🧑⚕️ Aurora Cannabis CEO — Medical Marijuana First at the Federal Level in U.S.
🧑⚕️ Aurora Cannabis CEO — Medical Marijuana First at the Federal Level in U.S.
Tilray Stockholders Approve Proposal to Increase Shares. WM Technology Acquires Sprout. Jushi Completes Nature’s Remedy (MA) Acquisition for up to $102M. Akerna Acquires 365 Cannabis for $17M.
🍻 If you’re in Santa Rosa next Tuesday evening (5-7p) before Hall of Flowers kicks off, join executives from Mediajel and Rebud, along with other newsletter subscribers for drinks, RSVP here. Also I’ll be around until Friday morning if anyone wants to connect another time.
🌿Industry
Mayors Across The U.S. Push Biden And Congress To Legalize Marijuana With A Focus On Racial Equity. Members of the U.S. Conference of Mayors recently voted to call on President Joe Biden to federally legalize marijuana, expunge prior cannabis convictions and allow for commercial sales under a model that promotes social equity. The organization, which represents mayors of cities across the U.S., passed the comprehensive resolution as part of its 89th annual meeting late last month. It notes that the U.S. government has owned a patent recognizing the medical value of cannabis and cited statistics about the racially disparate impacts of criminalization.
MSOs post strong quarterly results, but investors tepid.
All 10 of the largest publicly held MSO posted double-digit revenue growth in the quarter ended June 30, but stock prices remained weak as investors grow impatient with the slow pace of federal marijuana legalization efforts. Four of the largest five publicly held MSOs actually made a profit in the quarter, with Trulieve leading the way with $40.9M in earnings. Q/Q revenue increases ranged from 10% for TerrAscend to 56% for Ayr Wellness. Two factors are potentially suppressing stock prices:
Restricted access to MSO stocks by certain brokerage firms, wire houses and big banks because of marijuana’s federally illegal status
Low trading volume. MSO stocks, which trade on over-the-counter exchanges in the U.S., don’t generate the trading volume that Nasdaq- or New York Stock Exchange-listed stocks have. The lower market float can make a stock more vulnerable to an attack by short sellers. At the same time, solid buying pressure could cause the stocks to rebound sharply
MA regulators probing Gotham Green’s cannabis license request. Massachusetts regulators reportedly are looking into whether private equity firm Gotham Green left out information about the cannabis licenses it controlled in the state as it sought permission to acquire others. iAnthus, which has been trying to fend off Gotham Green’s attempt to take control of the company, alleged in court documents in Canada in late August that the PE firm withheld information about its interest in MedMen’s two Massachusetts dispensaries as it filed a change-of-ownership request with state regulators, the Boston Business Journal reported. The state’s Cannabis Control Commission in June approved the request pertaining to three iAnthus MMJ and two recreational marijuana licenses.
Aurora Cannabis, former execs accused of 'sham' sales to inflate earnings, lawsuit alleges. The class-action lawsuit, which was filed in a U.S. District Court in New Jersey on Tuesday, alleged that Aurora and its executives engineered a way to artificially inflate the company's fiscal 2019 fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by selling $21.7 million worth of dried cannabis to Radient Technologies Inc. in June 2019 in a deal that "lacked commercial substance". The filing further alleged that Aurora later repurchased that same amount of dried flower back from Radient, an Edmonton-based cannabis extraction firm in which Aurora has a 12% ownership stake as well as control of one board seat. According to comments provided by four former Radient employees contained in the filing, there was no plausible business reason for the cannabis processor to buy $21.7 million of cannabis from Aurora. One former employee alleged in the filing that Radient's operations were not large enough to process so much cannabis in a reasonable amount of time, while another former staffer alleged it made "no sense" for Radient to make that purchase as the company itself was having trouble paying its day-to-day operating expenses and its extraction technology was still in the testing stage at that time.
Questionable New Mexico cannabis license raises allegations of unfairness. The New Mexico cannabis industry is in an uproar over allegations of favoritism by state regulators after the lead agency overseeing medical marijuana companies quietly reopened applications for business licenses, awarded one permit and then closed the window again. According to the Santa Fe New Mexican, the state health department, without a public announcement, began accepting applications for marijuana cultivation licenses for one week in late June before all industry oversight was transferred to the new Cannabis Control Division. The health department received one application that week and awarded a license to the applicant, Albuquerque-based GH, the New Mexican reported. The application window was the first time since 2015 that New Mexico cannabis regulators had made new business permits available, but the lack of communication to the industry and others who would have been interested in applying has many crying foul.
BDSA — Top 5 Cannabis Brands in AZ, CA, CO, IL, MA, MD, NV, OR, PA. Judging by BDSA’s retail sales tracking data from the first half of 2021, the leading brands list has laid out a clear trend of multi-state operators and vape brands dominating the rankings: 1. Cresco Cannabis, 2. Rythm, 3. Stiiizy, 4. Select Oil, 5. Raw Garden.
💵Deals
Jushi — Completes Nature’s Remedy Acquisition and Officially Enters MA Market. Jushi acquired Nature’s Remedy for an upfront payment of $91.2M, comprised of $40.0M cash, ~$34.7M stock, $11.5M unsecured three-year note and a $5.0M unsecured five-year note. Under the agreement, the Company has also agreed to issue up to an additional $5.0M in Company Shares and a $5M increase to the principal balance of the 3-Year Note upon the occurrence or non-occurrence of certain conditions after the closing date, bringing the total potential consideration for the acquisition paid by the Company to $101.2M. Assuming all conditions are met, the Company expects to issue up to 4.3M fewer Company Shares, assuming an average daily volume weighted price of $4.61, as a result of the revised agreement. The revised purchase price (inclusive of the full $10 million of Additional Consideration, but excluding any benefit from the acquired excess inventory) represents a multiple of 2.7x to 3.0x Nature’s Remedy’s expected full year 2022 EBITDA of $34--$38M.
WM Technology — Acquires Cannabis CRM & Marketing Platform Sprout. Weedmaps has acquired Sprout, a cloud-based CRM & marketing platform for the cannabis industry. WM Technology’s acquisition of Sprout reinforces the company’s end-to-end operating system as one of the most comprehensive software solutions available in the cannabis market today. Sprout empowers cannabis retailers to acquire new customers, retain existing ones and grow revenues. Sprout’s purpose-built, omni-channel software platform combines all-in-one CRM and marketing, third party integrations, a robust targeted messaging system across text, email and in-app, a loyalty program, compliance modules, and analytics. WM Technology’s acquisition of Sprout strengthens the company’s position between retailers and consumers in the rapidly growing legal cannabis industry.
Akerna — Acquire 365 Cannabis for comprehensive cannabis ERP offering. 365 Cannabis is a cannabis business management software system built on Microsoft's Dynamics 365 Business Central. The transaction is valued at $17 million deal, 2.1x LTM revenue. The deal will be paid with $4 million in cash and $13 million stock with a potential earnout of $8 million. As a result of the acquisition, 365 Cannabis' 85+ clients will gain access to Akerna's Compliance Gateway, feature-rich reporting, MJ Retail POS, and the recently launched Akerna Connect. Akerna has partnered with SAP, Sage Intacct, and other leading providers for integrated financials and tax planning, offering cannabis operators a solution for each stage of their evolution. The acquisition is expected to close in Q4 and is subject to customary closing conditions.
Heritage Cannabis — Executes Term Sheet with Merida Capital Holdings to Support Entry into the Missouri Market in Partnership with 3Fifteen Primo Cannabis. Heritage (CSE: CANN) (OTCQX: HERTF) has executed a term sheet with Merida for up to $1.5 million in Senior Unsecured Convertible Promissory Notes to fund the Company’s entry into the state of Missouri. Missouri’s first legal medical sale took place in October 2020, and, per the Missouri Department of Health and Senior Services, there are already 140 approved dispensaries responsible for over $65 million of retail sales in the first half of 2021, and $21 million of sales in the month of July.
Halo Collective — Acquires Pistil Point Indoor Facility. Halo closed the acquisition of Food Concepts LLC, the master tenant of an approximately 55,000 square foot indoor cannabis cultivation, processing, and wholesaling facility in Portland, Oregon operated under the Pistil Point name, on the terms set out in the merger agreement previously announced on August 27, 2021. Pursuant to the Acquisition, ANM, Halo's wholly-owned subsidiary, became the 100% owner of Food Concepts LLC, the master tenant of the Pistil Point facility, and the owner of the operating equipment and related tangible assets which it leases to the operating entities. The consideration payable by Halo for the acquisition of Food Concepts LLC was $8.2 million, payable in 258,156,500 Halo common shares.
Cronos Australia to merge with unlisted Queensland, Australia-based cannabis company. Two medicinal cannabis companies have entered into a merger agreement in a deal worth around $85 million, giving Queensland-based CDA Health control over the Australian subsidiary of Cronos Group. The deal, between ASX-listed Cronos Australia (ASX: CAU) and CDA Health, will comprise a combination of shares and cash, with CDA shareholders to own ~73.7% of CAU on completion of the merger. It comes nearly two years after CAU listed on the ASX following a $20 million IPO, at the time giving the company a market cap of $64M.In the years since, shares in CAU dropped significantly from its $0.36 per share debut and were trading at $0.10 yesterday, representing a market cap of just $5M. Founded in 2018 by Guy Headley, Dr Ben Jansen, Jessimine Jansen and Dr Matua Jansen, CDA has seen rapid growth over the last two financial years, generating more than $21 million in sales for FY21 and is profitable. CDA operates across various parts of the medicinal cannabis industry and owns medicinal cannabis wholesale distributor Burleigh Heads Cannabis, medicinal cannabis clinics operator CDA Clinics, and hemp-based foods brand Healthy Not High.
AFC Gamma — Expands Existing Senior Secured Credit Facility With Devi Holdings by $30M. Devi Holdings, doing business as Nature’s Medicines, a multi-state operator headquartered in Phoenix, Arizona. The credit facility is designed to provide Nature’s Medicines with additional capital to complete strategic acquisitions and further expand its existing business operations. AFC Gamma has committed an additional $20 million under the expansion to the credit facility, and now holds $62.5 million in total of the expanded credit facility, and $10 million of the expansion was syndicated to an affiliate.
📄Company Updates / Earnings
Tilray — Stockholders Approve Proposal to Increase Authorized Shares at Special Meeting. Since the merger of Tilray and Aphria, which closed in May 2021, the new Tilray has made substantial strides across its business, by driving increased revenue through rapidly expanding its international medical business, introducing a new medical brand in Canada while increasing its share in that market, and making strong progress towards its target of $80 million in synergies. With additional authorized shares, Tilray is now able to accelerate its progress towards its goal of delivering $4 billion in revenue by the end of fiscal 2024 by taking full advantage of its competitive differentiators and executing on its strategy.
Plus Products — Files for Creditor Protection Under the Companies’ Creditors Arrangement Act and Cancels September 14 Annual General Meeting. After reviewing a number of options, PLUS’s Board of Directors determined that CCAA proceedings are in the Company’s best interests. Pursuant to the Initial Order, the Court has granted a stay of proceedings that will allow PLUS to, among other things:
Continue to conduct operations and pay normal expenses in the ordinary course of business and in accordance with the Initial Order, and
Facilitate the completion of the Board of Directors’ review of strategic alternatives, including the solicitation, development and execution of any potential sale or other strategic transaction involving PLUS, whether in addition to, or as an alternative to, a CCAA plan of compromise or arrangement
Fire & Flower — Q2 2021 Results
Revenue of $43.3M compared to revenue of $28.6M for Q2 2020, an increase of 51.4%
Gross profit of $16.2M (37.3% margin), compared to gross profit of $10.0M (34.8% margin) in Q2 2020
Fifth consecutive quarter of positive Adjusted EBITDA of $3.1M compared to positive Adjusted EBITDA of $1.1M for Q2 2020, up 176% YoY
Total debt at July 31, 2021 was $3.8M
Cash and short-term investment balances of $29.3M
IIP — Commencement of Registered Exchange Offer for Its 5.50% Senior Notes Due 2026. These notes were originally issued on May 25, 2021 in a private placement pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, in an aggregate principal amount of $300,000,000. Holders of these notes may exchange them for an equal principal amount of a new issue of 5.50% Senior Notes due 2026 pursuant to an effective registration statement on Form S-4 filed with the Securities and Exchange Commission.
🏬Retail
GTI — Rise Bloomfield, New Jersey. This is the Company’s third store in New Jersey and 65th in the nation. GTI has retail locations in New Jersey in Bloomfield, Paramus and Paterson. The company entered the New Jersey market in 2018 and operates a manufacturing facility in Paterson that produces and distributes its branded products including Rythm premium flower and vapes.
Harvest — Opens 12th FL store in Jacksonville. Additional Harvest dispensaries in Florida are located in Gainesville, Kissimmee, Lehigh Acres, Longwood, North Jacksonville, North Miami Beach, North Port, Olympia Heights, South Miami Beach, Tallahassee, and West Palm Beach.
High Tide — Reveals Design Concept for Cannabis Chop Club Retail Value Brand. The interior aesthetic is both simple and approachable for the value customer and showcases a discount warehouse vibe along with a club membership feel. Cannabis Chop Club stores will also feature exclusive deals and wholesale prices for “Chop Club” members.
Halo Collective — Begins Construction of Dispensary in Westwood, Los Angeles. Scheduled to open in the fourth quarter of 2021, the Westwood Dispensary will be the Company's first of three planned dispensaries for Southern California and a key first step towards achieving the stated goal of opening ten dispensaries by the end of 2022. The Westwood Dispensary is strategically located on Santa Monica Blvd within a mile of the UCLA campus and blocks away from Century City. There is daily traffic of over 161,000 vehicles within three blocks, primarily on Santa Monica Blvd. and Westwood Blvd. This prime location features ample parking on the street front and an adjacent parking lot.
🌱Product
Trulieve — Debuts New Line of Concentrates Using Hydrocarbon Extraction. Live Resin is created in Trulieve's state-of-the-art hydrocarbon extraction lab using the Company's proprietary blend of propane and butane on TruFlower that has been frozen immediately after harvest. The result is a strain-specific and full-spectrum concentrate that is exceptionally flavorful. It contains higher levels of cannabinoids and terpenes than other concentrates. Live Resin provides patients with a powerful and richly aromatic experience with a broader sensation of effects. Hydrocarbon extraction uses solvents to gently process cannabis, allowing for the retention of high levels of the plant's original flavor and terpene and cannabinoid profiles at a lower temperature. By protecting the delicate properties of the plant from high heat, the process creates a consumption experience most similar to smoking whole flower cannabis. Trulieve's first hydrocarbon extracted concentrates, Live Resin in the popular Member Berry and Orchard Nectar strains, are available in .5g sizes throughout Florida. All of the extracts in Trulieve's product line will be strain-specific, ranging across Indica, Sativa, and Hybrid products.
Jushi — Launch of Flower Brands, The Bank and Sèche in Virginia as Commonwealth’s Flower Sales Begin. Jushi has received the Virginia Board of Pharmacy (BOP) approval to begin selling its premium flower brand, The Bank, and its value flower brand, Sèche, to Virginia patients. The Bank, an award-winning flower brand known for its superior plant genetics, initially offers pre-packaged flower to registered Virginia cannabis patients in three-tiered lines: Gold Standard, Cache and Vault. The Bank is currently available for purchase at BEYOND / HELLO™ Manassas, the Company's 15 Pennsylvania BEYOND / HELLO™ locations and partner dispensaries in Pennsylvania and Nevada. Sèche, Jushi’s fine grind, fine flower and pre-rolls brand, is also available for purchase at BEYOND / HELLO™ Manassas, the Company's 15 Pennsylvania BEYOND / HELLO™ locations and partner dispensaries in Pennsylvania, Ohio and Nevada. Jushi will continue to roll out its in-house flower brands to additional BEYOND / HELLO™ Virginia locations as they open, and to partner dispensaries in the Commonwealth in the coming weeks and months.
Lowell Smokes — Now Available Exclusively at Ascend in MA. The launch brings Lowell Smokes to the Bay State, which has enjoyed recreational cannabis since 2018. The partnership between Lowell Farms Inc. and AWH follows a similar launch last month in Illinois which has been well received. The Illinois launch initiated in Ascend dispensaries and has subsequently expanded to dispensaries state-wide.
Unrivaled Brands x Amuse — D2C Delivery of Korova Across California. The partnership includes the launch of an exclusive CBN & THC Sleep tincture, the first multi-cannabinoid tincture in Korova’s Black Bottle lineup. Korova’s Black Bottle is a 2oz 1000mg, nano-emulsified, rapid-onset tincture offered in distinct fruit flavors.
Source Cannabis Quest flower — Weedmaps/We Tried It. This weed struck me because it was actually amazing, like the medicinal flower of my mid-aughts, pre-Prop 64 childhood. However explosive its nug optics, the high was even better. It felt full, like a round ball of joy enveloping everything in its path. When I found out the brand had been around since 2003, the picture began to focus. In an impossibly difficult market that eats brands for breakfast, to be around since 2015 is considered a feat. The fact that Source Cannabis has been thriving since 2003 shows these MFs clearly know what they're doing.
🧔People | 💻Hiring
NABIS — Director Of Credit (SF)
710 Labs — VP, Finance (LA)
Omura — VP, Sales (LA)
🎙️Interviews
Aurora Cannabis CEO — Medical Marijuana First at the Federal Level in the U.S.
Can the Marijuana Industry Ever Be Profitable? An Interview With Columbia Care CEO Nick Vita. “We are building out our wholesale business, which now makes up 15% of total revenue -- but which we expect to exceed 50% in the future as we have more cultivation come online in some of our markets such as Pennsylvania and New Jersey. We've harmonized [standard operating procedures] across cultivation in our markets and saw record cultivation yields in seven markets last quarter.”
Daniel Pronk + Trulieve CEO Kim Rivers On The Long Term, Generational Investment Opportunity
How Weedmaps plans to grow: Q&A with WM Technology CEO Chris Beals
How a cannabis-focused AI platform, FolioGrow, helps growers predict yield
InterCure: Internationally Profitable Cannabis
Liberty Cannabis (Holistic Industries) comes to Missouri: Q&A with Lee Riley
👋 Highly Objective is curated by Dai Truong. 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.