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🌿 Industry

NJ delays sales of recreational cannabis again, but approves first batch of companies. Cultivators and manufacturers were picked as the first recipients of the 68 licenses to help boost production and expedite the launch of the recreational market. And in response to questions about its commitment to promoting equity in the legal cannabis industry, the Cannabis Regulatory Commission released a breakdown of the ownership of these firms that are receiving conditional approval.

So far, eight medical marijuana companies have applied to begin recreational sales. But they don’t currently meet the requirements to do so, according to Jeff Brown, executive director of New Jersey’s Cannabis Regulatory Commission. He added that state officials would work with the eight companies to remedy any issues over the next couple of weeks before reconsidering their applications. In related news, seven Jersey City retail cannabis applicants received planning board approval yesterday. New Jersey Senate President Nick Scutari (D) says that delays in rolling out the state’s adult-use marijuana market are unacceptable, and he will be forming a special legislative committee to explore the issue through oversight hearings.

In reversal, Ontario cannabis regulator to allow white-label retail deals. The cannabis retail regulator in Ontario, Canada, is set to reverse course on its recent decision to ban retailers from creating in-house brands and white-label products. In February, the Alcohol and Gaming Commission of Ontario (AGCO) announced its intention to prohibit retailers from co-branding cannabis or accessories with producers. The move would have meant products branded with a retailer’s name or white-label products produced under a special brand were off the table. Several Canadian cannabis retailers with Ontario operations had already launched, or planned to launch, white-label or house brands, including High Tide, Sessions Cannabis and Fire & Flower.

Cresco’s marijuana asset sales could hit $500M after Columbia Care deal.

Cresco Labs is expected to sell off $250-$500M worth of marijuana cultivation and retail licenses largely to meet state license limits as part of its planned $2B acquisition of Columbia Care. Company executives told analysts that Cresco “will likely” divest assets in Florida, Illinois, Massachusetts, New York and Ohio because of overlapping operations with Columbia Care in limited-license markets. Investment analysts said it’s also possible Cresco would have to sell some cultivation operations in Maryland and Pennsylvania. But the regulatory requirements in several states, including New York, are unclear. The large-scale asset sale would open opportunities in several high-growth markets for other Cannabis companies. Analysts also warned that the Cresco-Columbia Care deal runs higher odds of collapsing than other recent cannabis mergers because of required divestitures, state regulatory approvals, shareholder consent and federal antitrust scrutiny.

Leaflink Insights Flash for March 2022. 

• The wholesale cannabis industry grew 29% in February 2022 YoY

• The top performing brands in January was Timeless NOIR (AZ), Jeeter (CA), Colorado Cannabis Company (CO), STIIIZY (MI), Aether (NV), Higher Cultures (OR), and Cultivate (MA)

• Massachusetts grew the fastest at 121% Y/Y

• Concentrates saw the largest drop in platform market share (-0.22%) from January 2021 to February 2022

• During February 2022, average sales per seller fell 6.3% YoY, and average spend per buyer grew 4.6% YoY

• Flower retained its #1 spot this month with 33% of GMV during January 2022, despite a 7.5% decrease in sales

• Edibles & Ingestibles saw the largest share change this month compared to January, with a 0.34% increase. The category also saw the largest sales change, decreasing by 5% while other categories experienced more significant declines.

Deadline is imminent for California provisional cannabis licensing. The final day of this month – Thursday, March 31 – marks the final opportunity for most California cannabis companies to apply for provisional licenses in the state – if they haven’t already. After Thursday, the vast majority of the legal marijuana industry in California will be required to already have either provisional or annual licenses to be compliant with state law. The Thursday deadline applies to retailers, distributors, manufacturers, delivery operations and most cultivators. There’s an exception for small-scale growers with less than 22,000 square feet of canopy and some social equity licensees. The deadline is the first of several facing the legal California marijuana industry as “provisional” licenses are phased out over the next few years. The last day that state authorities will be allowed to issue most provisional permits will be June 30, and by January 2026, all provisional licensees will have to transition to annual licenses.

💵 Deals

RIV Capital — Acquire Etain for $247M, names new CEO to lead entry and expansion in U.S. cannabis market.

Etain has four operating dispensaries, including its Manhattan flagship store and locations in Kingston, Syracuse and Westchester. RIV Capital will acquire ownership and control of the Etain companies for $247M ($212M cash, $35M stock), subject to, among other things, receipt of all required regulatory approvals, including from the New York Cannabis Control Board and the New York State Office of Cannabis Management. RIV Capital also announced today that its Board of Directors has named Mark Sims as President and CEO of RIV Capital, to lead the company's formal entry into the U.S. market and expansion into licensed adult-use operations in New York. Mr. Sims is a current director of RIV Capital, a role he will retain, and most recently was Senior Vice President of Strategy and M&A for The Scotts Miracle-Gro Company (NYSE: SMG), where he also previously served as its CIO and head of business transformation. He replaces Narbé Alexandrian, who departs RIV Capital to pursue other opportunities.

Bright Green — Files Registration Statement for Proposed Direct Listing of its Class A Common Stock. Bright Green, one of the very few companies selected by the US government to grow, manufacture, and sell, legally under federal and state laws, cannabis and cannabis-related products for research, pharmaceutical applications and export, has publicly filed a registration statement on Form S-1 with the SEC relating to the proposed direct listing of its common stock. Bright Green has applied to list its common stock with The Nasdaq Stock Market under the ticker symbol "BGXX.” Bright Green disclosed that it had 157.6M shares of stock held privately by 425 stockholders of record as of Feb. 28. Based on a price of $4 a share in a private stock sale in January, the company’s current valuation is about $630M.

Aurora Cannabis — Acquires Thrive Cannabis for $38M. The Transaction is based upon aggregate consideration of $38M payable in cash and Aurora common shares, plus two earnout amounts payable in Aurora Shares or cash (at the election of Aurora), if applicable, based on Thrive achieving certain revenue targets within two years of closing of the Transaction. Founded in 2018, Thrive is a licensed producer of super-premium cannabis concentrates and craft dried flower, and leverages innovative cultivation and extraction techniques with a singular focus on achieving the highest quality standards. Thrive is most widely known for its award-winning flagship recreational brand, Greybeard.

The Valens Company — $22.5M Bought Deal Offering of Units. Underwriters have agreed to purchase, on a "bought deal" basis, 10,613,207 units of the Company at a price of C$2.65 per Unit for aggregate gross proceeds to the Company of C$28,125,000 (~$22,500,000). Each Unit will be comprised of one common share in the capital of the Company and one-half of one Common Share purchase warrant. Each Warrant will be exercisable to acquire one additional Common Share for a period of 48 months following the closing of the Offering at an exercise price of C$3.20 per Warrant Share, subject to adjustment in certain events.

📄 Company Updates / Earnings

Trulieve — Q4 and Full Year 2021 Results

2021

• Revenue increased 80% Y/Y to $938.4M. Gross profit of $566.1M (60.3% GM)

• Net income of $18.0M and adjusted net income of $123.4M, which excludes $105.4M of non-recurring compensation, fair value of inventory step up, and transaction, acquisition and integration charges primarily associated with the Harvest acquisition

• Adjusted EBITDA of $384.6M, or 41.0% of revenue

• Cash at year end of $234M

Q4 2021

• Revenue of $305.3M, up 81% Y/Y and 36% sequentially to $305.3M

• Gross profit of $132.4M, 43.4% (GM)

• Net loss of ($71.5M) and adjusted net income of $1.8M, which excludes $73.3M of non-recurring fair value of inventory step up, and transaction, acquisition and integration charges primarily associated with the Harvest acquisition

• Adjusted EBITDA of $100.9M, or 33.0% of revenue

Cresco Labs — Q4 & Full Year 2021 Results

Fiscal Year 2021 Financial Highlights

• Revenue of $822M, up 73% Y/Y, 52% Gross Margin, adjusted EBITDA of $194M, up 219% Y/Y. $224M of cash on hand

Fourth Quarter 2021 Financial Highlights

• Revenue of $218M, up 34% Y/Y, adjusted EBITDA of $57M (26% margin), up 90% Y/Y. Wholesale revenue of $101M, Retail revenue increased 10% sequentially, to $117M, an average of $2.8M/store. Same-store-sales increased 28% Y/Y, 1% sequentially. Excluding California, revenue grew 6% sequentially. Cash flow from operations of $38M

Columbia Care — Q4 and Full Year 2021 Results

• FY2021 GAAP Revenue of $460M and Adjusted EBITDA of $58M, Quarterly Revenue of $139M, up 70% YoY, 5% Sequentially2022

• 2022 Guidance: $625M-$675M Revenue, $120M-$135M Adjusted EBITDA

• $82.2M of cash on hand

Jushi Holdings — Q4 and FY 2021 Financial Results

Q4 2021

• Revenue of $65.9M, up 22% sequentially and 104% YoY, Adjusted gross profit of $26.4M. Net income of $9.1M, Adjusted EBITDA of $1.5M

• Cash and cash equivalents were $95.0M

FY 2021

• Total revenue of $209.3M, up ~159% YoY, Adjusted gross profit f $92.1M, up 144% YoY. Net income of $25.3M, up $237.2M YoY. Adjusted EBITDA of $16.9M (8% margin), up $16.3M YoY

Planet 13 — Q4 and Full Year 2021 Financial Results

• Q4 2021. Revenues were $29.9M, Gross profit was $16.2M (54.3% GM),

  Net loss of ($5.1M), Adjusted EBITDA of $1.9M

• Full Year 2021. Revenues were $119.5M, Gross profit was $66.0M (55.2% margin), Net loss of ($19.5M), Adjusted EBITDA of $16.9M

• Cash of $61.6M

Leafly — Q4 and Full Year 2021 Financial Results

• Q4: Total revenue was $12.1M, 88% GM, Net loss was ($5.1M), Adjusted EBITDA loss was ($4.1M)

• FY 2021: Revenue was $43.0M, up 18% Y/Y, 88% GM, Net loss was ($12.0M), Adjusted EBITDA loss was ($9.4M)

• 2022 Guidance: $53.0-$58.0M revenue, representing 29% YoY growth at the midpoint. Adjusted EBITDA loss to be in the range of ($31.0M)-($26.0M)

• $28.6M cash as of 12/31/21

Weedmaps — New Docu-Series That Celebrates Cannabis Culture In Four Major U.S. Cities. Hosted by Killer Mike and created and produced by digital media platform Wheelhouse, Tumbleweeds with Killer Mike, will premiere on April 20 on VICE TV. The four-part docuseries celebrates the impact and evolution of cannabis culture in Las Vegas, San Francisco, New York, and Chicago.

🏬 Retail / Manufacturing / Distribution

Pabst — Opens Cannabis-Focused Beverage Factory, Triples Capacity for THC-Infused Drinks. Beyond its Pabst Blue Ribbon 10mg High Seltzer, Pabst also produces Not Your Father's Cannabis Infused Root Beer and the St. Ides Cannabis product line (which includes their 100mg infused four-ounce shots). Other brands will be allowed to access the facility through co-packaging relationships.

Jazz Pharmaceuticals — New manufacturing facility for cannabis-based medicines. Jazz Pharmaceuticals, and its subsidiary, GW Pharmaceuticals, have designed the facility with careful consideration to the environment and stated that it will continue through its build phase and use. This will include the installation of animal refuge boxes to promote wildlife in the local area and over 1,100 solar panels to provide a portion of the building’s energy usage. Due to open in 2024, the facility is designed to support the company’s two regulatory-approved cannabis-based medicines, and support future capacity for new medicines under development. The new facility will be ~60,000 sq ft, with an investment of over ~£75M.

HERBL — New Distribution Partnerships. HERBL will now distribute the entire product line of Friendly Farms, one of California's top cannabis brands. Among products available through HERBL are live resin cartridges, cured Resin cartridges, premium flower, edibles and more. HERBL also partnered with OASIS to distribute their suite of all-natural cannabis edibles and Ciencia Labs' Quell brand to supply their stress-relieving tinctures and gummies formulated with CBD, CBG and THC. HERBL is also gearing up for several more impressive brands to join its portfolio in April and May, which they will release in the near future.

🌱 Product

Tyson 2.0 — Acquires Majority Stake in Ric Flair Drip. Tyson 2.0's strategic alliance with Ric Flair, popularly known as "Nature Boy®," enables the company to assume control of Ric Flair's trademarks and intellectual properties to launch cannabis flower and edible products under the Ric Flair brand name in the near future. Origins of the partnership started with Fyllo CEO Chad Bronstein.

Curaleaf — Select X Bites. By optimizing the absorption and delivery of THC molecules with proprietary encapsulation technology, Select X Bites give consumers a faster, stronger and longer high. Encapsulation technology mimics the body’s natural lipid barrier which optimizes the absorption of THC into the body at a steady, prolonged rate. Each pack of Select X Bites contains 10 bites, with 10mg per bite. 

Toast — Georgia Louise for Toast. Your Grace is a masterfully formulated, dual-acting renewal serum—infused with CBD, CBG, and over 20 proven ingredients to radically revitalize skincare.

F/ELD — Disposable Sauce Pens & Valley Grove Collab. Valley Grove was the first licensed farm in Sonoma County operated by an ethnic minority owner and has been in the cannabis industry long before legalization. Available in Sour Diesel x Wilson, LA Kush Cake and Grapes N Cream. Later this month, F/ELD will be launching a brand new disposable sauce pen. Since you can’t always carry a rig around with you, the team at F/ELD wanted to bring a product to market that can let you dab on-the-go.

Ayr Wellness — Launches Entourage Vape Offerings in Florida. Entourage vapes is one of the Company’s ten national brands. Sales of Entourage begin this weekend across Liberty Health Sciences’ footprint of 45 dispensaries. The initial launch includes a collection of three strain-specific offerings, including “Tahoe OG,” “9lb Hammer,” and “Grape Ape.” The product will initially launch in 1-gram cartridges, followed by syringes at a later date. Entourage is also available in Massachusetts, in Ayr-owned and 3rd party retail locations. The company plans to introduce Entourage in additional key markets throughout 2022.

🧔 People

Leaflink — Artie Minson joins as President and COO. Prior to joining LeafLink, Minson founded 715 Capital Partners, which provides early-stage capital and advice on strategy and operations to technology-enabled subscription businesses. Minson’s prior roles include Co-CEO, President, COO, and CFO of WeWork, CFO of Time Warner Cable, and COO and CFO of AOL.

Wana Brands — Adds Sandy Li as CFO. Prior to joining Wana Brands, Li was VP Finance, Head of FP&A and Treasury at Parallel. She previously held a variety of senior leadership positions at both public and private companies.

NUG — Adds Timeka Drew as Chief Growth Officer. This appointment comes as NUG transitions its focus from a Northern California-based operator to having a presence in multiple states, with pending projects in New Jersey and New York. Prior to joining NUG, Drew served as the VP of Licensing and Operational Compliance for Eaze and also held executive positions with 4Front Ventures and Field Extracts.

Perfect Union — Meghan Fort takes on New Role as COO. Her prior experience comes from a variety of retail industries, including serving as the VP of North American Retail at Farrow & Ball. With stops along the way at Burberry, Vineyard Vines, PRADA and Ralph Lauren, Fort held roles ranging from store management, human resources and product development.

YourWay Cannabis Brands — Adds Jakob Ripshtein as Executive Chairman and Sandra Ceccacci as CFO. Ripshtein was elected Chairman of the Board of YourWay in 2021. He previously served as the President of Aphria (now Tilray Brands). Prior to that, he was President of Diageo Canada, before becoming North American CFO for Diageo. Sandra Ceccacci has joined as CFO, prior to YourWay, she served as VP Finance for Clearway Group of Companies. Prior to that, she delivered $1.3B in shareholder value by leading the spin out of Element Financial Corporation's equipment, rail, and aviation divisions and subsequently joining ECN Capital Corp as SVP, Finance and Taxation.

🎙️ Interviews

Ben Kovler, GTI, discusses what to expect from Congress on legalizing marijuana

Jim Caccioppi, Jushi, on targeting overlooked markets (Virginia, Pennsylvania)

Len & Robyn Tannenbaum, AFC Gamma, on the Future of Cannabis Banking

Gorilla Rx Wellness, Kika Keith, on building the dispensary of her dreams in LA

Safe Harbor Financial, Sundie Seefried, on banking and financing challenges in Cannabis

Falcon Brands, Steve Gutterman, on maintaining its competitive positioning

WYLD, Ben Gaines, on keeping the brand vision at the forefront of cannabis operations

Grenco Science, Chris Folkerts, on his journey through cannabis and the California market

👋 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.