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🗽 New York Releases Proposed Regulations for Conditional Adult-Use Retail Dispensary
TerrAscend completes acquisition of Gage Cannabis. Agrify secures $135M Debt Facility. Earnings - AWH, Goodness Growth, AFC Gamma, springbig. Curaleaf CFO departs after 9 months.
New Yorkers With Marijuana Convictions Will Get First Retail Licenses. The policy is part of a concerted push to assure that early business owners in the state’s projected billion-dollar marijuana industry will be members of communities that have been affected by the nation’s decades-long war on drugs. In favoring those with marijuana convictions and prepping their businesses for turnkey sales, New York appears to be trying to avoid pitfalls encountered in some other states, which have seen designated “social equity” applicants and other mom-and-pop marijuana businesses struggle with issues like lack of capital or competition from deep-pocketed corporate operations. Hochul has proposed including $200 million in this year’s budget to support the fledging businesses, money that would be spent on finding, securing and renovating storefronts for retailers. That need for state assistance is particularly acute in New York City, where real estate prices have rebounded as the worst of the Covid pandemic has receded. Link to the 35-page proposed regulations.
New York State Announces The Office of Cannabis Management Seeding Opportunity Initiative. Governor Kathy Hochul announced the first-in-the-nation Seeding Opportunity Initiative, which will position individuals with prior cannabis-related criminal offenses to make the first adult-use cannabis sales with products grown by New York farmers. This farm-to-store initiative makes sales in New York possible before the end of 2022, jumpstarts New York’s Cannabis Industry, guarantees support for future equity applicants, and secures an early investment into communities most impacted by the disproportionate enforcement of cannabis prohibition. The Cannabis Control Board at its meeting today advanced two components of the Seeding Opportunity Initiative. First, it advanced to public comment regulations for Conditional Adult-Use Retail Dispensaries. As part of the Seeding Opportunity Initiative, this subset of dispensaries must be owned by equity-entrepreneurs with a prior cannabis-related criminal offense who also have a background owning and operating a small business. They will be the first to open and make sales in New York State, establishing equity-owned businesses at the front-end of New York’s adult-use market. Second, the Board approved a license application for hemp farmers seeking to grow adult-use cannabis this spring – called the Adult-Use Conditional Cultivator License. GreenspoonMarder published their opinion here.
Oakland Cannabis Sellers, Once Full of Hope, Face a Harsh Reality. When Tucky Blunt was selected for one of Oakland’s first equity cannabis licenses in early 2018, he remembers shouting out his gratitude to the crowd gathered at City Hall. Blunt struggled with the rising taxes; the cost of the armed guards, who are each paid about $30 an hour; and the looting in the late spring of 2020. The bigger problem, he said, was that one of his partners, who oversaw the books, stopped paying taxes and vendors. A year ago, Mr. Blunt had to close for several months because the store’s finances were a shambles. Grizzly Peak agreed to bail him out, but needed total control—splitting any profits with Blunt, who still owns a majority stake in the store but is paid a salary as a consultant. “I am grateful that Grizzly Peak believes in me,” Mr. Blunt said. “I wouldn’t be in business without them.” In late November, business was looking up. The store’s finances had been stabilized. But then, a few days before Thanksgiving, Mr. Blunt’s store was robbed for the second time in 18 months. The thieves cleared out much of the store.
New Jersey’s adult-use market is expected to launch with only a handful or so of the state’s existing medical cannabis operators. The start of recreational marijuana sales also comes as social equity applicants are struggling to jumpstart their business, raise funds and secure real estate. Existing medical marijuana operators might get as much as an 18-month head start on some new cannabis businesses, an industry expert said in conversation with MJBizDaily. Existing medical cannabis operators have maintained since November 2021 that they are ready to sell recreational products. But New Jersey’s regulators resisted, voicing skepticism the state’s medical marijuana industry could adequately serve both the MMJ and adult-use markets. New Jersey has only 11 licensed medical marijuana businesses operating 23 dispensaries, according to state data. In recent months, regulators approved an additional four vertically integrated medical marijuana licenses, 10 cultivation permits and 30 dispensary licenses to support the MMJ market. But those businesses aren’t yet in operation.
Department of Cannabis Control Launches CannaConnect, a New Resource to Support California’s Cannabis License Holders. CannaConnect will serve as a one-stop-shop for cannabis businesses to find the information, resources and support they need at each stage of the regulatory process – from initial licensure to subsequently remaining in compliance. CannaConnect offers simple informational materials on the processes mandated by the state for cannabis businesses, from applying a unique identifier tag (UID) and using California’s Track-and-Trace system (CCTT) to preparing for site inspections, understanding regulatory compliance requirements.
urban-gro — Acquires Emerald Construction Management, adding in-house Design-Build Solutions to its Global Indoor CEA Service Offerings. Emerald C.M. expects 2021 revenues of $26.5M and adjusted EBITDA of $1.2M. The total purchase price for the transaction, inclusive of a maximum $2.0M contingent earnout, is $7.0M ($2.5M cash, $4.5M stock).
CannTrust — Completes C$17M Financing, Exits CCAA. A group of investors led by Marshall Fields International B.V., a subsidiary of Kenzoll B.V., a Netherlands-based private equity investment company, has invested C$11.2M to acquire a 90% equity interest in CannTrust Equity and provided a C$5.5M secured credit facility to CannTrust Equity, which is subordinated to the existing $22.5M credit facility arranged by Cortland Credit Lending Corporation. The Company retains the remaining 10% of the common shares of CannTrust Equity.
Pelorus Equity Group — $17M Debt Financing with Royal Emerald Pharmaceuticals. The financing will help Royal Emerald purchase a new facility location in Desert Hot Springs, California. Formerly a Kmart retail location, the new facility situated on a 7-acre campus will undergo an extensive renovation and remodel to turn the 94,000 sq ft building into a high-tech cannabis cultivation and medical research facility. Royal Emerald is a DEA-registered, specialty pharmaceutical company working to research and produce federally compliant THC and CBD based medicine for veterans and first responders. As one of the first pharmaceutical companies in the nation to receive federal licenses to research, manufacture, import, and distribute substances with THC and CBD, Royal Emerald will be able to ship its medical cannabis products across state lines and into international jurisdictions upon completion of the Desert Hot Springs Facility.
Agrify — Secures $135M Debt Facility. The company has entered into a debt financing agreement for up to $135M in a Senior Secured Note facility with an institutional lender. An initial funding of $65M under the Note will be immediately available to the Company at an initial closing, with the option for the Company to draw down the remaining $70M available in two subsequent funding of $35M each, subject to the satisfaction of certain funding conditions.
TerrAscend — Completes Acquisition of Gage Cannabis. At closing, TerrAscend issued an aggregate of 51.3M ($252.4M based on $4.92 closing price on 3/10) common shares to former Gage shareholders. In addition, up to 25.8M ($126.9M based on $4.92 closing price on 3/10) TerrAscend common shares are reserved for issuance in connection with the exercise or exchange of former Gage convertible securities that will be satisfied with TerrAscend common shares if and when exercised or exchanged.
📄 Company Updates / Earnings
AWH — Q4 & 2021 Financial Results
Q4 2021: Revenue of $102.0M, down 2.9% Q/Q and up 71.0% Y/Y; Net revenue (excludes intercompany sale of wholesale products), decreased 6.2% Q/Q to $88.5M, but up 63.0% Y/Y; Adjusted EBITDA was $19.8M, down 16.0% Q/Q, up 82.8% Y/Y. Adjusted EBITDA Margin was 22.3%, a 261 basis point decrease compared to the prior quarter, but a 242 basis point increase compared to prior year.
FY 2021: Revenue of $380.4M, up 135.8% Y/Y; Net revenue up 131.3% Y/Y to $332.4M. Adjusted EBITDA was $79.4M, up 157.6% Y/Y. Adjusted EBITDA Margin was 23.9%, a 245 basis point increase compared to the prior year.
Balance Sheet: As of December 31, 2021, cash and cash equivalents were $155.5M, net debt was $103.3M.
Goodness Growth Holdings — Q4 and Full Year 2021 Results
2021: Revenue of $54.4M, up 10.6% Y/Y, including the Company's former subsidiaries in Pennsylvania and Ohio, and its former dispensary in Arizona. Excluding contributions from Pennsylvania, Ohio, and Arizona retail, full year revenue increased 30.8%. Retail revenue excluding Arizona and Pennsylvania increased 33.3% to $39.6M in 2021. Wholesale revenue, excluding Pennsylvania and Ohio, increased by 21.3% to $9.7M. Gross profit was $19.8M (36.4% GM), as compared to gross profit of $17.1M (34.8% GM) last year. EBITDA, as described in accompanying disclosures and footnotes, was a loss of ($15.1M), compared to a loss of ($6.0M) in FY2020.
Q4: Total revenue was $13.7M, up 10.5% Y/Y. Excluding contributions from Pennsylvania, Ohio, and Arizona retail, total revenue increased 23.8%. Retail revenue excluding Arizona and Pennsylvania increased 33.8% to $10.8M in Q4 2021 and reflected growth in each of the Company's other retail markets. Wholesale revenue, excluding Pennsylvania and Ohio declined by 5.6% to $2.2M, with the decline primarily driven by continued impact of crop loss in Arizona which occurred during Q3, partially offset by growth in New York and Maryland. EBITDA was a loss of $5.9M during Q4 2021.
springbig — 2021 Financial Highlights and Nominees for Post-Business Combination Board of Directors.
Revenue: $24M in 2021, up from $15M in 2020 (58% growth)
Gross margin of 71% in 2021, up 4% YoY from 67% in 2020
Retail client base of 1,240 in 2021, up 63% from 759 in 2020
Net dollar retention of 110%
Distributed 1.9B standardized client messages in 2021, up 56% Y/Y
Board: Jeffrey Harris (springbig), Sergey Sherman (Tuatara Capital), Steve Bernstein (SBA Communications), Patricia Glassford (GE), Amanda Lannert (Jellyvision), Phil Schwarz (Corazon Capital), Jon Trauben (Altitude Investment Management)
AFC Gamma — Q4 and Full Year 2021
2021: Net income of $21.0M, or $1.57/share; distributable earnings of $24.7 million in 2021, or $1.85/share, closed $341.3M of new commitments in 2021
Q4 2021: Net income of $7.0M, or $0.43/share; distributable earnings of $8.5M, or $0.52/share; closed $127.3M of new commitments and funded $125.6M of new and existing commitments; paid dividend of $0.50/share on January 14, 2022 for Q4 2021, representing a 16% increase from the prior quarter
Portfolio: Total loan commitments of $419.2M ($363.7M of which has been funded) across 16 portfolio companies, as of December 31, 2021. The portfolio’s weighted average yield to maturity was ~19% as of December 31, 2021, compared to 21% as of September 30, 2021. All loans are current and performing
AFCG received a BBB+ investment grade rating in 2021 and issued $100M in aggregate principal amount of 5.75% senior unsecured notes due 2027
Dutchie — Pledges $1M to Help Free People Imprisoned On Cannabis Charges. The Last Prisoner Project, a nonprofit dedicated to undoing the harms of the failed war on drugs, recently launched a campaign to free Kevin Allen. That campaign, and thousands of others like it, received a significant boost on Monday as the Last Prisoner Project announced a new wide-reaching partnership with cannabis technology platform, Dutchie. To kickstart the partnership, Dutchie is matching $1 million in donations from their dispensary partners and cannabis consumers, in addition to a $100,000 donation upfront to the Last Prisoner Project.
Greenlane — Headcount Reductions, Exclusive of anticipated pre-announced Merger Synergies, Expected to Result in ~$8M in Additional Annual Cost Savings. The reduction in force encompassed a broad spectrum of divisions both domestically and abroad. The Company is also considering reducing its facility footprints worldwide and adjusting its go-to-market strategy. Additional strategic measures that the Company is pursuing or intends to pursue in order to capitalize the business in a non-dilutive manner, include: Conducting a sale leaseback of the Company's HQ;
disposing of non-core assets; discontinuing sales of lower-margin 3rd-party brands and selling existing inventory; raising prices on select products; and, securing an asset based loan that will support working capital needs.
🏬 Retail / Cultivation
Glass House Brands — Receives Licenses to Operate SoCal Greenhouse Facility. The Company received California state cannabis licenses, as well as a cannabis business license from Ventura County for the Phase I retrofit of the Company's 5.5M sq ft greenhouse located in Southern California. Receipt of the Licenses enabled Glass House to immediately commence cultivation activities at the SoCal Facility on March 11th, which included an initial transfer of ~30,000 clones from the Company's nearby cultivation facility in Santa Barbara, California. First harvest from the SoCal facility is expected to occur in Q3 2022. The SoCal Facility consists of six, high-tech, environmentally controlled agricultural greenhouses totaling ~5.5M sq ft, located on a 165-acre property in Ventura County, California.
C3 Industries — Enters Massachusetts Cannabis Retail Market via Social Equity Partnership with Local Family. The deal encompasses three new High Profile x Budega retail locations in the City of Boston. The first of the three stores, located at 43 Freeport Street in Dorchester, is celebrating its grand opening this weekend from March 17th to the 20th. As part of the partnership, C3 Industries and Brian Chavez will also be opening locations at 561 Dudley Street in Roxbury and 3995 Washington Street in Roslindale. The stores will carry a wide array of cannabis products in all categories, and will specifically feature Cloud Cover flower, prerolls, concentrates and vape cartridges produced at C3's cultivation and processing facility in Franklin, MA.
Curaleaf — Opens Tamarac, FL Dispensary. Curaleaf Tamarac is the Company's 45th location in Florida and the second in Broward County. Curaleaf has served nearly 300,000 patients through its 45 dispensaries across Florida.
Columbia Care — Third Dispensary Opening in West Virginia. Columbia Care officially opened its first West Virginia store in Williamstown on February 3 and its Beckley store on February 18. Cannabist Morgantown will open in the coming weeks and the fifth location will follow later in 2022. The Company has also begun third party wholesale distribution across the state.
Raw Garden — Launches 100% pure Cannabis Joints Infused with Micronized Refined Live Resin Crushed Diamonds. Raw Garden’s joints are grown and rolled in-house with no trim, additives, or artificial flavoring. To ensure the product maintains the best flavor and freshness, Raw Garden uses a trade-secret post harvest and drying process that allows them to preserve the flower’s freshness and dry in small lots. The joints are then hand-rolled and not stuffed so consumers can see the freshness within.
Sweet Flower — Launches "SWEETS by Sweet Flower" In-House Brand. Starting with the launch of the "SWEETS" cannabis flower line, in three cultivars – Limoncino Sour, (indica cross of Gelato #33 x Divorce Cake), Strawberry Horchata, (hybrid Wedding Cake cut back-crossed with White Widow x Wedding Cake), and Maraschino (sativa dominant hybrid cross of Cherry Haze x Slymer), each featuring unique terpene profiles. SWEETS' flower is grown in a hybrid indoor facility in Southern California, scientifically engineered to deliver each plant the highest qualitative and quantitative source of light.
Curaleaf' — Select Brand Expands Product Offerings With Live Rosin Solventless Extracts. Select Live Rosin, the Company's first line of solventless extracts will be available to patients across Florida. The products will initially launch at 12 Curaleaf locations and will continue to expand statewide by April 7th. The products feature an aromatic, pure cannabis flavor created through the Company's live harvesting, flash-freezing and gentle solventless extraction processes that preserve the natural integrity of each strain's terpenes and cannabinoids. Curaleaf's proprietary water-based extraction process eliminates the waste and inefficiencies associated with live rosin manufacturing.
Trulieve — Partners with Survivor's Ethan Zohn as Momenta Brand Ambassador. Through the partnership, Zohn will be the official ambassador of Momenta, Trulieve's in-house everyday wellness and overall well-being brand. Zohn will be documenting and sharing his holistic cannabis wellness journey and how he incorporates cannabis into his daily routine. The partnership includes local and national educational outreach, keynote speaking, philanthropic opportunities and social media collaborations. The former professional soccer player will also wear Momenta apparel during his future athletic endeavors. Momenta, currently available in Florida, Massachusetts and West Virginia, empowers patients to enhance their everyday wellness routines through cannabis.
TerrAscend — Becomes First Major U.S. Cannabis Operator to Launch Mobile Retail App on the Apple App Store. Users can now place orders for pickup at The Apothecarium dispensaries in Maplewood and Philipsburg, NJ, as well as delivery and pick-up orders from The Apothecarium Capitola in California. The Company expects to expand availability of the mobile app across TerrAscend's U.S. footprint of Apothecarium locations in the coming weeks. The Apothecarium app offers a seamless, engaging, and informative way for patients and consumers to order cannabis products online. Customers have access to convenient features like live chat, order tracking and dedicated search functions to help them find the most suitable products for their needs. Apothecarium customers in California will also be able to utilize digital payment and delivery features.
MariMed — Launches Vibations: High + Energy Drink Mix Brand. The product features an all-natural, full-spectrum cannabis drink mix that provides focus and energy. Every single-serving packet of Vibations: High + Energy contains full-spectrum cannabis, guarana-based caffeine for energy, and a variety of vitamins and electrolytes for hydration. Available in four flavors—Strawberry Lemonade, Peach Tangerine Tea, Iced Tea Lemonade, and Pomegranate Blueberry Acai.
Acreage Holdings x botanica — Mr. Moxey’s THC Mints. Acreage has signed a licensing agreement with botanica, producer of Mr. Moxey’s THC and CBD products, to manufacture and distribute Mr. Moxey’s THC mints in Acreage’s operating markets in OH, NJ, PA (as regulations allow), IL, NY, and ME, which will double Mr. Moxey’s consumer reach. Acreage will manufacture Mr. Moxey’s entire line of THC mints in their facilities utilizing botanica’s proprietary ingredients, formulas, procedures, and packaging. The six SKUs include Relax, Relief, Energize, Balance, Dream, and Zen.
Jones Soda — Releases Cannabis Products under New Mary Jones Brand. The launch portfolio of 16 different SKU’s includes single and multi-dose infused sodas as well as syrup and gummies offered in four of the most popular Jones Soda flavors. Initially launching in California, the portfolio fills a gap that exists in the market between micro-dose, health claim-driven brands and high-potency terpene flavor profile brands by offering both new and experienced users a welcome alternative for cannabis moments and social occasions.
🧔 People | 💻 Hiring
Curaleaf — Appoints Neil Davidson as Interim CFO. Mr. Davidson, who served as Curaleaf CFO from 2019-2020 and as COO until now, will serve in the CFO role while the Company searches for a permanent replacement. Current CFO Ranjan Kalia s leaving the company to pursue other career opportunities, he joined in July 2021.
GTI — Departure of Wes Moore from Board. Moore joined Green Thumb’s board of directors in 2018 and served on the audit and compensation committee.
WM Technology — Appoints Anthony Bay as New Chairman of Board. Bringing more than 20 years of board leadership experience to WM Technology, Bay is the founder and CEO of Techquity, an operating advisory firm of senior tech executives with deep experience growing and scaling companies. In addition to serving on boards of venture funded private companies during his career, Bay has served on several public boards in the US and Europe, including two as chairman. Bay has been a senior executive and led product groups at Apple, Microsoft and Amazon during periods of rapid, formative growth.
Los Angeles Department of Cannabis Regulation (DCR) — Executive Director Cat Packer Steps Down. Under Packer’s leadership, the city’s cannabis overseer issued more than 1,200 licenses, including 350-plus granted to social equity applicants, the office of L.A. Mayor Eric Garcetti noted on twitter. Packer was at the center of an ongoing battle in the city over marijuana licensing, saying her department had been underfunded since its inception in 2017 and that the agency faced an overwhelming task that was nearly impossible to achieve.
Coda Signature Expands Its Women-Led Executive Board. CEO Maigread Eichten, CFO Jessica Urbaniak and CMO Amber Milos represent decades of experience shepherding companies such as PepsiCo, General Electric (GE), and Bacardi USA through hypergrowth and overcoming market challenges. CEO Maigred Eichten, who previously served on Coda’s board of directors, has over 30 years of executive leadership experience spanning from Fortune 500 companies to startups. CFO Jessica Urbaniak built her career at GE, where she oversaw the financial management of product supply chains exceeding $100M in annual production. CMO Amber Milos combines a unique understanding of luxury branding with marketing in heavily regulated industries, having served as a senior leader for global beverage giant Bacardi USA with brands such as Grey Goose Vodka, among others.
🎙️ Interviews / Videos
Emily Paxhia, Poseidon, ‘We’re not holding out hope’ for federal legalization
Rosie Mattio, CEO MATTIO Communications, on becoming the go-to Pot PR Pro
Cannabis Investing Network on Investing through PAIN
Sunderstorm President, Keith Cich on scaling an OG edible brand
Wyld CEO, Aaron Morris, on $200M in Revenue for 2022
Glass House CEO Kyle Kazan bets big on scale
Thomas Winstanley, VP Marketing, Theory Wellness on The State of Cannabis in the Northeast
👋 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.