💼 AWH Settles Lawsuit with MedMen by increasing transaction consideration by $15M

Curaleaf names Matt Darin CEO. BLAZE acquires Greenline POS. Austin Decriminalizes Cannabis. Earnings – Curaleaf, GTI, WM Technology, Cronos, MariMed, Lowell Farms, GrowGen, Hydrofarms, AFC Gamma.

May 11, 2022

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🌿 Industry

Drivers Behind Year-Over-Year Changes in March Cannabis Sales for 11 States.

New Cannabis Ventures published an exclusive look into BDSA’s monthly cannabis sales data for 11 states. According to the data, sales remained relatively flat sequentially on a per-day basis and, compared to last year, sales expanded in Arizona, Florida, Illinois, Massachusetts and Michigan. The biggest growth driver was pre-rolls in Arizona, jumping 224%, Illinois, increasing 32%, and Massachusetts, gaining 25%. Ingestibles sales grew the most in Florida, expanding 73%. Concentrates, the strongest category in Michigan, were up 12%. In California, Colorado, Nevada and Oregon, lower flower sales appeared to drag down the overall sales for the month. Maryland experienced declines in all categories, while in Pennsylvania, the vape recall caused an 8% decrease in concentrates. — New Cannabis Ventures

Sundial CEO predicts ‘massive’ cannabis store closures in Canada. In a letter to shareholders, Sundial Growers CEO Zachary George warned the “trickle” of cannabis store closures could grow into a flood “with the toll likely closer to 1,000 than 100.” George didn’t share specific reasons for the expected mass store closures. However, Canada’s marijuana retailers have fended off stiff competition while coping with falling prices eating into margins and oversaturation in some areas. As of April 2022, 3,138 cannabis stores were open across Canada, according to Cannabis Benchmarks. Sundial said it manages Canada’s largest private sector marijuana retail network, with ~180 locations. Those locations consist of corporate-owned stores, franchised locations, and others. George said Sundial closed 11 stores “and will continue to evaluate our retail portfolio to optimize quality and profitability. Sundial’s retail network creates an opportunity to own the relationship with cannabis consumers and showcase both Sundial’s branded products and the best offerings from other Canadian licensed producers.” — MJBizDaily

New York approves another 36 new Adult-Use Conditional Cultivators. Board members voted in favor of issuing the 36 new licenses, bringing the total number of farms allowed to grow adult-use cannabis to 88. The Office of Cannabis Management has received about 200 applications, and will submit more for board approval. Conditional license holders can begin growing cannabis outdoors or in a greenhouse with up to 20 artificial lights. Provisional license holders will have to apply for full licenses by June 1st, and the temporary licenses expire June 30, 2024. — Syracuse.com

Dozens of Mississippi cities and counties opt out of medical cannabis. Nearly four dozen Mississippi municipalities and counties have so far opted out of the state’s new medical marijuana program, with the deadline for doing so emerging in a few days. The Sun Herald in Biloxi confirmed this week that at least 28 cities and 16 counties had decided to opt out before the May 10th deadline, with most choosing to opt out of all MMJ operations. Biloxi, which is known for its casinos, has opted in. The 2022 MJBiz Factbook projects that sales will reach $265M in Year 1 and increase to $800M by Year 4, with no state cap on licensing. Online license applications will open in June, according to the Mississippi Department of Health website. — MJBizDaily

Vertosa Joins KhuenPhu and Hivi's Effort To Destigmatize And Normalize Cannabis Within the AAPI Community. Vertosa, an Asian-led cannabis infusion technology company, today announced its support for Modern Cannabis, an inclusive educational campaign designed for the AAPI community. Developed in partnership with Vertosa's brand partner, KhuenPhu, a CBD brand built to modernize Asian healing traditions, and HiVi, a digital-first cannabis company changing how conscious consumers discover and adopt cannabis for their wellbeing. The Modern Cannabis campaign is a 360-degree movement that uses print and digital assets to educate older generations and non-English speakers about cannabis' wellness applications. — Press Release

Cannabis pop-ups make a comeback in retail stores. What do tour buses, tarot cards and Mexican wrestling have in common? They involve brands setting up temporary venues at stores to promote their products and stand out from the crowd. Garcia Hand Picked uses an Airstream to spread the word for the edibles brand. Luchador, which bills itself as “The Heavyweight Champion of Cannabis,” holds free Mexican wrestling shows at dispensaries to promote its line of THC-infused gummies and drops. Jushi hosted a lucha libre event at one of its California stores on 4/20, drawing about 2,000 people to its dispensary. Jushi orders a certain amount of product from vendors such as Luchador and Garcia Hand Picked in exchange for the pop-up events to take place at its dispensaries. For one of its own brands, Tasteology, Jushi is offering tarot card readings at its Massachusetts dispensaries. — MJBizDaily

Austin Set to Decriminalize Cannabis. Austin, Texas voters approved a local ballot measure to decriminalize marijuana—a victory for activists who are also pursuing similar reforms in other cities in the Lone Star state. The measure, which was spearheaded by the progressive campaign Ground Game Texas, passed by a margin of 85% to 15%. Besides decriminalizing cannabis, the measure also bans “no-knock” warrants by police. Activists turned in more than 33,000 signatures to qualify the measure, after which point the Austin City Council approved a resolution to put it on the ballot. On the same day that the initiative was certified, Gov. Greg Abbott (R) said that he doesn’t believe people should be incarcerated over low-level marijuana possession. — Marijuana Moment

Missouri PAC Submits Twice the Signatures Needed for Cannabis Measure. Missourians in all likelihood will hold the key to adult-use cannabis legalization in the November 2022 election after activists submitted more than double the required signatures to the Secretary of State’s Office. While Legal Missouri 2022, a registered political action committee (PAC), needs ~171,500 valid signatures in order to put its issue before state voters, the group submitted more than doubled that benchmark with the 385,000-plus signed petitions it turned in on May 8th. Legal Missouri 2022 received more than $2.5M in cash contributions in support of its ballot effort, including $250,000 from Good Day Farm Missouri, $250,000 from BD Health Ventures, $247,500 from New Growth Horizon and $177,500 from Green Four Ventures, according to the Missouri Ethics Commission. — Cannabis Business Times

💵 Deals

AWH / MedMen Settles Lawsuit, Consideration increased by $15M to $88M Total.

To settle the dispute, AWH will increase the transaction consideration by $15M, $4M of which is contingent on the start of adult-use sales at a MedMen NY dispensary. The revised total consideration of $88M remains significantly below recent precedent transactions. As part of the settlement, MedMen will withdraw its counterclaims against AWH. The parties will also amend certain terms in the previously announced transaction agreement. Amended Transaction Terms: AWH will receive a 99.99% controlling interest in MedMen NY at closing, AWH will pay MedMen $74M at closing ($63M transaction consideration and $11M settlement payment). AWH has already paid $4M of the consideration as a deposit. AWH will make a subsequent payment of $14M upon the first sale of recreational cannabis in a MedMen NY dispensary. — Press Release

Valcon Medical Closes Series C Round and Launches Global Commercial Sales of Formulated Medical Cannabis Products. Valcon Medical, Europe’s leading specialty medical manufacturer of cannabis-derived, prescription-based formulated product and API (Active Pharmaceutical Ingredient), has closed its most recent round of growth funding with a combination of new equity investment and a new expandable credit facility of underwritten term debt by Denmark’s state-backed investment fund, Vaekstfonden. The funding, which was led by Altitude Investment Management, Artemis Growth Partners, and Enexis A/B, increases total capital raised to €11.8 million, accelerates commercial sales, expands geographic reach, and funds new product development for Europe’s leading manufacturer of formulated medical cannabis products under EU GMP standards. — Press Release

BLAZE Expands to Canada through acquisition of Greenline. The acquisition allows BLAZE to better serve its international clients, while also enabling the Company to gain experience operating in Canada's federally regulated marketplace. The acquisition of Greenline provides an added benefit for BLAZE clients looking to expand their reach into a new market using the existing platform, while additionally providing Greenline operators the benefit of BLAZE's comprehensive, compliance-focused operations software. — Press Release

MariMed Closes Acquisition of Illinois Craft Cannabis License Allowing for Vertically Integrated Operations. The close of this transaction enables MariMed to add cultivation, manufacturing, and distribution to its existing retail cannabis operations in Illinois. The Company has commenced development of a state-of-the-art cultivation and processing facility in Mt. Vernon, IL and anticipates commencing operations in the fourth quarter of 2022. The Mt. Vernon cultivation and processing facility currently under construction will house up to 14,000 square feet of canopy, an extraction lab to produce concentrates, and a production kitchen for the manufacture of edibles and other derivative products. — Press Release

Glass House Brands Acquires Remaining Equity, Property Ownership in The Pottery Dispensary. Under the terms of the Agreement, Glass House will acquire all of the equity interests of N.R.O. Management and The Pottery or 500,000 shares of Glass House set at a fixed price of $6.00/share. The shares will have a one-year lock-up period from the closing date. As part of the transaction, Glass House will also acquire The Pottery's three active state cannabis retailer, distributor, and cultivation licenses; as well as six city-level adult-use and medical cannabis retailer, distributor, and cultivation licenses. In addition, Glass House has committed to acquire all of the undivided ownership interests in the Property held by TLMD Holdings, LLC and TLMD Real Estate Holdings, LLC, respectively, for $3M in cash. — Press Release

Aurora Cannabis Advances Premiumization Strategy by Completing Acquisition of Thrive Cannabis, and its Greybeard Brand. Aurora has completed its previously announced acquisition of TerraFarma (parent company of Thrive ) for aggregate initial consideration of $38M in cash and stock, and up to $30M in potential earnout amounts, payable in cash, Aurora Shares or a combination of both (at the election of Aurora), subject to Thrive achieving certain revenue targets within two years of closing of the Transaction. — Press Release

📄 Company Updates / Earnings

Curaleaf — Q1 2022 Results. $313.1M in Revenue (49.3% GM), down (2%) sequentially from $320.0M (49.7% GM). Adjusted EBITDA of $72.9M, down (8%) from 79.7M from Q4 2021. As of March 31, 2022, the Company had $243M of cash and $584M of outstanding debt net of unamortized debt discounts. During Q1 2022, Curaleaf invested $30M net in capital expenditures mostly attributable to cultivation, processing, and retail sites development activities. — Press Release

GTI — Q1 2022 Financial Results. Revenue increased 25% Y/Y to $243M, flat compared to Q4 2021. Gross profit was $122.9M (51% margin) compared to $110.9M (57% margin) for the comparable period. GAAP net income of $29M / $0.12 per basic and diluted share. Adjusted Operating EBITDA was $67M (28% margin). Cash flow from operations of $55M. $175M Cash, $244M Debt. — Press Release

During GTI’s earnings call , hedge-fund billionaire Leon Cooperman ripped into CEO, Ben Kovler, over what Cooperman said was rampant insider selling by the company's executives. — Business Insider

WM Technology — Q1 2022 Financial Results. Revenue of $57.5M, up 40% from Q1 2021. Monthly active users (MAUs) increased to 16.4M, up 52% compared to the prior year period. MAU growth of 73% when adjusting the current period to exclude the MAUs attributed to the Learn section of weedmaps.com that were not trackable during the prior period. Average monthly revenue per paying client increased to $3,810, a 9% increase compared to the prior year period. Average monthly paying clients increased to $5,026, a 28% increase compared to the prior year period. Gross Profit was $53.7M (93% margin), which reflects a 200bps margin reduction from the prior year given previously discussed growth investments and initiatives. Net loss was $(31.2M) as compared to net income of $7.7M from the prior year period. Adjusted EBITDA was $(1.0M) as compared to $9.0M from the prior year period. Cash totaled $55.9M as of March 31, 2022 and the Company remains debt-free. — Press Release

MariMed Q1 2022 Earnings. $31.3M in revenue (54.3% margin), up 27% Y/Y, $10.4M in Adjusted EBITDA. $8.5M in Cash flow from operations. $33.5M in cash. The Company maintained its previous financial guidance for FY2022—Revenue of $145-$150M. Gross margin in line with fiscal 2021 gross margin of 54%-55%. Adjusted EBITDA of $47-$52M. Capital Expenditures of ~$25M. — Press Release

Cronos Q1 2022 Earnings. Net revenue of $25.0M, up $12.4M from Q1 2021. Gross profit of $6.9M in Q1 2022 improved by $9.9M from Q1 2021. Adjusted EBITDA of $(18.9M) improved by $17.7M from Q1 2021. The improvement year-over-year was primarily driven by the improvement in gross profit and a decrease in sales and marketing and R&D expenses. $861.5M cash as of 3/31/22. — Press Release

Lowell Farms Q1 2022 Earnings. Revenue of $12.4M, up 13% Y/Y. CPG revenue increased 10% sequentially, primarily due to increases in pre-roll and packaged flower revenue. As expected, Lowell Farm Services (LFS) revenue declined $2.8M from Q4 seasonal high levels. Gross margin of 12.7% compared to (12.3%) sequentially and (13.4%) Y/Y. Operating loss was ($2.5M) compared to an operating loss of ($8.2) sequentially and an operating loss of ($5.7M) Y/Y. Adjusted EBITDA was ($0.9M) compared sequentially to adjusted EBITDA of ($3.6M) and negative adjusted EBITDA of ($4.6M) Y/Y. — Press Release

GrowGeneration Q1 2022 Earnings. Net sales declined 9.2% to $81.8M driven by softer industry demand. Comparable store sales for the quarter decreased 35.5%. Net loss of ($5.2M) compared to net income of $6.1M last year. Loss per share of ($0.09). Adjusted EBITDA loss of ($0.7M). Revenue guidance for 2022 updated to be between $340-$400M, down from a range of $415-$445M previously. Adjusted EBITDA guidance expected to be between $0-$10M, down from previous expectations of $30-$35M. Expect to add 10-15 new stores this year, down from previous target of 15-20 new stores, given strategic decision not to build new stores in states where there is already physical retail presence. — Press Release

Hydrofarm Q1 2022 Earnings. Net sales remained flat at $111.4M. Gross Profit decreased to $16.6M compared to $23.2M. Adjusted Gross Profit was $22.3M compared to $23.4M. Net loss was ($23.3M), or a loss of ($0.52) per diluted share, compared to net income of $4.9M, or $0.13 per diluted share. Adjusted Net Loss was ($7.8M), or ($0.17) per diluted share, compared to Adjusted Net Income of $7.2M, or $0.18 per diluted share. Adjusted EBITDA decreased to $3.1M compared to $9.9M. Guidance — Revenue of $480-$520M. Adjusted EBITDA of $46-$54M (10% margin). — Press Release

AFC Gamma Q1 2022 Earnings. Net income of $10.2M, or $0.53 per basic weighted average share of common stock Distributable earnings of $11.9M, or $0.62 per basic weighted average share of common stock Paid a dividend of $0.55 per common share on April 15, 2022 for Q1 2022, representing a 10% increase from the prior quarter. Distributable earnings significantly exceeded the declared dividend for the fourth consecutive quarter. Closed $154.2M of new commitments since the start of Q1 2022 and funded $131.5M of new and existing commitments. Total loan commitments of $482.7M ($419.1M of which has been funded) across 12 portfolio companies as of May 9, 2022. The portfolio’s weighted average yield to maturity was ~19% as of March 31, 2022 and December 31, 2021. — Press Release

Flower One Delays FY21 Filing. The additional time is required to permit the Company’s auditors, MNP, to complete its review and enquiries in connection with the audit of the Company’s annual financial statements. The delay is also in part attributable to (i) logistical challenges related to the COVID-19 pandemic in the 2021 calendar year and (ii) recent changes to the Company’s finance department—including its CFO and overall team. The Company and its auditors are working diligently, and the Company intends to make the Annual Filings as soon as possible and it expects to make these filings by no later than June 30, 2022, if not sooner. — Press Release

🏬 Retail

Harborside Opens Dispensaries in San Francisco and La Mesa. The SF store is Harborside-branded, while the La Mesa store will be Urbn Leaf-branded. Ed Schmults, CEO of Harborside. — "It is particularly notable that these stores have significantly less square footage compared to many cannabis dispensaries in the state. This smaller footprint reflects a much more sustainable approach to cannabis retail in an evolving market. We believe that both stores are well positioned for long-term success” — Press Release

Planet 13 Opens Second Florida Dispensary Located in the Tampa Bay Market. The location in Port Richey is on a busy retail corridor near a Home Depot and on the way to the popular waterfront destinations from downtown. — Press Release

Curaleaf Expands Retail Presence in Florida with Three New Dispensaries. Curaleaf's latest expansion will increase the Company's retail footprint to 50 dispensaries in the Sunshine State and 133 locations nationwide. — Press Release

Verano Opens MÜV Fort Myers Beach, Company’s 46th Florida Location. MÜV is the first medical cannabis dispensary located in the Fort Myers Beach community within greater Fort Myers, an area with 86,000+ residents. — Press Release

🌱 Product

Kiva Expands to Canada. Over the next year, Kiva Confections will work with Canada-based producer Greentone to bring the brand's full portfolio of award-winning edibles to dispensaries across the Canadian market. Kiva is planning an ambitious rollout, with a stated goal of having all of their product lines in the majority of retail doors nationally by year end. — Press Release

Schwazze to Bring Lowell Smokes to Colorado and New Mexico. The strategic licensing agreement will seeLowell Smokes on dispensary shelves state-wide in both markets, including at Schwazze’s three retail banners: Star Buds and Emerald Fields in Colorado and R.Greenleaf in New Mexico. — Press Release

Sonoma Hills Farm Sun-Grown, Full Spectrum Pre-Rolls for the Experienced Flower Consumer. The strain-specific pre-rolls are made in small batches using all-natural, freshly packed ingredients, including OCal-Certified sun-grown flower wrapped in the finest hemp paper. Available in five strains, all feature high-THC flower harvested at peak trichome ripeness, boasting dynamic cannabinoid content and a flavorful terpene profile. — Press Release

House of Saka secures exclusive, North American rights to produce and distribute Gem + Jane Cannabis-Infused Beverages from Vintage Wine Estates. The female-targeted, premium beverage was launched by CannaCraft in 2021 and this agreement allows the brand to maintain and grow its roots in the cannabis-infused beverage sector. Vintage Wine Estates acquired the rights to the brand in 2022, and plans to separately launch hemp-derived CBD-infused beverages under the Gem + Jane label in the coming months. — Press Release

HUGS Brand Launched by MWG. HUGS, the newest cannabis retail brand under MWG is launching their first products for PRIDE month. As part of the launch, the brand is donating $1 from every HUGS 3.5g jar sold in June to the Sacramento LGBT Community Center. The HUGS brand debuts with their first three limited-edition premium indoor flower strains aptly named Rainbow Sherbet, Same-Sex Wedding Cake, and Banana Envy. Each strain is available in full 1g prerolls and 3.5g jars in dispensaries throughout California. — Press Release

Copperstate Farms Introduces New Cannabis Brand Jukebox. Jukebox features a selection of cartridge flavors, pre-rolls, and edibles, Jukebox will replace the Copperstate product line and is now available at Sol Flower and select dispensaries throughout Arizona. The botanically derived cartridges use premium cannabis oils paired with high quality grade terpenes. Produced by ethanol extraction and double distilled for up to 93% potency, the cartridges are available in over a dozen flavorful strains including: Super Sour Diesel, Sequoia, Lemon Cake, Blueberry Cookies, Grapefruit Kush and Purple Punch. — Press Release

Ayr Wellness expands product portfolio available in MA with the addition of its premium flower brand, Kynd, and the launch of Entourage vapes in Ohio. Sales of Kynd began in Massachusetts on April 29th, exclusively at Sira Naturals dispensaries. Each unique strain included in the initial launch, “Mr. Nasty,” “Orangutan Zkittlez,” and “Fresh Squeezed,” are new to Ayr’s offerings in the Massachusetts market and boast a premium genetic profile. These offerings will be made available through 3rd party dispensaries and the broader adult-use market in the near future. Entourage vapes begin sales in Ohio on May 4th, launching with six strain-specific offerings, including “Skywalker OG,” “OG 1 Kenobi,” “Yoda’s Alien Cookies,” “Blue Dream,” “Champagne Kush,” and “Jack Herer.” The initial drop can be purchased by Ohio medical patients in 28 dispensaries throughout the state. — Press Release

Columbia Care Brings its Most Popular Brands, Seed & Strain and Classix, to Colorado. The brands are now available across 20 The Green Solution (TGS) dispensaries and will be available to wholesale partners in the coming months. In similar adult use markets like Illinois, the company has seen ~90% penetration in dispensaries with brands like Seed & Strain. — Press Release

🧔 People

Curaleaf Names Matt Darin CEO. Current CEO Joe Bayern will launch and run a new division of Curaleaf developing a new CPG-based business model. Darin was a co-founder of Grassroots, he was a first entrant in some of the top cannabis markets in the U.S., including Illinois and Pennsylvania. Since joining Curaleaf in July 2020, he led the Central region, the company's largest by footprint and revenue. In 2021 he added the Southeast region to his responsibilities, helping increase Curaleaf's market share by 55%.

Pacific Stone Adds Angela Cheng as SVP Marketing and Ted Whitney as VP Sales. Cheng joins Pacific Stone with over two decades of brand marketing experience creating consumer and trade advocacy programs for some of the largest global spirits conglomerates, including Diageo, Bacardi and Moët Hennessy. Whitney previously served as the VP Retail Operations of NUG where he spearheaded brand innovation initiatives. Both executives have extensive experience across several industries including cannabis, spirits and consumer packaged goods, and will spearhead brand growth initiatives in their new roles.

🎙️ Interviews

The Rise & Fall of Canada’s Cannabis Industry — The Big Story

Maison Bloom on Cannabis Beverages & Standing Out — Alchemy Podcast

Vertosa's Austin Stevenson on Cannabis Infusion — Honeysuckle

How It Started with Steve Gutterman, CEO of Falcon Brands — BudsFeed

C3 Industries Is Turning On Assets and Ramping Up Revenue — NCV

Takeaways from Benzinga Miami 2022 — Cannabis Investing Network

👋 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.