💨 StateHouse Holdings (Loudpack, Harborside, Urbn Leaf) Merger Creates Major CA Operator
💨 StateHouse Holdings (Loudpack, Harborside, Urbn Leaf) Merger Creates Major CA Operator
SF suspends Cannabis business tax. Schwazze raises $93M Convertible Notes, enters New Mexico market. Bespoke Financial raises $125M Financing CF. Headset completes $8.6M Funding.
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🌿 Industry
San Francisco delays Cannabis tax a second time to combat illicit market. San Francisco supervisors unanimously approved an ordinance to suspend the city’s Cannabis Business Tax through the end of next year, in an attempt to curb illegal Cannabis sales. According to Supervisor Rafael Mandelman, the legislation’s author, suspending the city business tax through Dec. 31, 2022, would help support legal cannabis retailers as they struggle to compete with illegally sold cannabis. In addition to the illegal sales, increased theft is also creating problems for cannabis retailers. At least 15 dispensaries have also been hit in Oakland, totaling ~$5M in losses. Oakland operators are also calling for a tax break.
With taxes going up, cannabis operators threaten “California Weed Party.” With Cannabis Cultivation taxes set to increase and a lack of enforcement with the illicit market, Flow Cannabis co-founder, Mikey Steinmetz, wrote a medium post saying that he will be making the recommendation to their board that they refrain from paying the cultivation tax after July 1st, 2022. Their recommendation will be to place estimated tax in escrow in good faith, and to withhold payment until the industry sees real, actionable change. It was also an open invite for fellow California operators to join them. The idea seems to be picking up momentum, but in a comment to The Mercury News, Attorney Hilary Bricken said she wouldn’t recommend clients refuse to pay their taxes. Such a move, she said, would “violate all kinds of tax laws and regulations” and could lead to their licenses getting suspended by the state.
America’s Top Cannabis Industry Employers 2021. mg Magazine surveyed employment practices, businesses responded with alacrity and compassion to compile the list. Every company on this year’s list has implemented work-from-home policies; many employers provided equipment, furniture, and/or stipends to help employees make the transition. Because coworkers seldom saw one another in the real world under the new paradigm, businesses found creative virtual ways to keep employees connected and maintain morale (including monthly or quarterly interactive “town hall” meetings). Both sides of the equation reported finding the measure liberating, so it’s become standard operating procedure, at least for some employees, at almost every company that appears on this year’s list.
New Mexico Creates $5M Loan Program for Cannabis Microbusinesses. The New Mexico Finance Authority Oversight Committee approved a new, $5M loan program aimed at helping licensed cannabis microbusiness—specifically those operated by members of communities disproportionately impacted by previous cannabis law enforcement or located in rural communities—succeed. The Cannabis Microbusiness Loan Program will offer affordable loans to licensed cannabis establishments that demonstrate the technical and managerial capacity to operate but are unable to fund start-up costs due to their size, socio-economic or demographic characteristics. With $5M dedicated to the program overall, individual loans will be up to $250,000 with an expected average loan size of $100,000. There is a minimum 5% equity requirement and the loans will be fully collateralized. Loan terms will go up to 5 years and interest rates will vary from 2% to 3%.
💵 Deals
Harborside — Business Combination with Urbn Leaf and Loudpack Creating StateHouse Holdings.
Through the first nine months of 2021, Harborside, on a pro-forma basis including revenue of Sublime, had gross revenue of $57.8M, while Urbn Leaf and Loudpack had revenue of $45.9M and $61.4M, respectively. Therefore, on a pro forma basis, management estimates that StateHouse would have generated gross revenue of ~$165 million for the same period. Ed Schmults, the current CEO of Urbn Leaf, is expected to be appointed as CEO of StateHouse upon completion of the Urbn Leaf Transaction and will be joining the Board of Directors of StateHouse. Marc Ravner, the current CEO of Loudpack, is expected to be appointed as President of StateHouse upon completion of the Loudpack Transaction and will be joining the Board of Directors of StateHouse. Matthew Hawkins, current Chairman and interim CEO of Harborside, will remain as Chairman of the Board of StateHouse. Based upon the relative enterprise value of each party, following closing of the Transactions, existing Harborside, Loudpack and Urbn Leaf shareholders will own approximately 35%, 39% and 26% of StateHouse, respectively. In connection with the Transactions, management has entered into a letter of intent with Pelorus Equity Group to complete the Real Estate Financing of $77.3M of non-dilutive real estate debt financing, which unlocks significant value from the StateHouse real estate portfolio and provides significant growth capital for the business. StateHouse will have 15 retail locations, 230,000 sq ft of greenhouse cultivation space and 36,000 lbs of cultivation capacity. The Company will have 9 popular brands, including top-five ranked brands in the pre-roll (Fuzzies and Kingpen), edible (Smokiez) and value flower (Dime Bag) segments, representing the #3 ranked brand house in California.
Schwazze — $93M Convertible Notes and entry into New Mexico. The Company will issue and sell $95M of principal amount ($93M of funding—2% original issue discount) of convertible notes. The notes will accrue 13% interest per year (9% payable in cash and 4% accreting to the principal amount), have a 5-year term and will be secured by a first lien on the unencumbered assets and a second lien on the encumbered assets of the Company and its subsidiaries. The note will be convertible into shares of the Company's common stock at any time at a conversion price to be set upon issuance equal to 117.5% of the lower of the volume weighted average of the closing prices of the Company's common stock. The Company will have a right to redeem the notes at any time, subject to a prepayment penalty. Schwazze is using most of the debt to acquire substantially all the operating assets of Greenleaf (New Mexico—10 dispensaries, 70,000 sq ft cultivation, 6,000 sq ft manufacturing). Total consideration for the acquisition will be $42M ($25M cash, $17M 3-year seller note at 5% interest) with a potential performance based earnout.
Bespoke Financial — Raises $125M to Expand Lending Capacity. Bespoke has been at the forefront of the industry trend toward debt financing, working with both large and small companies of all license types, including brands like Jeeter, Buddies, Claybourne Co., and Friendly Farms. Since the company’s launch more than three years ago, Bespoke has provided funding for a growing number of businesses spanning the entire cannabis supply chain. The company now works across the country in 12 regulated markets from California to Maine, financing lines of credit in amounts as large as $15M.
Headset — Completes $8.6M Financing. Headset raised $3M of new capital led by Althea with participation from Poseidon and WGD Capital. As part of this financing, Headset also converted $5.6M of bridge notes previously issued in August 2020 and April 2021.
Greenrose Acquisition Corp. — Closes Business Combination with Theraplant. The Company has been renamed The Greenrose Holding Company and will continue to be listed on the OTC under the symbols “GNRS” and “GNRSW.” Greenrose also intends to co-list on the NEO exchange. With the closing of the Business Combination, Greenrose currently expects to continue to work towards the acquisition of each of Shango Holdings and Futureworks (d/b/a The Health Center) and certain assets of Arizona-based True Harvest. The acquisition of Theraplant was funded, in part, by a $105M senior secured credit facility from DXR Finance.
Canna-Global Acquisition Corp — Prices $200M IPO. The Company intends to focus its search for a target business addressing a large market opportunity with a company that is driving its growth in the medicinal cannabis or cannabinoid industry, which is compliant with all applicable laws and regulations within the jurisdictions in which it is located or operates. In particular, the Company will not invest in or consummate a business combination with a target business that has been operating, or whose plan is to operate, in violation of U.S. federal laws, including the U.S. Controlled Substances Act. The Company is led by its CEO, J. Gerald (Gerry) Combs.
Body and Mind — Acquires The Reef (Seaside, CA). Total consideration of $5.8M ($2.5M cash, $2.3M 5-year note at 10% interest, and $1M in either cash of stock).
Spacestation — Merges With Mammoth Distribution. The initial collaboration between Spacestation and Mammoth is the groundbreaking, cannabis tincture reimagined, the HVY Grand. The key innovation, developed with Spacestation, is the Liquid Trichomes process, a proprietary single-strain nano-emulsion infused with pure Acapulco Gold terpenes. With this merger, Mammoth Distribution will likely continue to launch innovative beverage and tincture products for the California market and beyond.
GAGE — Closed Acquisition of Sturgis, MI Dispensary. The Sturgis dispensary is expected to be re-branded as a Cookies store and marks the 17th license in the Company's retail portfolio. The dispensary is strategically located near the state of Indiana.
Unrivaled Brands — Closes Acquisition of People’s First Choice. In connection with the acquisition agreement, the Company will take full control of the People’s Riverside, People’s Los Angeles and People’s Costa Mesa operations and will receive all economic benefits of each. The Santa Ana dispensary generated almost $30M in revenues during 2020, and revenue has continued to grow during 2021. The Los Angeles and Riverside locations are also in prominent locations, and both are expected to be strong performers. The Company’s President, Oren Schauble, wrote more in a post here. The Company also announced the first harvest from its new cultivation facility in Oakland, California. Launched in September, the cultivation facility is expected to produce 3,500 pounds of cannabis annually. The facility contains four fully populated flower rooms, each containing 60 lights, and has tripled Unrivaled’s existing cultivation footprint.
📄 Company Updates / Earnings
Gage Growth — Q3 2021 Results and Provides Business Update. $27.2M Revenue, up 3.2% Q/Q. Announced proposed arrangement pursuant to which TerrAscend will acquire Gage. Closed on $55M senior secured term loan, ended the quarter with $17.7M cash and $72.3M of pro forma cash. Gross margins of 36.5%, sequential quarter growth of 230 basis points. Average selling price of dried flower of ~$4,900/lb vs. Michigan average of ~$3,400/lb—a 44% premium. The state of Michigan posted $164M of cannabis sales in October, which equates to ~$1.96B when annualized, positioning Michigan as the third largest cannabis market in the United States based on this run-rate. Eleven cultivation facilities in operation today (three Gage operated and eight contracted cultivation assets). The Company introduced Gage branded vape carts in October 2021, which currently account for almost 80% of the overall vape cart sales so far in November.
Harborside — Q3 2021 Financial Results. $17.9M Revenue, 10.4% higher sequentially. $6.8M Gross Profit (39% GM). Adjusted EBITDA was $1.5M. Cash of $14.2M.
Hollister Biosciences — Q3 2021 Financial Results. $14.5M Revenue, up 53% Y/Y. Gross profit of $3.5M. Net income was $0.4M. Adjusted EBITDA was $1.2M. Cash & cash equivalents of $7.6M.
Red White & Bloom — Q3 2021 Financial Results. $11.8M Revenue, $5.9 EBITDA. The Company is in advanced discussions with a number of funds to restructure the current debt of $115M due in 2022 into a more advantageous long-term debt solution.
Flower One — Q3 2021 Financial Results. $14.1M Revenue, ($5.7M) Adjusted EBITDA, $4.9M Cash.
C3 Industries — Opens 15,000 Sq. Ft. Manufacturing Facility in St. Louis, MO. C3 has also finalized an exclusive licensing partnership with Kiva to bring Kiva's edibles brands to the Missouri market. The facility will initially produce high-quality concentrates and cartridges under C3's brand, Galactic Meds, which are expected to be available for sale in Q1 2022. C3 expects to then launch the Kiva line in Q2 or Q3 2022. The St. Louis facility will also ultimately produce C3's own Cloud Cover Cannabis line of concentrates, cartridges and pre-rolls starting in late 2022. Products manufactured in this facility will supply dispensary locations across the state of Missouri, including C3's five High Profile Cannabis Shop locations in St. Charles, Columbia, St. Robert, Cape Girardeau and Sunset Hills. The St. Louis location joins the growing roster of C3 Industries' production facilities. C3 first began production operations in the spring of 2018 with a state-of-the-art 36,000 square foot indoor cultivation and manufacturing facility in Portland, Oregon. Within only six months of commencing production, Cloud Cover Cannabis, C3's premium indoor flower brand, became one of the top Oregon cannabis brands. C3 has since added cultivation and manufacturing operations in its home state of Michigan and also launched its facility in Massachusetts in October 2021.
SOL Global — Completes $30M Oversubscribed Substantial Issuer Bid and Takes up Shares. SOL Global has taken up and purchased for cancellation a total of 7,407,389 of its common shares at a price of $4.05 for an aggregate purchase price of $30M. The Common Shares purchased represent ~14.2% of the total number of SOL Global’s issued and outstanding Common Shares. Prior to the completion of the Offer, SOL Global had 52,018,533 Common Shares issued and outstanding. After giving effect to the Offer, and the take up of 7,407,389 Common Shares, SOL Global has 44,611,144 Common Shares issued and outstanding.
Alpine IQ — Partners with High Tide. High Tide tapped Alpine IQ to power its loyalty program, leveraging the company’s robust suite of tools to engage with customers, drive increased satisfaction, and ultimately, repeat visits. Within two years, Alpine IQ has supported dispensaries with various loyalty offerings including SMS Messaging, Native Apps, Data Analysis and more, helping to facilitate more than $5.5B in transactions.
Cookies x InterCure — European Expansion. The parties entered into a multiyear deal under which InterCure will establish Cookies stores and medical cannabis pharmacies in Austria and the United Kingdom in early 2022.
🏬 Retail / Cultivation
GTI — Opens Rise Reno in Nevada (67th Nationally). In addition to Rise Reno, the Company owns and operates a Rise store in Carson City, along with retail locations throughout the greater Las Vegas area, including stores in Henderson, South Durango, South Rainbow and Tropicana. Earlier this year, GTI partnered with COOKIES to open the brand’s first location in Nevada, COOKIES on the Strip.
Verano — Opens Zen Leaf Dispensary in West Chester, PA (91st nationally). Zen Leaf West Chester is Verano’s 13th affiliated Pennsylvania dispensary and second state location to offer convenient drive-through service. The West Chester Zen Leaf storefront is the third of six permitted clinical registrant dispensary locations opened by Verano affiliate Agronomed Biologics in Pennsylvania. The Pennsylvania medical cannabis program has grown significantly to more than 630,000 statewide patients and caregivers; Zen Leaf West Chester will offer expanded access to serve Chester County’s medical cannabis community of nearly 26,000 patients.
Trulieve — Opens Tampa Dispensary. The new location is Trulieve's 110th dispensary in Florida and its 157th nationwide.
Ayr Wellness — Receives Approval to Begin Operations in 86,000 sq. ft. Arizona Cultivation and Production Facility. The first crop was planted over the weekend, with its first harvest projected for mid-March 2022. The Company anticipates receiving local and regulatory approvals for additional sections of the cultivation facility in the coming weeks.
🌱 Product
Curaleaf — Expands B NOBLE Cannabis Brand with Fab 5 Freddy. The New York Cannabis Control Board recently approved whole flower as part of its medical marijuana offerings in late October. In addition to being sold in Curaleaf retail locations across New York, B NOBLE whole flower will also be available to the majority of the Company's wholesale partners in the state.
Tilray — Launches Fast-Acting Oral Strips. The strips are now available throughout Canada and are available in three different cannabis ratios: THC 10, CBD 20:1, and THC:CBD 10:10. Each pack of Aphria oral strips comes with 30 individually wrapped strips for precise, single-dose delivery.
🧔 People | 💻 Hiring
The Parent Company — Tiffany McBride as Managing Director of Social Equity Ventures and Kerry Arnold as Chief People Officer. McBride joins from Docstur, where she previously served as COO. Arnold previously served as Chief People Officer at Canndescent.
The Weldon Project — Expands Board, Lobbyist Brady Cobb Join. Cobb is the founder and former CEO of Bluma Wellness and One Plant Florida (acquired by Cresco Labs for $213M) and works as an attorney, lobbyist, strategist and consultant with a focus on Federal and State government relations and regulatory matters.
Eaze — VP, Corporate Strategy (LA)
Kiva — VP, Marketing (Remote)
Vangst — Head of Software Engineering (Remote)
Weedmaps — Director, Investor Relations (Remote)
🎙️ Interviews
Max Simon (Green Flower): Educating cannabis professionals
Taking Advantage of Volatility in Cannabis Investing (420investor)
Taking on the customer knowledge gap in the cannabis industry (Dutchie)
Helene Servillon (JourneyOne Ventures) on cannabis obstacles and tailwinds
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