🍎 TILT Partners with Shinnecock Indian Nation of New York to develop Vertical Cannabis Operations

Earnings (Q2 Revenue) - GAGE ($26.4M), TILT ($48.5M), Cansortium ($16.5M). SOL Global invests $20M in Common C Holdings LP (MI). AFC Gamma Provides DMA Holdings with $19.75M Senior Secured Credit.

Aug 25, 2021

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🌿Industry

Legal Dispensaries Are Taking on the Illicit Market. March & Ash filed a lawsuit against former San Diego County Sheriff’s Capt. Marco Garmo and a long list of alleged co-conspirators. The lawsuit alleges violations of anti-racketeering, false advertising and unfair competition laws. One of the defendants is a local media outlet that regularly runs advertisements for illegal dispensaries. Garmo was sentenced to two years in federal prison in March “for years of unlawful firearms transactions and for an array of corrupt conduct relating to unlicensed marijuana dispensaries operating in his former jurisdiction,” the U.S. attorney’s office wrote in a press release. In addition to Garmo and the San Diego Reader, the six other defendants in the case brought by March & Ash include ATM operators, landlords and bootleg edibles companies. By knowingly supporting an illegal dispensary’s activity by doing business with them, even if they are not selling contraband themselves, they are complicit, the suit alleges.

The Rise Of Debt Financing In The U.S. Cannabis Markets. As MSOs set up massive credit facilities based on their strong financial performance and profitability, Bespoke VP Business Development, Judson Hill, has seen this trickle down to privately held businesses and smaller operators outside of the MSOs. A number of local credit unions in cannabis-friendly states across the country have stepped up to be bank operators. What is most exciting for Hill is to see the transformation over the past three years from debt being seen as something for distressed businesses to new credit facilities being hailed in the headlines as a major mark of success. [*Note: The Company is still hiring a VP Capital Markets]

Clio Cannabis — Announces Jury to Select 2021 Award Winners. The awards program that celebrates creators at the forefront of cannabis marketing and communications, today the list of industry leaders who will determine 2021’s winning entries. The 47 member jury is comprised of a diverse mix of creative talent from leading cannabis brands, services, dispensaries, and agencies who are moving the industry forward. Notable names include — Adam Grablick (COO, Kiva), Joe Hodas (CMO, Wana), Mimi Lam (CEO, Superette), Nidhi Handa (CEO, LEUNE), Vince Ning (CEO, Nabis), Wanda James (CEO, Simply Pure), Kate Miller (CEO, Miss Grass), Angela Pih (CMO, Cannacraft), Kimberly Dillon (CEO, Frigg), and Rosie Mattio (CEO, MATTIO Communications).

💵Deals

TILT — Partners with Shinnecock Indian Nation of New York to develop vertical cannabis operations.

Through a joint venture with the Nation’s cannabis project development firm Conor Green, TILT will finance, build and provide management services for the vertical cannabis operations of the Shinnecock Nation’s wholly owned cannabis business, Little Beach Harvest. A subsidiary of TILT has purchased 100% of the Class A membership interests of Standard Farms New York, LLC (SFNY) which will hold a 75% interest in a joint venture with Conor Green for approximately $700,000, in cash and stock, with up to $2.65 million to be paid in additional shares priced at the time of closing, to be issued upon achievement of certain milestones, including commencement of retail and wholesale cannabis sales. Through the agreements between the joint venture and Little Beach Harvest, TILT will provide management services to Little Beach Harvest for the development of the facilities, including planning, design and funding of up to approximately $18 million in capital expenditures in order to provide a fully vertical cannabis operation. The 9% debt financing TILT provides is repaid through cash flows monthly and is secured by the assets of the project which will include:

a 60,000 square-foot cultivation, processing, extraction and packaging facility;
a two-story dispensary with a drive through; and
an adjacent wellness lounge
In exchange for providing management services, SFNY receives 11.25% of the Nation’s gross revenue as well as 18.75% of free cash flows from all Shinnecock cannabis operations during the initial term of up to nine years. The management agreement may be extended up to 10 additional years, pending accomplishment of certain performance-based milestones related to revenue and profitability

SOL Global — Jumps Into Michigan Cannabis Market with $20 Million Investment In Common C Holdings LP. Common C Holdings, which was formed in 2018, provides support services, financing, intellectual property licensing, accounting and professional coordination, and real estate support services to state-compliant licensed cultivation, processing, and retail cannabis operators in Michigan. Some of the key client assets Common C Holdings supports include:

Over 170,000 square feet of cultivation in current production, producing over 60,000 pounds in annual production (scalable up to 1,200,000 square feet, subject to additional licensing requirement); and
5 Retail operations and scaling to over 12 stores by 2022.

AFC Gamma — Provides DMA Holdings With $19.75 Million Senior Secured Credit Facility to Fund Its Massachusetts Expansion. The credit facility is designed to provide DMA with the capital necessary to purchase and expand its Tier 6 cultivation license, as well as complete the buildout of its processing facility and dispensary in Dudley, Massachusetts. AFC will hold the entire $19.75 million credit facility, which consists of a first-lien term loan. The loan is secured by first-lien mortgages on DMA’s wholly owned real estate properties in Massachusetts and other commercial-security interests. AFC Management, LLC served as Lead Arranger and Administrative Agent for the transaction.

Bespoke Financial — $3.5 million line of credit for LadyBug Farms. Headquartered in Monterey, California with additional cultivation facilities in Half Moon Bay, LadyBug Farms is a cannabis cultivator, processor, co-packager and distributor supplying products to some of the state’s leading retailers and is recognized for its high quality and fair market pricing. The farm harvests cannabis five days a week throughout the year producing up to 100,000 pounds of biomass annually. It is no secret that cannabis businesses can be notoriously difficult to fund through non-equity diluting options, which can dramatically reduce opportunities to scale businesses. Well known as the “farm behind California’s favorite brands,” LadyBug Farms cultivates for industry leading brands such as Old Pal, Cookies, Miss Grass, Pure Beauty, Weed and Dimebag among others.

Flora Growth — Closes Investment in Hoshi, Provides Clear Expected Pathway To European Distribution. The Strategic partnership with Hoshi International, which holds European assets, provides Flora with a clear expected pathway to European distribution and the introduction of Flora’s products, formulations, and brands
Alignment between the two companies.

GrowGeneration — Acquires Los Angeles County's Commercial Grow Supply, Strengthens Foothold in Southern California. Founded in 2011 by Sevan Derohanian, Commercial Grow Supply is one of the largest hydroponic suppliers in Los Angeles County, with annual revenues approaching $10 million. The acquisition brings the number of GrowGen locations in California, the country's largest legal cannabis market, to 22, with 10 locations in Southern California. The Commercial Grow Supply acquisition is GrowGen's 14th this year. The Company raised its 2021 revenue guidance to $455 million-$475 million . GrowGen plans to have over 70 garden center locations by the end of 2021.

📄Company Updates / Earnings

TILT Holdings — Second Quarter 2021 Results

Revenue increased 33% to $48.5 million — driven by growth in both cannabis and inhalation and accessory revenue. Cannabis revenue increased 31% to $10.0 million and inhalation and accessory revenue increased 34% to $38.5 million
Gross profit before fair value adjustments increased 25% to $13.1 million or 27% of revenue, compared to $10.5 million or 28.9% of revenue. Gross margins were impacted by supply chain expenses related to freight costs for the Company’s inhalation and accessory business
Adjusted EBITDA (13.5% margin) was $6.5 million (6.7% margin) compared to $2.4 million
At June 30, 2021, cash and cash equivalents was $9.6 million

GAGE — Second Quarter 2021 Results

Revenue of $26.4 million, an increase of 130.2% Y/Y and 49.9% Q/Q, Strong average basket size of $152
Gross margins of 34.2% compared to 26.1% in Q1 2021, sequential quarter growth of 810 basis points
July average selling price of approximately $5,100/lb vs. Michigan average of $3,500/lb – 46% premium, Michigan posted $171 million of cannabis sales in July ($2.05 billion annualized), positioning Michigan as the third largest cannabis market in the United States based on this run-rate
Nine cultivation facilities in operation today (three Gage operated and six contracted cultivation assets) compared to two cultivation facilities in Q2 2020; the Company expects to expand to 15 cultivation facilities by year end
The Company expects to operate in-house processing asset in Q4 2021, leading to further margin expansion
Cash: $32.8 million

Cansortium — Second Quarter 2021 Results

Revenue increased 24% to $16.5 million compared to $13.2 million Y/Y
Florida revenue increased 22% to $14.6 million compared to $12.0 million Y/Y
Adjusted gross profit increased 24% to $10.7 million or 65.1% of revenue, compared to $8.7 million or 65.5% of revenue Y/Y
Adjusted EBITDA approximately doubled to $5.2 million or 31.8% of revenue, compared to $2.6 million or 19.7% of revenue Y/Y
At June 30, 2021, the Company had approximately $26 million of cash and cash equivalents and $71 million of total debt

🏬Retail

Ayr Wellness — Adds to Florida Retail Footprint, Opens New Dispensary in Boynton Beach. This is the Company’s 40th operating dispensary in Florida. The 1,600 sq. ft. retail store sits within a shopping center with approximately 60 parking spaces and is a 10-minute drive from some of South Florida’s most popular beaches. The new location features LHS’s expanded selection of offerings, in addition to the Company’s recently launched Origyn concentrates and Big Pete’s Cookies. Jonathan Sandelman, CEO of Ayr, said, “With 40 open stores in Florida, we now have the second largest retail footprint in the state, with more set to open during the rest of the year. Our plan in Florida is working. Our improved cultivation facility is allowing us to open new stores at a rapid clip and is helping to greatly expand our presence in what is quickly becoming one of the largest marijuana markets in the U.S. As we continue to improve our product mix, Ayr will increasingly become a force to be reckoned with in the Florida market.”

🌱Product

springbig — Launches re:source, a Comprehensive Cannabis Retail, Loyalty and Digital Communications Platform on Apple and Google Play App Stores. Through re:source, consumers can directly shop springbig-powered dispensary menus via their respective loyalty accounts. The app's rewards and offers pages enable customers to conveniently see all redeemable points and available promotions at each retailer. Cannabis shoppers can save their contact information, product preferences and interests to their re:source profile page, which allows retailers to send personalized promotions and recommendations. Customers can also use their re:source profile, which contains a unique QR code, to check out in-store and accumulate more loyalty points.

Trym — Launches Crop Steering Capabilities. Crop steering, a long-standing practice in large-scale greenhouse vegetable farming, is the manipulation of a controlled environment to elicit a desired response in a crop. In cannabis cultivation, the desired result is typically higher yields and improved quality. Trym customer and early adopter, Randy Hansen, Co-founder and COO of Pacific Grove, an indoor craft cannabis producer located in Portland, OR, has yielded exciting results from their first harvest with the new technology. A unique attribute of Trym's crop steering module is it's flexible sensor integrations with technology providers Growlink and Trolmaster.

The Parent Company — Expands Product Portfolio with Launch of “Well by Caliva” Lotions and Tinctures. The line offers lotions and tinctures in three categories - Well Balanced, Well Rested and Well Relieved.

🧔People | 💻Hiring

Ayr Wellness — VP Operations Massachusetts (Milford). The Vice President is responsible for oversight across the organization with seven direct and four dotted line reports and two hundred and sixty indirect reports. This position leads and engages a high-performance management team for Retail, Wholesale, Operations, Marketing, Compliance, Finance, Human Resources, and Government Relations.

Cova Software — Director of Strategic Programs (Denver). The Strategic Programs team builds and manages a North American partner ecosystem including Payment partners, Strategic Eco-system partners and Integrated partners. With an increasing ability to monetize Cova’s partner network, the position will work to establish product, commercial, and strategic partnerships that help Cova and its partners grow revenues.

Pharmacann — Senior Corporate Accountant (Chicago)

Burb — Financial Controller (Vancouver)

🎙️Interviews

Popular California Cannabis Edibles Manufacturer Kiva Confections Quietly Expands Into New States. New Cannabis Ventures checks in with Co-Founder Kristi Palmer for updates on the company’s market presence, brand portfolio and plans for the future.

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