💼 JWAM Seeks Order to Require RIV Capital to purchase firm's Common Shares at Fair Value as of March 29, 2022, the day prior to the announcement of the Etain Acquisition.

Boston Beer launches TeaPot. RI to become 19th state to legalize Cannabis for adult-use. NY approves 58 more hemp cultivators for adult-use cultivation. NJ brings in $24M in first month of sales.

May 25, 2022

💬 I’ll be in Chicago for NECANN on Friday, June 10th, If you’re in the area, I’ll be hosting a cannabis industry networking event on Thursday, June 9th with friends at Crowe—please fill out the google form if you’d like to attend. Also, I’ll be in NYC the following week for BevNet Live if any readers are attending that as well.

On the heels of their NYC conference last week (2,300 attendees), MJ Unpacked will be hosting their next one in Las Vegas (Sept. 28-30) and will also be hosting the Clio Cannabis Awards on Sept. 29th.

👥 Follow on LinkedIn/Twitter for more real-time updates.

🌿 Industry

RI lawmakers vote to legalize Recreational Cannabis. The General Assembly voted to legalize recreational cannabis, paving the way for Rhode Island to become the 19th state to legalize Cannabis for adult-use. The historic votes took place after years of debate about legalization, which Rhode Island has allowed for medical use since 2006. The House vote was 55-16, as five Republicans were joined by 11 Democrats in voting no. The Senate vote was 32-6, with three Democrats joining three of the chamber’s five Republicans in opposition. The three existing medical marijuana dispensaries—in Providence, Warwick and Portsmouth—will be able to convert into hybrid retailers by December 1st, as will the six additional proposed medical dispensaries recently selected from a state lottery. (Though it’s not clear how many of the six might be up and running by then). The legislation calls for a maximum of 33 total dispensaries.

New York approves 58 more hemp cultivators to grow adult-use marijuana. New York increased the number of conditional adult-use marijuana cultivation licensees from 88 to 146 after the state’s Cannabis Control Board approved 58 new applications. Conditional license holders must apply for full licenses by June 1st, and the temporary licenses expire June 30, 2024. More than 200 applications have been submitted by hemp farmers since the Office of Cannabis Management started accepting applications on May 15th. New York is the first regulated cannabis market to allow licensed hemp growers to get first crack at growing recreational marijuana.

Has Canada reached cannabis retail saturation? Not yet, according to Cannabis Benchmarks.

Canada’s cannabis industry has been sounding the alarm about oversaturation of retail stores, with the CEO of Sundial Growers warning of “massive store closures” and some stores closing or going up for sale in Ontario. The question of cannabis retail saturation has even entered mainstream politics, with the Liberal Party of Ontario vowing during the ongoing provincial election campaign to rein in dense concentrations of marijuana retailers. However, every Canadian province except Alberta could actually handle more recreational cannabis stores, according to an industry analyst. Market data firm Cannabis Benchmarks estimates that Canada can sustain more than 5,100 brick-and-mortar cannabis retailers. The country is far short of that target, with 3,162 stores nationwide as of the end of April. Cannabis Benchmarks’ estimates assume an optimal number of stores for the wealthy country of 38.5M people: roughly one store per 7,500 Canadians. That figure is based on per-capita store count figures in two U.S. markets, Colorado and Oregon, five years after recreational marijuana legalization

Illinois issues permits for new craft cannabis operations to start construction amid ongoing turmoil in Cannabis industry. Illinois has begun issuing permits for new craft grow cannabis operations to begin construction, and a judge has authorized the state to hold a corrective lottery for dispensary applicants that filed lawsuits challenging the licensing process. Those two developments mark small but significant steps in the long-delayed process of expanding access and improving competition in the state’s legal marijuana industry. Last August, the state Department of Agriculture announced the first 40 craft grower conditional license winners. It took until Wednesday for the first three of those applicants to get their plans approved and obtain permits to begin construction. Those businesses, Galaxy Labs in Richton Park, Mint Cannabis in Forest Park and Star Buds Illinois in Rockford, are all majority Latino- or Black-owned. Of the 40 conditional license winners, 80% identify as nonwhite, and 88% qualified as social equity applicants, generally meaning the majority owner or a family member had a minor cannabis conviction, or came from poor areas with high rates of cannabis arrests, according to the state.

First month of adult-use cannabis sales in N.J. brings in $24M. The $24M in sales at the 12 dispensaries that can sell recreational cannabis — a 13th location didn’t get final approval until two weeks ago — is lower compared to other states. In Arizona, which launched its market at 73 facilities, the state reported $32 million in sales in the first full month the market was open. In New Mexico, which launched in April with at least 100 stores, sales reached nearly $40M. New Jersey dispensaries brought in about $5M each week total. The commission expects that number to balloon as more licenses are approved. A total of 46 conditional licenses were awarded at Tuesday’s meeting: 22 for cultivators, 13 for manufacturers, and 11 for recreational retailers. Four testing labs were also approved to begin operating. It’s not clear when the recreational retailers can begin sales. There are still local regulatory hurdles for owners to clear.

$140M ownership dispute over Native Roots revived by judge. A long ownership dispute over Colorado dispensary chain Native Roots isn’t settled, after all. A Denver judge has thrown out a $140 million arbitration award granted to founders Josh Ginsberg and Rhett Jordan, who were challenging an attempted sale by owner/investor Peter Knobel and his company, Brightstar. Ginsberg and Jordan were awarded the money in March by an arbitrator who sided with them when they accused Knobel of breach of contract and other missteps in the attempted sale in 2017. Knobel appealed to a Denver judge, who recently vacated the arbitration award. District Judge J. Eric Elliff cited “legal error” in how the arbitration was handled. According to arbitration records, the ownership dispute began in 2017, when Knobel tried to sell Native Roots and attempted to take over Ginsberg and Jordan’s ownership portions of the company in order to complete a sale, according to records.

💵 Deals

JWAM x RIV Capital — Application in connection with Etain acquisition. JWAM is the holder of ~20.4% of RIV Capital’s issued and outstanding Class A common shares. JWAM's President and CIO, Jason Wild, both individually and through JWAM beneficially owns ~35.8% of TerrAscend, a competing U.S. MSO. Wild also serves as the Executive Chairman and Chairman of the Board of TerrAscend. In JWAM's application—which RIV Capital forcefully disagrees with, and intends to vigorously contest—JWAM is seeking a declaration that the management, business or affairs of the Company have been conducted in a manner that is oppressive or unfairly prejudicial or that unfairly disregards the interests of JWAM as a shareholder of RIV Capital. JWAM is also seeking an order requiring RIV Capital to purchase JWAM's Common Shares at fair value as of March 29, 2022, the day prior to the announcement of the Etain Acquisition. RIV Capital's firm position is that the Etain Acquisition, the initial closing of which occurred on April 22, 2022, complied with all applicable laws and stock exchange requirements. The Company also strongly believes that the position advanced by JWAM is baseless and is wholly without merit. RIV Capital intends to ask the court to dismiss the application and award RIV Capital its costs of defending it.

Lowell Farms — Acquires Automated Pre-Roll Manufacturing Assets From All Good Collective. As part of the transaction, Lowell Farms will manufacture and sell All Good Collective’s successful line of pre-rolls from Canada into the California cannabis market, where they will be sold alongside Lowell’s existing line of products. Lowell intends to offer production capacity to other cannabis brands seeking to showcase their flower in this new format. The transaction will be treated as an asset acquisition, with Lowell issuing a combination of stock and cash upon delivery of the equipment with a current value of ~$4.1M as consideration.

Item 9 Labs — Acquires Sessions Cannabis, One of Canada's Largest Cannabis Retail Franchisors. Founded in 2019, Sessions currently has 43 stores throughout the Province of Ontario, the majority of which are located in prime retail shopping centers, typically anchored by national tenants such as Costco, Walmart, well-known grocers, quick service restaurants and more. The Ontario-based business has a franchise system comprised of 18 franchisees, the majority of which are multi-unit owners, and plans to continue its growth across Canada with multiple openings already planned for this year. Sessions also anticipates it will continue its consistently strong performance. Steven Fry, CEO Sessions, noted that Sessions' locations that have been open for more than a year see an average annual revenue of C$2.5M.

Flora Growth — Acquires CBD Brand Masaya. Flora entered into an agreement with leading cell biologist, Dr. Annabelle Manalo-Morgan, Ph.D., to acquire her brand Masaya, together with its patent-pending CBD formulations. Created by Dr. Annabelle and backed by her research, Masaya’s formulations of pure, potent CBD oil are 100% THC-free and have a long track record of positive testimonials collected over years of use. Flora intends to distribute the brand and its formulations worldwide.

Harborside — Acquires Full Ownership of Seaside, CA Store. The company has reached an agreement on May 18, 2022 to acquire a further 50% ownership interest in its Seaside store. The Acquisition will result in the Company owning all of the issued and outstanding securities of 680 Broadway Master, LLC, which owns the Seaside Store, bringing the Company's interest in the Seaside Store to 100%. The Acquisition was the result of a legal settlement with the Company's former partner in the Seaside Store. As a result, the total cost of the Acquisition was only $440,000, with $100,000 to be paid upfront and the balance payable over seven years, with $50,000 being paid on the first to sixth anniversaries of the First Installment, and $40,000 being paid on the seventh anniversary of the First Installment.

📄 Company Updates / Earnings

Verano — Q1 2022 Financial Results

Revenue increased 67% to $202M compared to the Q1 2021
Gross profit was $100M (49% GM), compared to $54M in Q1 2021; excluding an M&A inventory step up and D&A, GM was 61%, up 1% from Q4 2021
Net loss was ($7M), compared to a loss of ($2M) in Q1 2021
Unadjusted EBITDA was $81M (40% margin)
Cash flow from operations (CFO) was $53M, and FCF was $6M
Cash and cash equivalents of $140M. Total debt, not including lease liabilities and net of issuance costs, of $384M

Jushi — Q1 2022 Financial Results

Total revenue of $61.9M, up 48.5% Y/Y
Adjusted gross profit of $25.5M, up 33.1% Y/Y
Net loss of ($14.3M)
Adjusted EBITDA of $1.1M (1.7% margin)
Cash and cash equivalents of $76.2M, $147M in principal amount of total debt, excluding leases and property, plant, and equipment financing obligations
Revised Q4 2022 annualized revenue to be between $340-$380M, annualized Adjusted EBITDA to be between $60-$80M. The slight reduction in revenue and Adjusted EBITDA guidance was driven by (1) weakening in the macro environment; (2) ongoing regulatory delays; and (3) supply chain issues

4Front Ventures — Q1 2022 Financial Results

Systemwide Pro Forma Revenue increased 7% Y/Y to $32.4M
GAAP revenue increased 13% Y/Y to $26.1M
Adjusted EBITDA increased 53% Y/Y to $9.0M
As of March 31, 2022, the Company had $8.6M of cash and $48.7M of related-party long-term debt not due until May 2024
Completed accretive acquisition of New England Cannabis Corporation (NECC), more than doubling the Company's total flower canopy in MA and scaling its presence as a dominant wholesaler and producer in the state
Signed definitive agreement to acquire Island Cannabis Co., combining premier California brand with 4Front's state-of-the-art Commerce, California manufacturing facility (acquisition completed in April 2022)

Nabis — Reports Steady YoY Growth, Becomes No. 1 Licensed Cannabis Wholesale Platform in California. Nabis announced that it offers the widest selection of products from nearly 200 exclusive brands to California’s entire network of state-licensed dispensaries and delivery services. Since its inception in 2018, the company, which currently represents ~15% market share of the state’s total cannabis sales, has surpassed $1 billion in completed end-to-end transactions. In the past year, Nabis has nearly doubled its monthly average number of orders and has experienced steady growth in brand partners (56%) and retailers (34%) joining the platform. Nabis currently distributes for Raw Garden, Wonderbrett, Alpine Vapor, Pacific Reserve, Apex Cannabis, Euphoric Life, Higgs, K-Zen and Santa Cruz Veterans Alliance, among others.

MedMen — Prevails in Lawsuit Against Arizona-Based Whitestar Solutions. In March 2020, litigation was filed by Whitestar against MedMen in the Superior Court of Arizona, Maricopa County, related to a Membership Interest Purchase and Sale Agreement governing the purchase of EBA Holdings, Inc. dba MedMen Scottsdale. Whitestar alleged fraudulent inducement and breach of contract, among other claims, and sought rescission of the underlying transaction or $60M in alleged monetary damages. MedMen consistently maintained that the lawsuit and claims were baseless and without merit – and the judge agreed on all counts, cancelling the upcoming jury trial and stating that "no reasonable juror could conclude that Whitestar is entitled to relief on any of those claims." The judge further ruled that as the prevailing party, MedMen is entitled to submit an application to recover attorneys’ fees and taxable costs from Whitestar.

Abaca — Expands to Mississippi. Arkansas-based cannabis financial technology firm Abaca has expanded coverage bringing digital-first banking, payment and treasury management solutions to Mississippi's cannabis industry. Integral in banking 95 percent of Arkansas's cannabis industry since day one and hundreds of cannabis clients across the country, Abaca is uniquely positioned to support Mississippi. Founded in 2017, Abaca enables traditional banking services in Arkansas, California, Colorado, Florida, Illinois, Louisiana, Michigan, Missouri, Montana, North Dakota, Ohio, Oklahoma and South Dakota – and now Mississippi – through its bank partners. Additionally, the company's online banking platform offers lending and payment processing. To date, Abaca has compliantly processed more than $2.5 billion in total transactions.

Lantern — Expands Cannabis Delivery in Massachusetts to the North Shore. Lantern, the leading on-demand cannabis e-commerce marketplace and home delivery platform in the U.S., announced plans to expand its delivery zone to Massachusetts' North Shore in partnership with local dispensaries, Insa and Olde World Remedies. Customers over the age of 21 living in Lynn, Salem, Beverly, Swampscott and Marblehead are now able to order cannabis products of their choosing through the Lantern marketplace.

🏬 Retail

Ayr Wellness — Receives Approval to Begin New Jersey Adult-Use Retail Sales. Ayr currently operates medical dispensaries in Woodbridge, Union, and Eatontown, all located in Central New Jersey, a region of 3.4 million people which until now only had access to two adult-use dispensaries. The Company’s three retail locations are the maximum allowable dispensaries under current state law.

Curaleaf — Expands New Jersey Adult-Use Sales to Edgewater Park Dispensary. Curaleaf Edgewater Park is now the Company's second location to sell adult-use cannabis in the Garden State. Edgewater Park is now the 13th dispensary licensed to sell adult-use cannabis in the Garden State.

Trulieve — Opens Two Medical Dispensary in West Virginia. In November 2021, Trulieve was the first to open a medical dispensary in West Virginia. The Company continues to serve patients at its dispensaries in Morgantown and Weston. Trulieve expects to open five more dispensaries in West Virginia this year, including locations in Belle, Huntington, Hurricane, Milton and Morgantown-Granville.

Verano — Opens MÜV Ocala, the Company’s 47th FL Location. MÜV Ocala is located in Marion County, a rapidly growing area that experienced a population increase of 13.5% from 2010 to 2021. Ocala was also recently named the sixth fastest-growing city in the U.S. Verano’s active operations now spans 13 states, comprised of 98 dispensaries and 12 cultivation and processing facilities with more than 1 million square feet of cultivation capacity

Columbia Care — Low-key cannabis allies drove $2M in sales and 40,000 retail visits in a campaign for dispensaries. Showing up on camera as themselves, while leaning into their recognition from TV, music and film, the stars talk up Columbia Care retailers like The Cannabist and The Green Solution in brief, homemade videos. They personally recommended a stop-by to consumers who had already dipped their toe into weed but were still looking for some hand-holding in the shopping process. The recently-launched program, thought to be the first of its kind for a cannabis marketer, represents another step in weed’s data-driven march to reach the coveted canna curious demo and the significant non-buying “addressable” audience.

🌱 Product

Boston Beer Company — Enters Cannabis Market with TeaPot, a New Line of Cannabis-Infused Iced Teas. The launch of TeaPot marks a monumental point in cannabis as the first major, publicly-traded alcohol and beverage company to enter the industry with its own THC brand and product. The launch is through BBCCC Inc., the cannabis subsidiary of Boston Beer. Leveraging The Boston Beer Company’s seasoned expertise in developing highly sought-after beverages, TeaPot promises to elevate the cannabis beverage market with its exceptional, refreshing taste. TeaPot’s first release is Good Day Iced Tea, a blend of real lemon black tea infused with expertly grown Pedro’s Sweet Sativa. Each 12-ounce can of TeaPot contains 5mg of THC and is crafted to minimize any cannabis taste or aroma. Additional varieties of TeaPot will be announced in the coming months.

PAX — Live Rosin Vape Cart Line. With the rising popularity of live rosin carts, PAX delivers a “pure, chemical-free experience with no harmful solvents, heavy metals, pesticides, or combustion byproducts.” While the flavors are immaculate and the diamonds add potency, the purity of the live rosin and the nuanced flavor profiles of the terpenes leaves consumers in a frenzy.

LeafLink — Launch Cannabis Logistics & Payments Tools in CO. As of next month, cannabis brands, retailers and distributors across the state will have access to LeafLink’s innovative transportation and payment tools, as well as brand and retail fulfillment offerings. Colorado was the first state where LeafLink launched its marketplace when the company was founded in 2016. Through Leaflink’s technology-enabled solutions, brands and retailers across Colorado efficiently create orders, fulfill them, handle transport, and seamlessly process payments.

Texas Original — Releases 10-Count/100 mg Medical Cannabis Gummies for $35. The condensed package of TXOG’s popular gummies will come in THC-only (10 mg of THC per gummy) or balanced CBD to THC (5 mg of CBD and 5 mg of THC per gummy) formulations. Each formulation is available in sour peach mango or strawberry passion fruit flavors.

SLANG Worldwide — Enters Maryland Through Strategic Partnership with Trulieve. As part of the new strategic partnership with Trulieve, SLANG will supply branded products for distribution in the Maryland market and support in-market sales with pop-up presence at retail locations throughout the state, as well as support other marketing efforts and local community activations. SLANG has partnered with Trulieve over the past year to enter the Florida and Massachusetts markets with SLANG providing wholesale initiatives, which is a SLANG core competency. Along with wholesale, this launch will also take place in Trulieve owned retail locations throughout the state.

🧔 People

Metrc — Jeff Wells Transitions from CEO to Chief Visionary Officer, Michael Johnson (CFO), promoted to CEO. Jeff Wells, Co-Founder and Chair of the Board of Directors, has transitioned from CEO to CVO. Michael Johnson, currently President and CFO, has been appointed as CEO, effective immediately. The company also announced that Lewis Koski, who has served as COO since 2019, has been promoted to CSO. Metrc now holds exclusive government contracts in every region of the U.S., with a total of 21 government contracts to date.

Curaleaf — Appoints Tyneeha Rivers As Chief People Officer. Tyneeha brings over 20 years of experience in corporate human resources, leading HR for Merrill Lynch, Morgan Properties, The Galman Group, Philadelphia 76ers, Harris Blitzer Sports & Entertainment, Greater Philadelphia YMCA, and most recently at Curio Wellness.

MedMen — Tyson Rossi, Chief Strategy Officer, Departs. Moving forward, the role will be filled internally. Rossi joined the company in February 2019 as Director or Product Marketing and also head the role of Head of Product and SVP, Product and Revenue.

Canopy Growth — Lays Off 8% of workforce, eyes C$150M more in savings. The latest round of layoffs amounts to 245 people, according to the company, and comes as Canopy struggles with falling sales in Canada. The company has yet to turn a profit. In a news release late Tuesday, Canopy acknowledged the reduced head count and said it expects the adjustments to generate up to C$150M in savings in 12 to 18 months. In addition, Canopy expects to incur between C$100M and C$250M in non-cash impairment charges, driven by goodwill and intangible asset impairments. Included in the layoffs were the Social Impact and Advocacy team, which led the company’s environmental, social and governance (ESG) strategy. However, the company said the department’s ESG work will be continued by Canopy’s Diversity, Equity, and Inclusion (DEI), investor relations and communications teams.

🎙️ Interviews

Hope Chicago: Charity sending students from Chicago high schools to college for free, featuring Pete Kadens, GTI Co-Founder (60 Minutes)

How Asian-American Women Are Blazing New Paths in Cannabis (Green Entrepreneur)

Jason Wild, TerrAscend Chairman and CEO on NJ, Strategy, Interstate commerce (The Dime)

WM Technology Launches New Solutions to Unlock More Value (NCV)

Leafly Is on a Mission to Empower the Cannabis Marketplace (NCV)

Grupo Flor is setting the new standard on how cannabis is sold (sponsored, SFGATE)

Legal And Illicit Weed And The Economics Of Cannabis (Seeking Alpha)

👋 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.

Highly Objective