📈 Leafly and Merida Merger Corp. I close Business Combination (LFLY)
Phylos raises $7.6M. Columbia Care closes $185M 9.50% Notes. IIP pulls $300M debt offering. GTI opens two Rise dispensaries in Virginia. Columbia Care opens first Cannabist dispensary in West Virgina.
The Ultimate 2022 Cannabis Industry Forecast Roundup. Grasslands put together a round up the top trending 2022 cannabis predictions so far. From Cannabis Business Times to CNBC, New Frontier Data to The Seattle Times and more, here are the 10 cannabis industry predictions for 2022 that dominating forecast lists:
Federal legalization won’t happen this year
Unlicensed legacy cannabis will continue to compete with legal businesses
Consumption lounges will be in demand as part of a larger experiential trend
Cannabis research will further expand
Potency cap campaigns will continue to dog the industry
Republicans cozy up to cannabis
The hemp market will continue to boom
Weed delivery is here to stay
Prepare for interstate commerce
The consolidation surge will continue
Weedmaps’ digital ad personifies cannabis as a character named Brock Ollie. Resembling a head of broccoli, the vegetable emoji commonly used as a visual representation of cannabis in marketing, the 30-second spot provides viewers with insight into a day in the life of Brock Ollie, whose superfood identity is up in smoke as he is repeatedly mistaken for cannabis. The advertisement is a humoristic take on the challenges imposed on the broader industry, which include social media censorship and a lack of consistent advertising regulations, thus restricting cannabis-related spots during nationally televised events, like the big game. Brock Ollie shines a light on the marketing hurdles that continue to impede industry growth and consumer education as well as make space for the existing stigma associated with cannabis to thrive.
As consumers become increasingly sophisticated in more established state markets, retailers report less of an emphasis on buying for potency in favor of other characteristics of the plant, including terpenes and minor cannabinoids. According to retail sales data from the six states Headset tracks, flower sales grew from $4.92B in 2020 to $5.49B in 2021. But flower’s share of the overall market fell. Cooper Ashley, Headset’s senior data analyst, noted last year’s 11.5% increase in flower sales was less than the 18% jump in overall Cannabis sales. By comparison, sales of pre-rolls rose from $1.02B in 2020 to $1.42B last year, an increase of 38.9% across the six states Headset tracks. Sales of edibles increased from $1.14B to $1.37B over the same time period, up 20.4%. Flower was the third-slowest-growing product category, ahead of topicals (up 2.5%) and tinctures and sublinguals (down 7.5%).
Cannabis Sales Bounced in Key Markets in December. Several markets exhibited strong growth, especially those in the East, which tend to be dominated by MSOs. Flower sales in almost all markets grew substantially slower than other categories. Western Markets — BDSA provides coverage for the relatively mature markets of Arizona, California, Colorado, Nevada and Oregon. In November, growth ranged from (14%) in Nevada to 27% in Arizona compared to a year ago. Eastern Markets — In the newer markets, the annual rate of growth picked up in two of the three markets for which BDSA provides data. Florida sales soared 14.7% sequentially to $163.8 million, while Pennsylvania rose 7.7% from November to $108.0 million. Still, both markets experienced small sequential declines from Q3 in Q4, with Florida declining 1.1% and Pennsylvania dropping 2.3%. Michigan, previously detailed, saw overall sales increase 10% from November to $168 million, up 66% from a year ago.
Mississippi will start taking Medical Cannabis applications in June. The MSDH is currently working to establish the licensing and patient registry structures and plans to begin accepting online license applications for patients, medical practitioners, cannabis cultivation facilities, and others by June 2022.
Leafly and Merida Merger Corp. I — Close Business Combination. In connection with the closing, Merida has adopted the Leafly name, and Leafly’s common stock began trading on the NASDAQ on February 7, 2022, under the ticker symbol “LFLY.” Since announcing the proposed combination with Merida in the summer of 2021, Leafly has introduced new value-driving tools for brands subscribers and enhanced its iPhone and iPad app to enable users to place pickup orders for cannabis products in legal state markets. The Company has also announced a post-combination Board of Directors with wide-ranging expertise and bolstered its executive leadership team with highly experienced hires for CFO, General Counsel, SVP of Sales, and SVP of Engineering.
Phylos — Closes $7.6M Funding led by Merida Capital Holdings. Phylos®, a modern crop science company developing advanced Cannabis and hemp genetics closed $7.6M in funding led by Merida Capital Holdings with participation from Accomplice and Entourage Effect Capital. During its restructuring, Phylos met several notable milestones at the 80,000 square foot state-of-the-art breeding, genomics, and chemotype analysis facility it shares with its cultivation partner Progressive Plant Research (PPR). This includes the development of dozens of novel cultivars and discovery of genetic markers for numerous high value Cannabis and hemp traits. The company has expanded its flagship AutoCBD™ autoflower hemp seed to four varieties and has developed ground-breaking low-touch, high-yield, and disease resistant early maturation Cannabis seed genetics for commercial-scale grows.
IIP — Pulls $300M Debt Offering Due to Market Conditions. On February 1st, Innovative Industrial Properties (NYSE: IIPR) began marketing a $300M debt offering. After the close on Friday, the company disclosed in an SEC filing that it has decided to not proceed due to market conditions. The company, which manages approximately $1.7 billion of assets, had intended to use the proceeds to fund the purchase of real estate assets. The notes were to include its 3.75% exchangeable senior notes due 2024 and 5.50% senior notes due 2026.
Columbia Care — Closes $185M Private Placement of 9.50% Senior-Secured First-Lien Notes. The 2026 Notes are senior secured obligations of the Company and were issued at 100% of face value. The 2026 Notes accrue interest payable semi-annually in arrears and mature on February 3, 2026, unless earlier redeemed or repurchased. The Company may redeem the 2026 Notes at par, in whole or in part, on or after February 3, 2024, as more particularly described in the fourth supplemental trust indenture governing the 2026 Notes. In connection with the Offering, the Company has received binding commitments to exchange ~$31.75M of the Company’s existing 13% senior secured notes due 2023, pursuant to private agreements in accordance with the trust indenture, for an equivalent amount of 2026 Notes plus accrued but unpaid interest and any negotiated premium thereon. As a result of the note exchanges, the Company received aggregate gross proceeds of ~$153M in cash pursuant to the Offering.
Ayr Wellness — Signs Management Services Agreement with Tahoe Hydroponics. The Company has entered into an Interim Management Services Agreement (MSA) with Tahoe Hydro, one of Nevada’s top cultivators of high-quality cannabis flower, and NV Green, producers of leading concentrates, pursuant to the previously announced Definitive Agreement signed in July 2021. Following the approval of the relationship under the MSA, Ayr will now begin leveraging the high quality and highly respected Tahoe and LIT cannabis brands throughout Nevada, including in increasing the brands’ presence in Ayr’s leading Nevada retail footprint.
Goodness Growth Holdings — Expansion of Credit Facility with Lenders. Goodness Growth has executed a third amendment to its credit facility with its senior secured lender, Chicago Atlantic, an affiliate of Green Ivy Capital, and a group of lenders. The amended credit facility enables the Company to access an additional delayed draw term loan of up to $55M which, a portion of which shall be utilized for working capital and general corporate purposes, and the remainder to be used for other specific purposes, including related to its expansion in the State of New York. Draws on the loan have a maturity date of April 30, 2023 with an option to extend another 12 months for an additional fee of $1,375,000. The cash interest rate on the Delayed Draw Loans is equal to the U.S. prime rate, plus 10.375%, with a minimum required rate of 13.375% per annum, in addition to paid-in-kind interest of 2.75% per annum.
Jushi Holdings — Closes Additional $3.7M with Long-Term Strategic Investors in the Private Placement. Jushi has closed an aggregate of 1,000,000 subordinate voting shares at a price of $3.68 per share for gross proceeds of $3,680,000 with Kenneth Rosen in the non-brokered private placement offering. Rosen, a long-term, strategic investor in the Company and industry supporter, has participated in several rounds of Jushi financings and is one of its original top ten investors. These additional proceeds follow the previously announced $10.0M in proceeds raised from Graticule Asset Management Asia.
Agrify — Acquires Lab Society. Lab Society is a Leader in Distillation and Solvent Separation Solutions for the Cannabis Extraction Industry with $10M in Annual Revenue. The Acquisition Further Solidifies Agrify as the Largest and Most Comprehensive Provider of High-Quality Extraction Solutions for the Cannabis and Hemp Industry Globally. Lab Society’s annual revenue for 2021 was ~$10M, and the acquisition is expected to be accretive in early 2022. The Company inherits Lab Society’s intellectual property, talent, and outstanding reputation for quality and reliability. The purchase price for Lab Society was $8M ($4M cash, $4M stock). There is also an additional earnout opportunity of up to $3.5M.
📄 Company Updates / Earnings
MedMen — Extends Maturity Date of Commercial Loan Agreement. The Company will prepay $20.0M on the Term Loans and pay a fee of $1.0M to the lenders in consideration of the Amendments, which fee will be paid in Class B Subordinate Voting Shares at a price of $0.12447 for a total of 8,021,593 Shares, with any difference in realized net proceeds that is less than $1.0M from the sale of the Fee Shares during a 30-day period, to the extent such Fee Shares are sold, reimbursed in cash. The Amendments require that the Company make a mandatory prepayment in the event of the sale of certain assets. Also, covenants related to strategic actions MedMen must implement if it is unable to pay the Term Loan by the extended maturity date.
Body and Mind — Expands to Michigan. The Company, through its wholly owned subsidiary, has received all licenses and approvals and opened the Body and Mind branded dispensary on February 2, 2022 to serve medical patients and recreational customers in Muskegon, Michigan. This will be the fifth state with Body and Mind operations with additional wholly owned licenses in development. As part of the Company's vertical growth strategy in Michigan, the previously announced, fully funded 57,000 square foot, two phase cultivation and production facility has commenced construction (see press release dated September 21, 2021). The Company will provide ongoing construction updates as the facility moves through the development process.
Ceres Acquisition Corp. — Proposed Extension to Consummate a Qualifying Transaction. The Company is seeking an extension to its permitted timeline, from March 3, 2022 to June 30, 2022, to extend the date by which Ceres has to consummate a qualifying transaction.
C21 Investments — Settlement of Phantom Earn-Out Share Obligation. Pursuant to the Phantom Purchase Agreement, a portion of the purchase price payable to the Vendors by C21 in connection with the acquisition of Phantom Farms in February 2019 was to be paid by the issuance of the Phantom Earn-Out Shares, the delivery of which was dependent upon certain triggers, including various price targets as well as any change of control, with up to 4.5M Phantom Earn-Out Shares deliverable to the Vendors pursuant to the Purchase Agreement. Vendors, who were entitled to receive up to 4.5M Phantom Earn-Out Shares pursuant to the Phantom Purchase Agreement, agreed to collectively receive 1.3M common share of C21 in exchange for termination of their entitlement to receive the Phantom Earn-Out Shares.
GTI — Open Two Rise Retail Locations in Virginia, Expanding Footprint to Four Stores in the Commonwealth. The company will open Rise Lynchburg and Rise Christiansburg. The Company owns and operates Rise stores in Abingdon and Salem and maintains the opportunity to open one additional retail location in the state.
Columbia Care — Opens First Cannabist Dispensary in West Virginia. Columbia Care began cultivation operations at its 40,000-square-foot facility in West Virginia in July 2021. Cannabist Williamstown will offer Columbia Care’s Seed & Strain brand in multiple forms, including whole flower and vape carts. The Company’s other portfolio brands such as Triple Seven and Classix will be introduced in the coming months for patients and wholesale partners. The Company is expecting to open three more Cannabist dispensaries in the spring with locations in Beckley, Morgantown and St. Albans, as well as a fifth location to follow later in 2022.
Trulieve — Statewide Retail Rebrand in Maryland. The Company is re-branding its Maryland retail locations, formerly branded as Harvest. Locations include Rockville, Halethorpe and Lutherville.
Cresco Labs — 15th Florida Sunnyside Store Opening in North Miami. Sunnyside North Miami is Cresco Labs’ first location in Miami-Dade County, 15th store in Florida and 49th dispensary nationwide. The Company’s upcoming Lady Lake store will be its 50th in the US.
Ayr Wellness — Opens 45th Florida Dispensary in Tampa. The new dispensary occupies over 3,000 square feet of prime retail space on Kennedy Boulevard, a well-traveled road in the area’s business district surrounded by restaurants and shopping areas. The store will have nine points of sale and feature Ayr’s full line of concentrates, edibles, gummies, vapes, and a selection of high-quality flower, including whole flower and pre-rolls.
Element 7 — Launches Ventura's First Cannabis Retail Express Outlet. Element 7's Express model was designed to allow for a grab-and-go cannabis transaction built around the industry's biggest brands with prices that disrupt the market and offer value that the customer isn't getting from other operators. The menu selected for Port Hueneme includes some of the State's leading brands like Jeeter, Wyld, Kiva, Raw Garden, Jungle Boys, Stiiizy, and West Coat Cure, as well as local craft cannabis brands from across California.
🌱 Product / 🚚 Distribution
PAX — New Vaping Pod is Made Solely from Pure Cannabis.
Pax Labs is debuting a product it designed to address the biggest concerns of vaping. Called Fresh Pressed Live Rosin pods, they are filled with nothing but cannabis compounds that have been cold-pressed almost like juice—with zero solvents or other chemical additives used in the process. Steven Jung, COO of Pax, compares these new pods to “raw food.”
Amuse x Cookies — Partners to Cookies’ eCommerce Delivery Platform. Amuse will serve as the first and primary cannabis delivery partner in California for Cookies' locations, starting in Los Angeles, San Francisco, San Jose and Sacramento, with more coming in California throughout 2022.
Trulieve — Unveils Expansive Florida Product Release Lineup for February. The company launched two proprietary brands, Sweet Talk™ and Momenta™, new Cultivar Collection™ flower releases, and the second product drop of Live Diamonds by Muse™. Momenta – Trulieve's staple cannabis line for everyday wellness and overall well-being. The product lineup includes tinctures, nano tinctures, capsules, RSO and a topical muscle gel. Sweet Talk – Trulieve's newest introduction of tasty edibles. The brand will launch in Florida with strawberry gels. In the future, Sweet Talk products will expand to include chocolate bars and a variety of gummies. Live Diamonds by Muse – The most recent innovation from Trulieve's state-of-the-art hydrocarbon extraction lab, the only one of its kind in the state of Florida. Cultivar Collection – Throughout the month, Trulieve will introduce regional product drops of its small-batch, top-shelf whole flower throughout the state of Florida.
MariMed — Brands and Products Now Available in Delaware. As a result of new regulations in the Delaware Medical Marijuana program, MariMed has expanded its licensing agreement with First State Compassion Center (FSC), a Delaware vertically integrated cannabis operator, to produce and distribute its branded cannabis edibles. First State Compassion will have exclusive rights to produce and distribute MariMed’s Betty’s Eddies® infused fruit chews, Bubby’s Baked™ soft and chewy, full-spectrum cannabis baked bites, and k FUSION chewable micro-dose mints. MariMed and FSC have a longstanding advisory relationship. FSC currently licenses MariMed’s Nature’s Heritage® premium flower and concentrates brand. With the addition of Delaware, MariMed’s brands will now be available in six states plus Puerto Rico.
Unrivaled Brands x POTTERS — Distribution Agreement. POTTERS Cannabis Co.’s offering includes premium cartridges, live resin and full spectrum vape products that are 100% natural and CGMP compliant.
🧔 People & Jobs
Claybourne — VP Operations (Perris, CA)
The Parent Company — COO Steps Down. Dennis O'Malley, the Company's COO has elected to step down in the spring of 2022. O'Malley has served as COO since January 2021, when the Company completed its qualifying transaction. Prior to that, he served as CEO of Caliva since January 2017.
TerrAscend — Key Leadership Team Additions. Charishma Kothari as SVP Marketing, Charles Oster as SVP Sales, and Jared Anderson as SVP Finance and Strategy.
Schwazze— significant expansion within manufacturing, cultivation, and information technology Leadership. David Kaufman as VP of Manufacturing and Supply Chain. Steven Liedtke joins as VP, Information Services. Robert Piziali joins Schwazze as VP, Cultivation.
AFC Gamma — Appoints Marnie Sudnow to its Board. Since 2020, Sudnow has served as SVP Client Success at Stylitics, where she oversees the company’s delivery of world-class merchandising technology providing personalized data-driven omnichannel solutions for leading retailers. Prior to Stylitics, she held several leadership positions at Mediaocean and worked in Private Banking for JP Morgan.
SLANG Worldwide — Matt Fraser resigns from Board. Matt Fraser has resigned from the Board of Directors effective immediately, to fulfil his other business interests. The Board and management of SLANG intend to commence a search to identify qualified candidates to fill the vacancy.
Clever Leaves — Appoints George Schultze to Board. Schultze is the founder and managing member of Schultze Asset Management, L.P. (SAM), where he chairs the firm’s investment and strategy committees. With over 25 years of experience in the investment industry, he is widely recognized as an expert on event-driven and special situations investing.
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👋 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.