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🏛️ California Cannabis Operators Call for Change to Tax System (Cultivation & Excise Taxes)
Leafly/Merida $30M Convertible Note. Vangst raises $19M. VIOLA raises $13M. Garden Society raises $7M. Sweet Flower opens Culver City, Eaze opens SD / 2nd Santa Ana location.
Craft cannabis industry in California is 'on the brink of collapse,' advocates say. Cannabis advocates, small farmers and business owners called for an overhaul of the California marijuana tax system as they struggle to keep afloat amid rising operating and regulatory costs. They gathered outside the State Capitol in Sacramento to make their case and warn that the industry could collapse if steps aren't taken soon. Amber Senter (Co-Founder, Supernova Women), and others are asking the Legislature and Gov. Gavin Newsom to eliminate the cultivation tax and repeal the state’s excise tax for social equity retailers. "Small operators, especially social equity and small farmers are really being taxed out of existence," said Senter. "Outdoor grown cannabis is $300/pound, and we have a cultivation tax that's $161/pound. So if you do the math there, over 50% of a pound of cannabis is going to taxes." Kristi Knoblich Palmer, co-founder KIVA Confections, lamented that the migration of business into the illegal market was damaging the effort to establish a stable, consumer-friendly marketplace in a conversation with the Sacramento Bee. “To have this system that now appears to be failing, having people go back into the old-school way of doing things..it does not help us get to our goal of professionalizing cannabis and normalizing cannabis,” she said.
Cannabis stocks offer higher growth at lower valuations, Tim Seymour says — the top 2022 trend he’s watching. Brand building may be the central theme in cannabis for 2022, portfolio manager Tim Seymour says. After a disappointing 2021 on the legislative front, larger players will use this year to bolster their presence in existing cannabis markets and adjacent industries, Seymour told CNBC’s “ETF Edge.” “As we look forward to 2022, one of the big themes for cannabis investors should be the emergence of the brands,” said Seymour, who runs the Amplify Seymour Cannabis ETF (CNBS). “If you think about valuations for the sector, we come into 2022 cheaper than we went into 2021,” Seymour said. “This is a sector that offers higher growth than many other sectors outside of cannabis at much lower valuations.”
Covid’s Cannabis Breakthrough on Late Night Shows. Jimmy Kimmel shared the news, joking that cannabis compounds are “also what Willie Nelson calls his house.” “This would be interesting. All this time we’ve been listening to the C.D.C., we should have been eating CBD.” — JIMMY KIMMEL. “You know, it’s funny — all these crazy cures, I’m like ‘Oh, that’s ridiculous.’ Ivermectin, the horse dewormer; bleach. And then somebody says marijuana prevents Covid, I’m like ‘Oh, really? Do tell.’” — JIMMY KIMMEL. “Great news for all the teenagers whose parents find weed in their room: ‘Oh, Mom, I see you found the Covid-stopping compounds that I hid in my sock drawer. Those aren’t mine. no, no. Those aren’t mine. I’m just holding them for my friend, Tony Fauci.’” — STEPHEN COLBERT
Arizona Cannabis Sales Top $1.2 Billion in First 11 Months of 2021. Arizona cannabis sales continued on an upward trajectory in 2021, with the Arizona Department of Revenue reporting more than $1.2B in combined cannabis sales through the first 11 months of the year. In November, adult-use recreational cannabis sales hit a new peak and crossed $60M for the first time. Medical sales have fluctuated throughout the year, topping out at about $73M in March and April.
Ascend Wellness Holdings— Files Lawsuit and a Motion for Preliminary Injunction for Specific Performance to Close Transaction with MedMen. In addition, AWH has made an application for a preliminary injunction and temporary restraining order to maintain the status quo between the parties and to prevent any actions by the MedMen parties that would result in additional encumbrances on the equity or assets of MedMen NY, Inc.
Leafly and Merida Merger Corp. I — $30M Convertible Note Financing. Leafly and Merida Merger Corp. I (NASDAQ: MCMJ) entered into a $30M convertible note purchase agreement with new investors led by Cohanzick, an investment management firm. This supplemental financing, which will close immediately prior to the closing of the proposed business combination between Leafly and Merida, will help to ensure full funding of Leafly’s current multi-year business plan. The $30M financing will be in the form of unsecured convertible senior notes due 2025. The notes will bear interest at a rate of 8.00% per annum, paid in cash semi-annually in arrears on July 31 and January 31 of each year. The notes will be convertible at the option of the holders at any time before maturity at an initial conversion share price of $12.50 (80 shares of the company common stock per $1,000 principal amount of notes or accrued and unpaid interest, if any, thereon). In addition, the company has the option after one year to redeem all or a portion of the notes for cash equal to the principal or force the conversion of the notes after two years based on pre-agreed share price thresholds.
Vangst — $19M Series B. Vangst, the cannabis industry's leading hiring platform, completed its $19M Series B financing. The round was led by Level One Fund, with participation from previous investors including Lerer Hippeau, Colle Capital, Casa Verde Capital, Phyto Partners, and new investors including L2 Ventures, Althea, Delta Emerald Ventures, Achari VC and others. Vangst currently works with 1,200 of the leading cannabis businesses, including GTI, Dutchie and Holistic Industries. The Vangst platform streamlines the hiring process by matching both full-time employees as well as vetted, credentialed, W2, on-demand GIG workers, with cannabis businesses across the U.S. As the first and only gig platform in cannabis, Vangst has filled over 150,000 part-time gigs since launching the product in 2018.
VIOLA — Closes $13M Bridge Round. This latest round of funding allows Viola to expand into several key new markets, including Pennsylvania, Illinois, New Jersey, and Maryland, and continue executing on strategic marketing initiatives, further positioning Viola to be one of the top brands and operators in the rapidly growing cannabis industry.
Garden Society — Closes $7M Series A Funding Led by RJ Primo. Garden Society, a popular women-owned cannabis brand featuring craft gummies, gourmet chocolates, and rosette pre-rolls, has secured $7M in Series A funding. Led by RJ Primo LLC, the funding will be used to scale product offerings, modernize manufacturing, and further expand its team to meet the growing demand throughout California, as well as to expand into other states in 2022. In addition to the primary funding, the round included an oversubscribed SPV (composed of strategic female and BIPOC angel investors. Additionally, Brooke Carpenter, former head of sales for Flow Cannabis, has joined the Garden Society team as head of sales to help drive the company forward.
MariMed — Acquires Illinois Craft Cannabis License Allowing for Vertically Integrated Cannabis Operations. The company will acquire Green Growth, holder of a provisional Cannabis Craft License in Illinois. The transaction is subject to customary closing conditions and regulatory approvals. Terms of the deal were not disclosed. For this Craft License, the Company will acquire a building to develop up to 14,000 square feet of canopy for cultivation, build an extraction lab to produce concentrates, and build a production kitchen for the manufacture of edibles and other derivative products. A Transportation License also being acquired will enable the Company to wholesale its products throughout Illinois.
1933 Industries — Signs Binding LOI to acquire Beverage Company Day One. 1933 Industries will issue 55M shares (~$1.8M) of common stock of the Company to acquire Day One. 45.2M shares will be issued at closing, and the balance of 9.8M shares will be issued subsequent to closing in quarterly installments. All shares issued under the transaction will be subject to a contractual one-year hold period, in addition to any resale restriction that may be required under applicable securities laws. In addition, the vendors will be eligible to receive up to a further 27.5M share purchase warrants of the Company, exercisable at a price of $0.0545/share based on the achievement of certain gross revenue milestones over a period of 30 months following the closing of the transaction.
Day Three Labs — Acquires Pharma-Grade Cannabinoid Infusion Technology In Deal Led By KEY Investment Partners. Cannabinoid CPG ingredient producer Day Three Labs (DTL) has acquired a patented pharmaceutical-grade cannabinoid infusion technology developed by a leading Israeli bioscience company. This first-of-its-kind technology allows ingested cannabinoids to naturally bypass patients' and consumers' first-pass metabolism, delivering significantly elevated levels of Delta 9-THC into the bloodstream without converting to 11-hydroxy-THC. As a result, DTL's technology is able to consistently mimic the experience of smoking whole flower cannabis by taking effect within 10 minutes, enhancing bioavailability by upwards of 500% and capturing the plant's entire cannabinoid and terpene profile.
Halo Collective — Expands into Functional Beverages, Agrees to Acquire H2C Beverages and Establishes a $30M Distribution Agreement with Elegance Brands. Halo has signed a definitive agreement to acquire H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages. In consideration for all the issued and outstanding shares of H2C, Halo has agreed to issue 7,538,462 common shares in the capital of Halo. Under the Distribution Agreement, Elegance has agreed to purchase $30M of H2C and Hushrooms branded products during the 24-month Launch Period and to distribute these products to retail outlets in respective legal states across the United States.
AUDACIOUS — Completes Transaction to Acquire Lo͞oS. Lo͞oS products are based on a unique nano-emulsion technology platform for rapid onset, are vegan, gluten free, low sugar and low calorie. The 2-oz. shots are infused with 100mg THC (5 mg per serving) and are available in three flavors: Orange Crush Sativa, Green Dream Hybrid, and Lavender Indica. Each flavor features a unique terpene profile and has less than 3 mg of sugar per bottle. After entering the market in the 2-oz. drink category, Lo͞oS plans to release a number of other products across several key categories. As part of the consideration for the transaction, the Company issued a total of 4,687,500 common shares.
Decibel Cannabis — $54M Debt Refinancing with connectFirst, increasing its Access to Debt by $20M. The Committed Amount is comprised of $40.5M of term debt, a $6.0M authorized overdraft secured against government receivables, and an accordion line of $7.5M. The Company expects the proceeds combined with contributions from operations to provide sufficient liquidity to repay Decibel's convertible debentures on maturity.
📄 Company Updates / Earnings
Red White & Bloom — Receives Full Licensing, Commences Operation of 15,000 Sq. Ft. Michigan Cannabis Manufacturing/Processing Facility. RWB will immediately commence operation of its new Warren facility as the hub for production and distribution for its wildly popular Platinum Vape® brand vapes, and will soon add gummies and chocolates for Michigan’s $1.8 billion medical and adult-use markets / 400+ dispensaries (provisioning centers).
Green Check Verified — Reports over $1.5 Billion in GMV in 2021 Among Other Milestones. Among these milestones, GCV increased the number of cannabis-related businesses (CRBs) on its platform by 270% and added financial institution (FI) customers in 10 new states and 2 U.S. territories — bringing its total number of U.S. bank and credit union partners close to 100.
Halo Collective — Receives Local Approvals for Budega™ Dispensary in Los Angeles's NoHo Arts District. The NoHo location is the second Budega-branded dispensary planned to open in Southern California over the next few months. The NoHo location is expected to generate nearly $10 million annually of retail sales at maturity2. The company is also licensed for delivery, and this additional service is expected to increase top-line sales and help capture overall market share. The NoHo location's delivery service area will include Studio City, North Hollywood, Hollywood Burbank, and the Eastern San Fernando Valley.
Stem Holdings — FY2021 Financial Results
Revenue: $41.8M, up 155% as compared to $16.4M for the same period the year prior. The Company’s revenue for FY2021 net of Driven’s portion totaled $24.4M, which is an increase of 49% from prior year. Net revenue after discounts and returns totaled $35.8M, up 156% as compared to $14.0M for the same period the year prior. The Company’s net revenue after discounts and returns net of Driven portion totaled $20.9M, up 49% for the same period the year prior
The Company reported impairment expenses totaling $52.5M, predominately related to the intangible assets and a related party receivable of Driven Deliveries, which the Company recently divested
Adjusted EBITDA loss for the fiscal year 2021 totaled $5.8M as compared to $5.4M in the prior year period
Net loss totaled $64.6M, predominately attributable to a $52.5M impairment charge related to Driven Deliveries
GrowGeneration — Q4 and FY Updated Outlook
FY2021 projected revenue between $420Mto $422M, versus $193M for FY2020
FY2021 projected EBITDA adjusted for stock-based compensation between $31.5M to $33.5M, versus $19.2M for FY2020
Same-store-sales increase of 24.4% for FY2021 compared to 2020
Same-store sales decrease of 12.3% for Q42021 compared to the same year-ago period
A total of 24 new and acquired store locations in 2021, now with 62 locations nationwide
On January 1, 2022, acquired Mobile Media, a leading indoor vertical mobile racking and benching system manufacturer
🏬 Retail / Delivery
Sweet Flower — Opens Flagship in Culver City.
The 3,150-square-foot emporium will offer 89 brands, of which 20% are BIPOC-owned — including Biko, SF Roots, Grizzly Peak, Sundae School, Agua De Flor and El Blunto. The Culver City spot joins Sweet Flowers operating in West Hollywood, Studio City, Westwood and downtown. The company’s 2021 revenues grew by 50% over 2020, according to CEO, Tim Dodd. Sweet Flower is preparing three more licensed locations for launch in early-mid 2022, including Sweet Flower Pasadena, and has several additional license pursuits underway throughout the state.
Eaze — Launches First Dispensaries in San Diego and Santa Ana. Eaze launched its first Eaze Dispensary store, located in San Diego, and acquired a second dispensary in Santa Ana. To-date, Eaze has completed 8 million cannabis deliveries across California and Michigan. In company surveys, 47% of Eaze customers reported shopping at dispensaries in 2021. Eaze projects the addition of storefront retail in California will add 11% to the company’s 2022 state revenue. Eaze Dispensary San Diego (formerly known as Apothokare) is located at 3455 Camino Del Río S. San Diego, CA 92108. Eaze Dispensary Santa Ana (formerly known as Weden) is located at 1625 E St Gertrude Pl, Santa Ana, CA 92705.
Cresco Labs — Opens 10th Pennsylvania Dispensary in Ambler, 47th nationwide. Located in the borough of Ambler north of Philadelphia, the dispensary is a few miles away from the Pennsylvania Turnpike, a superhighway transporting thousands of people daily east-west across the state. Sunnyside Ambler resides in an area home to large facilities operated by major pharmaceutical companies, including Johnson & Johnson, Merck and Janssen.
Ayr Wellness — Opens 44th Florida Dispensary in Pinellas Park. The new dispensary will occupy over 2,700 square feet of prime retail space on one of the most heavily traveled routes in Pinellas County, population over 900,000, according to the U.S. Census Bureau.
Trulieve x Connected Cannabis — Expand Partnership to Florida. Through this agreement, Trulieve will be the exclusive producer, processor and retailer of Connected branded products throughout Florida. Connected branded products will be available later this year exclusively at Trulieve's 111 Florida dispensaries. Trulieve already partners with Connected in Arizona.
Cresco Labs x Khalifa Kush — Partner for CA. Cresco’s Floral Farms and Continuum will be the respective sole producers and distributors of KK’s Green Goods in CA. The Keck strain, which is said to have been “founded, perfected and enjoyed by Wiz Khalifa over the past decade,” will be available in a range of products for California smokers, including flowers and pre-rolls, including There will be an extended line for illumination. Later in 2022. According to a statement, KK Gear will be sold exclusively at Cookie Stores at launch, with additional retail partners expanding throughout the year.
Ripple — Debuts Fast-Acting CBN Products Designed for Rest and Relaxation. Ripple, Colorado’s trusted cannabis edibles brand and pioneer of fast-acting and clinically proven technology, is leading the way in cannabis wellness with new Ripple Sleep QuickDissolves and Ripple Sleep QuickGummies. With 10mg THC and 5mg CBN per packet (QuickDissolves) and 5mg THC with 2.5mg CBN per gummy (QuickGummies), the flavorless Ripple Sleep QuickDissolves and “Berry Sleepy” flavored Ripple Sleep QuickGummies have the same clinically proven 10-minute absorption onset as Ripple’s flagship products.
High Life Farms — Launches Popcorn Small Buds Product Line in MI; Shifts Focus to Pre-Packaged Flower in 2022. Soft-launched at the end of December 2021, Popcorn Buds Pre-Packaged Flower joins High Life Farms' wide range of award-winning flower products cultivated and manufactured in the company's state-of-the-art facilities. Offering high-quality strains at a smaller bud size and more accessible price point, current Popcorn Buds strains available include Dr. Gonzo, Kush Mints and Wedding Cake, with others rolling out as available.
Charlotte's Web — Gummies Launching at GNC Locations Across 24 States. The national distribution agreement with GNC will bring the products to more than 2,000 locations in the United States. Initial shipments of six varieties of Charlotte's Web Gummies will be available for purchase at GNC retail locations across 24 states, with the intent to expand into additional states.
🧔 People | 💻 Hiring
Columbia Care — Adds Derek Watson as CFO. Prior to joining Columbia Care, Derek served as the Chief Financial and Commercial Officer at Tastes on the Fly, a PE-backed, national consumer retail company based in California. He has also held CFO roles at two other consumer companies, Starr Restaurants and Samba Brands, and as CFO and VP of Strategic Initiatives at Schindler Elevator, the U.S. subsidiary of Schindler Holding AG (SCHN.SW). Derek began his career at KPMG where he spent 20 years providing audit and consulting services.
Lowell Farms — Adds Jeff Monat to Board. Monat is a Senior Partner at Merida Capital Holdings. He sits on Merida’s Investment Committee, helping to steer the firm’s investments that focus on products and services associated with the evolution of cannabis as an agricultural product, a natural plant-based medicine, a constituent in pharmaceutical formulations and a recreational consumer product. Monat has previously worked in analyst roles for Seven Locks Capital, Rockbay Capital, and Goldman Sachs, where he advised clients on M&A transactions, financial valuation, and corporate governance issues.
MedMen — Tracy McCourt appointed President of West Hollywood Cannabis Organization. MedMen's CRO appointed President of Emerald Village West Hollywood, a new trade marketing organization for licensed cannabis businesses in WeHo. Emerald Village offers an extensive and eclectic range of cannabis attractions, including culinary, wellness, entertainment, nightlife, art and personalized experiences. Visitors can plan their cannabis adventures through the Emerald Village website – emeraldvillageweho.com – which features the latest on cannabis events, businesses and attractions in the area.
Helene Servillon, JourneyOne Ventures, Women in capital in cannabis
Cannabinoid Connect: Skip Motsenbocker, Pacific Stone
High Rise: Reflections and Projections for 2022
Building Cresco into the Industry's Partner of Choice (Greg Butler, CCO)
Infusion Tech with Austin Stevenson, Chief Innovation Officer of Vertosa
Transformative Acquisitions Position Valens to Ramp Up Consumer Cannabis Products
How Pistil Data Has Become a Secret Weapon for Cannabis Brands and Sales Teams
👋 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.