💨$154M in sales for 4/20. NJ kicked off recreational sales on 4/21. Biden grants clemency to 78 people.
💨$154M in sales for 4/20. NJ kicked off recreational sales on 4/21. Biden grants clemency to 78 people.
Treez $51M Series C. Lucid Green $10M Series B. AWH consolidates ownership in Story (PA). 4Front closes Island acq. RIV Capital acq. non-regulated portion of Etain Health. Icanic closes LEEF acq.
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🌿 Industry
NJ recreational cannabis program has smooth launch despite supply worries.
New Jersey’s recreational cannabis market has gotten off to a relatively smooth start, with no major bottlenecks despite long lines reflecting pent-up demand from local residents as well as customers coming over from neighboring New York and Pennsylvania. State regulators reported few initial glitches after sales began last Thursday – although some recreational customers were frustrated by prolonged waits in lines dozens of people long. Also, one of the 13 stores (Curaleaf Edgewater Park) approved by regulators delayed its opening due to undisclosed details that needed to be resolved with the municipality. Lines were wrapped around the building at Curaleaf Bellmawr dispensary.
Akerna Flash Report: 420 cannabis sales reach $154.4M, setting a new record for most dollars spent in single day. Compared to last year's 420, which until last week was the industry's largest sales day to date and brought in nearly $112M, this year's 420 was a significant 38.1% growth over last year's sales. Akerna data has shown increases in cannabis sales market share for women shoppers over the past few years. This trend continued with this 420, with women's market share of sales breaking the 40% mark for the first time ever.
In MI, consumers purchased ~$15.5M from retailers, which was up 45% from 2021, and 2021 was up 291% from 2020
Biden to grant clemency to 78 people.
In addition to three pardons, Biden is expected to commute the sentences of 75 nonviolent drug offenders. They will be his first clemency grants since he took office. Biden said the 75 people whose sentences are being commuted "are serving long sentences for non-violent drug offenses." He said many of them have been moved to home confinement because of the pandemic and "would have received a lower sentence if they were charged with the same offense today, thanks to the bipartisan First Step Act," the criminal justice reform measure Trump signed into law.
NY legal Cannabis should hit shelves by the fall, says top cannabis official. A public forum hosted by the Central Harlem Community Board on Saturday saw Cannabis Control Board Chair Tremaine Wright fleshing out details of both the retail and cultivator conditional licensing programs that the state launched last month. Among the particulars: conditional dispensary license holders will be eligible to receive loans with interest, as opposed to grants or interest-free loans. The money will come from a $200M cannabis social equity fund. “Loan funds will be provided to our conditional dispensary licensees,” Wright said. “I want you to think about this as a franchise model: these folks don’t get to pick where their location is, they will have a lot of assistance on buildout, and they will repay their loans.”
Illinois adult-use marijuana sales rebound with second-best month. Illinois adult-use marijuana sales totaled nearly $131M in March, halting a two-month slide. Nearly a third of the sales – $40.6M – went to out-of-state residents, according to Illinois Department of Financial and Professional Regulation data. March sales in Illinois were the second-highest on record since the state launched its recreational marijuana program in January 2020. The highest sales month came in December 2021, when transactions totaled $137.9M, according to The Edwardsville Intelligencer. Sales declined in January and February of this year to $117M and $114M, respectively. For all of 2021, Illinois posted nearly $1.4 billion in recreational marijuana sales, with $436.2M coming from out-of-state customers.
Arizona Collected More Tax Revenue From Marijuana Than Alcohol And Tobacco Combined, March Data Shows. Tax deposits to the state general fund from medical and adult-use cannabis reached about $6.3M in March, compared to $1.7M from tobacco and $3.7M from alcohol sales, according to the Arizona Joint Legislative Budget Committee (JLBC). Beyond that $6.3M in cannabis tax dollars for the general fund, marijuana excise taxes separately exceeded another $11.9M last month, for a total of $18.2M in marijuana revenue—most of which goes to the state, with smaller portions being distributed to cities and counties.
Leaflink Insights Flash for April 2022. Some key takeaways:
The wholesale cannabis industry grew 20% in March 2022 YoY
The top performing brands in March were Sublime Brands (AZ), Jeeter (CA), Colorado Cannabis Company (CO), STIIIZY (MI), CannaPunch (NV), Grown Rogue (OR), and Cultivate (MA)
Massachusetts grew the fastest at 133% Y/Y
Edibles and Ingestibles saw the largest drop in platform market share (-1.22 percentage points) from February 2022 to March 2022
During March 2022, average sales per seller fell 5% YoY, and average spend per buyer grew 11% YoY
Flower retained its #1 spot in April with 33% of GMV during March 2022, thanks to a 32% increase in sales
Cartridges saw the largest increase this month, gaining 1.4% M/M, the first time the category led in share growth since September 2021. The 24.6% overall market share marks a 1.5% increase over last month.
💵 Deals
Treez — $51M Series C Funding, $260M Post-Money Valuation. The round brings new investment from Long Ridge Equity Partners, Kayne Partners, and Synchrony (NYSE: SYF), a leading consumer (B2C) financial services company. Existing investors also participated in the round. Treez will use the funding to fuel its aggressive sales growth, accelerate product innovation, including developing new payments and advanced analytics solutions, enhance the functionality of its open cloud commerce platform for single-store and multi-store operators, and expand its geographic reach. Treez has unveiled new integrations that enhance online ordering and delivery options for retailers. Treez was also one of the few cannabis technology companies to achieve a successful SOC 2 Type 1 audit earlier this year, demonstrating the company's commitment to compliance and customer data security. The company has recently expanded into two markets, and now supports retailers in eight states.
Lucid Green — $10M Series B to Power Intelligent Cannabis UPC Platform. The $10M Series B funding was led by Gron Ventures, with participation by Gotham Green Partners. Lucid Green's signature LucidIDs utilize QR codes to make the cannabis supply chain more efficient by allowing for true truck-to-shelf inventory intake, reducing manual labor and human errors, and virtually eliminating data cleanliness issues. The intelligent QR codes permit dynamic information flow which empowers stakeholders to continue adding information about a product through its lifecycle, unlike the status quo of secondary stickering. Lucid Green told Techcrunch that the company’s app has more than 75,000 registered users. Between 2020 and 2021, LucidIDs made their way onto 16M products, with March 2021 seeing the creation of 1M additional products carrying a LucidID. Based on the current trend and signed deals, the company expects to add its label to 85M units this year.
AWH — Consolidates Ownership in Vertically Integrated Pennsylvania Operator. AWH has completed an equity transaction to roll up all of the other existing members of Story of PA. The Roll-up will enable Story, with AWH's financial support, to fund the acquisition and buildout of a 100,000 square foot newly constructed grower and processor facility, fund industry-leading preclinical, clinical, and translational marijuana-related research led and conducted by Geisinger, and open six dispensaries to expand points of access in populous but underserved areas of Pennsylvania. AWH acquired all of the remaining outstanding equity interests of Story of PA CR for total consideration of approximately $53M ($11M cash and 12.9M shares of common stock).
RIV Capital — Acquires Non-Regulated Portion of New York-based Etain in Initial Closing. Pursuant to the Initial Closing, RIV Capital is acquiring the non-regulated portion of the Etain companies for ~$198M through a combination of cash and newly issued Class A common shares of RIV Capital. An additional amount of ~$49M through a combination of cash and Common Shares will be paid subject to, among other things, receipt of all required regulatory approvals, including from the New York Cannabis Control Board and the New York State Office of Cannabis Management. Concurrent with the Initial Closing, The Hawthorne Collective, a wholly-owned subsidiary of The Scotts Miracle-Gro Company, completed its additional $25M investment in RIV Capital.
4Front Ventures — Closes Island Cannabis Co. Acquisition. The Transaction was first announced in the Company's press release dated March 30, 2022. The Acquisition of Island adds new high-quality products to 4Front's growing brand portfolio, including diverse lines of pre-rolls, flower and infused products with a strong following from local California consumers. Importantly, Island Founder and CEO, Ray Landgraf, Island COO, Brandon Mills, and the Island leadership team join 4Front's management team as a result of the Transaction.
Icanic Brands — Closes Acquisition of 100% of LEEF Holdings. LEEF’s manufacturing capabilities include a 12,000 square foot extraction and manufacturing facility with significant throughput and distillate extraction capability. Icanic issued an aggregate of 758,274,035 common shares of the Company, resulting in former LEEF shareholders being entitled to receive ~12.5 Icanic Shares for each Leef Share held. Pursuant to the terms of the Merger Agreement, former LEEF shareholders will also be entitled to receive the contingent earn-out payments based on revenue milestones.
SKYMINT — Completes 3Fifteen Cannabis Acquisition. With the closing of the transaction, SKYMINT has appointed Mitch Baruchowitz, CEO of Merida Capital Holdings, to the company's Board of Directors. SKYMINT will now have a combined retail portfolio of 29 operational locations, with an additional 15+ in the pipeline to be opened over the next year Dominant presence in every major metro market in Michigan ($1.9B market and 3rd largest in the U.S.): Grand Rapids (4), Greater Lansing (6), Detroit (3) / Metro Detroit (6), and Ann Arbor (2). Expanded distribution of SKYMINT™ brand and partner products; SKYMINT stores feature 60+ brands and more than 250 products across all cannabis categories Two indoor cultivation facilities totaling 77,000 sq ft with a third indoor cultivation facility—totaling 184,000 sq ft—due to come online this year. A state-of-the-art indoor processing facility producing the highest quality distillate, live products, concentrates and edibles. A 1,000-acre sustainable outdoor farm.
AFC Gamma — $82.5M Senior Secured Credit Facility for Bloom Medicinals Expansion. Bloom is a privately held MSO with licenses in MO, NJ and OH. Bloom intends to use the proceeds from the new credit facility to repay existing debt, fund expansion initiatives, acquire a Level 1 Cultivation license in Ohio and provide additional working capital. AFC Gamma has committed $82.5M under Bloom’s senior secured credit facility. The facility is secured by first-lien mortgages on Bloom’s owned real estate properties and other commercial security interests.
Bespoke Financial x PayQwick — Launch Fintech Partnership Serving Cannabis Operators and Banks. Bespoke Financial, the first Fintech lender in the country providing debt financing to cannabis companies, today announced its strategic partnership with PayQwick, the cannabis industry’s most comprehensive treasury and financial services platform. The partnership provides a compliant one-stop shop for cannabis businesses to access Bespoke’s lending products and PayQwick’s invoicing, electronic bill pay, armored car cash pick-up, wire transfers and other financial services.
The Flowr Corporation Sells Holigen Holdings to Akanda for $35M. The acquisition includes a premium 20,000 square foot indoor cultivation site in Sintra, Portugal, one of a limited number of fully certified EU GMP sites of its kind in Europe. The facility is designed to produce over two tonnes of high-THC premium medical cannabis per year. Flowr has entered into a definitive agreement to sell Holigen to Akanda for aggregate consideration of ~$35M, including approximately $5.1M of indebtedness being assumed by Akanda under the transaction, representing value of approximately $0.08 per share. The proposed Transaction significantly improves Flowr’s financial position by increasing cash by ~$4.8M and reducing indebtedness by ~$5.1M. In connection with the proposed Transaction, Akanda has agreed to subscribe for $1M of common shares of Flowr, subject to the approval of the TSXV.
Fire & Flower — Confirmation of Intent to Exercise Series B Warrants by Circle K owner Alimentation Couche-Tard. 2707031 Ontario Inc., an indirect wholly-owned subsidiary of Alimentation Couche-Tard has confirmed its intention to exercise warrants to acquire 8,288,067 common shares of Fire & Flower pursuant to the terms of a Second Amended and Restated Warrant Certificate dated January 18, 2022 on the day that is two days following the release of the Company's financial statements for the year ended January 29, 2022. The exercise price for the Series B Warrants will be determined based on the 20-day volume-weighted average price for common shares of the Company in accordance with the terms of the Series B Warrant Certificate. Pursuant to the terms of the Series B Warrant Certificate, all of the Series B Warrants are subject to a maximum exercise price of $18.75, and 1,570,513 of the Series B Warrants, which were issued pursuant to the exercise of top-up rights previously granted to ACT, are subject to a minimum exercise price of $4.7732. Following the exercise of the Series B Warrants, ACT's ownership of common shares of Fire & Flower will increase by ~14.49% to ~35.32%.
📄 Company Updates / Earnings
Verano — Will Release Q4 and Full Year 2021 Financial Results on April 27th and Q1 2022 Results on May 25th. Additionally, the Company is submitting an application to the Alberta Securities Commission, the Company’s principal securities regulator in Canada, requesting that a management cease trade order (MCTO) be granted in respect of the expected late filing of the Company’s 2021 audited annual financials prepared in accordance with IFRS and the related management’s discussion and analysis of financial results and officer certifications.
Lowell Farms — Becomes Exclusive Distributor of Zippo Products for California Cannabis Dispensaries. The 18-month collaboration sees Lowell Farms serving as the exclusive distributor of Zippo products at dispensaries, processing and administering all orders from its Monterey County headquarters, and retaining exclusive rights to the Zippos name for all co-branded events and activations within the cannabis industry. As part of the agreement between the two companies, Lowell Farms and Zippo will collaborate on new lighter designs including customizable options for dispensary partners, and Zippo will debut an exclusive Lowell Farms-branded lighter within their cannabis channel portfolio.
Red White & Bloom — Completes Company-wide Restructuring Eliminating $115M in Liabilities and Over $22M in Annual Expenses. RWB will sell its Granville, IL property to New Branches and repay $51.7M of secured debt; eliminating $6.3M of annualized debt servicing. RWB will pivot to an asset-light, brand-rich model in Illinois, eliminating over $13M in associated annual operating expenses, inclusive of $8M in cash operating costs. With the strategic pivot of Illinois complete, and due to a number of factors, RWB has decided to prioritize growth of its Platinum Vape™ (PV) branded product portfolio. As a result of the restructure and new focus on its own brands, RWB expects that an intangible asset of approximately $77M as well as a license liability of $60M, as reported as of the end of Q3 2021, will be eliminated from the balance sheet.
Green Flower — Cowboy Cup Cannabis Championship in OK Now Powered By Ganjier for Comprehensive Judging. Prospective judges will apply via the Cowboy Cup website, and will be hand-selected to rate entries via our point based system on Appearance, Aroma, Taste, Cure/Trim and Overall Experience. From there the Certified Ganjiers™ will handle the final judging process as they are given the top 15 selections in each of the three flower categories selected, and they will determine the award winners in each of these categories.
Fire & Flower — 2021 Fiscal and Q4 Financial and Operational Results
Revenue of $42.7M and $175.5M for Q4 and FY ended January 29, 2022, representing a 1% decrease for the comparable quarter (from $43.2M) and a 37% increase Y/Y (from $128.1M), the decrease was primarily due to increasing competition from new licenses issued and pricing pressures
Gross profit of $13.7M and $62.1M for Q4 and fiscal year ended January 29, 2022 represented a decrease of 17% for the comparable quarter (from $16.4M) and a 37% increase Y/Y (from $45.4M)
Adjusted EBITDA of negative ($2.4M) for Q4 and $5.1M for the fiscal year ended January 29, 2022. Net loss of ($19.5M) for the quarter and ($63.6M) for the fiscal year ended January 29, 2022, compared to a ($11.4M) for the comparable quarter and ($79.0M) for the fiscal year ended January 30, 2021
An increase of 32 stores during the fiscal year, with 105 stores open and operating at the fiscal year end
Alimentation Couche-Tard increased its equity ownership to 20.8% with $20M outstanding on the ACT Loan and $2.4M in convertible debentures outstanding
As part of the Company's continued digital strategy, completed the acquisitions of Pineapple Express Delivery, PotGuide and Wikileaf
🏬 Lounge / Cultivation / Distribution
The Artist Tree Studio is Southern California’s Second Consumption Lounge to open since 2019. The Artist Tree Studio Lounge sits on top of the dispensary of the same name, which first opened in late 2019. It’s a split-level consumption lounge, where smoking is allowed on the second floor, with an edibles-only area on the top floor. The Artist Tree is a rare business for the city, let alone the country, having secured every license possible from West Hollywood officials. That includes on-site consumption, medical and adult-use retail, and delivery. Though table service includes cannabis consumption, food and drinks come from Kitchen 24. No alcohol is allowed at any cannabis consumption lounge either, so Kitchen 24’s virgin margaritas, mojitos, and a virgin cucumber mule will have to do for those looking for beverages.
Cresco Labs seeks $38M in tax breaks for new Ulster County production site. The company received approval in March to build a 380,000 sq ft production facility in Wawarsing. Cresco Labs' application to the Ulster County Industrial Development Agency asks for a $28M reduction in property taxes that would be piad over 15 years to the town, county and Ellenville School District. That would cut the company's projected taxes over that time almost in half, to $29M. Cresco is also asking the agency to waive $10M in estimated sales tax on construction materials for the facility, which is to be built on a 91-acre property on the edge of Ellenville where a factory that made TV antennas and then knives stood for decades.
Humble & Fume — Update on California Expansion. Humble & Fume’s subsidiary Humble Cannabis Solutions has officially begun operations in the California market and signed an exclusive distribution services agreement with leading California brand house, Canndecent Brands, which includes Canndescent, VOLCANNX, goodbrands, Baker's Cannabis Co. and JUSTICE JOINTS. Humble's commitment to supporting its brand and retail partners, includes hiring approximately 65 employees within the year, securing over 20 distribution vehicles and outfitting the distribution facility with cutting edge technology and security. The result is next-day delivery to all major metro locations in California, efficient route plans with final mile communication, and in-store retail support through custom trade marketing.
🌱 Product
Curaleaf — Expands Product Offerings With Launch of BlueKudu Chocolates in Florida. Acquired by Curaleaf in 2020, BlueKudu was founded in Colorado as one of the state's original and most experienced edible manufacturers known for utilizing culinary experts to create artisanal cannabis products. The expansion marks BlueKudu's first launch outside of Colorado and Curaleaf's entrance into Florida's infused chocolate category. Patients in the Sunshine State can now experience the BlueKudu brand through three distinct 100mg gluten-free bars: Milk Chocolate (sativa), vegan Dark Chocolate Mint (hybrid) and Milk Chocolate (indica). Each BlueKudu chocolate bar consists of high-quality ingredients sourced from Rainforest Alliance Fair Trade Certified Farms. BlueKudu's alcohol extraction process produces a clean and more natural oil infused in easy-to-manage 5mg pieces that simplify the dosing process.
Ayr Wellness — Launch of Kynd Premium Flower in Florida. Sales of Kynd began this week across Liberty’s 45-dispensary footprint. The initial launch includes six strain offerings, namely “Blueberry Headband,” “Extraterrestrial Bananas,” “True OG,” “Purple Trainwreck,” “Polyjuice #4,” and “Lemon Haze.” Kynd is also sold in Nevada and Arizona, in Ayr-owned and 3rd party retail locations. The Company plans to introduce Kynd in additional key markets throughout 2022.
David Beckham-backed CBD brand pulls ingestibles range. Cellular Goods has suspended sales of its ingestible CBD range after it failed to comply with Food Standards Agency rules. The company, which is part-owned by David Beckham, was forced to withdraw its products after it was contacted by Trading Standards. It had previously claimed it could keep selling as its ingestible products were just rebranded versions of those supplied by Chanelle McCoy Health, which has several lines on the FSA’s list of tradeable CBD goods under the Pureis brand. However, the agency banned the launching of new brands and products after February 2020 while it assesses the risks of the existing market.
🧔 People
SOL Global — Appointment of Kevin Taylor as CEO and Chairman. For the past 14 years, Kevin has served as the President and CEO of TEReI International Limited, a merchant bank focused on debt and equity opportunities in the small to mid-cap markets in North and South America. Taylor acts as a director for a number of companies listed on the CSE, Toronto Stock Exchange and the TSX Venture Exchange. Effective today, SOL Global’s founder, Andy DeFrancesco, has ceased to be the CEO and a Director of the Company, but will continue working with management to transition responsibilities, including investment decisions related to the management of the portfolio companies.
🎙️ Interviews
High Rise: Poolside Sessions recorded at Benzinga Miami — Nancy Whiteman (Wana), Karson Humiston (Vangst), Brady Cobb (Sunburn Cannabis), Nancy Mace (South Carolina), Kim Rivers (Trulieve), Aaron Miles & Sammy Dorf (Verano), Morgan Paxhia (Poseidon), Abner Kurtin (AWH)
Nick Paschal, Alpine IQ CEO, on helping dispensaries drive decisions with data
AdvisorShares Pure US Cannabis ETF Portfolio Manager Dan Ahrens on SAFE Banking
Cannabis Council CEO Steve Hawkins: Cannabis “tends to be more popular than any politician on the ballot
👋 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.