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👩🌾 California Governor Proposes Eliminating Cannabis Cultivation Tax
Canopy Growth pays $69M for option to acquire Jetty Extracts. Glass House acquires Natural Healing Center for $23M. Earnings - Trulieve, Cresco Labs, TerrAscend, AWH, Planet 13, Columbia Care, & more
California marijuana growers would see tax relief under Gavin Newsom’s proposed budget. California Gov. Gavin Newsom wants to give Cannabis cultivators a break by eliminating a tax they’re required to pay even before they make a sale. Newsom announced in a 2022-23 budget that he intends to seek for the elimination of the cannabis cultivation tax, paid for by the growers. The proposal must be approved by California lawmakers; it would go into effect July 1st if they agree to it. Cannabis grown and sold in California is taxed four times—the cultivation tax that growers pay, a state and local excise tax paid for by buyers, and the sales tax paid by the customer. Currently, cannabis cultivators are required to pay $10.08 for flowers per dry-weight ounce, $3 for leaves per dry-weight ounce, and $1.41 for plants per ounce. Newsom also called for shifting the point of collection for the state’s 15% excise tax from cannabis distributors to cannabis retailers, beginning in January 2023. The existing tax rate would be maintained.
Marijuana and the Metaverse: How LA Cannabis Startups Are Lighting Up the Virtual Realm. While many cannabis firms are still figuring out how to incorporate the metaverse and Web3 applications like NFTs, Canoga Park’s Saucey Farms & Extracts has become one of the first business to offer THC products in the metaverse as part of a dispensary in Cryptovoxels, a virtual platform build on the Ethereum blockchain. Local weed brand Califari, meanwhile, recently sold NFT artwork to support the cannabis-oriented criminal justice nonprofit The Last Prisoner Project. Then there’s groups like the Crypto Cannabis Club (CCC), an organization centered around 10,000 “NFTokers” that gives holders discounts on cannabis products and has hosted weed-themed meetups in the Decentraland metaverse.
Canopy Growth — Option to Acquire Jetty Extracts for $69M Upfront Payment.
Canopy Growth and Jetty, a California-based producer of high-quality cannabis extracts and pioneer of clean vape technology, have entered into definitive agreements providing Canopy Growth, by way of a wholly-owned subsidiary (Canopy Sub), the right to acquire, upon federal permissibility of THC in the U.S. or earlier at Canopy Growth's election, up to 100% of the outstanding capital stock of Jetty. The Agreements are structured as two separate option agreements whereby Canopy Growth has a call option to acquire up to 100% of the equity interests in Jetty. Under the Agreements, Canopy Growth will make aggregate upfront payments in the amount of ~$69M payable through a combination of cash and Canopy Growth stock (majority stock), in exchange for ~75% of the equity interests in Jetty, subject to certain adjustments. Upon exercise of the rights to acquire up to 100% of the equity interests in Jetty covered by the first option agreement, Canopy Growth will make an additional payment pursuant to the terms of the Agreements, also to be satisfied through a combination of cash and Canopy Growth stock.
Glass House Brands — Acquires Natural Healing Center Dispensaries for $22.6M. The retail dispensaries currently operate under the name Natural Healing Center (NHC), located in the Central Coast area. The two operating retail dispensaries had revenue of $15.3M from April 2021 through March 2022 with EBITDA margins above 20%. Glass House is acquiring the two operating retail dispensaries in Lemoore and Morro Bay for ~$22.6M ($5.7M cash, $16.9M stock). The third retail dispensary, currently under construction and located in Turlock, is expected to open in Q3 2022.
Icanic Brands — Non-Binding LOI to Acquire Lifted Organics. Lifted currently has 20.25 acres of licensed outdoor canopy. Lifted is a market leader in fresh frozen flower production as well as live solventless extracts. Lifted currently has 100% of its cultivation under contract with three of the largest companies in California including Buddies, Jetty and LEEF brands. Lifted has been a trusted supply chain partner for LEEF in the past and has proven to be one of the best cultivation groups in the state, cultivating high yielding, pesticide free cannabis year after year.
AWH — $36.5M Incremental Senior Debt Financing. The company has closed on $36.5M of additional funding under the increase option of its existing term loan credit facility. In August 2021, the Company announced it had closed on a $210M Senior Secured Term Loan credit facility with Seaport Global Securities as lead manager.
Chicago Atlantic Real Estate Finance — Upsizes its Revolving Credit Facility to $65M. The Revolving Loan’s aggregate commitment was increased from $45.0 million to $65M with a maturity date of December 16, 2023, and a one-year extension option, subject to customary conditions. The Revolving Loan bears interest at a floating rate, based upon Chicago Atlantic Lincoln’s leverage ratio, ranging from 0% to 1.25% over the Prime Rate, subject to a 3.25% Prime Rate floor. The Company expects to use the available borrowing base from the Revolving Loan to fund additional loans and for general corporate purposes.
Cresco Labs — Expiration of the HSR Act Waiting Period for the Proposed Acquisition of Columbia Care. “We’ve been concurrently working on our divestiture process and working with our state regulators to align with our previously disclosed estimated closing timeline of year-end" said Charles Bachtell, CEO of Cresco Labs.
📄 Company Updates / Earnings
Trulieve — Q1 2022 Results
Revenue increased 64% Y/Y to $318.3M from $193.8M and 4% sequentially
Gross profit of $178.2M and GAAP gross margin of 56.0% compared to gross profit of $132.4M and GAAP gross margin of 43.4% in Q4 2021
Net loss of ($32.0M), a sequential improvement of 55%, and adjusted net income of $1.7M, which excludes $17.2M of transaction, acquisition, integration, and other non-recurring charges primarily associated with the Harvest acquisition, $13.8M in asset impairments associated with the closing of redundant cultivation facilities and a loss of ($2.7M)due to the divestiture of a duplicative, non-operating location
Adjusted EBITDA of $105.5M, or 33.2% of revenue compared to adjusted EBITDA of $100.9M, or 33.0% of revenue in Q4 2021
Cash of $267M, bolstered by $45.1M in CFO and the closing of $75M senior secured notes at 8% due October 2026
Cresco Labs — Q1 2022 Results
Revenue of $214 million, up 20% Y/Y
Gross profit excluding fair value mark-up for acquired inventory of $113M (53% margin), up 29% Y/Y
Adjusted EBITDA of $51M (24% margin), up 45% Y/Y
Wholesale revenue of $95M, maintained position as #1 seller of branded cannabis products in U.S. with leading share in the flower, concentrates, and vape categories
Retail revenue increased 44% Y/Y, to $119M, or $2.5 M per average store open in the quarter and same-store-sales increased 9% Y/Y
Cash of $179M
TerrAscend — Q1 2022 Financial Results
Net Sales were $49.7M compared to $49.2M in Q4 2021
Gross Profit Margin was 30.5% compared to 42.3% in Q4 2021
Adjusted Gross Profit Margin was 38.4% as compared to 49.8% in Q4 2021
Adjusted EBITDA was $3.3M as compared to $11.9 M in Q4 2021
Adjusted EBITDA Margin was 6.6% as compared to 24.2% in Q4 2021
Cash and Cash Equivalents totaled $88.4M
AWH — Q1 2022 Results
Gross Revenue: Total revenue of $101.2M, down 0.8% Q/Q and up 33.4% Y/Y
Net Revenue: Net revenue, which excludes intercompany sale of wholesale products, decreased 3.8% Q/Q, but increased 28.7% Y/Y, to $85.1M
Net Loss: ($27.8M compared to net loss of ($16.5M) in Q4 2021
Adjusted EBITDA: Adjusted EBITDA of $16.4M, a 19.2% margin
Balance Sheet: Cash & cash equivalents were $143.8M, and net debt was $89.9M
Planet 13 — Q1 2022 Results. All comparisons below are to the quarter ended 3/31/21.
Revenues were $25.7M as compared to $23.8M, an increase of 8%
Gross profit was $12.9M or 50.2% as compared to $13.0M or 54.7%
Net income before taxes of $0.7M as compared to a net loss of $2.7M
Net loss of $2.1M as compared to a net loss of $6.0M
Adjusted EBITDA of $2.6M as compared to Adjusted EBITDA of $5.1M
Cash of $62.1M as compared to $61.6M
Columbia Care — Q1 2022 Results
$123M, up 43% YoY
Gross Profit of $57M, up 68% YoY. Gross Margin of 46%, up 676bps YoY, 149bps QoQ
Adjusted EBITDA of $17M (14% margin)
Reiterates 2022 Guidance of $625M—$675M Revenue, $120M—$135M Adjusted EBITDA
Cash of $168.4M
Leafly — Q1 2022 Financial Results
Total revenue was $11.4M, up 21% Y/Y driven by growth in new subscriptions and increased monetization from advertising products
Gross margin was 87%, compared to 88% in Q1 2021
Total operating expense was $17.4M, up 84% over $9.5Min Q1 2021, and included investments in platform, product development and sales and marketing to position the business for growth
Net loss was ($19.4M), and included ($10.4M)of losses on derivative liabilities, compared to net loss of ($1.1M) in Q1 2021
Adjusted EBITDA loss was ($5.4M), compared to adjusted EBITDA loss of ($0.8M) in Q1 2021
Cash of $35.4M
Glass House Brands — Q1 2022 Financial Results
Net Sales decreased 8% to $14.0M from $15.2M in Q1 2021 and declined 24% sequentially from $18.4M in Q4 2021
Gross Profit was $2.3M compared to $5.4M in Q1 2021 and $(0.4M) in Q4 2021. Gross Margin was 17%, compared to 36% in Q1 2021 and (2)% in Q4 2021.
Adjusted EBITDA2 was $(6.4M), compared to $0.6M Q1 2021 and $(9.1M) in Q4 2021
Cost per Equivalent Dry Pound of Production decreased 2% versus the first quarter of last year to $238
Equivalent Dry Pound Production was 16,729 pounds, up 7% Y/Y
Cash balance was $24.8M, compared to $54.1M at year-end 2021
The Parent Company — Q1 2022 Results
Net sales of $33.2M, Gross profit was $8.2M (25% GM)
Net loss and comprehensive loss of ($33.5M)
Adjusted EBITDA loss of ($19.2M)
Unrestricted Cash and cash equivalents totaled $143.5M
Schwazze — Q1 2022 Results
Revenues of $31.8M, Retail sales were $26.5M
Gross Margin of $10.9M
Net Loss was ($26.8M)
Adjusted EBITDA of $7.9M
$47.7M of cash
TILT Holdings — Q1 2022 Results
Revenue was $42.4M
Gross profit before fair value adjustments was $9.4M (22% GM)
Adjusted EBITDA was $1.5M
Cash was $9.2M, Debt was $88.0M
Unrivaled Brands — Q1 2022 Financial Results.
Revenue of $20.7M ($12.1M retail, $8.6M cultivation/distribution)
Gross profit was $6.4M; EBITDA was negative ($12.1M)
Cash of $3.7M
Greenlane — Q1 2022 Results
Revenue of $46.5M. The Y/Yincrease in net sales was primarily driven by the KushCo merger. Excluding KushCo's post-merger sales, revenue declined 47% to $18.1M, compared to $34.0M for same period in 2021. Third-party brand sales decreased 49% due to strategy to focus on our proprietary, higher-margin Greenlane Brands.
Gross profit was $6.0M (12.8% GM)
Adjusted EBITDA was ($5.3M)
Cash totaled $5.9M
Aurora Cannabis — Q3 2022 Results
Net revenue was $50.4M, down 17% sequentially. Q3 2022 average net selling price per gram of dried cannabis, excluding the effect of bulk wholesale sales, increased 20% to $5.41 from $4.52 in Q2 2022
Adjusted gross margin before fair value adjustments on cannabis net revenue was 54% vs. 53% in the prior quarter and 44% in Q3 2021. The increase in Adjusted gross margin compared to the prior year period is due to increased sales in international medical markets
Adjusted EBITDA loss declined to ($12.3M) vs. $9.0M in Q2 2022 but narrowed from ($20.9M) in the prior year period. The change from Q2 2022 was primarily driven by lower revenue that was partially offset by a decrease in SG&A, net of restructuring and one-time costs
Cash of $480.6M, including $50.7Min restricted cash, no secured term debt
Vertosa — Collaborative Research Partnership with the University of Massachusetts Amherst. Through this initiative, Vertosa will offer its internal insights, resources and raw materials to support UMass’s studies regarding the nutritional applications of cannabigerol (CBG), a minor cannabinoid with potential therapeutic effects. Moreover, CBG interactions with one’s diet is a central focus of this research.
Aurora — Achieves EU-GMP Certification at Cannabis Production Facility. The new state-of-the-art production facility in Leuna, Saxony-Anhalt, Germany adds to the company's pan-European network of EU-GMP facilities supplying premium, high-quality cannabis flower and extracts for medical use by patients across existing and expanding markets. Germany's medical cannabis market currently serves ~100,000 patients, representing only 0.1% of the population. In mature medical cannabis markets like Canada, market penetration is upwards of 1%, therefore the German market has significant potential for growth.
Flora Growth — Establishes On-the-Ground Presence in UK and EU. The London-based offices will serve as the regional headquarters for its sales force and management of its distribution centers in the UK and Netherlands. The expansion signals an assertive push to broaden the reach for JustCBD’s 79 products registered with UK Novel Foods and paves the way for meaningful distribution of Flora’s house of brands. In addition, Flora bolsters its strategic positioning in the region by partnering with Hoshi to distribute the Company’s broader product portfolio to 11 countries, including Germany, Portugal, the UK, Italy, Poland, the Czech Republic, Denmark, the Netherlands, Switzerland, Malta, and Macedonia.
🏬 Retail / Cultivation / Distribution
Jushi — Opens 32nd Retail Location Nationwide in Grover Beach, Expanding its California Footprint to Three Stores. The new store, which is located between Ocean and Pismo Beach at 923 Huber Street, is the fourth and final retail dispensary permitted in the city of Grover Beach. Jushi owns 78% of the equity of the Grover Beach, California retail license and has the option to acquire the remaining equity in the future.
Jushi — Awarded Provisional Medical Marijuana Dispensary License in Ohio; Establishes Fifth Vertically Integrated State-Level Operation. The License is designated for Clermont County, Ohio, located just 17.5 miles east of Cincinnati. The new store marks the Company’s first retail location in the Buckeye State. This will be the Company’s fifth vertically integrated state, accompanying PA (by way of its affiliated subsidiaries), VA, MA, and NV. This summer, the Company plans to begin construction on the store and expects the store to be open by Q1 2023.
Ayr — Receives Final License to Sell Adult-Use Cannabis in the Heart of Boston’s Back Bay, the Company’s First Adult-Use Dispensary in Greater Boston. The Boston dispensary executed a Host Community Agreement (“HCA”) with the City of Boston’s Cannabis Board on November 16, 2020. The Company executed two additional HCAs in the Greater Boston area in October 2020 -- one in Watertown and a second in Somerville, where the Company currently operates a medical dispensary. Ayr will continue to work closely with the CCC to move toward final approval to commence adult-use operations at all three locations.
Ayr — Opens 47th Florida Dispensary in Clermont, a western suburb of Orlando. The new dispensary spans 4,000 square feet of retail space and is located near Clermont Historical Village. The store features Ayr’s full line of concentrates, edibles, gummies, vapes, and a selection of high-quality flower, including newly launched Kynd whole flower offerings and Walking STiX pre-rolls.
Ayr — First Sale from 80,000 Sq. Ft. Phoenix Cultivation Facility, Launch of STiX Pre-Roll Co. in Arizona. The 80,000 sq. ft. cultivation facility began operations in December 2021. The indoor facility has 22 strains under cultivation, with first harvests yielding ~75 g/sq. ft. The Company anticipates increases in yields, THC percentages and terpene percentages in subsequent harvests.
MariMed — Awarded Dispensary License in Ohio. MariMed won this license in the Ohio lottery process. The license allows the Company to develop a medical dispensary in Tiffin, Ohio, located south of Toledo and home to the University of Bucharest and Tiffin University. Under the Ohio regulations, MariMed must complete the buildout and pass final inspection by February of 2023.
HERBL — Exclusive Distribution Partnership With Ball Family Farms. Ball Family Farms is one of the first vertically-integrated, Black-owned social equity commercial cannabis operators in Los Angeles, California. The company is family-owned and prioritizes equal pay, diversity and the empowerment of women in the workplace. Founded by Chris Ball, a cannabis entrepreneur and former professional athlete, Ball Family Farms cultivates unmatched premium cannabis and celebrates an uplifting, encouraging company culture. Ball Family Farms’ hand-crafted flower is meticulously grown using proprietary, pheno-hunted genetics developed in-house along with living soil and cultivation systems that are completely organic and sustainable.
Leafly — Launches Online Cannabis Delivery Services in California and Other Delivery-Legal States. For the first time, Californians will be able to leverage Leafly’s extensive strain database and product reviews to discover the right cannabis for them and place a delivery order from one of the state's many delivery services and dispensaries in one integrated platform. Leafly features local retailers and brands from across the state and more than 4,000 strains available for order, many of which have roots in California.
WM Technology — Launches Payments in Ontario. Effective immediately, customers at participating Ontario retailers will be able to not only browse for cannabis products through Weedmaps’ industry-leading listings platform, but also make payments directly to participating retailers in-app through Visa or MasterCard credit cards. Additionally, for improved customer experience and to help facilitate compliance with Canada’s personal possession limits, customers will be directly notified when an item in their cart is out of stock or if their order exceeds the legal purchasing limits.
Verano — Launches Mobile Applications and Exclusive Rewards Programs for Flagship Zen Leaf and MÜV Cannabis Dispensaries. The Zen Leaf and MÜV mobile applications offer a robust suite of conveniences and exclusive offerings through comprehensive rewards programs that include: Exclusive incentives upon initial application download and enrollment into the rewards program, Vouchers and special limited-time offerings, Referral programs allowing patients and adult use customers to earn discounts when they refer their friends, In-app push notifications delivering the latest Zen Leaf and MÜV updates, Rewards offers that are unlocked at different thresholds, allowing users to earn redeemable rewards, or save points to unlock discounts off a future purchase, Mobile ordering for in-store pickup or delivery (delivery available in select markets only), and List of all participating dispensary locations in each state, with option to create accounts and earn points in multiple markets.
Jushi — Expands Product Offerings with Launch of Its First Line of Solventless Cannabis Extracts. The new top-shelf product line, produced purely from premium flower and extracted simply with ice and water, includes a 0.5g vape extract cartridge available now and 1g jarred concentrates coming soon for purchase exclusively at BEYOND / HELLO™ store locations in Pennsylvania under the name, The Lab™ Solventless Live RSN. In addition, throughout the summer, it is expected to launch at the Company’s locations in Massachusetts, Nevada, and Virginia, pending regulatory approvals.
TerrAscend — Launches First-Ever Concentrates in New Jersey. Kind Tree Liquid Live Resin Vape Cartridges and Kind Tree Live Resin Crumble are available exclusively at The Apothecarium Maplewood and Phillipsburg locations. The company also commenced sales of adult-use cannabis-infused edibles under its Valhalla brand.
Miss Grass — Available in Illinois Through Partnership with AWH. Miss Grass' Illinois launch will feature its popular Minis collection. Miss Grass Minis come in packs of five 0.4g pre-rolls available in three color-coded and carefully selected strains. Miss Grass' selected strains are consistent in terpenes and cannabinoid profiles across its markets.
Flora Growth’s Vessel Brand x Highsman. To launch the partnership, the former NFL star collaborated with the Vessel team to create a custom Highsman-branded and designed Helix one-hitter accessory. The Highsman Helix showcases both brands’ appreciation for elite performance and the cannabis plant. Precision-crafted in pure, non-toxic brass, the patent-pending double helix design provides the perfect combination of filtering and cooling for a truly unique user experience.
GrowGeneration — Debuts Drip Hydro, a Complete Line of Liquid Fertilizer Blends Designed for Commercial Cultivators. Drip Hydro was developed by Rex Gill, founder of Power Si, the original patented formula of mono-silicic acid for crops, along with Robert (Bear) Masterson, the former owner of The Harvest Company. Drip Hydro was designed to improve quality, reduce costs, and drive consistency.
TerrAscend — Appoints Lynn Gefen as Chief Legal Officer. Most recently, Ms. Gefen served as Deputy General Counsel, Chief Risk and Compliance Officer and Assistant Secretary at HomeServe, a publicly traded, independent provider of home repair service solutions. Prior to her role at HomeServe, Ms. Gefen worked for Diageo North America, a global leader in beverage alcohol, focusing on regulatory matters, privacy and compliance, and for Citrix Systems, a multinational cloud computing and virtualization technology company, where she led a team with global responsibility for corporate and compliance matters including securities, commercial transactions, litigation, governance, and employment.
Glass House Brands — Appoints Hilal Tabsh as CRO. Hilal worked at Red Bull GmbH for fifteen years across two continents. Initially based in Dubai, he served as the head of sales and marketing strategy, overseeing the Middle East, Africa and Pacific regions. After that, Tabsh served eight years as the Head of Sales and Marketing for Red Bull North America. In this role, he directly managed more than 150 team members and over 200 distribution partners that were key to growing the Red Bull footprint across the U.S. He was responsible for partner development, product launches, sales and route-to-market distribution strategy, directly overseeing over US$1B in annual revenue.
MariMed — Jon Levine Elevated to Chief Administration Officer & Susan Villare Appointed CFO. Levine served as the Company’s CFO, he will now oversee the Company’s finance and accounting teams, operations, sales and marketing, and external communications. Most recently, Villare was SVP of FP&A and Treasurer for Ribbon Communications (NASDAQ: RBBN) and held CFO and other senior finance leadership positions for public and private companies including BigBand Networks, Burst Media, MatrixOne, and Price Waterhouse.
Akerna — CFO (John Fowle) departs, COO (Ray Thompson) leaves as well. Dean Ditto has been working with Akerna as a consultant since April 21, 2022. In addition, Ray Thompson will be transitioning from his current role of President & COO of Akerna to Special Advisor to CEO. In this role, Ray will continue to oversee the legacy business, assist the CEO with special projects and advise on various aspects of corporate strategy.
Flora Growth — Appoints Holly Bell as VP of Regulatory Affairs. Most recently, Bell was the Florida Department of Agriculture and Consumer Services’ first Director of Cannabis. This agency allowed for the creation of manufacturing, cultivation and sales programs in the state. As the Director of Cannabis, Bell worked with leading regulators throughout the state to create the first commercial hemp program in Florida and develop an extensive educational series on the program. She also advised leading financial institutions on compliance to help them offer banking services to cannabis businesses.
They came out of the ‘cannabis closet’ to help other Asian Americans do the same (LA Times)
Jason Wild, TerrAscend Chairman on NJ Cannabis, East Coast Strategy, Interstate Commerce (The Dime)
Woody Harrelson Talks Cannabis At The Woods Dispensary Opening (Forbes)
Trulieve CEO 'absorbing and digesting' the 'largest cannabis transaction to date’ (Yahoo!)
B Real Talks Legacy Growers, Cannabis Unity At Hall Of Flowers (Forbes)
Huckleberry Hill Farms On What’s At Stake For Legacy Cannabis Growers (Forbes)
All Cannabis Investors Need Is Just A Little Patience (Investing in Cannabis)
London Mayor's California visit could lead to decriminalization of cannabis in the UK (NPR)
👋 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.