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🌿 Wholesale Flower Prices Plummets in MI While Supply Concerns in NJ
Tilray Q4 Net Revenue up 8% to $153M, Net Loss of ($457.8M). IL Issues 149 Dispensary Licenses. StateHouse reaches payment plan with IRS. Choice Consolidation Corp SPAC winds down. Big Papi Cannabis.
⚽If you’re interested in joining a mostly Cannabis executives & investors Fantasy Premiere League, reply to this email and let me know! Last year’s league included representation from Argonautic Ventures, Casa Verde Capital, BLAZE, Happy Cabbage Analytics, Arcview, etc.
👥 The deadline to apply for the Good Green Grant Program, GTI's’ social equity initiative, is on Friday, August 19. Good Green offers unrestricted funding to 501(c)3 nonprofits supporting underserved communities by creating opportunity and change in three key areas: education, employment, and expungement. Applicants should support activities in: IL, MA, NJ, MD, PA, VA, OH, MN, NY, FL, NV, CT and RI. Good Green has awarded more than $500,000 in grant money to eight impactful organizations including Growing Home (Chicago), Greyston Foundation (NY), and Why Not Prosper (Philadelphia).
Illinois Issues 149 Adult-Use Cannabis Dispensary Licenses. The conditional adult use dispensing organization licenses are the first ones to be issued by Gov. J.B. Pritzker’s administration since Cannabis was legalized with his signature in 2019 and sales started in 2020. The 149 social equity licensees were among 185 such applicants who won a convoluted series of lotteries ending last summer for the coveted licenses. bout 41% of the new licensees are majority Black-owned, 7% are white-owned, 4% are Latino-owned, and 38% didn’t share their owners’ races, officials said. Illinois saw a 50% increase in cannabis sales, with $1.5 billion in the past fiscal year.
Michigan’s Wholesale Cannabis Flower Prices Plummet. Prices of wholesale Cannabis in Michigan are now as low, or lower, than those in older adult-use states—underscoring how new markets are ramping up more quickly and, in some cases, becoming glutted. Industry insiders say cannabis flower in Michigan is readily available for less than $1,000 a pound on the wholesale market—and often for much less – because of oversaturation as more and more cultivation companies come online in a state with no limit on business licenses. According to Maxim-Sparrow, a year ago a midgrade pound of indoor-grown wholesale flower that tested at around 20% THC potency would sell for $1,800-$2,200. Now, that same grower is lucky to get $600 a pound, and she’s heard of some selling for as low as $300. The dynamics playing out in Michigan could offer a harbinger of what’s to come in other new markets. In particular: As more multistate operators learn how to quickly set up shop in new regions with many producers, the pace of a newly legalized state’s market hitting an oversaturation point is speeding up. This is more likely to happen in states without licenses caps or that have many growers—unlike limited-license markets that are more common on the East Coast.
Supply concerns overhang New Jersey recreational cannabis market. Despite a relatively smooth start to recreational cannabis sales in April, industry officials in New Jersey continue to fret over possible supply shortfalls that could disrupt the East Coast’s newest adult-use market. Some, in fact, argue the supply crunch has arrived. Industry officials have already reported long lines at dispensaries and low supplies of concentrate-infused products. Seven of New Jersey’s 13 existing medical marijuana cultivators were permitted to sell adult-use products on the promise that MMJ patients would be prioritized if supply runs low. Regulators, however, believe that promise hasn’t always been kept. Five of the seven were recently fined for selling adult-use products during hours reserved for MMJ patients. From the start, the market has faced concerns over whether growers could serve the state’s 127,708 medical cannabis patients (as of April) without disrupting recreational supplies. The seven licensees—operating out of 13 retail storefronts—continue to account for all the state’s adult-use sales. At the same time, legal wrangling has contributed to concerns over the ability of adult-use growers to meet demand.
4 Arkansas marijuana companies hit with RICO suit over alleged THC inflation. Four medical marijuana companies in Arkansas are in the crosshairs of a federal civil lawsuit alleging that they conspired to defraud MMJ patients by illegally lying about cannabis potency testing results. The class action lawsuit – filed July 12 by three Arkansas MMJ patients – alleges that a prominent state cannabis testing lab “intentionally inflates the amount of THC in its customer’s flower” on behalf of at least three growers also named as defendants. The suit was filed against testing lab Steep Hill Arkansas and growers Bold Team, Natural State Medicinals and Osage Creek Cultivation.
Redwood City Issues Permits to Two Additional Storefront Cannabis Businesses. The recipients of the permits, as issued by City Manager Melissa Stevenson Diaz, were Flor Peninsula LLC and Element 7, which will be located at 620 El Camino Real and 615 Woodside Rd. Suite, respectively. After an initial selection of four retail cannabis storefront businesses in March, Diaz said that the two additional businesses had also met the necessary criteria in the application process to be awarded permits. In November 2020, the city council authorized the city manager to grant cannabis business permits for up to six cannabis storefront businesses.
Proof of Lawful Residence No Longer Required to Own Denver Cannabis Business. According to a July 5 announcement from the Denver Department of Excise and Licenses, the proof-of-residency requirement instituted in 2006 by state lawmakers was eliminated by recent legislation. Senate Bill 21-199 removed proof of lawful residence as a requirement to receive public benefits not just from the state, but also local authorities and municipalities (it didn't affect requirements for federal aid). And Denver was quick to take advantage of that.
Twice the Required Signatures Not Enough (Yet) For Missouri Cannabis Ballot Initiative. More than 390,000 signatures and nearly $6M in backing still might not be enough in Legal Missouri 2022’s ongoing effort to place an adult-use cannabis legalization measure on this November’s ballot. While activists from Legal Missouri, a political action committee (PAC), turned in more than double the roughly 171,500 valid signatures needed statewide, the initiative campaign has only crossed the finish line in four of the eight congressional districts so far. To qualify a petition for the ballot, the initiative effort must include valid signatures from 8% of voters in each of at least six of the eight congressional districts. As of July 26, Legal Missouri was short 1,573 signatures in the 6th Congressional District, which extends across the northern region of the state, and 1,444 signatures short in the 7th Congressional District, which includes Springfield in the southwestern corner of the state, The Missouri Independent reported. Legal Missouri’s efforts in the 4th and 8th congressional districts—in central and southeastern Missouri, respectively—also were short of their respective benchmarks as of July 26. But the initial figures are unofficial as county officials have until Aug. 2 to complete their verifications.
Hall of Flowers Welcomes Cannabis Brands and Retailers to Enercare Centre on September 13 & 14. Unlike prior Canadian cannabis trade shows, Hall of Flowers focuses solely on connecting cannabis brands directly with inventory buyers in an environment that reflects the industry and the plant's role within it. “Our goal is to bring 1,000 certified buyers representing 800+ stores and 200 premium licensed cannabis brands together for this elevated experience,” says Dani Diamond, Hall of Flowers Founder and CEO. “By only focusing on the buyers and the brands and offering them a dedicated place to connect, consume and recuperate in our outdoor lounge, we’ve seen how impactful that is to developing relationships and partnerships between them.” Notable sponsors and attendees include Pure Sunfarms, Canopy Growth Corporation, The Green Organic Dutchman, Heritage Cannabis, Collective Project, BZAM Cannabis, Thrive Cannabis, Sunday Market, PINNRZ, Nextleaf Solutions, Kinloch Naturals, Weed Me, Ayurcann, Medipharm Labs, Puffco, Motif, and Nuveev.
Choice Consolidation Corp. SPAC — Winding-Up and Redemption Date. Choice Consolidation’s acquisition strategy focused on strategically important limited license states, and the company was looking to acquire single-state operators, distressed assets and rehabilitation licenses. However, current conditions favor single-state operators maintaining the status quo until capital is flush to create operating scale. When favorable tax benefits are available and cannabis marketing and branding is normalized nationwide, conditions will improve for single-state operators to enter the public market. The Company’s board of directors has determined that it is in the best interests of the Company and its shareholders for the Company to be wound-up as they do not believe that an appropriate qualifying transaction can be identified and completed within the Company’s permitted timeline.
XS Financial — Provides $15M CAPEX Lease Facility to Green Dragon / Eaze. Green Dragon / Eaze has been approved for a $15M CAPEX lease facility, with an immediate drawdown of over $2M to purchase equipment with up to 60-month terms. This equipment acquisition will enhance the capabilities of existing processing facilities and buildouts for their Colorado and Florida expansion.
Glass House Brands — Acquired Remaining Equity Ownership Interest of The Pottery. Glass House previously owned 50% of the dispensary business. Including The Pottery and NHC acquisitions, Glass House aims to add 7 new dispensary locations in the second half of 2022, bringing its total retail footprint to 10 stores. Under the terms of the purchase agreement, Glass House acquired all of the equity interests of N.R.O. Management, LLC (the management company of The Pottery) and The Pottery, Inc. for 500,000 equity shares of Glass House set at a fixed price of $6/share. The shares have a one-year lock-up period from the closing date. As part of the transaction, Glass House also acquired The Pottery's three active state cannabis retailer, distributor, and cultivation licenses; as well as six city-level adult-use and medical cannabis retailer, distributor, and cultivation licenses.
StateHouse Holdings — Agreement with IRS to Resolve and Reduce Legacy 280E Federal Tax Obligations Related to Harborside. At issue were federal taxes owed of approximately $22.1M. Under the Agreement, StateHouse is resolving this liability through the payment of ~$5.8M, to be made through $50,000 per-month payments over an expected period of 116 months, beginning in August 2022. The monthly payment amount is subject to IRS review every two years. With each review, the payments may adjust up or down depending on PMACC's ability to pay at that time. The Company does not anticipate that these biennial reviews will result in a material increase to the payment plan. The Company has maintained a provision on its balance sheet related to the taxes owed. This provision was approximately $21.6M as at March 31, 2022. Given that the Provision is significantly higher than the anticipated repayments under the Agreement, the Company expects to record a positive non-cash accounting adjustment of approximately $15.8M to reverse previous accruals in its financial results relating to the Provision. It is anticipated that the adjustment will be reflected in the Company's financial results for the second quarter ended June 30, 2022.
Cogent Bank x Green Check Verified. Cogent Bank, a full-service financial institution (FI) and one of the leading banks in the southeastern U.S. region, announced a partnership with Green Check Verified (GCV), a provider of compliant cannabis banking solutions and services. Through this partnership, Cogent plans to offer their full suite of products and services to the entire supply chain of businesses within the cannabis banking ecosystem. Cogent is providing a solution by rolling out a program that treats cannabis businesses like any other client. This includes providing deposit and treasury management services and even certain types of loans that have been notoriously difficult to obtain in the industry.
📄 Company Updates / Earnings
Tilray Brands — Fiscal Year 2022 Results
FY2022 Net Revenue Grew 22% to $628MCompared to the Prior Year
Q4 Net Revenue Grew 8% to $153M Compared to the Prior Year Period
Expects to Generate $70-$80M of Adjusted EBITDA and be Free-Cash Flow Positive in Its Operating Business Units in FY2023
Net loss of ($457.8M) during Q4 compared to net income of $33.6M in the prior year quarter. Net loss in the fiscal 2022 fourth quarter includes a non-cash impairment of $395.0M primarily impacting inventory, goodwill and other intangible assets. The impact was related to changes in market opportunities causing a shift in our strategic priorities, and market conditions inclusive of higher rates of borrowing and lower foreign exchange rates
Ended FY2022 with $416M in Cash
Turning Point Brands — Q2 2022 Results
Net sales decreased (16.1%) to $102.9M
Combined net sales for Zig-Zag (45% of sales) and Stoker’s (33% of sales) Products demonstrated resilience decreasing 0.9% for the quarter
NewGen (22% of sales) net sales declined by 45.1%
Gross profit decreased 14.2% to $51.5M
Net income decreased 64.7% to $5.4M
Adjusted EBITDA decreased 17.6% to $24.7M
Diluted EPS of $0.30 and Adjusted Diluted EPS of $0.70 as compared to $0.73 and $0.84 in the same period one year ago, respectively
Pacific Stone — Partners with Weed + Grub for “Pacific Stone Comedy Tour”
The Pacific Stone Comedy Tour is an invite-only experience for budtenders and retailers at a ticket price of $4.20, with all proceeds donated to RIP Medical Debt. The first show kicked off on July 27th at Club Tee Gee in Los Angeles, with additional dates to be announced in Santa Barbara and Northern California this October. Curated by Weed + Grub co-hosts Mike Glazer and Mary Jane Gibson, the multi-city tour will feature a dynamic lineup of comedians and entertainers.
LeafLink — Expands Unified B2B Cannabis Platform to New Mexico. The company is expanded its unified B2B platform to New Mexico’s cannabis industry. LeafLink’s industry-leading unified platform helps cannabis wholesalers reach other businesses locally and nationally, seamlessly process and fulfill orders, and make and receive payments on their terms, allowing them to better serve customers while saving time and money.
Verano — Restates Previously Issued Financial Statements. The Audit Committee determined that the Company’s stock-based compensation expense in connection with the Company’s restricted stock units was understated in each of the Prior Period Financials (i) primarily as a result of calculating such expense as if each restricted stock unit vested into one share of the Company’s Class A subordinate voting shares instead of 100 SV Shares and (ii) to a lesser extent, as a result of, among other things, using the Black-Scholes option pricing model to value such restricted stock units instead of the date of grant trading price of the SV Shares underlying such restricted stock units, as listed on the Canadian Securities Exchange. As a result of such understated stock-based compensation expense, the Company’s tax expense in each of the Prior Periods Financials was overstated, and accordingly, the Company’s tax obligation will be reduced.
Planet 13 — Awarded Conditional Illinois Retail Licenses. Planet 13 Illionis has been awarded a Conditional Adult Use Dispensing Organization License in the Chicago-Naperville-Elgin region from the Illinois Department of Financial and Professional Regulation. Planet 13 Illinois LLC is owned 51% by Frank Cowan and 49% by Planet 13 Holdings, Inc.
Body and Mind — Awarded Two Conditional Chicago Dispensary Licenses. Two subsidiaries, NMG IL 1 and NMG IL 4 have been awarded conditional dispensary licenses in the Chicago area. NMG IL 1 and NMG IL 4 conditional licenses were awarded for BLS Region #5 (Chicago-Naperville-Elgin) where 119 conditional licenses are available. Body and Mind has the option to indirectly acquire all of the membership interests in each of NMG IL 1 and NMG IL 4 pursuant to a convertible credit facility between BaM's subsidiary, DEP Nevada, and each of NMG IL 1 and NMG IL 4, and membership interest purchase agreements between DEP and the members of NMG IL 1 and NMG IL 4, subject to obtaining all required local and state regulatory authorization.
TerrAscend — Opens The Apothecarium Lodi, NJ. This is the Company’s third retail location in New Jersey and 27th overall. The 5,000 sq ft dispensary, located at 200 NJ-17, features a spacious showroom and interactive "bud bar", where shoppers can see and smell the product prior to purchase. Patients and consumers can order online or through the Apothecarium app to experience New Jersey's first-ever dispensary drive-thru. The Apothecarium Lodi is located in one of the most populous regions of Northern New Jersey, 14 miles outside of Manhattan and adjacent to the iconic Satin Dolls "Bada Bing" Club, as featured on The Sopranos. The Apothecarium Lodi joins Maplewood and Phillipsburg in carrying the state's largest assortment of the highly sought after Cookies, Gage and Kind Tree branded products and accessories.
Jushi Holdings — Opens 34th Retail Location Nationwide and Third Beyond Hello™ Dispensary Location in Virginia. Located directly off the Capital Beltway (I-495), the new 9,600 sq ft store features 14 traditional and nine express patient checkouts and over 50 parking spots with easy in-and-out access to improve patient accessibility. Housed in the former Great American Steak & Buffet building, Beyond Hello™ Alexandria will broaden patient access to Jushi’s suite of medical cannabis brands, including The Bank, The Lab, Sèchè, and Tasteology.
Curaleaf — Opens Tampa Citrus Park Dispensary, 51st in Florida. The 4,023 sq ft location features a drive-thru that offers patients on-the-go access to the dispensary's wide array of offerings.
Verano — Opens MÜV Port Charlotte, the Company’s 53rd Florida Location. MÜV Port Charlotte is conveniently situated off Florida’s Tamiami Trail, a busy thoroughfare that sees average daily traffic of 43,500 vehicles. Charlotte County, part of the Punta Gorda Metropolitan Statistic Area, was among Florida’s top five counties for population growth from 2020 to 2021, with an increase of 3.7%.
Verano — Receives Approval to Launch Adult Use Cannabis Sales at Zen Leaf Neptune in New Jersey. Situated off busy 2100 NJ-66 in Neptune Township, approximately two miles from the Jersey Shore and popular landmarks such as the Asbury Park Boardwalk, Zen Leaf Neptune is a convenient cannabis dispensary for Jersey Shore tourists and locals. Verano’s New Jersey operations also include Zen Leaf Lawrence Township and Zen Leaf Elizabeth and a state-of-the-art, 120,000 sq ft cultivation and processing facility in Branchburg.
Ayr Wellness — 49th Florida Dispensary Opening in Clearwater. Located centrally in Pinellas County, the store spans 6,100+ sq. ft. of retail space. Product offerings include Ayr’s full line of concentrates, edibles, vapes, and a growing selection of high-quality flower, including Kynd whole premium flower and Later Days whole flower.
David Ortiz/Rev Brands — Launches Papi Cannabis. The first product in the line is “Sweet Sluggers.” These are pre-rolled blunts filled with Ortiz’s favorite strains like “Black Mamba #7,” “Lava Cake #7,” “Motorbreath #15” and “Bootylicious #4”. They are packed “full of flavorful terpenes, high THC, and rolled in non-tobacco blunt wrappers produced with tea leaves and hemp.” Later this summer, the brand will launch other products, such as a vape cartridge, a chocolate edible made with fair trade Dominican chocolate, and a healing salve.
Leafly — Launches Unique Data-Sharing Program to Advance Cannabis Research. The program allows accredited cannabis researchers to supplement their work with a large cannabis dataset that would otherwise not be available. Leafly is the informed way to shop for cannabis and its data library includes tens of thousands of cannabinoid and terpene strain profiles from the Leafly-Certified Labs Program, subjective strain effects from consumer reviews, and cannabis popularity metrics. This data does not include identifiable customer information and is curated to be of the most use to academic researchers that study the various scientific compounds.
Curaleaf — Launches Plant Precision, New Product Line Targeting Specific Health and Wellness Categories. Plant Precision allows consumers to explore a range of potentially therapeutic destinations such as: Balance: an apple-flavored gummy containing 2.5mg THC and 10mg CBD for waking up, winding down, or providing a moment of calm. Slumber: a cherry-flavored gummy containing 2.5mg THC and 10mg CBN which could be a helpful addition to a nighttime routine to help fall (and stay) asleep. Soothe: a pineapple-flavored gummy containing 2.5mg THC and 10mg CBG for rebounding after travel, long workouts, or long weekends. Boost: a lemon-flavored gummy containing 2.5mg THC and 10mg THCV for starting your day with a little extra buzz. Relieve: a high absorbing topical gel with 100% THC designed to rapidly ease tension with a 30–45-minute onset time. The Plant Precision Topical Gel was engineered using hydro-alcoholic technology to facilitate the delivery of cannabinoids through the skin and contains 650mg of total THC.
Flower by Edie Parker — Launches Fruit-themed Accessories.
Strawberry Fruit Pipe, Strawberry One Hitter Necklace, Cherry One Hitter Necklace, Banana One Hitter Necklace. The new line of products stand on their own, or can be displayed as a high-concept fruit bowl.
Solar Cannabis — Launches “Solar Power” Fast-Acting Cannabis-Infused Energy Shot in MA. Solar Power Energy Shots are a portable, sugar free, faster acting and longer lasting cannabis-infused energy drink. Each shot packs 225 mg of caffeine per serving (~4 cups of coffee), as well as COQ10 (for focus), and a combination of b-vitamins and Taurine (for energy). This energy blend is infused with 5mg of nano-emulsified THC for rapid absorption, so its users can reach new highs faster. Solar Power Energy Shots are sweetened with zero sugar and deliver a cool, refreshing and invigorating citrus taste. Other ingredients include: organic chicory root inulin, isomalt from beets, as well as all-natural fruit and vegetable coloring.
Willow Industries — Appoints Scott Daly as Chief Commercial Officer. Willow Industries, the leader in cannabis kill-step and decontamination technology, has appointed Scott Daly as Chief Commercial Officer. Scott previously served as the Chief Revenue Officer at Simplifya, a regulatory compliance solutions company for the cannabis industry. Before his work at Simplifya, Scott was the VP of Client Solutions at Akerna.
Merida Capital, Managing Partner, Mitch Baruchowitz (Cannabis Business Executive)
Fyllo, CEO, Chad Bronstein (NCV)
Decriminalizing Cannabis at the Federal Level (High Rise)
Würk, CEO & Chairman, Scott Kenyon (Cannabis Industry Journal)
Petalfast, CEO, Jason Vegotsky (Talking Hedge)
👋 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.