🤔 Schwazze - Shwahzz? Schwayze? Swaggz?
Medicine Man Technologies rebrands as Schwazze. Stimulus checks spent on Cannabis. California cannabis distributors sharing info. iAnthus possibly considering a Management Buyout Offer.
🌿Industry
Medicine Man Technologies rebrands as Schwazze
Pronounced "sh-wah-zz"
Medicine Man Technologies (MMT) is announcing a new brand, Schwazze, which will be an overarching parent company for MMT and its collection of brands. The publicly-traded company is now listed under the OTC ticker symbol “SHWZ.”
Schwazze refers to a cultivation process, and the company’s new CEO told TechCrunch the name change reflects the company’s focus. “It is the core process within nurturing and growing a plant by taking the leaves off very carefully to allow the trunk to grow and widen, providing more nutrients to the flower in the canopy.”
“It’s incredibly important. It spurs growth and health,” Schwazze CEO Justin Dye said, referring to the Schwazze method. The company will keep the Medicine Man Technologies brand as its professional services arm.
I’m not sure if a branding agency was used, but I hope they did this in-house. I'm no branding expert but you shouldn't pick a name that 95% of people have a hard time saying.People Are Spending Their Stimulus Checks On Cannabis
On April 15, dispensaries in legal markets across the country saw substantial sales spikes. It is the same day the federal government sent out stimulus checks to about 80M Americans (60M Americans are estimated to still be waiting for their checks).
Jane Technologies, a popular online cannabis marketplace, found a 48% increase in sales on Wednesday, April 15, 2020, compared to an average day. Jane took a look at data from over 1,300 dispensaries. It pulled some numbers post-stimulus check from stores in their partner network which include Apothecarium, Harborside, and Airfield Supply Co., to name a few.
Another marketing platform for the industry with over 16M users, Springbig, reported an even higher increase on its platform: sales were up 63% on Wednesday, April 15. Springbig reported a total of $18.7M in 4/20 merchant sales this year.
Data has come flooding in to back up these stimulus sales spikes for cannabis. Flowhub, one of the leading cannabis retail software companies in the industry, reported its second-best sales of the year after March 18, 2020, which was the peak of the COVID-19 stockpile in sales. Flowhub found adult-use sales increased 57% on Wednesday, April 15. Medical sales increased a bit more modestly, but still up 39% compared to the prior Wednesday.
California cannabis distributors sharing info
A small group of licensed California marijuana distributors is trying to solve the ripple effects of unpaid bills by pooling information detailing which companies are reliable or unreliable at paying their tabs. The goal is to help distributors stay afloat and remain financially solvent by identifying and avoiding California marijuana companies that have been a financial drag on the rest of the supply chain. The effort is proceeding in two ways:
Cannabis Distribution Association (CDA) – a group of roughly 30 businesses, including about 20 distributors – has been working on an ad-hoc credit rating system for its members. The system is designed to help rate which businesses – retailers, manufacturers and others – have been paying their bills and which haven’t
Separately, Todd Kleperis, founder of Desert Hot Springs-based distributor Hardcar, has been recruiting a fraction of the roughly 1,000 licensed distributors in California for a new Crisis Alliance aimed at helping a select few companies survive the coronavirus pandemic through information-sharing and logistical support. Among other functions, the alliance will put together a “blacklist” of companies that can’t be trusted to pay their vendor bills
iAnthus possibly considering a Management Buyout Offer
It appears that one of the strategic alternatives that iAnthus Capital Holdings (CSE: IAN) is considering for shareholders may be that of a potential management buyout offer. The Deep Dive has obtained documents that point to an offer for a management buyout being assembled by certain executives of the firm as a strategic alternative for the current liquidity crises faced by the company.
While the liquidity problem being faced by the company is no secret to long time shareholders, the proposal of a potential management buyout offer may come as a shock. While executives were unable to find further funds to support the operation in the current format, they may have now evidently found the capital needed to perform a go private transaction. The documents sourced indicate that a total equity investment of $139M would be associated with the offer.
The proposal, which is allegedly being conducted by an entity referred to as “Saving Grace Capital, LLC,” consists of offering 70% of current shareholders a price per share of US$0.50. Current in-the-money warrant and option holders would be eligible to exercise their units, however units that are not in the money would effectively expire worthless. Gotham Green meanwhile would see certain high yield holders and other debtholders repaid, while secured and unsecured convertible debenture holders would roll forward.
The CSE also briefly halted trading of the Company’s stock Wednesday.
California provides another $30M for marijuana social equity programs
California awarded an additional $30M to 16 different cities and counties to bolster social equity programs, which are designed to get victims of the war on drugs more directly involved in the legal cannabis industry. The new grant money is on top of $10M disbursed by the state last fall for social equity programs.
The lion’s share of the new funding – nearly $29M – went to local governments that already have social equity programs in place, including Long Beach, Los Angeles, Oakland, Sacramento, San Francisco and Humboldt and Mendocino counties. Oakland was the top recipient, with $6.5M. Mendocino County was at the bottom, with $2.2M. At least $23 million of that funding pool will go directly to qualified social equity businesses in the form of loans or grants, according to a news release from the Bureau of Cannabis Control (BCC) and Gov. Gavin Newsom’s Office of Business and Economic Development. The other recipients each received $150,000 or less to help develop social equity programs. Those localities include Clearlake, Coachella, Palm Springs, San Jose, Santa Cruz, Stockton as well as Lake, Monterey and Nevada counties.
MedMen creditor seeks to seize cannabis firm’s former execs’ homes
A MedMen Enterprises creditor is claiming in a civil lawsuit that three men with ties to the California-based marijuana company – including former CEO Adam Bierman and ex-President Andrew Modlin – owe the deeds to their personal homes as part of an investment guaranty from late 2019. Alaska-based Milestone Investments filed the suit against MedMen Chief Strategy Officer Christopher Ganan, Bierman and Modlin in California Superior Court in Los Angeles County.
Milestone alleges that, as part of an investment deal in December 2019, the three agreed to enter into a “pledge of their personal residences in the form of a mortgage or deed of trust” as collateral for Milestone’s purchase of 23.7M shares of MedMen stock for just under $10.2M. The creditor also loaned the group an additional $2M, which they were reportedly going to use to purchase another 4.6M MedMen shares. But, the suit alleges, Bierman and Modlin failed to live up to their end of the arrangement, though Ganan provided a deed of trust in February for his Los Angeles home. The company sent notices of default on the guaranty to all three in March.
Ontario online pot purchases jump 600% amid COVID-19 pandemic
Cannabis purchases rose as much as 600% since the beginning of March in Canada's biggest market thanks to stockpiling by consumers during the COVID-19 pandemic - and demand may be sticking around. Sales data provided by the Ontario Cannabis Store (OCS) over the past six weeks - the same period that COVID-19 spread across the country - show legal pot appears to be a more "habitual" purchase than a one-time novelty, according to Cheri Mara chief commercial officer at the provincial retailer.
Two weeks after Ontario declared cannabis stores were not an essential business (shifting them to curbside and delivery service), daily sales have held steady around the 9,000 order/day level, almost five times the amount made prior to the pandemic. More than one-third of all orders are classified as new OCS customers, the data showed.
Ayr Strategies - Business Update
Nevada Key Metrics
Positive adjusted EBITDA for April to date and 2020 year to date
Completing up to 1,200 delivery transactions per day with more than 50 delivery vehicles
Average ticket as high as $139 since implementing delivery model, up from $61 pre-COVID
Weekly average revenue growth over 40% since the start of home delivery
Gross margins expanded 20 percentage points from pre-COVID levels
Achieved daily revenues as high as $169k, and at $190k in daily revenue, expected to reach pre-COVID adjusted EBITDA levels
Massachusetts Key Metrics
Average ticket as high as $225, up from $140 pre-COVID
Daily dispensary revenues up nearly 40% versus pre-COVID levels
The only dispensary in greater Boston to offer curbside pickup
Offering home delivery to the greater Boston area, materially expanding our dispensary reach
Two successful harvests from recently completed 19,000 ft² cultivation expansion, bringing annual cultivation capacity in Massachusetts to 20,000 lbs
Harborside - Business Update
Q1 2020 Revenue up ~20% year-over-year to ~$14.4M, which was driven by ~12% growth in retail revenue and ~47% growth in wholesale revenue. The continued growth in retail reflects the Company's enhanced merchandising and pricing initiatives which resulted in, amongst other things, improved product mix, selected pricing changes and higher sell-through of internally-produced products (Harborside-branded products represented seven to nine of the 20 top-selling SKUs at Harborside stores in each month of the quarter).
Wholesale growth was primarily driven by improved harvest yields and higher sales volumes at the Company's farm operation in Salinas, California, benefiting in part by the first harvest from the Company's new state-of-the art 44,000 square foot Dutch Venlo greenhouse cultivation facility
Adjusted EBITDA is expected to be positive, driven largely by the Company's retail initiatives, a general operational efficiency improvement program, and headcount reductions across the Company
As of March 31, 2020, Harborside had ~$12M in cash
The Company is currently reviewing the possibility of generating additional cash by exercising its contractual rights to repurchase the farm property in Salinas, California and potentially entering into a separate sale leaseback agreement
💵Deals
Greenbits - $23M Series B led by Tiger Global and Casa Verde
Greenbits serves more than 1,200 retail locations, including medical dispensaries and adult-use retailers, across 13 states. Greenbits will use the new capital to accelerate sales, marketing, and product development while expanding product and service offerings to new geographic markets. In February, Greenbits began operating in the state of Illinois, which opened its adult-use market in January and is expected to become the second-largest cannabis market in the United States.
CEO Barry Saik noted that, despite the macro volatility and the coronavirus pandemic, legal cannabis sales remain robust. According to Saik, same store sales year-to-date are up 25% over the same period last year and same store sales in March 2020 were up nearly 35% year-on-year.
$16M IIP / Cresco’s Michigan property sale-leaseback
IIP closed on the acquisition of a property in Michigan, which comprises ~115,000 square feet of industrial space. The purchase price for the property was $5.0M (excluding transaction costs). Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease agreement with Cresco, which intends to operate the property as a regulated cannabis cultivation and processing facility upon completion of redevelopment. Cresco is expected to complete additional tenant improvements for the property, for which IIP has agreed to provide reimbursement of up to $11.0M. Assuming full reimbursement for the tenant improvements, IIP’s total investment in the property will be $16.0M.
BR Brands and Dixie - Execution of Definitive Agreement
Following completion of the Transaction, BR Brands will own and control approximately 80% of the outstanding voting shares of Dixie, with existing Dixie shareholders holding the balance of the outstanding voting shares. The non-participating voting shares of Dixie will be redeemed as part of the Transaction. Combined, the company will boast an unrivaled product offering across one of the largest THC geographic footprints, representing more than 200 SKUs across 10 states and Puerto Rico
Organigram announces C$49M At-The-Market (ATM) Equity Program
Any Common Shares sold in the ATM Program will be sold through the TSX, NASDAQ or any other marketplace on which the Common Shares are listed, quoted or otherwise traded, at the prevailing market price at the time of sale. Distributions of the Common Shares through the ATM Program will be made pursuant to the terms of an equity distribution agreement dated April 22, 2020 among the Corporation, BMO Nesbitt Burns Inc., as Canadian agent, and BMO Capital Markets Corp., as U.S. agent.
The Flowr Corporation - C$20M Private Placement led by Insiders
Flowr announces non-brokered private placement of convertible debenture units of $20 million, with ability to upsize to an aggregate of $25 million
Continued support by management and insiders who commit in excess of $10 million, led by Chairman and CEO
Group of major insiders agree to a voluntary 1-year lock-up
The Offering consists of units of the Company at a price of CAD$1,000.00 per Unit. Each Unit consists of one subordinated secured debenture of the Company and one common share purchase warrant. The Debentures will bear interest at a rate of 10.0% per annum. Each Warrant entitles the holder thereof to acquire one Common Share at an exercise price of $0.76 per Warrant Share for a period of 36 months from the closing date.
Fire & Flower taps Alberta Crown Corporation for $10M Credit Line
The new financing will be comprised of two separate loan facilities on a two-year term: a revolving credit facility in the amount of $5M, and a term loan in the amount of $5M. Both loan facilities bear interest at ATB Financial's reference rates plus a spread. The Commitment Letter also includes an "accordion" option to increase the revolving facility by an additional $5M, subject to ATB Financial's consent and certain other customary conditions.
Clever Leaves / Canopy Growth - Regional Supply Agreement
Clever Leaves, a leading multinational operator (MNO) and licensed producer of pharmaceutical-grade cannabis and hemp extracts, and Canopy LATAM Corporation, a wholly owned and controlled subsidiary of Canopy Growth Corporation, announce that both parties have entered into a regional supply agreement.
Under the terms of the agreement, Clever Leaves will supply Canopy LATAM with extracted products from its GMP-certified, licensed cannabis processing system and cultivation sites in Colombia. Clever Leaves has delivered the first of these products to Canopy Growth under the terms of the one-year agreement, which includes an option to renew for two additional years.
🧔People
Sarvesh Mathur joins Greenbits as CTO
Mathur brings substantial experience building and providing software solutions to help businesses succeed. Before Greenbits, Mathur served as CTO at Scout RFP (acquired by Workday), the procurement and sourcing software solution for businesses that has been praised for its simplicity, design, and impact on customers’ bottom lines.
🏬New Products / Store Openings
Cresco Launches value brand, High Supply
The product portfolio includes vape pens, popcorn, shake and pre-rolls sold in bulk, single-serve packages. The products are produced from Cresco Labs-grown cannabis and are available at a lower price point than many of the company’s other offerings.
The High Supply brand initially launched in Illinois in January and expanded to California earlier this month. Cresco Labs plans to expand the product line to every state in which it operates over time. In launching its High Supply product line, Cresco Labs identified an opportunity in the market to provide better-priced products, Rothschild said. As more cannabis brands invest more in packaging, celebrity endorsements and marketing, it becomes more difficult for consumers to identify a no-frills brand that offers quality cannabis at a good price.
Canndescent launches value brand, Baker’s Cannabis Co.
Baker’s mission is to deliver lower cost but high quality products in order to further democratize the legal cannabis consumption experience. The brand is now selling $6 one gram pre-rolls and $55 half ounce pre-ground pouches with a full set of rolling papers and crutches in dispensaries across California.
Trulieve opens 46th dispensary in Titusville, FL
The Titusville location marks a record 46 locations in the state of Florida and 48 nationwide for Trulieve.
🤷♂️Somewhat Relevant
4 reasons retail in the US won’t be bouncing back like in China
While America’s retail industry is looking to China for clues about how shoppers are rebounding from the coronavirus pandemic, there are shortcomings to using the region as a blueprint for the U.S. In China, already, the consumer “is back with a vengeance,” Coresight Research Chief Executive and founder Deborah Weinswig said in an interview. “There is a pent-up demand.”
But the return of retail in the U.S. will likely play out differently, as unemployment keeps surging, nonessential stores remain shut for longer periods of time and international travel is still limited. “We have 50 states acting as 50 countries,” Weinswig said about the U.S. “11% unemployment also never happened in China.”
100,000 retail stores could close by 2025, accelerated by COVID-19
Analysts at Wall Street firm UBS said in a research note this week that the pandemic could alter behaviors, leading more shoppers to continue buying online. Shoppers who do go to stores may not linger. Clothing, electronics and home furnishings stores would be affected the most if online shopping increased to 25% of retail sales up from its current 15%, according to the investment banking firm. Enclosed malls would be under pressure as stores closed. Smaller retailers would be hurt the most while large chains such as Walmart, Target and Costco might benefit from the shuttering of under performing retail stores, UBS said. Dollar stores and home improvement retailers such as Home Depot and Lowe's should also be beneficiaries.
Who writes this newsletter? ➡️ Dai Truong