🧾 Tilray Earnings – Revenue up 43% to $168M but Net Loss increases to ($34.6M)

NBA to stop random tests for Cannabis. 4Front Ventures acquires New England Cannabis Corporation (MA) for $55M. Sundial Growers acquires Alcanna for $346M.

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🏙️ I’ll be attending the Benzinga Cannabis Capital Conference in NYC next Thursday/Friday, so if you’re be there and would like to say hi, let me know! (use code: HIGHLY for 30% off)


🌿Industry

New York Marijuana Regulators Hold First Legalization Implementation Meeting And Approve Patient Access To Flower Cannabis. New York’s Cannabis Control Board (CCB) held its first meeting on Tuesday, a key step toward implementing the state’s adult-use marijuana program. Regulators announced that some changes to the state’s existing medical cannabis program that were included in the recreational legalization law enacted earlier this year will take effect immediately. Dispensaries will now be allowed to sell flower marijuana products to qualified patients, for example. But home cultivation for patients remains prohibited for the time being because officials have failed to meet a deadline to develop rules for such activity.

NBA will not randomly test players for marijuana again this season. The policy to not randomly test players for marijuana has been in place since the Orlando restart and will continue this season.

Two PA. lawmakers have joined forces in a bipartisan effort to legalize Cannabis. On Monday, Regan, who represents part of Cumberland and York counties, unveiled his plans for a marijuana bill in the Senate. The senator’s proposed bill focused on ensuring the appropriate regulation and taxation of adult-use cannabis, which he said could generate $1 billion annually for the commonwealth. On Tuesday, Brown, a Philadelphia lawmaker, began circulating a memo to his House colleagues seeking support for a proposed marijuana legalization bill that would offer some provisions for decriminalization for non-violent marijuana offenses. It also would level the playing field for individuals from marginalized communities to have opportunities to generate money and generational wealth by getting into the legal marijuana business. Brown conceded the sponsorship memos contain some differences. But he thinks there is hope for passage as lawmakers see the two lawmakers from opposite sides of the aisle work together.

Ontario making cannabis delivery permanent for province’s 1,000+ stores. Ontario plans to permanently enable cannabis stores to offer delivery and curbside-pickup services, a move that likely would provide a major boost for many of the province’s pandemic-hit, adult-use marijuana retailers. Stores in Canada’s largest cannabis market were first temporarily granted the ability to offer delivery in April 2020 after the pandemic forced the province to shut down most retailers to curb the spread of COVID-19. Since then, the province subsequently extended the temporary provision. The move still requires legislative approval. Ontario’s cannabis store landscape has soared in the past 18 months. When Ontario first allowed privately owned stores to offer delivery in 2020, roughly 54 stores had been authorized to open. By last month, Ontario reached 1,000 operating cannabis stores and has since surpassed that mark.

San Francisco Strengthens Cannabis Equity Rules For Processing New Permits. The Board of Supervisors this week unanimously approved a measure from Mayor London Breed to make changes to the city’s three-year-old cannabis equity program. In the three years since the city’s cannabis equity program was established to lower the barriers for entry to the industry for disadvantaged people, there have been 94 applicants and 36 permits issued. Specifically, the legislation:

  • Prioritizes cannabis equity applicants who are sole proprietors

  • Shortens the time period for a transfer of more than a 50% ownership interest in a cannabis business from 10 years to five years

  • Requires cannabis businesses make additional social equity contributions if they seek to reduce the equity applicant’s ownership interest by 20% or more

Canopy Growth to report weaker sales as profit hopes fade. Analysts are slashing sales forecasts for Canopy Growth amid fading expectations that the company can turn a profit within the next three quarters. In August, the company said its shrinking share of Canada's recreational market was the result of temporarily closed shops during the pandemic, competition from small producers with potent products, and "internal supply and execution challenges." The reopening tailwind has been weaker than anticipated, according to BMO Capital Markets analyst Tamy Chen. She says September retail sales for Ontario, British Columbia, Alberta and Saskatchewan ticked up just 3% on a monthly basis. Canopy's sell-through, what consumers buy from stores and online, fell 15% month-over-month, according to the data sourced from HiFyre. Chen slashed a "sizeable" $42M from Q2 sales estimate, while Piper Sandler analyst Michael Lavery lopped $35M.


💵Deals

4Front Ventures — Acquires MA-Based New England Cannabis Corporation (NECC). NECC's fully operational 55,000 sq. ft. licensed cultivation facility strengthens 4Front's expanding footprint in this important limited-license state. The Transaction will more than double 4Front's total flower canopy in Massachusetts to over 30,000 sq. ft, with further expansion potential for up to an additional 10,000 sq. ft. of canopy, and will approximately triple 4Front's kitchen, processing and distribution space. 4Front will acquire 100% interest of NECC for total consideration of $55 million, funded through the issuance to the seller of 25 million subordinate shares and $25 million cash. The cash portion will be funded through proceeds raised from a $15 million convertible notes offering, led by Navy Capital, a vendor take back note and balance sheet cash. The convertible notes have a maturity date of 36 months following their date of issuance and bear interest at a rate of 6.0% per annum, payable annually. Investors can elect at any time to convert their outstanding balance into shares at a conversion price equal to $1.03.

Sundial Growers — Acquires Alcanna. With over 25 years of experience in retailing regulated products, Alcanna is Canada's largest private liquor retailer, operating 171 locations predominantly in Alberta under its three retail brands "Wine and Beyond", "Liquor Depot" and "Ace Liquor". Alcanna's strategic partner, in which it holds a ~63% equity interest, Nova Cannabis, is one of Canada's largest cannabis retailers, operating 62 stores across Alberta, Saskatchewan and Ontario primarily under the "Value Buds" and "Nova Cannabis" banners. The ~$346 million transaction value at $9.12/share represents a 39% to the 10-day VWAP of the Alcanna Shares.

Akerna — $20 million Re-investment. The company has entered into a securities purchase agreement for a $20 million convertible debt financing with existing institutional investors who hold the Company's currently outstanding convertible notes. The financing is in the form of Notes, which are convertible into shares of common stock of Akerna at a conversion price of $4.05 per share. The Notes, maturing on October 5, 2024, have an aggregate face value of $20 million and are being issued with an original issue discount of 10%. The Note do not bear interest except upon the occurrence of an event of default and are to be repaid in monthly installments beginning on January 1, 2022. Net proceeds from the Notes is expected to be approximately $14.6 million, which includes deductions for the original issue discount, the payment of approximately $3.3 million of amounts owing to payoff the prior convertible notes and payment of expenses.  The Company's unaudited proforma cash balance following the issuance of the Notes is expected to be approximately $19.8 million, which includes the deduction of the $4.5 million payment related to the closing of the Company's acquisition of 365 Cannabis. 

Indiva — Increase and Amendment to Term Loan Facility with Sundial Growers. Sundial Growers has provided an additional $8.5M in available funds to Indiva and has amended the terms of its existing non-revolving term loan facility with Sundial, bringing the total principal amount of the Term Loan including accrued and deferred interest to $19.75M. Indiva has also entered into a settlement and termination agreement Dycar, whereby the parties have agreed to terminate and settle all matters between them in relation to the licensing and manufacturing agreement, as amended, entered into on February 18, 2020.

High Tide — Enters U.K. Market Through Acquisition of Blessed CBD. Founded in 2019 with its headquarters in Scotland, Blessed has quickly grown to become one of the most popular brands for hemp-derived CBD products across the U.K., including CBD oils, creams, gummies, and capsules. In 2020 Blessed had almost 5 million site visits and an average order value of approximately £75. High Tide will acquire 80% of Enigmaa Ltd., operating as Blessed CBD for £9.06 Million, and will have a three-year option to acquire the remaining 20% of Blessed at any time. The implied enterprise valuation of £11.3 Million represents 4.0x LTM EBITDA ended August 2021.


📄Company Updates / Earnings

Tilray — First Quarter Fiscal Year 2022 Financial Results

  • Net revenue increased 43% to $168M from $117M Y/Y. The increase was driven by 38% growth in net cannabis revenue to $70M, net beverage alcohol revenue of $15M following the SweetWater acquisition on November 25, 2020, and wellness revenue of $15M from Manitoba Harvest

  • Maintained #1 market share in Canada with leading portfolio of comprehensive medical cannabis and adult-use brands, including top position in cannabis flower and pre-rolls; five Tilray brands rank in top five brands across all adult-use product categories

  • International market leader and #1 in Germany with medical cannabis extracts

  • Net loss of ($34.6M) compared to net loss of ($21.7M) Y/Y

  • Adjusted EBITDA of $12.7M, up 58% Y/Y, and the tenth consecutive quarter of positive Adjusted EBITDA. If Adjusted EBITDA were normalized for Aphria’s production costs, would have been closer to $17M

  • Gross profit increased 46% to $51M from $35M Y/Y

  • Cost-saving synergies of $55M achieved on a run-rate basis to date, with actual cash-savings close to $20M. On-track for at least $80M in cost-savings from Aphria and Tilray business combination synergies

—> Tilray combating “ankle biters” to win back market share after mixed Q1

—> Tilray CEO: THC seltzer is next big upcoming business

Ceres Acquisition Corp. — Releases Letter to Shareholders. Ceres will continue pursuing the completion of a qualifying transaction prior to the deadline of March 3, 2022 (unless that date is extended, with shareholder approval). While Ceres will continue to search for target businesses with a focus on the cannabis and related health and wellness industries, we are not limited to a particular industry or geographic region for purposes of completing our qualifying transaction.   

Charlotte's Web — Begins Retail Expansion in California. Following AB 45's passage, the Company expects California retailers to expand or begin receiving product shipments from Charlotte's Web. This includes Charlotte's Web current national retail partners which combined represent more than 1,000 locations in California, that can now confidently offer Charlotte's Web products to consumers with clear regulatory guidance across the state.


🏬Retail

Trulieve — Reopens Dispensary in North Port and Kissimmee, FL. The Sarasota-area dispensary is Trulieve's 92nd location in Florida and was formerly branded as Harvest House of Cannabis. The Orlando-area location was formerly branded as Harvest House of Cannabis and is Trulieve's 93rd location in Florida. Both stores reopened one week after closing for renovation and rebranding. The Company will continue to reopen Harvest locations in Florida throughout the month of October.

Columbia Care — Opens Cannabist Dispensary in Hermann, Missouri. This marks the ninth Cannabist location and the 75th active Columbia Care dispensary in the U.S. Columbia Care will also open a manufacturing facility in nearby Columbia, which will produce vapes, edibles, tinctures, tablets and pre-rolls. Missouri’s medical marijuana sales reached more than $113 million in September, since launching in October 2020. There are approximately 150,000 registered medical patients in the state. Hermann is located between Kansas City and St. Louis, the two largest population centers in the state.

GTI — Expansion of Rise Mundelein in Illinois to Enhance Guest Experience. Designed by acclaimed interior design firm, Sasha Adler Design, the expanded space provides guests and patients with an open concept bar for individualized consultations, interactive product displays and pop-up shops, increased points of sale and additional educational spaces. Rise Mundelein will also offer legal on-site purchase and consumption of cannabis by reservation only. As part of the expansion, Rise Mundelein is the first store in Illinois to offer roll-through car service for medical cannabis patients to pick-up orders.


🌱Product

AWH and Edie Parker — Launches Latest Pre-Roll Collection in MA. In May, AWH and Edie Parker announced an exclusive wholesale licensing agreement to bring Flower by Edie Parker products to emerging adult-use markets in Massachusetts and Illinois. The coveted West Coast brand first expanded beyond California earlier in March by launching sales in Colorado. Elegantly packaged and sold in new 'Best Buds' twin packs of 0.5 gram pre-rolls, customers can choose from three distinct offerings including:

  • Early Bird, a sativa product featuring a light and creative flavor that pairs well with morning hike or mid-afternoon coffee.

  • Happiest Hour, a hybrid product that's party perfect, ideal for hanging with friends or a night out dancing.

  • Nightcap, an indica perfect for evening or any relaxation ritual.

Truss CBD USA (Molson Coors x HEXO JV) — Expands Veryvell™ CBD Beverages Semi-Nationally. Following a successful Colorado launch in 2020, Truss CBD USA now expands Veryvell semi-nationally to be available in 17 states. The ready-to-drink beverages come in three premium flavors and feature 20mg of high-quality CBD and adaptogens in each 12 oz can.

Day One — Relaunches. The brand relaunched after a brief hiatus away from shelves. The product is available now for U.S. consumers at www.drinkdayone.com. Distribution and availability is coming to Southern California, Texas, Ohio, Kansas, Illinois and Tennessee.


🧔People | 💻Hiring

Leafly — New General Counsel Kimberly Boler. Kimberly’s highly regulated industry experience includes Assistant General Counsel and V.P. of Investment Governance of AIG and General Counsel of Aria Energy. She also has served most recently as V.P. Corporate Law at Patriarch Partners, LLC. Her private practice experience includes Simpson Thacher & Bartlett LLP and Duane Morris LLP.

MediaJel — Controller (Remote)

Bespoke Financial — Controller (Remote)

NABIS — Director of People Relations (Hybrid)


🎙️Interviews

Blunt Business — HERBL CEO, Mike Beaudry

CIN — Verano Holdings CEO, George Archos

CSE — Ayr Wellness CEO, Jonathan Sandelman

Weednesday — Jushi CEO, Jim Cacioppo

Cannabis Business Times — NABIS President, Jun Lee

CNBC — Tilray CEO: Opportunities in medical cannabis are tremendous

NCV — NewLake Capital Partners CEO David Weinstein and President & CIO Anthony Coniglio

IIC — Petalfast CEO Jason Vegotsky


👋 Highly Objective is curated by Dai Truong. 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.