📃 Republican Support for ‘SAFE Banking Plus’
Berner makes cover of Forbes. GTI revenue increased 4.8% Q/Q. Canopy revenue of $110M in Q1 declined (19%) Y/Y. Oklahoma pushes back moratorium start date.
🌲 I’ll be at Outside Lands this weekend, excited to stop by Grass Lands.
Weed vs. Greed: How America Botched Legalizing Pot. The Forbes magazine cover with Bener has everyone talking—the article provides a review of the industry struggles and points out how state taxes can go as high as 37%, causing effective tax rates for Cannabis companies to be 60%+. Forbes estimates that Cookies did an estimated $400 million in GMV in 2021 across 51 licensing deals (branded retail shops), generating around $50 million in annual revenue. The August / September issue feautring Berner makes him the first Cannabis executive to be on the cover.
Booker Says There’s Republican Support For ‘SAFE Banking Plus’ Cannabis Compromise. Since filing the Cannabis Administration and Opportunity Act (CAOA), Booker has characterized himself as a “compromise guy,” ready and willing to work with his colleagues across the aisle to get something done on marijuana policy before the end of the session. That something will likely be what’s become known as “SAFE Banking Plus” that combines protections for financial institutions that work with state-legal cannabis businesses with other reforms such as expungements for people with past convictions and industry access to federal Small Business Administration (SBA) services. Schumer has been holding bipartisan and bicameral talks about what such a marijuana omnibus bill might look like.
Massachusetts Cannabis Industry Reform. The Massachusetts legislature approved a bill, S. 3096, earlier this week that significantly changed many of the challenges faced by operators in the Commonwealth’s cannabis market for years. At a high level, the reforms focused on two main aspects—social equity and host community agreements (HCAs). The bill has been sent to the desk of Charlie Baker for approval. Other reforms promulgated by this new bill include expanding certain tax deductions cannabis licensees may be able to partake in that are not otherwise available due to federal illegality of cannabis, as well as the legislator’s interest in initiating a study on elementary and secondary education with respect to the possession and consumption of medical marijuana in public or private schools in the Commonwealth to students who have been issued a valid medical card.
Oklahoma to Push Back Moratorium Start Date for Medical Cannabis Licenses. Oklahoma has pushed back the start date for the moratorium on medical cannabis licenses to Aug. 26. Gov. Kevin Stitt signed House Bill 3208 into law May 26, which “implements a two-year moratorium on medical cannabis licensing, prohibiting regulators from issuing new cultivation, processing and retail licenses from August 2022 to August 2024,” Cannabis Business Times previously reported. The moratorium was expected to start Aug. 1, but has been pushed back to Aug. 26. The Oklahoma Medical Marijuana Authority (OMMA) said in a press release that it made a mistake in interpreting the effective date of the legislation. The moratorium does not apply to existing grower, processor, or dispensary licenses. Existing license holders can apply to renew their licenses at any time, according to the release.
Arkansas panel rejects recreational marijuana ballot measure. The State Board of Election Commissioners on Wednesday blocked a proposal to legalize recreational marijuana from appearing on Arkansas’ ballot this fall. The panel rejected the popular name and ballot title for the proposed constitutional amendment that supporters hoped to put on the November ballot. Supporters submitted more than enough valid signatures from registered voters to qualify, but the proposal still needed approval from by the board to appear on the ballot. An attorney for Responsible Growth Arkansas, the group backing the proposal, said it would appeal to the state Supreme Court. The panel rejected the measure after commissioners said they didn’t believe the ballot title fully explained to voters the impact of the amendment. For example, commissioners said they were concerned that the amendment would repeal the state’s current limit under its medical marijuana amendment on how much THC is allowed in edible marijuana products.
Canadian growers destroyed a record 425 million grams of cannabis in 2021. Canada’s federally licensed marijuana producers destroyed a record 425 million grams – or 468 tons – of unsold, unpackaged dried cannabis last year, according to Health Canada data provided to MJBizDaily. Last year’s total was up more than 50% from the 279 million grams of dried cannabis that was destroyed in 2020. LPs destroyed 155 million grams in 2019. Headset estimates that sales of dried cannabis and pre-rolls amounted to 293 million grams last year in four key provinces, indicating destroyed inventory again exceeded sold production.
Vermont accepting recreational marijuana business license applications. So far, more than 200 companies have been prequalified for some sort of license, and about 50 of those are retailers, recreational marijuana sales are set to begin on Oct. 1.
Leaflink Insights Flash for July 2022.
Wholesale cannabis industry declined 4% in June 2022 Y/Y
The top performing brands in June were Ogeez (AZ), Jeeter (CA), 'CHOICE (MI), City Trees (NV), Colorado Cannabis Company (CO), Higher Culture (OR), In Good Health (MA)
Massachusetts grew the fastest at 37% Y/Y
Flower saw the largest drop in platform market share (-1.9%) from May to June
During June, average sales per seller fell 19% YoY, and average spend per buyer fell 1% YoY
Flower retained its #1 spot this month with 32% of GMV during June 2022, however, it took a 3% decrease in sales and a 1.9% decrease vs. the prior month in market share
Cartridges saw the largest growth in platform market share at 1.3% M/M. 510 Thread Cartridges had the largest subcategory share percentage at 16.4%
Planet 13 — Purchase Option for Illinois Dispensary. Planet 13 has entered into an Option Purchase Agreement that gives Planet 13 the option to purchase 51% of Planet 13 Illinois from Frank Cowan for $866,250 in cash and 1,063,377 common shares of Planet 13 valued at $2 million based on a 5-day VWAP. The option is exercisable at Planet 13's discretion for a period of two years, subject to approval from applicable regulators. However, in accordance with regulatory guidance, the option shall not be exercised prior to Planet 13 Illinois obtaining an Adult Use Dispensing Organization License from the State of Illinois. Planet 13 Illinois is currently 51% owned by Frank Cowan and 49% owned by Planet 13.
Kush.com — Raises $2M, Moves HQ from Seattle to Tampa Bay. The company, founded in 2014, claims to be the country's largest B2B network of cannabis products. TampaTech entrepreneur and investor Steve MacDonald, the company's new board chairman and a GP in the Florida Funders VC, invested $2M in Kush for its ongoing funding round. Kush recently acquired Tampa-based TradeCraft Origin, a cannabis brand strategy firm, and named its founder, John Lynch, Kush's new CEO.
NewLake Capital Partners — Expands Revolving Credit Facility to $90M. The Company has added two lenders to its existing five-year revolving credit facility and upsized the aggregate commitment under the facility from $30M to $90M. The Credit Facility matures in May 2027 and has a fixed interest rate of 5.65% for the first three years and a floating rate thereafter.
Pelorus x TransCanna — $15.8M Debt Facility at 14% Interest. The $15.8M debt facility accrues interest at 14% per annum. If certain requirements are met after 18 months, the interest rate will be reduced to 12% per annum. In connection with the loan, Pelorus issued warrants to purchase up to 51,208,682 common shares of the company. No common shares may be issued on exercise of the Loan Warrants if the issue of such shares would cause the holder (and any person acting jointly and in concert with the holder) from holding beneficial ownership or having control or direction over greater than 9.9% of the outstanding common shares. The Loan Warrants are subject to the company’s standard Put/Call Structure.
📄 Company Updates / Earnings
Green Thumb Industries — Q2 2022 Results
Revenue increased 4.8% sequentially and 14.6% year-over-year to $254.3M, Revenue growth was primarily driven by increased retail sales in New Jersey
1H 2022 revenue increased 19.4% to $496.9M compared to 1H2021
Eighth consecutive quarter of positive GAAP net income, delivering $24.4M or $0.11 per basic and $0.10 per diluted share
Adjusted Operating EBITDA grew 17.4% sequentially to $78.7M (31.0% margin)
Cash flow from operations of $39.9M year-to-date
As of June 30, 2022, cash and cash equivalents of $145.3M. Total debt outstanding was $253.4M
Canopy Growth — Q1 FY 2023 Financial Results
Q1 FY2023 net revenue was flat compared to Q4 FY20221
Net revenue of $110M in Q1 FY2023 declined 19% versus Q1 FY2022
Gross Margin in Q1 FY2023 was (1%) as compared to 20% in Q1 FY2022
The Company recognized a non-cash goodwill impairment of $1.725B related to the cannabis operations reporting unit
Adjusted EBITDA loss in Q1 FY2023 was ($75M)
Net Loss in Q1 FY2023 was ($2.088B)
Cash and short-term investments amounted to $1.2B at June 30, 2022, representing a decrease of $200M from $1.4B at March 31, 2022
Innovative Industrial Properties (IIPR) — Q2 2022 Results
Total revenues of ~$70.5M, up 44% Y/Y
Net Income attributable to common stockholders of ~$39.9M, or $1.42 per diluted share, and AFFO of ~$60.1M, or $2.14 per diluted share (including the dilutive impact of the assumed full exchange of the 3.75% Exchangeable Senior Notes due 2024 (the Exchangeable Senior Notes)
Completed an underwritten public offering of common stock, including the exercise in full of the underwriters’ option to purchase additional shares, resulting in net proceeds of ~$330.9M
Made four acquisitions for properties located in Arizona, Maryland, Massachusetts and Texas, and executed five lease amendments to provide reimbursement for additional improvements at properties located in Illinois, Michigan, New York and Pennsylvania
In these transactions, IIP established new tenant relationships with Maryland Cultivation and Processing, Texas Original Holdings, and TILT Holdings, while expanding existing relationships with Curaleaf, GTI, PharmaCann and Sozo Health
Columbia Care — Introduces National Cannabis Loyalty Mobile App, Stash Cash, Across 14 Markets and Portfolio of Retail Brands. The mobile application is the new digital hub for the entire shopping experience. Customers and patients in participating markets can place orders; discover new products through Forage; build a profile; earn and redeem rewards, where permitted, throughout the entire Columbia Care dispensary network; receive deals, discounts and/or other updates from their dispensary; and interact with social platforms.
Green Flower x Minority Cannabis Business Association (MCBA) — Partnership Provides Members with Free Cannabis Training Courses. Green Flower will offer MCBA members four on-demand Certificate programs including retail, cultivation, manufacturing and cannabis business essentials. Certificates offered through Green Flower’s programs include: Dispensary Associate; Cultivation Technician; Manufacturing Agent; and Cannabis Business Essentials, covering key elements that are necessary for success in the highly competitive cannabis industry.
Lantern — Launches its Fifth Social Equity Incubator Program in New York. The New York Cannabis Project is a multi-dimensional program segmented into the following four sections: business fundamentals, go-to-market strategy, community impact and the cannabis industry. During each step of the program, facilitators and collaborators provide industry training, education and resources to aspiring cannabis industry leaders from the communities most impacted by the War on Drugs.
Flower One — Amends Terms of its Short-Term Debt. The Company extended the maturity date of its USD$6,000,000 short-term debt from July 24, 2022 to December 31, 2022, which is referenced in the Company’s press release from January 27, 2021. The remaining terms of the Short-Term Debt remain in place.
Greenlane — Board's Approval of Reverse Stock Split Ratio and Effectiveness Date. The reverse split will reduce the number of shares of Class A common stock issued and outstanding from approximately 137.5 million to approximately 6.9 million and reduce the number of shares of Class B common stock issued and outstanding from approximately 5.2 million to approximately 260,000.
🏬 Retail / Consumption
TrufflezNFT — Launches First NFT Membership Cannabis Consumption Lounge in New York. Trufflez, a vertically-integrated premium cannabis company and droppLabs, a subsidiary of Dropp Group ("Dropp"), the future-forward web3 enabler, today announce the world's first NFT membership cannabis consumption lounge in New York. The companies partnered in March this year to launch TrufflezNFT, an innovative NFT project that democratizes ownership of cannabis-related IP while providing a strong community focus on cannabis industry education. As an expansion of the project, TrufflezNFT project is announcing the launch of the world's first NFT membership cannabis lounge in partnership with New York-based Elite/AB Hospitality Group. The Trufflez Lounge will open in Williamsburg in November, 2022 and will be accessible only to TrufflezNFT members.
Trulieve — Opens First Branded Dispensary in Arizona. This is the first cannabis dispensary in the Roosevelt Row neighborhood in downtown Phoenix. Over the course of the next year, existing Harvest locations will be rebranded to Trulieve. Harvest and Trulieve-affiliated dispensaries in Arizona are located in Avondale, Casa Grande, Chandler, Cottonwood, Glendale, Guadalupe, Lake Havasu, Mesa, Peoria, Phoenix, Scottsdale, Tempe, and Tucson.
Verano — Opens New Zen Leaf Elkridge, Maryland Dispensary. Zen Leaf Elkridge is relocating from its former home on Montevideo Road to 6000 Marshalee Drive, located less than 15 minutes from Baltimore/Washington International Thurgood Marshall Airport. Verano currently operates medical cannabis dispensaries in Germantown, Pasadena and Towson, plus a cultivation & processing facility in Jessup.
Verano — Opens MÜV Tampa Himes, the Company’s 54th Florida Location. MÜV Tampa Himes is the fourth MÜV retail location in Tampa, with storefronts on Dale Mabry, Preserve Walk Lane and West Kennedy. Tampa is the third largest city in Florida, with a population of over 385,000.
Curaleaf — Opens Tampa Citrus Park Dispensary. Curaleaf Tampa Citrus Park expands the Company's retail presence to six locations in Hillsborough County and 51 across the Sunshine State. Located on Sheldon Road near Citrus Park, the 4,023 square foot location features a drive-thru that offers patients on-the-go access to the dispensary's wide array of offerings.
Re+Play — Agrees to multi-year partnership with National Basketball Players Association (NBPA). Re+Play is the performance-based wellness and recovery line of Harrington Wellness (Al Harrington), designating Re+Play as an official partner of the NBPA. The equity partnership will allow Re+Play to bring the latest in recovery-promoting products and technology to athletes of all levels. The landmark multi-year product development plan brings recovery-promoting technology to the masses, with offerings from topicals, kinesiology tape, and massage guns, among other naturally infused-pain products. The first product release from this new partnership is a line of proprietarily formulated recovery creams — developed in partnership with Avicanna, a biopharmaceutical company focused on the development of plant-derived cannabinoid-based products.
WYLD — Launches Strawberry 20:1 CBD:THC in Canada. The Canadian edibles market grew 118% last year from the previous year ($142M vs $65M). With this data in mind, the US’s #1 selling edibles brand, Wyld, launched in Canada last year and has been growing tremendously, reaching ~$1M in sales per month.
SLANG Worldwide — Launches New All-Natural Edible Brand, Alchemy Naturals. The Company will be replacing its current CBD gummy brand, Lunchbox Alchemy, with the Alchemy Naturals brand, to build upon its success by providing an all-natural product line with engaging new flavors in both of the CBD and THC categories. New Alchemy Naturals products include Sleep, Relief, De-Stress, Intimacy, and Daily gummies formulated with THC, CBD and other minor cannabinoids and nutraceuticals which have demonstrated the ability to support the intended effects.
MariMed x Emack & Bolio — Launch New Line-Up of Cannabis Infused Ice Creams. MariMed collaborated with the legendary Boston ice cream brand Emack & Bolio’s® to develop and market new and innovative vegan and dairy ice cream in outrageous flavors. The ice cream is an extension of MariMed’s top-selling and award-winning Betty’s Eddies infused fruit chews brand and shares the brand’s commitment to being hand-crafted and using all-natural ingredients. The ice cream contains MariMed’s superior formulations of full spectrum cannabis oil, with natural cannabinoids and terpenes. Two delicious vegan flavors, Cup O’ Coffee Chip and Chocolate Sunny Days, debuted at MariMed’s Panacea Wellness dispensary in Middleborough, MA, this week. Additional flavors and wider availability are expected in the coming months.
Tilray Wellness — U.S. Distribution Agreement with Southern Glazer’s Wine & Spirits for CBD Beverages. Fresh Hemp Foods, a part of the Company’s Tilray Wellness division, has signed a distribution agreement with Southern Glazer, the preeminent distributor of wine and spirits. The distribution agreement will provide Tilray Wellness with direct access to Southern Glazer’s distribution network reaching consumers everywhere from local bars and restaurants to independent and national grocery chains and convenience stores.
Irwin Naturals — Licensing agreement with Entourage Brands for Canada. Under this exclusive arrangement, Irwin Naturals’ brand will be enhanced with cannabis and made available to dispensaries across Canada in a line of softgels in five different varieties: CBD, THC and three additional formulations that include both THC and another cannabinoid. In May, Entourage announced the debut of TeaPot, a cannabis-infused iced-tea beverage developed in conjunction with the Boston Beer Company, maker of Sam Adams and Twisted Tea.
Canopy Growth — Appoints Christelle Gedeon as new Chief Legal Officer. Gedeon most recently served as the Chief Legal Officer and Corporate Secretary for The Metals Company (TMC). Prior to this, she served as the Chief Legal Officer and Corporate Secretary at Aphria, where she oversaw the reverse takeover of Tilray.
GTI, CEO, Ben Kovler (Yahoo Finance!)
Uncle Arnie’s share how they’re using data to thrive past the two year mark when only 14% of brands survive (Headset)
More cannabis reform updates: don’t worry, it’s actually positive news (High Rise)
Curio Wellness, CEO, Michael Bronfein (NCV)
Bespoke Financial, CEO, George Mancheril (Cannabis Industry Journal)
👋 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.