🗣️ HERBL in talks to go public via SPAC combination with BGP at ~$600M valuation

TILT x 1906 (MA, PA, OH). Earnings (Q2 Revenue) – WM Technology ($46.9M), Charlotte's Web ($24.2M), Hydrofarm ($133.8M), Agrify ($11.8M), Sundial ($18.6M), Clever Leaves ($3.7M).

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🌿Industry

California distributor HERBL in talks to go public via SPAC merger (Reuters). HERBL is in talks to go public by merging with blank check company BGP Acquisition, at a valuation of about $600 million, sources familiar with the matter said. Santa-Barbara, California-based HERBL, has seen its post-merger enterprise value cut to between $450 million and $500 million in recent weeks, from over $630 million in the original agreement reached with BGP around June, the sources said. That would translate to an equity valuation of about $600 million, down from around $800 million in the previous agreement, they added. BGP, a Special Purpose Acquisition Company (SPAC) formed by Ruth Epstein, has been trying to raise roughly $50 million from investors as part of a PIPE round, they added. Its GMV grew almost 150% last year to $264 million and it is projecting over 35% topline growth this year, according to documents seen by Reuters. The company broke even on an adjusted core earnings basis in 2020 and expects to report a $10 million profit this year. BGP completed a $115M IPO on February 4, 2021. BGP Acquisition Corp. issued a statement, confirming that it is in discussions regarding a qualifying transaction, but has not finalized definitive agreements in respect of a qualifying transaction and will disclose details regarding any potential transaction if and when it is legally required or otherwise appropriate to do so. 

Dispensary applicant sue Costa Mesa for a permitting process they say is far too hazy (LA Times). Costa Mesa on Thursday began accepting applications for cannabis dispensary permits, but one business looking to grow roots in the city has already filed a lawsuit claiming the process is inscrutable and possibly favors certain candidates over others. In a petition filed Tuesday in Orange County Superior Court, petitioners with RD x Catalyst-Costa Mesa LLC allege members of the City Council defied Measure Q — a ballot initiative passed by voters in November — when they left creation of a permitting process to the discretion of City Manager Lori Ann Farrell Harrison.

Cancer doctor from Dothan to chair Alabama Medical Cannabis Commission (AL.com). The Alabama Medical Cannabis Commission met for the first time today and named Dr. Steven Stokes, a radiation oncologist from Dothan, as its chair. Stokes said he has been prescribing medical marijuana to cancer patients in Florida for about four years. He said he was skeptical about medical cannabis until he saw the results. Stokes said the earliest that medical marijuana products would be available in Alabama is probably the fall of 2022, although he said doctors could be certified to participate in the program as early as January. The program will be restricted to products made in Alabama. The Legislature created the 14-member commission when it passed a bill in May making Alabama the 37th state to legalize medical marijuana. Stokes was the only nominee for chair and was a unanimous pick.


💵Deals

TILT — Enters Into Three State Agreement To Manufacture and Distribute 1906. Through its subsidiaries Standard Farms, LLC in Pennsylvania, Standard Farms Ohio, LLC and Commonwealth Alternative Care, Inc. (CAC) in Massachusetts, TILT will provide full-service wholesale manufacturing, packaging and distribution services to accelerate the availability of 1906’s portable, non-smokable cannabis products. Since coming to market in Colorado in 2016, 1906 has been one of the fastest growing brands in the U.S. Pending regulatory approval, later this year TILT expects to launch 1906’s zero-calorie, allergen-free pills (Drops) in Pennsylvania and Ohio, as well as 1906’s line of premium chocolates in Massachusetts, where their Drops are currently available to both medical patients and adult-use consumers.

SLANG Worldwide — Enters Vermont Market Through Closing of High Fidelity Acquisition. HI-FI generated positive adjusted EBITDA in fiscal year June 2021, and on this basis, is expected to be accretive to SLANG's earnings in calendar 2021 and onward. HI-FI's trailing twelve month revenue is $6.9 million USD and trailing twelve month adjusted EBITDA is $1.1 million. Adds two of the five medical cannabis licenses in Vermont with four fully operational dispensaries, including in the Burlington area, with ability to add two new retail dispensaries upon receipt of licenses. Expands SLANG's operational footprint with the addition of Vermont's leading vertically integrated cannabis company, which includes a 28,000-square-foot cultivation, production, lab, and retail distribution facility, with a planned 50,000-square-foot expansion expected to be completed in 2022.

High Tide — Closes Acquisition of Leading Online Retailer DankStop. High Tide acquires another top e-commerce platform for its portfolio which already includes 3 out of the top 5 most popular e-commerce platforms for consumption accessories and totaled almost 100 million site visits across all platforms in 2020, including 2.5 million associated with DankStop. Transaction is immediately accretive as DankStop generated revenue over $3 million during the 12 months ended April 30 2021, with an EBITDA margin in the low double digits.


📄Company Updates / Earnings

WM Technology— Q2 2021 Financial Results

  • Revenue increased to $46.9 million, up 21% from Q2 2020 or 55% when adjusting the prior Q2 to exclude revenue associated with Canada-based retail operators who failed to provide valid license information and were subsequently removed from Weedmaps marketplace

    • MAUs increased to 12.3 million at June 30, 2021 or 75% compared to the prior year period (or 56% when adjusting the current period to exclude the MAUs attributed to the Learn section of weedmaps.com that the company was not able to track during the prior period)

    • Average monthly revenue per paying client increased to $3,706 or 24% compared to the prior year period (or 21% when excluding revenue from Canada-based retail operators who failed to provide valid license information from the prior year period)

    • Average monthly paying clients decreased to 4,221 or (2)% compared to the prior year period (or increased 28% when excluding Canada-based retail operators who failed to provide valid license information from the prior year period)

  • Net income was $16.8 million as compared to $9.4 million Y/Y

  • Adjusted EBITDA was $8.5 million as compared to $10.4 million Y/Y

  • Cash: $91.7 million as of June 30, 2021

Charlotte's Web — Q2-2021 Results

  • Revenue increased 11.4% to $24.2 million vs. $21.7 million in Q2-2020

  • DTC eCommerce revenue increased 1.0% to $15.7M, contributing 64.9% of Q2 revenue and holding onto the pandemic online shopping boost

  • B2B revenue increased 37.7% Y/Y

  • Gross profit increased to $15.8 million, or 65.5% of consolidated revenue

  • Adjusted EBITDA of ($3.9 million), an improvement vs prior year ($5.7 million) and prior quarter ($4.7 million)

  • $27.1 million cash (plus $10.9 million pending IRS tax receivable) and $90.1 million working capital at June 30, 2021

  • $10M unused line of credit with JPMorgan; opportunity to extend to $20M

Hydrofarm — Q2 2021 Results

  • Net sales increased 46.7% to $133.8 million compared to $91.2 million.

  • Gross profit increased 65.5% to $29.6 million, or 22.1% of net sales, compared to $17.9 million, or 19.6% of net sales

  • Net income was $2.3 million or $0.05 per diluted share compared to a $1.9 million or $0.08 per diluted share. Pro forma adjusted net income was $12.5 million or $0.30 per pro forma diluted share compared to $4.0 million or $0.12 per pro forma diluted share

  • Adjusted EBITDA increased 127.5% to $16.2 million compared to $7.1 million

Agrify — Q2 2021 Financial Results

  • Revenue increased 203% to $11.8 million, compared to $3.9 million for Q2 2020 and increased 69% sequentially from $7 million in Q1 2021

  • New bookings were $30.7 million for Q2 2021

  • Total backlog increased to $101.1 million from $82.2 million Q/Q

  • Outlook: remains on track to achieve the upper target of its previously disclosed total revenue guidance of $48 to $50 million for the full year 2021

Sundial — Q2 2021 Financial Results

  • Net revenue for the Company's cannabis segment of $9.2 million. Investment and fee revenue of $5.7 million and Sundial's share of profit of equity accounted investees of $3.7 million for total net revenue and equity pickup of $18.6 million

  • Gross cannabis revenue of $12.7 million, an increase of 8% Q/Q

  • Net loss of $52.3 million compared to $60.4 million in Q2 2020. Excluding a non-cash provision for impairment on the Olds facility of $60.0 million, net income would have been $7.7 million

  • Adjusted EBITDA loss of $0.2 million for the second quarter of 2021, compared to an adjusted EBITDA loss of $3.9 million in Q2 2020

  • $1.3 billion of cash, marketable securities and long-term investments at June 30, 2021 and $1.2 billion at August 9, 2021, with no outstanding debt.

  • Subsequent to the quarter end, closed the acquisition of Inner Spirit and its Spiritleaf retail cannabis store network, establishing Sundial as one of Canada's largest vertically integrated cannabis companies

Clever Leaves — Q2 2021 Results

  • Revenue increased 89% to $3.7 million compared to $1.9 million, driven by both core segments of the Company

  • All-in cost per gram of dry flower equivalent was $0.22 compared to $0.11, attributed to ramping early-stage operations in Portugal

  • Gross profit increased 157% to $2.3 million, reflecting a 63.6% gross margin

  • Net loss was $(9.0) million compared to $(8.8) million

  • Adjusted EBITDA improved to $(5.8) million compared to $(6.7) million

  • Cash, cash equivalents and restricted cash was $57.1 million at June 30, 2021, compared to $79.5 million at December 31, 2020. This is primarily attributed to operating losses and capital investments during the year

Greenrose Acquisition Corp. — Extension of Time to Consummate Business Combinations. Greenrose provided notification to Continental Stock Transfer & Trust Company that the Company is extending the time available in order to consummate a Business Combination with the Target Businesses for an additional one (1) month, from August 13, 2021 to September 13, 2021.

TILT Holdings — Receives Four New Provisional Massachusetts Adult-Use Licenses in Addition to Final Medical Dispensary License for Brockton Location. The Massachusetts Cannabis Control Commission (CCC) has granted TILT’s subsidiary, Commonwealth Alternative Care, Inc. (CAC), a total of four provisional licenses for the cultivation, manufacturing and sale of adult-use cannabis at its Taunton location and the sale of adult-use cannabis at its Brockton location. The Commission also granted CAC a final license for the sale of medical cannabis in Brockton.


🏬Retail

Ayr Wellness — Expands its Florida Footprint, Opens Dispensary in Ocala. Liberty Health Sciences Ocala is the Company’s 39th open dispensary in Florida. The Florida medical marijuana market continues to show robust growth with the Florida Office of Medical Marijuana Use reporting over 595,045 registered patients as of August 6, 2021, up 53% year-over-year.


🌱Product

We Sampled Travis Scott’s Cactus Farms Cannabis — Here’s Our Review (UPROXX). Jack Flower provides a powerful high and an experience that is in line with other top-shelf cannabis brands in this price range. However, for this same price, you can pick up an equally powerful and flavorful weed that is packaged with a lot more care. If you absolutely must smoke Travis Scott’s weed, you won’t be disappointed. But if you’re a hard-core stoner looking for a strain to add to your regular rotation, this probably isn’t it.

The Valens Company and Verse Cannabis Expand Offering to Include Cannabis-Infused Beverages. Rapid Tropical Rush: The first cannabis-infused beverage introduced by Verse, Rapid Tropical Rush offers a refreshing twist to classic water with tangy citrus flavors of lemon and lime and a hint of sweet tropical ripe mangos. Each 250ml stubby bottle is infused with 10 mg of THC and 10 mg of CBD and is equipped with a resealable lid to allow for controlled consumption. Powered by SōRSE® by Valens technology, this beverage is free of cannabis taste and smell and offers a quick onset. Rapid Tropical Rush is currently available in Alberta and British Columbia with Ontario to follow in the coming weeks, and a variety of additional beverages are expected to launch from Verse in the coming quarters.


🧔People | 💻Hiring

Pelorus Equity Group — New Hires in NYC. Pelorus Equity Group, a provider of value-add bridge commercial real estate loans to cannabis businesses and owners with cannabis-related real estate, announced the opening of its New York office, led by Travis Goad, Managing Partner. The Company also hired Jessica Uris as a senior associate and Devin McGrath as an analyst for the Pelorus Fund, both of whom will be based in the New York City office and reporting to Travis Goad.

THC Design — Cannabis Account Rep (SF)


🎙️Interviews

Trulieve CEO Kim Rivers — “Trulieve is all about the U.S. growth story, which we believe is alive and well, there are some exciting things happening at the federal level.”

Cannabis Unlocked — Cannabis Venture & Debt Capital. Serge Sherman (Tuatara Capital), Ross Desmarais (Intrinsic Capital Partners), Heather La Freniere (LAGO Innovation Fund), Jonathon Goldrath (FocusGrowth Asset Management) and Jordan Youkilis (KEY Investment Partners), discuss the importance of backing strong management teams, lessons learned from the ups and downs of cannabis capital markets, valuations in cannabis today, what the current landscape looks like amongst institutional investors, and how they expect regulatory change to impact the industry moving forward.

Higher Calling — Julia Jacobson of Aster Farms on Sustainability and Creativity in Cannabis. Experimenting beyond traditional marketing, and leading on the environmental front.


👋 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.