💭 What's going on with alleaves?
Alleaves $40M Series A Funding led by The Eleven Fund. Senate Democrats unveil Cannabis Administration and Opportunity Act (CAOA). Juicyfields implosion/fraud. Canopy Growth retires ~$200M debt.
❓ The hot topic this week was Alleaves putting out an unclear press release about its $40M Series A, at a valuation of $240M (unclear if this is pre-money or post-money). Given that most people in the Cannabis industry had not heard of the company or investor, I spent some time digging a bit further into the company shrouded in mystery. Its co-founders, Mike Beedles and Ken Condren, last two company, NextChoice Advisors (IT Services) TenX Healthcare (BI for Healthcare providers) have less than five employees each. The Company’s lead investor, The Eleven Fund, has only one other investment that’s been publicly announced, participation in a $125M PIPE for Pear Therapeutics, which went public via a SPAC in June 2021 (closed yesterday at $1.47). The website’s mentions of products are general and could use a designer’s touch. The company touts that it’s been “profitable since inception” and will “seek to acquire and roll up other complementary cannabis technology platforms.” Bold claims for a company with limited contacts in the industry.
I joined the Cannabis VC Weekly Twitter Spaces with Patrick Rea and Colin Ferrian yesterday to discuss this and more (check it out). Patrick pointed out that you should pay attention to the language in the press release which says Alleaves “is finalizing its $40 million Series A funding round led by The Eleven Fund at a valuation of $240 million.” While Patrick did see the investment opportunity early on, no other Cannabis VCs that I checked in with had. A senior technology executive at an MSO told me that the company’s technology was far from adequate for their needs.
The size of the Series A, at that valuation, in this environment. The little-known lead investor making its first Cannabis investment. Annoucing the round size now rather than when it’s completed. Now why is that?
Booker, Schumer, Wyden Introduce Cannabis Administration and Opportunity Act (CAOA). The comprehensive legislation would end federal cannabis prohibition by removing cannabis from the Controlled Substances Act; empower states to create their own cannabis laws; ensure federal regulation protects public health and safety; and prioritize restorative and economic justice. Senators refined and expanded their discussion draft released last year after receiving more than 1,800 comments and working with various Senate Committees. While the headline helped pushed Cannabis stocks up yesterday, its widely considered to have very little to no chance of passing the Senate. Steve Hawkins, the CEO of the U.S. Cannabis Council, said he wouldn’t be surprised to see a package of marijuana policy issues approved that combines marijuana research, federal criminal record expungement and SAFE Banking. (link)
Juicyfields locks users out of cannabis investments. Since 2020, the company Juicyfields offered a service called "e-growing" where investors could participate in the cultivation, harvest and sale of medicinal cannabis. The company promised returns of well over 100% a year. The company's main tool was its online platform. There, users could buy and sell plants, manage them in virtual greenhouses and have their money paid out. However, recent developments called into question whether the plants ever existed. Since mid-July, users can no longer log in to the platform, and the company has removed all its content from social media platforms. Now, there are indications of what some industry experts have long suspected: that Juicyfields is a scam, and the investors' money is gone. The company claimed its platform had 500,000 users, mostly from Europe, Latin America, Asia and also Africa. (link)
Summer 2022 European Cannabis Roundup. Germany just wrapped up several weeks of hearings on how to implement recreational reform. A white paper containing the recommendations of the same will be released in the fall, with draft legislation expected to be published by the end of the year. Beyond that, the timing is understandably a bit hazy, but the bill is widely expected to pass in the early part of 2023, with a recreational market on track to begin by the first part of 2024. There are currently several E.U. countries on the verge of recreational reform that stand poised to follow Malta into recreational reform this year by legalizing home grow: Switzerland—launching its recreational use city trials this year; Portugal—is on the verge of formal recreational reform; Luxembourg—The country’s current government promised to implement recreational reform before the end of their first term (which ends next year); Austria—will certainly follow its DACH trading partners—Germany and Switzerland—across the recreational line in the near future. (link)
Central Coast Agriculture (Raw Garden) Gets Win In Tobacco Rival's Trademark Lawsuit. An Arizona federal judge handed cannabis grower Central Coast Agriculture Inc. a win in a trademark suit filed by BBK Tobacco & Foods LLP over the use of CCA's "Raw Garden" brand, finding that the brand was not likely to be confused by consumers for BBK's own "RAW" brand. In an order filed Tuesday, U.S. District Judge Michael T. Liburdi wrote that while the products might be sold in some of the same shops, the trademarks and logos were different enough that consumers would not mistake one for the other, and BBK showed no evidence that anyone had in fact been confused. (link)
Legal cannabis Increasing Plastic Waste. In the early days of legalization in Canada, solid black plastic packaging dominated the market, with many brands opting to package their product in sleek-looking but unrecyclable containers. These jars are widely used and decompose slowly over decades, pumping toxins into the soil and eventually making their way to the closest ocean. The exact scope of the rec market’s plastic waste problem is hard to quantify, but the overall impact has been decidedly negative. In 2019, the environmental company [Re]Waste estimated that between 5.8–6.4M kilograms (or between 12.7–14.1M pounds) of plastic from cannabis packaging ended up in landfills between October 2018 and August 2019. And cannabis sales and the range of available products have only increased since then. (link)
Michigan Awards $20 Million In Marijuana Tax-Funded Grants To Fund Veterans-Focused Research. The funding is required under Michigan’s cannabis law, which mandates that the state expend $20M annually for two years to scientists at academic institutions or non-profits organizations, with the purpose of supporting clinical trials into the medical efficacy of marijuana for veterans and veteran suicide prevention. The clinical trials into cannabis must be approved by the federal Food and Drug Administration (FDA) and sponsored by the grant recipient. After reviewing five applications and assessing each based on several factors (experience, financial sustainability, management summaries and budget), MRA on Thursday recommended awarding two grants: one to Wayne State University totaling about $12.5M and another to the University of Michigan for about $7.5M. (link)
New York Public Colleges to Split $5M in Funding to Launch Cannabis Courses. New York Gov. Kathy Hochul (D) on Monday announced that three State University of New York (SUNY) colleges and one City University of New York (CUNY) school will split $5 million in funding to support cannabis-related credential programs or course offerings that provide pathways to the cannabis industry. (link)
Heaset — Cannabis sales increased in 6.2% in US and 6.6% in Canada on 7/10. In the US, total sales increased by 6.2% compared to the previous four Sundays. In Canada, total sales increased by 6.6%. The Concentrates category experienced the most sales growth in the US, increasing by 66%. Vapor Pens, which we've also seen perform well during Dab Day in the past, had the second highest sales growth at 10%. In Canada, the Concentrates category only saw an 8% increase. This holiday was also a great day for fans of Concentrates to stock up. In the US the average discount on Concentrates grew by 73%, rising from 20.0% during the previous four weeks to 34.6% on 7/10. There was a significant increase in Concentrate discounts in Canada as well with the average discount for products in this category rising from 3.9% over the previous four Sundays to 5.6% on Dab Day for a relative increase of 44%. (link)
Alleaves — $40M Series A Funding led by The Eleven Fund. Alleaves, a cannabis enterprise resource planning (ERP) seed-to-sale technology platform, is finalizing its $40M Series A funding round led by The Eleven Fund at a valuation of $240M. With the completion of this strategic funding, Alleaves will embark on an accelerated multi-state commercial roll out with many of the industry's leading MSOs. In addition, Alleaves will seek to acquire and roll up other complementary cannabis technology platforms to both expand its customer base and to create the industry's most comprehensive and seamless real-time seed-to-sale software, transaction, and compliance platform.
Canopy Growth — Retirement of Approximately $204M of Debt. Canopy Growth has closed its previously announced exchange transaction of certain 4.25% unsecured notes due 2023 in order to reduce its debt obligations by approximately $263 million. Constellation Brands, through its wholly-owned subsidiary Greenstar Canada Investment Limited Partnership (GCILP), participated in the transaction. Canopy Growth acquired and cancelled approximately approximately $203.6M aggregate principal amount of its outstanding Notes from a limited number of holders, including GCILP, for an aggregate purchase price (excluding accrued and unpaid interest in the amount of approximately $4.2M, which was paid in cash of (approximately $201.6M payable in common shares of the Company.
Greenlane — Completes Sale of Interest in VIBES for $5.3M Cash. The strategic sale aligns with Greenlane's plans to capitalize the business and accelerate the Company's path to profitability. The Company sold its interest in VIBES™ at an enterprise value of approximately 1x VIBES' trailing 12 months revenue. Under terms of the sale, Greenlane has retained distribution rights to VIBES products and will remain a strategic partner with the premium rolling paper and apparel company.
📄 Company Updates
Dutchie — Launches Dutchie Pay; a Fully Integrated Digital Payment Solution for Cannabis to Reduce Reliance on Cash. A closed-loop automatic clearing house (ACH) solution, Dutchie Pay allows consumers to purchase their favorite cannabis products online while automating compliance so that dispensaries can focus on growing their business. Dutchie Pay launched in alpha and beta testing in Q1 and Q2 2022, and is already providing customers with tremendous benefits, including:
On average, order values increased by 30%
Decreased abandoned cart rates by an average of 32%
Reduced customers' cash management costs by at least 15%
No signup fees and no more ATM fees
Dutchie Pay drives repeat purchases, with 82% of consumers making at least a second purchase since signing up
STIIIZY — Enters into option-to-purchase agreement for 8.2-acre parcel in Binghamton, NY. A new cannabis cultivation, manufacturing and distribution facility is coming to Binghamton, according to Mayor Jared Kraham. STIIIZY, a cannabis brand based in Los Angeles, will enter into an option-to-purchase agreement for an 8.2-acre parcel of vacant land at 30 Charles St., part of the Charles Street Business Park, Kraham announced Wednesday. Pending local and state regulatory approval, the agreement will allow STIIIZY to move forward with plans to construct a new facility at the business park to support the emerging New York cannabis market, Kraham said.
Red White & Bloom Brands — Provides Update on Status of MCTO. The Company has been informed by its auditor, MGO, that it would not be in a position to complete its Fiscal Year ended December 31, 2021 filings by July 15, 2022. The existing MCTO presently continues to be in effect.
C21 Investments — Provides MCTO Status Update. C21 advises that there has been no change to the unaudited operational results reported in the June 9, 2022 news release. C21 and its auditors continue to work diligently toward completing the Annual Filings as soon as possible. The ongoing auditor review is primarily addressing non-operational derivative accounting and certain other non-cash items for restatement of previous periods.
Tilray Medical — Launches Cannabis Education Platform ‘WeCare-MedicalCannabis’ Across Europe. WeCare-MedicalCannabis provides science and research-based cannabis content tailored to healthcare professionals, caregivers, and patients to help them make informed decisions about medicinal cannabis and assists them along their path to discovering how medicinal cannabis can support daily wellness and health. Designed to serve as a one-stop, comprehensive resource on medical cannabis insights, WeCare-MedicalCannabis is now available in Germany, France, the United Kingdom, and Portugal.
Clever Leaves — First Export to Israeli Partner InterCure. With this initial shipment, medical cannabis patients in Israel will now have access to Clever Leaves’ cannabis flower grown in its IMC-GAP equivalent cultivation facilities. Clever Leaves will first supply InterCure with a high THC strain followed by several other genetics that will arrive, as part of the long-term partnership agreement between the companies previously announced. Complementing the Company’s plans to continue distributing high-quality flower to medical patients, Clever Leaves will cultivate Canndoc’s proprietary genetics in its Colombia and Portugal facilities, meeting all regulatory and compliance standards, for distribution across Israel and other countries.
🏬 Retail / Cultivation
TerrAscend — Opens Immersive “Cookies Corners” Experience. The first-ever "Cookies Corner" will open at The Apothecarium location in Maplewood. Additional Cookies Corners are scheduled to launch in Lodi and Phillipsburg. All three retail spaces will offer exclusive Cookies products and accessories through an immersive, branded shopping experience.
Northampton, MA has emerged as the retail cannabis capital of Massachusetts, but can a city of 29,000 sustain 12 dispensaries? Overall cannabis revenue for the city of Northampton has dropped each fiscal year since 2020, the first complete fiscal year dispensaries were open, as more retail pot shops open across the region and state. The city pulled more than $1.6 million in cannabis taxes in fiscal 2020, about $1.4 million in 2021, and about $900,000 through three quarters of 2022 — below the rate of the past two years. Dispensary owners and city officials refer to the fact that 17 liquor stores do business alongside each other in Northampton: they hope the same pattern can extend to cannabis, and that all business owners may find success. (link)
Lume Cannabis closing, are pot shops saturated in Bay City, MI? Right now, there are 23 total approved recreational and medical retail marijuana facilities in Bay City, 10 out of 12 with licenses are open and 11 locations are approved with provisional certificates with three more nearly ready for review. 50 total licenses are available in Bay City. Bay City, along with Ann Arbor and Battle Creek lead the state in the most dispensaries. Even large dispensaries like Lume struggle to stay in the game here, as they look to open stores in Ann Arbor, Grand Rapids, and Portage. (link)
Green Horizons begins construction on 1-million-square-foot campus in Southern California, bolstered by special tax rates and cost-effective utilities. The first-of-its-kind facility, a combination state-of-the-art greenhouse and connected brand development operation, is a partnership between lawyer Carlos “Los” Arias, California real estate mogul Michael Meade — both of whom also have years of experience in the legal cannabis space — and fashion icon Tommy Hilfiger. According to Arias, the company’s CEO, the goal is to use the facility to produce top-shelf cannabis for less than $300 a pound, and then package and sell the product through premium lifestyle brands that can be licensed throughout the world, with Hilfiger playing a key role in the brand-building enterprise. Though there is a well on site, Meade also entered an agreement with the Imperial Irrigation District to supply the land with Colorado River rights as well as power. According to Arias, the IID agreement gives the company 25-30% savings compared to competitors on Southern California Edison. Finally, Meade was able to secure a 2% flat tax across the board for the entire development as part of “spearheading the zone.” (link)
TILT Holdings — Launches Toast™ in Massachusetts. This marks the first phase of the previously announced multi-state agreement between TILT and Toast. Products include: Toast Slices contain 100% flower, expertly rolled in hemp paper and topped with a specially designed filter to smooth the smoke. Toast Original which has a 2:1 CBD:THC blend and Toast Reserve which has a 1:1 CBD:THC blend. Toast Classic features some of the most coveted and potent strains on the market, which are chosen for their terpene profile and euphoric effect. Toast Infused is produced with a proprietary manufacturing process and ensures a smooth and perfect burn every time. Each 1.2g pre-roll blends 100% flower which contains a range of major and minor cannabinoids, premium distillate and aromatic terpenes ideal for the “cannaseur.”
MariMed — Kitchen Expansion in Maryland. The company’s wholly owned subsidiary, Kind Therapeutics, has received approval from the Maryland Medical Cannabis Commission (MMCC) to operate its state-of-the-art expanded production kitchen at its Hagerstown, Maryland cultivation and production facility. The expanded kitchen significantly increases Kind’s production capabilities and capacity to meet the heavy demand for its branded products throughout the state. Today, the Company’s products are available in nearly all of Maryland’s approximately 100 dispensaries. MariMed expects the demand for its branded products to significantly increase if Maryland voters approve adult-use cannabis sales this November, as expected.
Select Expands Product Offerings in CA with Cliq Essentials. With Cliq Essentials you don't need to choose between the strains you love and quality oil. Essentials delivers a high potency oil (85-95%) with exceptional flavor in botanical terpenes and a wide variety of your favorite strains. Combined with the strong magnetic pod and device connection that Cliq’s technology provides, this gravity-fed pod ensures that every last drop is enjoyed. In addition to Cliq, Select launched Essentials 510 carts into the CA market last month.
The NY Office of Cannabis Management’s (OCM) Chief Counsel Just Left. The chief lawyer for the OCM has abruptly left the agency while it is in the middle of rolling out regulations and guidance for the emerging state marijuana market. Rick Zahnleuter was named as the OCM’s general counsel in October, back when the agency was in its infancy. Zahnleuter retired from the NY Department of Health in 2020, where he also served as GC and led the department’s division of legal affairs. He came out of retirement to join the OCM. (link)
GABY — Changes to its Board of Directors. Glenn Solomon has been appointed to the Board of Directors, effective July 14, 2022, replacing Loreto Grimaldi who stepped down from the Board effective, July 13, 2022.
Jobs in cannabis, turnover rates, and the impending recession (High Rise)
Q&A with L.A. Cannabis Regulator Michelle Garakian (MJBiz)
Niklas Kouparanis, CEO, Bloomwell Group (The GrowthOp)
Kim Rivers, CEO, Trulieve (NCV)
Everett Smith, Presidential, CEO (NCV)
Stacey Hronowski, Canix, CEO (NCV)
Shavo Odadjian, Founder, 22Red (Alchemy)
David Hua, CEO, Meadow (The Lion Legacy Podcast)
👋 Highly Objective is curated by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors. 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.