⛴️ Incumbent New Jersey Medical Cannabis Operators Receive Approval to Launch Adult-Use
Arizona awards 26 Social Equity Licenses. Open Book Extracts raises Series C. Leaf Trade raises $12.5M Series B. TerrAscend acquires AMMD (MD). Jushi completes NuLeaf acquisition (NV).
👥 Follow on LinkedIn for more real-time updates. Subscribe to the newsletter here.
Sorry if you happened to receive the same newsletter twice last week, Substack (newsletter platform) had two separate technical issues.
64 Squares Strategy Group and the Latino Cannabis Association are hosting a networking event tonight in Harlem if anyone is is interested in getting an update on the latest rules and regulations impacting the New York recreational cannabis market.
Drop me a note if you’ll be at the Benzinga Cannabis Capital Conference next week.
Legal Marijuana Sales Expected to Start Within Weeks in New Jersey.
A year and a half after New Jersey residents voted to legalize cannabis, the state on Monday gave seven medical-marijuana companies approval to start selling their products to all adults, opening the door to the first legal marijuana sales in the New York City region within a month. Recreational adult-use sales are permitted to start as soon as each of the seven companies pays upward of $1 million in fees associated with the expanded licenses and satisfies other bureaucratic requirements to gain final approval. The commission authorized 13 individual dispensaries, which will be scattered throughout New Jersey, including several that are within a half-hour drive of New York City. Smaller entrepreneurs also hoping to open recreational cannabis shops in New Jersey have filed 327 applications for retail licenses since March 15, but decisions about those applicants are not expected for at least another month. And it is likely to be a year or more before the smaller retail shops are up and running.
Seven MSOs—Acreage, Ascend Wellness, Columbia Care, Curaleaf, GTI, TerrAscend, and Verano operate a combined 13 dispensaries across the state.
Arizona Awards 26 Social Equity Licenses. After months of lawsuits, heated debate, and anticipation, Arizona has now awarded its “social equity” cannabis dispensary licenses in a random drawing. Twenty-six applicants hit the jackpot. The value of a license, the last of 169 that the state will award, is in the millions. And odds of winning were slim: Any given applicant could submit just two tickets into a lottery pool of 1,301. Many of these applicants worked with big-time cannabis companies and investors to go through the complicated, expensive application process to enter the drawing. And an initial survey of the results shows that these companies won big: The majority of winners, according to Phoenix New Times' initial review, are applications backed by major cannabis companies or investors. Still, each company or entity that applied had to be 51% owned by an individual who met the state’s social equity requirements. The program, which is meant to give back to communities harmed by the drug war, was open to people who fit a series of requirements, including income level, past pot charges, and ZIP code. Full list of winners on the ADHS website.
New York Marijuana Businesses Would Get State Tax Breaks Despite Federal 280E Provision Under Budget Deal. New York lawmakers have reached a tentative deal on a budget proposal that includes provisions to let marijuana businesses take state tax deductions that are available to other industries despite an ongoing federal ban on cannabis. Senate and Assembly leaders had included the reform proposal in earlier versions their respective budget measures last month, but there’s been uncertainty about what the final product would look like as lawmakers and Gov. Kathy Hochul work to reach consensus on unrelated issues, forcing an extension of the budget deadline for a week. With respect to cannabis, the proposals would carve out an exemption, making it so marijuana companies would be allowed to make tax deductions for business expenses and claim credits at the state level that they’re currently barred from utilizing on their federal returns under prohibition. Because many states simply mirror federal tax policy in their own codes, the federal government’s anti-cannabis stance also blocks state-level deductions in some places.
New Mexico’s earnings from one week of cannabis sales. According to the Cannabis Control Division (CCD), dispensaries sold $6.1M worth of recreational cannabis sales in the first week of legalized sales. When combined with medical cannabis sales, dispensaries generated ~$10M in sales. Albuquerque had the most total sales over the week at $2M+ in recreational cannabis from April 1 to April 7. Las Cruces and Santa Fe were next, with $500,000+ in sales. Rio Rancho had a bit over $200,000 in sales. Eventually, the CCD expects the industry to earn around $300M in sales per year, according to their news release.
D.C. Council Vote to Shut Down Cannabis Gifting Services Falls Short. A bill targeting shops “gifting” cannabis to consumers failed to receive enough votes in the Washington, D.C. Council this week. If approved, severe penalties would have been applied to shops offering cannabis as gifts and likely would have forced them to shut down. Because directly exchanging money for non-medical cannabis is illegal, many shops have developed a workaround. Customers can purchase a range of products like lemonade, postcards, artist prints, and even legal services that come with a complimentary cannabis gift. The D.C. Council voted 8-5 in favor of the crackdown, but nine votes were needed since the bill is considered emergency legislation. The legal limbo has led to the opening of shops like District Derp, an art gallery where patrons can buy paintings made by a dog. Customers are also gifted cannabis with their purchases. The price of the paintings corresponds with typical market prices for cannabis. For instance, a $55 painting comes with 3.5 grams of cannabis while a $330 painting yields an ounce of cannabis.
Missouri Medical Marijuana sales near $1M/Day. Missouri Medical Marijuana dispensaries topped $30M in monthly sales for the first time in March, putting overall sales for the 17-month-old program at ~$300M, more than a third of which has come since December. Officials at the Missouri Medical Cannabis Trade Association, an industry group, said the growth was driven by new dispensaries opening and lower prices prompted by the increased competition. The industry group said annual sales should easily top $300M in 2022 and could go even higher. More than a dozen of the 203 dispensaries allowed under a plan voters approved in 2018 have yet to open. The group is also backing a plan to ask voters this fall to legalize recreation marijuana, which could double sales.
A look at Adult-Use Cannabis Sales in Colorado.
Jocelyn Sheltraw points out the interesting decline in flower market share in the State over the past year. In January 2021, Flower category sales commanded 46.9% of all adult-use cannabis sales. However by February 2022, Flower share dropped to 35.5% of the overall market. In the same time period, Vape Pens have increased their share by nearly 6% and Edibles have increased their share by almost 4%. It will be interesting to see how these trends continue to change in Colorado.
Open Book Extracts — Series C Led by KEY Investment Partners. Open Book Extracts (OBX), providing high quality cannabinoid ingredients, concept-to-market formulation services, and finished goods manufacturing for the industry's leading brands, announced the first close of a Series C equity financing round. The financing will be used to expand finished goods manufacturing capabilities, to support ongoing and new safety studies and efficacy research, and to accelerate international distribution opportunities.
Leaf Trade — $12.5M Series B Round Led by Artemis Growth Partners. Leaf Trade powers ordering and fulfillment for cultivators, retailers, distributors, processors, and dispensaries in over 24 states, and facilitates nearly $2B in annualized net sales. The Company will use the funding to accelerate Western market expansion of the online wholesale cannabis marketplace and digital payment infrastructure. This brings total funding to date for Leaf Trade to $22.5M.
TerrAscend — Acquires Allegany Medical Marijuana Dispensary (AMMD) in Cumberland, Maryland for $11.7M. TerrAscend will acquire 100% equity interest in AMMD for $10M in cash, in addition to acquiring the real estate for $1.7M, the valuation Represents 5X 2021 EBITDA with significant projected profitability growth in 2022. TerrAscend expects to rebrand the 8,000 square foot dispensary as The Apothecarium. Following the close of the Transaction, TerrAscend's retail footprint will increase to 27 dispensaries nationwide. The company has built out a 160,000 sq ft facility in the State. Adult-use will be on the ballot for Maryland in the November election with a possible launch of its adult use program in mid-2023.
HEXO x Tilray — Enters Into Definitive Agreement to Create a Strategic Alliance. Under the terms of the Transaction Agreement, Tilray Brands has agreed to acquire 100% of the remaining outstanding principal balance, currently $193M, of the Amended Note originally issued by HEXO to HTI. As consideration for Tilray Brands’ purchase of the Amended Note, Tilray Brands will pay HTI 95% of the principal for the Amended Note that will be outstanding at closing. Until closing, HTI may continue to redeem the Note pursuant to its terms, however in no event shall the principal of the Amended Note be less than $160M prior to the closing of the Transaction.
Fyllo — Acquires Semasio to Supercharge Data Solutions for Brands Looking to Reach Innovative Audiences. The acquisition will enhance Fyllo’s Data Solutions, including its Data Marketplace, which offers the largest ecosystem of cannabis and CBD purchase data, with new targeting and distribution capabilities. Based in Germany, Semasio works with marketers to help them understand and reach their audiences, across 30 languages and counting, through three types of targeting: audience, contextual, and brand fit. Semasio provides future-proofed data solutions for brands that want to reach audiences based on what is important to them in the moment.
Jushi — Completes NuLeaf Acquisition for $53.6M. NuLeaf operates two high-performing adult use and medical retail dispensaries in Las Vegas, NV and Lake Tahoe, NV, in addition to a 27,000 sq. ft. cultivation facility in Sparks, NV, and a 13,000 sq. ft. processing facility in Reno, NV. NuLeaf also owns a third licensed retail dispensary located directly on Las Vegas Boulevard, expected to become operational in Q2 2022 subject to regulatory approval and other conditions. Jushi will make an upfront payment of $45.0M ($15.75M cash, $13.5M stock, $15.75M unsecured promissory note). The Company has also agreed to issue up to an additional $8.6M in an identical percentage combination of cash, stock, and unsecured promissory note upon the occurrence or non-occurrence of the Las Vegas Strip Dispensary receiving the applicable regulatory approvals to commence operations. Jushi plans to fund the cash portion of the NuLeaf acquisition and the previously closed Apothecarium Nevada acquisition by drawing down on its $100M Senior Secured Credit Facility. Following the drawdown on the Acquisition Facility, the Company expects to have $35M of capacity, not including the $25M accordion feature.
Pelorus Equity Group — Closes Second and Final Tranche of $77.3M Debt Financing with Harborside. Pelorus completed its second and final tranche of its previously announced US$77.3M non-dilutive real estate debt financing with Harborside. The initial funding included three individual loans to Harborside, Urbn Leaf and Loudpack with a second tranche made available upon final closing of the three-way merger. The proceeds were used primarily to retire certain existing loans and provide additional working capital. The Rollup Financing contains a nominal interest rate of 10.25%, along with specified origination, closing and other transaction fees, and will be secured by certain real estate assets and cannabis licenses of Harborside, Urbn Leaf and Loudpack. The Rollup Financing is subject to debt-service ratio requirements, interest reserves, certain cross-corporate guarantees and defaults, subordination agreements and intercreditor agreements, along with a general corporate guarantee from Harborside.
Agrify — First Total Turn-Key Agreement in New Jersey with Loud Wellness. Loud Wellness is one of only eight awardees that received both the Class 1 Cultivator and Class 2 Manufacturer licenses in New Jersey. The terms of the 10-year agreement entered into with Agrify include the installation of 500 VFUs, along with the use of the fully integrated Agrify Insights™ software, at Loud Wellness’ Glassboro, NJ facility – initially having 50,000 sq. ft. allocated to cultivation, 20,000 sq. ft. for manufacturing, and an 8,500 sq. ft. research center with an additional 50,000 sq. ft. available for expansion. Under the agreement, Agrify will also provide architectural and engineering services, operations consulting, and brand licensing. The engagement is expected to generate approximately $100M in production success fees, based on a conservative 35 pounds annual dry-flower production per VFU, and approximately $18M in SaaS software fees for Agrify during the 10-year term of the agreement. Upon securing additional third-party financing, Agrify may provide Loud Wellness up to an $18M construction loan based on its standard TTK terms.
📄 Company Updates / Earnings
MariMed — Files Preliminary Non-Offering Prospectus And Applies For Dual Listing on Canadian Securities Exchange (CSE). The Company also announced that it has applied to list its common shares on the Canadian Securities Exchange (CSE).
🏬 Retail / Consumption Lounge
Marley Natural® Cannabis Retail — New Dispensaries to Open Across Canada.
Docklight Brands which oversees the Marley Natural® and Marley™ CBD brands announced the upcoming opening of the Toronto location in a retail development agreement with Fresh Vibe Ventures, to bring Marley Natural dispensaries to adult-use cannabis consumers throughout Canada. Several prime retail sites have already been secured. Future locations are planned across Canada, with 35 stores expected by 2030. Each store will be independently owned and operated.
Four Seasons Co-Founder Launches High-End Recreational Cannabis Consumption Lounges. Cameron Forni, Frank Orenstein and Jonathan Eisenberg are launching a high-end, recreational cannabis consumption lounge partnership, investment and management group: Casterion. The group will bring long-awaited consumption lounges to major cities. The initial launch will be in West Hollywood, San Francisco, Las Vegas, Miami, New York and Barcelona. According to the co-founders, Casterion was formed to be the global leader in premium immersive cannabis lounge experiences.
GTI — Opens RISE Mankato, Its 77th Retail Location in the Nation. In addition to RISE Mankato, the Company has five other retail locations throughout Minnesota, including: Eagan, Hibbing, St. Cloud, St. Paul and Willmar. Formerly known as LeafLine, each store was rebranded to RISE earlier this month.
Time Machine — Launches Greenhouse-Grown Value Cannabis Brand in California.
Time Machine, a value driven cannabis brand launched today in California. Time Machine offers premium, greenhouse-grown hydroponic flower sourced from Pacific Stone's family of farms on California's central coast. The brand currently features eight consistent strains, including Wedding Cake, London Pound Cake, Blue Dream, Bubblegum, Strawberry Cheesecake, GG4, Snowman and Kush Mints, available in whole flower and pre-roll offerings. In addition to its wide selection of packaged small buds, Time Machine is the first brand in the industry to introduce a 28-count jar of hand-rolled pre-rolls containing half an ounce of flower per jar. Time Machine's entire product line will be exclusively distributed by Kiva Sales and Service (KSS).
BellRock Brands — Appoints Brian Jansen as CEO. Jansen previously served as President and COO of the Company. Brian Jansen has held executive management positions in the cannabis industry since 2019. Prior to the business combination of BR Brands and Dixie Brands, Jansen served as interim CEO and COO of Mary's Medicinals. Brian joined Mary's with two decades of leadership experience in the CPG industry, in roles at multiple global companies including PepsiCo, Grupo Bimbo, and the Hain Celestial Group.
Leaf Trade — Adds Brian Ward as CFO. Ward most recently served as Verano's CFO. His experience includes leading accounting and finance, M&A, analytics, IT, procurement, tax, treasury, and investor relations teams working at 3M and KPMG.
The Parent Company — Adds Tanisha Robinson as Chief Transformation Officer and Esther Song as CMO and Nominates CEO Troy Datcher as Director. Carol Bartz and Jeffry Allen have advised their intention to retire from the Board at the Company's upcoming 2022 Annual meeting. Robinson founded W*nder, a company focused on creating accessible, reliable, intuitive cannabis and plant-based beverages to enhance and improve how consumers experience the world. Prior to her role at W*nder, she worked as Chief Disruption Officer of BrewDog, and was the first CEO of BrewDog USA. Song has established expertise in public relations and marketing from over 20 years of experience in building brand visibility through strategic communications and global marketing campaigns. Prior to joining TPCO, she held the position of CMO for Pure Beauty, and prior to that, similar roles at Canndescent and MedMen.
California DCC — Confirms Nicole Elliott as New Director of Department of Cannabis Control. Elliott has led cannabis policy development and implementation across California state and local government levels since 2017, just ahead of adult-use cannabis sales beginning in the state in 2018.
C3 Industries — Appoints Parks McMillan as VP Cultivation. Prior to joining C3, Parks was the Director of Cultivation at Seed & Smith. Beyond his experience at Seed & Smith, Parks was General Manager of Cultivation at The Green Solution where he worked alongside C3's Chief Horticulture Officer, Joel Ruggiero, and managed over 40 individuals across each section of cultivation and processing.
Alchemy Podcast — Skip Motsenbocker, Pacific Stone, on legislation shaping the California market and Pacific Stone's regenerative farming practices
Yahoo! Finance — Tilray CEO, Irwin Simon, Americans want legal weed and we “need to be positioned for it”
NCV — Jake Bullock, Cann, on how the brand is going after Big Alcohol
Cannabis Investing Podcast — Guy Rocourt, Papa & Barkley, on Why many MSOs aren't in California—a branding knife fight
Forbes INSIDER — “Survivor” winner, Ethan Zohn: I'm running the Boston marathon to celebrate 10 years of cancer remission. Cannabis helped get me here
The Guardian — Seth Rogen, Houseplant, on why most people can incorporate Cannabis into their lives
FORBES — Hazy LA Founders on upcoming events and growth
👋 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.