💰 MedMen – $100M Private Placement backstopped by Serruya, Tilray exchanges 9M Shares for $165.8M Notes held by Gotham, providing favorable amendment and extension

Cresco Labs acquires Blair Wellness (MD) for 1.8x 2021E Revenue. Radiant Canna raises $6M. Greenrose SPAC increases 2022 guidance and payment to Theraplant by $50M. Trulieve adds CTO.

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🌿Industry

Cannabis Companies on the annual Inc. 5000 list:


💵Deals

MedMen — Backstopped $100M Equity Investment Led by Serruya Private Equity to Fund Expansion and Transform Balance Sheet. Serruya Private Equity (SPE) is purchasing $100 million of units (Units) of Medmen at a purchase price of $0.24 (C$0.32) per Unit (Private Placement). Certain investors associated with SPE agreed to backstop the $100 million to be raised in the Private Placement (Backstop Commitment). The $100 million in proceeds from the Private Placement will allow MedMen to expand its operations in key markets such as California, Florida, Illinois and Massachusetts and identify and accelerate further growth opportunities across the United States. In connection with the Private Placement, the Company appointed Michael Serruya to its Board of Directors as its seventh member.

Each Unit consists of one share and one quarter share purchase warrant, permitting the holder to purchase one Share for a period of five years from the date of issuance at an exercise price of $0.288 (C$0.384) per Share. Each Unit issued to certain SPE purchasers consists of one Share and one quarter of one Warrant plus a proportionate interest in a short-term warrant which expires on December 31, 2021. The Short-Term Warrant, which will be issued to certain of the SPE purchasers, entitles the holders to acquire, on payment of $30 million, at the option of the holders, Units at an exercise price of $0.24 (C$0.32) per Unit, or US$30 million principal amount of notes at par, convertible into Shares at a conversion price of $0.24 (C$0.32) per Share. The Company will use any proceeds from exercise of the Short-Term Warrant to pay down an existing debt instrument. In consideration for the Backstop Commitment, certain investors associated with SPE will receive a fee of $2.5 million to be paid in the form of Shares at a deemed price of $0.24 (C$0.32).

Tilray — Acquires Majority Position in Amended MedMen Convertible Notes.

Under the terms of the transaction, a newly formed limited partnership (SPV) established by Tilray and other strategic investors acquired an aggregate principal amount of approximately $165.8 million of the Notes and the Warrants, all of which were originally issued by MedMen and held by GGP, representing 75% of the outstanding Notes and 65% of the outstanding Warrants. Tilray’s interest in the SPV represents rights to 68% of the Notes and related Warrants held by the SPV, which are convertible into, and exercisable for, approximately 21% of the outstanding Class B subordinate voting shares of MedMen upon closing of the transaction. Tilray’s ability to convert the Notes and exercise the Warrants is dependent upon U.S. federal legalization of cannabis or Tilray’s waiver of such requirement as well as any additional regulatory approvals. As consideration for Tilray’s interest in the Notes and Warrants, and subject to Tilray receiving the stockholder approval necessary to increase the number of shares of its authorized capital stock, Tilray will issue approximately 9.0 million shares of its common stock to GGPprovided, however, that if Tilray has not received the stockholder approval by December 1, 2021, GGP may elect to receive cash rather than Tilray shares. Tilray’s previously scheduled Special Meeting of Stockholders will be held this Thursday, August 19, 2021. MedMen did not receive any proceeds from the transfer of the Notes.

In connection with the transactions, the parties agreed to amend and restate the facility governing the Notes to, among other things, extend the maturity date to August 16, 2028, eliminate any cash interest obligations and instead provide for pay-in-kind interest, eliminate certain repricing provisions, and eliminate and revise certain restrictive covenants. Accrued pay-in-kind interest on the Notes will be convertible at price equal to the trailing 30-day volume weighted average price of the MedMen Shares, as and when such pay-in-kind interest becomes due and payable.

Cresco Labs — Acquire a Top Performing Maryland Dispensary, Blair Wellness Center. Blair Wellness is one of the top performing dispensaries in Maryland with a 6,500 sq. ft. building located minutes from downtown Baltimore and centrally located between the city’s numerous universities. The Transaction implies a 1.8x 2021 revenue multiple, satisfied through the payment of cash and a twenty-four (24) month promissory note. The Transaction will be completed on a cash-free, debt-free basis with a mutually agreed upon normalized target level of working capital. The cash consideration would be payable upon closing of the Transaction.

Radiant Canna —Raises $6M, Targets Multi-State Expansion. Radiant Canna provides tech-forward manufacturing and distribution services in California to multi-award-winning brands, including Mendocino GrasslandsAhti HashSOG Army,  Wonder ExtractsArcannaWoodstock Heritage StrainsRidgetop BotanicalsMadame Munchie, and its own in-house extracts brand, Cosmic. Radiant Canna operates fulfillment centers in Northern and Southern California, including Santa Rosa, San Francisco and Los Angeles. The seed round was led by D4 Investments, the investment arm of D4 LLC, part of the family office of James Kinsella and Robert McNeal. The firm invests in start-ups and early-stage ventures where Kinsella's and McNeal's experience in building multi-billion-dollar companies in the US and the European Union can help drive a company's success. Other investors in the seed round include Donald Kivowitz and Charles Putnam, as well as Emles Venture Partners and West Creek Investments.

TILT Holdings — Second Agreement with Old Pal to Expand into Pennsylvania. TILT’s Pennsylvania subsidiary, Standard Farms , will bring Old Pal into the Company’s full-service wholesale manufacturing, packaging and distribution platform in the Commonwealth, expanding the Company’s relationship with Old Pal beyond Massachusetts. Standard Farms will be launching Old Pal’s Classic 7-gram Whole Flower pouches and one-gram 510 Oil Cartridges, provided by TILT subsidiary, Jupiter Research, LLC.

Flora Growth — Signs Agreement To Acquire Vessel Brand. The acquisition by Flora of Vessel is expected to be a substantive addition to the Flora Growth brand portfolio as a rapidly growing company with LTM Revenues of $6.2M. Further, upon closing of the acquisition Flora is expected to leverage Vessel’s in-house design, sales, and marketing expertise to conduct an audit of Flora’s existing global brand and product portfolio.

ALT (Advanced Liquid Technology) — Partners with Grow (Grow Group Plc) to market and distribute ALT’s products across Europe. ALT uses emulsion technology to create unique flavor neutral, zero calorie, sugar-free, vegan, keto, and paleo friendly water-compatible medical cannabis products in the form of nanoemulsions, which are kinetically stable with an incredibly small particle size. ALT’s technology allows for far more effective delivery of cannabinoids to the user, compared to tinctures and other ingestible products. Patients will benefit from rapid on-set of effects within 5-15 minutes in addition to higher efficiency in absorption of medical cannabis. ALT plans to have a range of EU GMP-certified liquid medical cannabis products available for patients in Europe by early 2022.


📄Company Updates / Earnings

Greenrose Acquisition Corp. — Increases Full Year 2022 Financial Outlook. Greenrose’s expanded financial projections reflect Theraplant’s additional upside potential from Connecticut’s earlier-than-anticipated approval of recreational marijuana sales, which are anticipated to begin in mid-2022. The Company’s current full year 2022 financial projections, compared to the previous projections provided in the presentation filed by Greenrose on June 16th, 2021, are summarized below:

In light of Theraplant’s revised projections, Greenrose on August 12, 2021 also announced that Greenrose and Theraplant amended the Agreement and Plan of Merger to increase aggregate consideration payable to Theraplant to $150 million, with $100 million paid in cash and $50 million paid in stock. The increase in consideration payable to Theraplant by Greenrose represents a $50 million increase from the consideration amount disclosed in the Company’s Form 8-K filed on March 18, 2021. Additionally, pursuant to the Amended Merger Agreement, Theraplant and the Company agreed to extend the timeline to complete the transaction to November 30, 2021.

Unrivaled Brands — Second Quarter 2021 Financial Results

  • Revenues: $6.3 million, up 131% compared to the same period of 2020

  • Gross Profit: $2.3 million (37.3%), compared to a gross profit of $1.2 million (46.1%) for Q2 2020

  • SG&A: $6.2 million, compared to 6.3 million for Q2 2020

  • Net loss: ($4.1 million), or ($0.02) per share, compared to a net loss of ($18.2 million), or ($0.10) per share for Q2 2020

  • Cash: $40.3 million as of June 30, 2021

Greenlane — Q2 2021

  • Revenue increased 7.1% to $34.7 million, compared to $32.4 million for Q2 2020;

    • Q2 2021 core revenue (defined as non-nicotine revenue) grew 14.9% to $34.5 million, compared to $30.0 million in Q2 2020;

  • Greenlane Brands grew to $9.0 million in Q2 2021, up 62.5% compared to $5.5 million in sales for Q2 2020; Greenlane Brands accounted for 25.9% of Q2 2021 total revenue compared with 17.1% of total revenue for Q2 2020;

  • Successfully transitioned to core business lines. Core revenue accounted for 99.3% of total revenue for Q2 2021;

  • Gross profit and gross margin grew by $1.0 million and 1.3%, respectively, to $7.8 million and 22.4%, compared to $6.8 million and 21.0% in Q2 2020;

  • Subsequent to quarter end, the Company completed a $32.0 million registered direct offering priced at-the-market

  • Cash: $11.6 million as of June 30, 2021

TILT Holdings — Graduates Public Listing to the NEO Exchange. Following a voluntary delisting from the Canadian Securities Exchange, TILT is now available for trading on NEO under the symbol TILT.


🌱Product

BioSteel (Canopy) — Named Official Sports Drink of the Lakers. Through the multi-channel sponsorship, BioSteel brand and products will have a year-round presence on and off the court. This includes BioSteel Sports Drink on the Lakers team bench and integration of the BioSteel brand into the team bench set ups, locker room displays and in-arena signage.

Happy Cabbage — Debuts Sirius, an Insights Compass for Cannabis Retailers. Centered around the key pillars of cannabis businesses - Sales, Marketing, Customers, Operations, and Products - Sirius provides a workflow that allows users to quickly identify issues, diagnose a solution, and take action. The cumbersome nature of report building and dashboarding is eliminated with Sirius.


🧔People

Trulieve — Appoints Nilyum Jhala as CTO. Jhala previously served as VP Global and Digital Technology at Hallmark Cards, where he led a large, geographically diverse team with more than 200 technology professionals across North America, Asia, South America and Eastern Europe, ensuring the end-to-end optimization of D2C, B2B2C, traditional retail and wholesale channels. He was responsible for the company's global consumer experience transformation, encompassing more than 50,000 retail rooftops in addition to all digital aspects of Hallmark.com, resulting in over 100% digital growth for the company in 2020. Prior to joining Hallmark, Jhala served as Division VP for Family Dollar, a subsidiary of Dollar Tree. Previously, he led IT transformation and roadmap initiatives for both Lowe's and Office Depot.


🎙️Interviews

Investing in Cannabis — Alexander Gastevich, V. Gastevich Investments

The Cannabis Investing Podcast — Alan Brochstein: The Longer Legislation Takes, The Better For Cannabis Companies

TRICHOMES — Jeffrey Harris, CEO, of Springbig


👋 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.