🤑 Trulieve — $350M 8% Senior Secured Notes
🤑 Trulieve — $350M 8% Senior Secured Notes
Ceres SPAC/Parallel terminate deal. Cresco Labs focuses on distributing owned-brands, King's Garden finds new distributor with HERBL. Leafly, Glass House, TOCC appoint CFOs. Flowhub adds COO.
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🌿Industry
Former Shryne (Stiiizy) CEO of California Cannabis Brand Charged With Fraud. The former CEO of Shryne Group was charged in Alameda County last week with multiple fraud felonies related to a different company. Brian Mitchell — who recently stepped down as CEO “for personal reasons unrelated to Shryne,” the company said in a press release — was charged with one felony count of conspiracy to commit a crime, six counts of felony insurance fraud, and two counts of workers’ compensation fraud, the Bay Area News Group reports. The charges stem from his time at the helm of Signature Painting and Construction. According to the report, the scheme allegedly used A-1 World Class Painting as a shell company to pay Signature’s workers from 2017-18 and subvert workers’ compensation insurance costs. Prosecutors alleged that the trio misclassified the roles of their employees and the riskiness of the work so as to pay lower insurance premiums. Authorities estimated that insurance carriers lost about $5 million through the scheme.
Challenges abound in New Jersey’s hot cannabis real estate market.
Cannabis businesses entering New Jersey are facing a sizzling market for retail and industrial cannabis real estate ahead of the launch of recreational sales, forcing them to search aggressively for appropriate sites in limited areas and pay premiums to secure them. Ascend Wellness Holdings, which operates in northern New Jersey, found that the area had “arguably some of the most expensive real estate, commercial real estate, industrial real estate, definitely in the eastern part of the country,” Chief Strategy Officer Frank Perullo said.
Average retail space in cannabis stores climbs sharply. The average size of retail space in cannabis stores jumped in 2020 amid increased consumer demand and the COVID-19 pandemic, rising 50% for medical dispensaries and 35% for recreational shops. Medical dispensaries averaged 3,357 square feet of retail space in 2020, while recreational shops averaged 4,308 square feet, according to owner surveys compiled for the 2021 MJBizFactbook.
Pennsylvania Lawmakers Unveil Marijuana Legalization Bill With Focus On Social Equity. A bill to legalize marijuana in Pennsylvania was formally introduced on Tuesday, and sponsors emphasized that the plan is to enact a policy change the prioritizes social equity for communities most harmed by the war on drugs. That said, the lawmaker acknowledged that “there’s real significant opportunities within our Commonwealth to increase our revenue from an industry that we see is growing all across all of our neighbors.” The state Departments of Revenue, Agriculture, Health and the attorney general’s office would be responsible for overseeing and regulating aspects of the program.
💵Deals
Trulieve — $350 Million Private Placement of 8% Senior Secured Notes. The Company received commitments for a private placement of 8% Senior Secured Notes due 2026 for aggregate gross proceeds of $350.0 million. The Notes, which will be issued at 100% of face value, will be senior secured obligations of the Company and will rank pari passu with the senior secured outstanding notes of the Company maturing in 2024. The Notes will bear interest at a rate of 8% per annum, payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The Notes will mature on October 6, 2026, and may be redeemed in whole or in part, at any time from time to time, on or after the date that is two years following the issue date at the applicable redemption price set forth in the supplemental indenture to be entered into on closing of the Offering. The Company intends to use the net proceeds of the Offering to redeem certain outstanding indebtedness of Harvest upon completion of the Company's acquisition of Harvest, and for capital expenditures and other general corporate purposes.
Ceres Acquisition Corp. — Mutually Agreed Termination of Its Business Combination Agreement With Parallel. Ceres intends to continue to pursue the completion of a qualifying transaction prior to the qualifying transaction deadline of March 3, 2022 (unless that date is extended, with shareholder approval). While the companies did not give a reason for pulling the plug on the deal, three sources familiar with the talks told Reuters that several investors had lost confidence in Parallel's ability to deliver on lofty financial projections it provided in February, when the merger was announced. The sources requested anonymity as the negotiations were confidential. Several investors who had committed to a $225 million private investment in public equity refused to invest over the following months, the sources added. An overview of the deal contemplated is available here.
Jushi — Expands and Strengthens its Presence in Nevada. The Company will acquire 100% of the equity interest of an entity operating an adult-use and medical retail dispensary under the name The Apothecarium in Las Vegas, Nevada. The Apothecarium Nevada acquisition, together with the April 2021 purchase of Franklin Bioscience NV, LLC, a holder of medical and adult-use cannabis cultivation, processing, and distribution licenses, will enable Jushi to become vertically integrated in Nevada, as well as provide significant branding exposure for Jushi’s high-quality product lines, including The Bank, The Lab, Tasteology and Sѐche. This will be the Company’s fourth vertically integrated state, joining PA (by way of its affiliated subsidiaries), VA, and MA.
Players Only — Chris Webber Launches $50M Cannabis Operations and Training Facility In Detroit's Corktown Neighborhood. Players Only, a black-owned business co-founded with entrepreneur Lavetta Willis, is focused on four business segments – 1) real estate development, 2) cannabis cultivation, 3) brand partnerships, and 4) creative content development and management. The state of the art 180,000 sq ft Players Only Facility will feature a 60,000 sq ft cultivation, an 8,000 sq ft dispensary and a private cannabis consumption lounge. At the groundbreaking, Webber also confirmed the expansion of Cookies U into Detroit and an exclusive distribution partnership with Gage Growth for Players Only branded cannabis products.
Pelorus Equity Group — Closes Offering of $42.2 Million of Senior Unsecured Notes due 2026. Pelorus Fund, a mortgage real estate investment trust, has closed a private placement of $42,250,000 aggregate principal amount of its 7% Senior Unsecured Notes due September 30, 2026. The Company intends to use the net proceeds from the offering to continue to lend to cannabis owners and operators. This will include a new stabilized lending program with three- to five-year amortizing loans to quality sponsorship, and be offered to current borrowers upon construction completion, as well as to new borrowers that meet the company’s underwriting criteria.
Red White & Bloom Brands — Refinances ~$19M of Short-Term Debt to January 2023. The Prior Debentures were replaced with a new debenture in the principal amount of $19,370,020. The New Debenture is unsecured, bears interest at the rate of 10% per annum, which accrues and is payable on the maturity date of January 21, 2023. The New Debenture is payable in full on a change of control.
IIP — Expands Long-Term Real Estate Partnership With Goodness Growth Holdings in New York. IIP will acquire approximately 92.3 acres in New York adjacent to one of IIP’s properties leased to Goodness Growth, where IIP and Goodness Growth will partner on the development of 324,000 square feet of industrial space. The purchase price for the land was approximately $10.23 million (excluding transaction costs). Concurrent with the closing of the land purchase, IIP amended its existing lease at the adjacent property to incorporate this new project, and Goodness Growth intends to operate the consolidated property as a licensed cannabis cultivation and processing facility upon completion of development. IIP is expected to provide reimbursement to Goodness Growth for the construction of the new building of up to approximately $46.1 million.
Flower One — Closing of $5M Non-Brokered Private Placement. In connection with the Private Placement, the Company issued a total of 50,000,000 units, each Unit comprised of one common share in the capital of the Company and one common share purchase warrant. The Company has reserved an option at its sole discretion to increase the size of the Private Placement by $10M to an aggregate of $15M.
HERBL — Exclusive Distribution Partnership with Kings Garden. Through this relationship, HERBL will now distribute Kings Garden's full line of flower, pre-rolls and concentrates. Based in Coachella Valley, Calif., Kings Garden is the state's preeminent indoor cannabis cultivator, specializing in premium boutique products at an impressive scale. Kings Garden boasts a 250,000 square foot operational footprint for indoor cultivation, manufacturing, and processing. There is an additional 415,000 square feet currently under construction. The operation produces over 1,000 pounds of hand-trimmed cannabis each week. Kings Garden was previously distributed by Cresco Labs (see below).
Cresco Labs — Shifts to Owned-Brand Distribution in California to Increase Profitability, Reduces Third Party Distribution. The Company will continue to partner with a small group of leading brands in California. The removal of most third-party brands results in a decrease in projected sales for the fourth quarter of 2021 and therefore the Company adjusts its previous Q4 2021 revenue guidance to a range of $235 million to $245 million. The Company reiterates its Q4 adjusted EBITDA guidance of at least 30% and gross margins in excess of 50%.
Bhang — Expanded Partnership with Trulieve. Trulieve has signed an expanded licensing agreement to manufacture and distribute Bhang's award-winning, THC-infused chocolate products in all Trulieve markets.
SLANG Worldwide — Enters West Virginia and Pennsylvania Markets Through Strategic Partnership with Trulieve. With the addition of these two states, SLANG's products will soon be available in 15 states, Canada, and Puerto Rico. Under the agreement, Trulieve will have exclusive access to the entire SLANG portfolio of brands. Additionally, SLANG will sell packaging to Trulieve, and will receive royalties on product sales at their locations in both states, as well as on wholesale revenues to third-party dispensaries. Product launches in both states are expected in 2022.
📄Company Updates / Earnings
Aurora Cannabis — Fiscal 2021 Fourth Quarter Results
Total Medical Cannabis Net Revenue Rose 9% Compared to Prior Year; Strong Adjusted Gross Margin before FVA of 68%
Reiterates Annual Cost Savings of $60 Million to $80 Million, Providing Clear Pathway to Adjusted EBITDA Profitability
Balance Sheet Remains Strong with $440.9 Million of Cash at June 30, 2021; Working Capital Improves by $404.3 Million Compared to Prior Year
Adjusted EBITDA Loss, Excluding Restructuring Costs, Narrows to $13.9 Million, a $17.6 Million Improvement Compared to Prior Year
Total Cannabis Net Revenue, Net of Provisions, of $54.8 Million Compared to $55.2 Million in the Prior Quarter, and $67.5 Million in the Year-Ago Period
C21 Investments — Q2 2021 Results with Cash Flow from Operations up 32%
Revenue of $9.0 million
Gross Margin (before fair value adjustments) of 52.3% – up 367 basis points Q/Q
Operating Cash Flow of $3.4M—up 16% over Q1 – $6.3 million YTD
Adjusted EBITDA of $3.3M (36.5% Margin)—$6.3M YTD
Net Income of $3.7M; EPS of $0.03—EPS of $0.06 YTD
Total Liabilities reduced by $4.7M from Q1; $10.4 million in reductions YTD
Cash: $4.2M, down $1.9M Q/Q reflecting an increase in one-time cash costs, including retirement of a $1.2M convertible note and the completion of the first phase of cultivation buildout. As a result, Total Liabilities for Q2 were reduced by $4.7M from last quarter and $10.4M YTD
Columbia Care — Commences Cultivation Operations at 34-Acre Long Island, New York Facility; Prepares for Upcoming Introduction of Whole Flower Program. The acquisition of the Riverhead location was announced in April 2021. The first phase of cultivation will entail 30,000 sq ft of canopy, to begin a perpetual harvest cycle in the Q4. Subsequent phases will utilize more of the 740,000 sq ft of operational greenhouse space and 200,000 sq ft of incremental grow capacity. This facility will serve Columbia Care’s four existing medical dispensaries across the state as well as wholesale distribution to the New York metropolitan area. Presently, the Long Island location offers supplemental cultivation capacity for the Company’s existing Rochester facility that has served more than 150,000 medical patients since 2015. As a current Registered Organization, Columbia Care intends to add an additional four medical dispensaries in New York, for a total of eight dispensaries in the state, three of which will be co-located with adult-use, pending regulatory approval.
🏬Retail
Verano — Opens New MÜV™ Dispensary in Pinellas Park, the Company’s 38th Retail Location in Florida & 86th Nationwide. Verano has opened nine new retail locations in Florida this year and plans to add up to four additional stores in the Sunshine State during Q4 2021.
Ayr Wellness — Adds to Florida Footprint with Opening of New Dispensary in Port Richey. This is the Company’s 42nd operating dispensary in Florida. The store brings LHS to the Gulf Coast city, which attracts visitors from throughout Florida and the U.S. for its lush landscapes and well-known 8,300-acre wilderness park.
Columbia Care — Transitions Cannabist in Downtown Boston Co-Located Adult-Use and Medical Dispensary. Columbia Care received approval from the Cannabis Control Commission (CCC) and the Boston Cannabis Board (BCB) to commence operations as Cannabist at 21 Milk Street in downtown Boston, its co-located adult-use and medical dispensary previously known as Patriot Care. Cannabist Boston is one of three dispensaries operated by Columbia Care in Massachusetts.
🌱Product
KindTap — Brings Credit Payments Solution to Cannabis Industry with Launch in Massachusetts. KindTap's digital credit solution offers consumers revolving credit lines for upfront cannabis purchases and allows merchants to seamlessly accept digital credit payments.
Ayr Wellness — Launches Sun Gems THC-Infused Gummies Throughout FL. The Sun Gems gummies will initially launch in Watermelon flavor, followed shortly by Blue Raspberry. The launch of gummies represents LHS’ second edibles offering available for sale in Florida, joining Big Pete’s Cookies which launched throughout the Company’s Florida footprint in June 2021. Sun Gems is the latest offering under Ayr’s recently launched fruit-forward brand, Secret Orchard, which also includes vape cartridges and syringes.
Lowell Herb Co. — Debuts Limited Edition Hash Wrap. Lowell’s Hash Wrap is made from 1 gram of fresh-pressed ice-water bubble hash that encapsulates .5 grams of premium, single-strain whole flower. Free of solvents and additives, the completely paperless Hash Wrap pre-roll is made entirely of cannabis, with the exception of the glass tip, which produces a smooth draw with every inhale. The strain-specific Hash Wrap has an impressively high 46%+ THC content (compared to the ~20% industry THC standard for pre-rolls), as well as an even burn consistency, which encourages sharing and sparks conversation amongst Lowell fans.
OFFFIELD’S — ‘High Performance’ Beverages to be Manufactured at Tinley’s Long Beach Facility. Recently recommended by Vice Media*, OFFFIELD’s Non-THC Enhanced Hydration beverage currently available nationwide has been praised by everyday athletes and press for its benefits that mimic the sought-after effects commonly referred to as a ‘Runner’s High’ or ‘Exercise High’. OFFFIELD’s ‘High Performance’ will contain 5mg of THC, 20mg CBD and 400mcg CBG, as well as a blend of L-Theanine, B and C Vitamins, Magnesium, Zinc and Electrolytes in each 8oz can.
OpenNest Labs — Unveils Afterdream and Pine Park. Cannabis venture studio OpenNest Labs (ONL) announced two iconic drops: Afterdream—in collaboration with premium spirits brand AMASS Botanics—as well as fine quality cannabis brand Pine Park, in collaboration with esports entrepreneur and legend Hector Rodriguez aka @HECZ (or H3CZ). Sip Afterdream on the rocks with a splash of tonic water or in a non-alcoholic cocktail. Afterdream contains 3.5 mg THC, 3.5mg CBD and 3.5mg Delta-8 per serving, blended using 14 botanicals and eight terpenes—the result being a “limb-loosening, mind-mellowing sip that mirrors the feeling that comes from drinking a strong cocktail.”
🧔People | 💻Hiring
Leafly — New CFO Suresh Krishnaswamy. Most recently, Suresh served as a key advisor for NextLevel Business Consulting, where he developed vision and strategy for large companies in financial services and technology. Prior to joining NextLevel, he held roles including CFO of Drift, a renewable energy marketplace, and worked with major investment banks including Credit Suisse, Bank of America, Credit Agricole, and Barclays. Suresh has served as a strategic advisor to a number of companies, including digital payments services and Fintech companies in finance, strategy, and product management roles.
Glass House Brands — Mark Vendetti joins as CFO. Vendetti has over 30 years of Finance and Accounting experience focused on Consumer driven product companies, spanning a wide variety of industries including retail, CPG, e-Commerce, manufacturing, financial services and entertainment. Prior to joining Glass House, Mark was the CFO of Canndescent from 2019 to 2021.
Texas Original Compassionate Cultivation — Hires Steven Yoo as CFO. Prior to joining TOCC, Yoo served as VP Corporate Development at Tilray and as a Principal at Subversive Capital. Yoo entered the cannabis space in 2015, when he joined Privateer Holdings.
Flowhub — Former Uber Exec Leandre Johns joins as COO. Johns previously served as a General Manager at Uber. He brings over 15 years of experience across finance, operations, strategic development and investing in the transportation and technology sectors. Outside of overseeing operations, he will also focus on strategic decision-making and team structuring to maximize customer success.
MariMed — Steve West joins as VP, Investor Relations. He brings to MariMed nearly 20 years of capital markets experience as an investor relations professional and sell-side analyst. Prior to joining MariMed, West led investor relations at industry-leading companies, including cannabis and hemp products company Neptune Wellness Solutions, Acreage Holdings, Dick's Sporting Goods, and Panera Bread Company. Before transitioning to investor relations, West spent nearly 10 years as a sell-side analyst, primarily covering restaurants at ITG, Stifel Nicolaus, and A.G. Edwards. Earlier in his career, he served as a finance director for Procter & Gamble.
Medterra — Appoints Gregory Reeder CEO, As CBD Industry Leader Embarks On Dynamic Growth Initiatives Beyond CBD & Into Broader Health & Wellness Solutions. Reeder initially joined Medterra in February as Managing Director of Medterra International. Prior roles included heading Pfizer's $1.8 billion Global Wellness business, General Manager of Pfizer Canada Consumer Healthcare, and Country Manager of Pfizer Romania. He started his career in Product Development and Brand Management at Procter and Gamble and earned a Ph.D. in Chemistry from the University of Cincinnati.
PharmaCann — Director, Corporate Development (Chicago).
710 Labs — VP, Finance (Beverly Hills)
🎙️Interviews
Cannabis Investing Network — Embracing the Uncertainty in Cannabis Investing
Wine & Weed — How To Taste Marijuana Like A Professional
MJBulls: Raising Cannabis Capital — Jushi Holdings, Jim Cacioppo
Authority Magazine — 5 Questions with Vishal Rungta of C3 Industries
Proactive — MedMen CEO Tom Lynch on Turnaround
Forbes — How Canada’s Craft Cannabis Cultivators Are Pushing For Tax Reform
Cannabis Beverage Boom 'Inevitable:' Q&A With SVEDKA Founder Marina Hahn
Jim Belushi on His Spiritual Journey in Cannabis and Season 2 of 'Growing Belushi'
Checking In On The State Of Cannabis Edibles With Kanha
Dewey Scientific Delves into Cannabis Genetics and Its Own Recreational Brand
👋 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.