously, Christoffersen worked for KushCo Holdings as CFO.
Thrive Cannabis Marketplace — Appoints Brandon Wiegand as COO. Prior to joining Thrive, Brandon served as the Chief Commercial Officer for TheSource+ Holding. Before his work at TheSource+ Holding, Brandon was the Director of Operations at The Grove Investment Group.
Vertosa — Introduces Cara Newkirk and Ryan Pinsky as Members of Sales and Business Development Teams. Newkirk will serve as EVP Business Development and Pinsky will serve as VP Sales. Newkirk most recently worked as the business development director at Synergy Flavors, a global manufacturer and supplier of flavorings, extracts, and essences. Pinsky previously served as a partner at Taima Extracts, a family-owned and operated extraction facility in Oakville, Ontario.
Unrivaled Brands — Appoints Sabas Carrillo as Interim CEO. The appointment of Sabas comes on the heels of Unrivaled’s previously announced 100-day turnaround plan and strategic restructuring. Sabas is CEO of Adnant, an accounting and consulting firm advising cannabis companies on technical and operational accounting, strategic transactions, and the public offering process since 2011. Sabas has served as Interim CFO for Cookies Creative Consulting & Promotions Inc. since April 2018. He is a co-founder and general partner of two cannabis-focused funds: Mesh Ventures and 1212 Ventures. He also serves as Chairman of the Board at Operators Only Corporation, which has entered into a definitive agreement to effect the rollup of Cookies Maywood, Cookies Oakland, Cookies Sacramento, Cookies Redding, Lemonnade Sacramento, and Lemonnade South Sacramento.
Fire & Flower — Change in Board of Directors. Guillaume Léger has tendered his resignation from the board of directors. ACT has designated Suzanne Poirier as its nominee to the Board as his replacement. Poirier is SVP Operations for ACT and is based in Montreal, Quebec. She joined ACT in 2018 as Vice President and Controller and since held various roles with progressively increasing responsibilities including Global Finance and Supply Chain Optimization and VP of North America Operations Excellence.
GrowGeneration —New Executives. Effective August 12, 2022, Jeff Lasher has resigned as CFO and, concurrently, Greg Sanders, previously VP and Corporate Controller, has been promoted to CFO. Separately, Stephen Kozey, previously VP Legal, is being promoted to General Counsel.
LeafLink’s Ryan G. Smith and Harish Mukhami on B2B Cannabis Technology (Cannabinoid Connect)
Paul Weaver on Boston Beer’s Cannabis Plans (Brewbound)
What's in the new Massachusetts cannabis bill? (GBH News)
👋 Highly Objective is curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.