▶️ Adult-Use Sales Launches in Missouri
▶️ Adult-Use Sales Launches in Missouri
Headwaters RTO with Stem Holdings. Ispire Technology files $42M IPO. TerrAscend closes on acquisition of AMMD. InterCure terminates $35M acquisition of Cann Pharmaceutical.
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🌿 Industry
Missouri's Recreational Market Begins to Take Shape. There are currently around 208,000 Missourians registered in the medical program, about 3% of the state’s population, though the number of cannabis consumers in the state is expected to swell to 600,000 under adult use, ~10% of the population. Adult-use cannabis sales will were allowed to start in Missouri this past Friday (February 3rd), led by medical marijuana operators that receive approval from the state by then. Missouri’s market expects to see consumers in the neighboring eight states, some with only medical marijuana markets and others where possession remains illegal. Greenlight (15 dispensaries in MO) should be the market leader given their current footprint.
Inside New York’s struggling weed real estate experiment. The slow drip of dispensary openings—Housing Works opened one on Dec. 29 and Smacked nearly a month later—underscores the challenges the state faces in securing real estate and raising capital for entrepreneurs. Unlike comparing prices for comparable office space, there’s no equivalent, transparent system for retail, explained Kristin Jordan, CEO of cannabis-focused brokerage firm Park Jordan. “It’s really a wild west,” she said. “Retail is not an open book.” Other legal weed states that have attempted social equity programs have encountered numerous problems: Entrepreneurs often struggle to raise capital or find landlords willing to rent to them, and licensees with little business experience find themselves entering a market already dominated by large cannabis companies. But there’s nothing quite like New York’s weed experiment. Faced with delays in securing and building out real estate, regulators have made several changes to the program. Most notably, the state is now allowing CAURD applicants to find their own real estate instead of waiting for a DASNY location. If applicants opt to find their own location, it will put them in competition with DASNY for a limited pool of spaces that meet state regulatory standards. Plus, if they sign their own leases, they risk their eligibility for the $200 million fund that was designed to help them. That’s leaving applicants in a bit of a bind: Strike out on their own to find a location and give up state funding, or wait in line for a DASNY location without clarity on when they will be given a shop?
Inside Mississippi’s Medical Cannabis Sales Launch. The state had licensed 154 medical cannabis dispensaries by Dec. 30, 2022, according to data from the Mississippi Department of Health. Currently, there are roughly a dozen medical cannabis dispensaries open across the state, with more expected to open in the coming weeks. The Cannabis Company, a Brookhaven, MS-based dispensary that made the first medical cannabis sale in the state on January 25, describes opening day as “hectic” with plenty of technical issues. The Cannabis Company currently carries products from two cultivators, Mockingbird Cannabis and River Remedy, with plans to bring on a third cultivation partner in the coming days. The state had approved 1,321 patients by December 30, with estimates now sits around 1,900.
Seattle No. 2 among metros where cannabis is more popular than nicotine.
In the Seattle area, the popularity of cannabis products easily exceeds that of cigarettes, e-cigarettes and vaping, according to new data from market-research firm Nielsen. In surveys conducted between March 2021 and January 2022, around 865,000 people age 18 and older in the Seattle market area — about 20% of the adult population — said they had used cannabis (including edibles) in the past 30 days. Only around 560,000 (13%) had smoked cigarettes or used one of the newer nicotine-based alternatives, e-cigarettes and vapes. The areas where nicotine products were most popular were in the Southeast, including metros in some leading tobacco-producing states. In Charleston-Huntington, West Virginia, and Knoxville, Tennessee, 25% of adults used cigarettes, e-cigarettes or vapes in the past 30 days.
Germany's plan to legalize cannabis in 2024 likely delayed. Germany's plans to legalize cannabis consumption in 2024 are looking increasingly unlikely as it has yet to submit its proposals to the European Commission, the health ministry confirmed to Euronews. The ministry said in an email on Thursday that its draft law for the legalization of cannabis is “currently being drafted” within the federal government. “A large number of legal and operational questions concerning implementation need to be answered and coordinated between the ministries in charge” before it can be submitted to the European Commission, it added. Berlin has proposed the paper to the European Commission for a pre-assessment and will only draft the law once the Commission sanctions the plan. However, given Europe’s current geopolitical agenda, with a war in Ukraine and a cost of living crisis, the topic is unlikely to be given diplomatic priority.
Trade agency rules in favor of cannabis vaporizer companies in patent suit. The International Trade Commission (ITC) ruled in an initial determination that dozens of North American cannabis vaporizer companies did not infringe upon three patents owned by Shenzhen, China-based Smoore Technology. Chief Administrative Law Judge Clark Cheney ruled in his Feb. 1 initial determination that Section 337 of the Tariff Act of 1930 was not violated “in the importation into the United States or the sale within the United States after importation of certain oil-vaping cartridges, components thereof, and products containing the same based on infringement” of three patents. The ITC began its investigation in November 2021 after Smoore, the parent company of CCell, filed a complaint seeking to stop the import of cannabis vaping products sold or manufactured by 38 North American companies. CCell produces the majority of ceramic vape cartridges for the U.S. cannabis industry.
💵 Deals
Stem Holdings x Headwaters Business Combination. Currently, Headwaters, located in California is a leading greenhouse cultivator, wholesale and distributor, with an emergent brand, Mr. Zips. The Transaction will result in a reverse takeover of the Company and, subject to the satisfaction of all listing conditions, the listing of the combined entity on the Canadian Securities Exchange (CSE) and the OTCQB Venture. Following the closing of the Transaction, it is expected that the former equity holders of Headwaters will own ~80% of the Company. 2022 Consolidated Business Combination Revenue of ~$75M and 2023 Consolidated Forecasted Revenue of $100M, while being Adjusted EBITDA positive in both 2022 and 2023.
Ispire Technology files $42M IPO. LA-based Ispire Technology Inc. was founded to develop various e-cigarette products and cannabis vaping hardware in regions including the US, Canada and the European Union. The firm was originally named Aspire Global, based in Shenzhen, China, and filed to go public in the U.S. in August 2021 but did not complete a transaction at that time. For LTM ended June 30,22, the company generated $88.1M (15.1% GM) with ($0.8M) EBITDA. Underwriters on the offering include US Tiger Securities, TFI Securities, and SPDB International. CEO Tuanfang Liu and his wife, Jiangyan Zhu, owns 71.5% of the Company.
TerrAscend closes on acquisition of Allegany Medical Marijuana Dispensary (AMMD), a medical dispensary in Cumberland, Maryland. Total consideration of $10M in cash, in addition to entering into a long-term lease with the option to purchase the real estate. AMMD is located in Northwest Maryland within six miles of both the West Virginia and Pennsylvania borders, generated net revenues in excess of $8M in 2022. In anticipation of adult use later this year, TerrAscend expects to rebrand the 10,000 sq ft dispensary as The Apothecarium. TerrAscend’s presence in the state also includes a 150,000 sq ft cultivation and processing facility in Hagerstown, MD.
InterCure terminates $35M acquisition of Cann Pharmaceutical (Better). In accordance with the terms of the Agreement, the Agreement terminates automatically if the closing conditions and the merger are not completed by January 31st. Accordingly, and in light of the fact that the closing conditions were not met by such date, the Agreement was automatically terminated. Intercure is owed significant amounts loaned and advanced to Better, and since the Agreement was terminated, it intends to recover said amounts under all legal means available to it.
📄 Company Updates
Flora Growth issues 2023 Revenue Guidance of $90–$105M, 100%+ Y/Y growth. The revenue guidance reflects expected organic growth in the House of Brands division and expansion of the Commercial & Wholesale division capabilities. This forecasted growth also incorporates Flora’s new German-based business as established through the acquisition of Franchise Global Health.
Akanda Books €1.8M of Revenue / €472K of EBITDA in Q4 2022 from Indoor Cannabis as German Sales Start. These revenues result from only two full months of sales, with the indoor facility shipping only an estimated 40% of the facility's capacity. The Company prepares for the expansion of its indoor cultivation capabilities at its Holigen facility after receiving test results for the highest percentage of THC potency (29.2%) in any cannabis product to be sold within Germany and forecasts sales to double over the next six months.
🏬 Retail
Okay Cannabis opens first cannabis store with a bar and a bakery under the same roof in Wheeling, IL. The 12,000 sq ft dispensary is located at a former Twin Peaks in Wheeling’s restaurant row on Milwaukee Avenue. The cafe with its bar is separate from the cannabis sales area. The owners hope someday to add a cannabis consumption area. The Fifty/50 Restaurant Group, founded by Scott Weiner and Greg Mohr, operates the bakery, and with their social equity partners plan to open two more Okay Cannabis locations, in West Town and Evanston, in the coming months. West Town Bakery already has four locations in Chicago. But just six social equity dispensaries have opened, including three in downtown Chicago, plus Okay, Altius in Round Lake Beach and Ivy Hall in Crystal Lake.
Columbia Care Opens New Cannabist in Hampton, Virginia. The location is the Company’s 83rd active dispensary and the 34th Cannabist location in the U.S. Columbia Care and Green Leaf Medical (gLeaf) are licensed to operate a market-leading total of 12 dispensaries in Virginia combined. The Company plans to open two more dispensaries in the coming months, pending regulatory approval. Columbia Care also has a fleet of delivery vehicles able to serve the entire state from its gLeaf locations.
🌱 Product
TILT Holdings brings Black Buddha Cannabis to Pennsylvania. Previously launched in Massachusetts, Black Buddha Cannabis is now available across Pennsylvania from TILT’s subsidiary, Standard Farms.
Solis joins Petalfast’s California sales and distribution portfolio. Founded in Santa Barbara, Solis puts the sun at the center of their business. The company’s microclimate of “refrigerated sunshine” creates the perfect environment for the production of premium cannabis products. By using precision agriculture technologies at its legacy farm, Solis operates with a focus on consistency and an ability to fine tune each plant's nutritional needs in real-time, with everything manufactured in-house. Solis’ product offerings include jarred flower, which must pass rigorous onboarding processes to guarantee freshness, structure and potency, as well as cannabis vape cartridges extracted from their sun grown cannabis and utilizing advanced vape technology. The company also provides white labeling and co-packing services. The environmental ethos of Solis is displayed through its cultivation techniques and conservation efforts. For example, Solis has donated more than 500 acres of farmland to the Santa Barbara Land Trust and 8 acres in the La Purisima Hills, built an Endangered Species Sanctuary, and continues to use their farm’s footprint to enhance its surroundings and positively impact the community.
Gold Flora expands Jetfuel Cannabis Brand Statewide in California. Jetfuel Cannabis products will now be available throughout California, beginning with the introduction of strain-specific cured resin cartridges. Jetfuel has gained a following for celebrating heirloom genetics with craft cultivation processes. Previously Jetful was an exclusive house brand at Airfield Supply Company.
🧔 People
Body and Mind appoints Josh Rosen to Board of Directors. Rosen is managing partner at Bengal Capital as well as interim president of Goodness Growth. Rosen was the co-founder and former CEO and Chairman of 4Front Ventures.
POSaBIT names Chris Baker Chief Strategic Officer. Chris most recently served as VP of Technology and Innovation at Genius Avenue, an Insuretech/Fintech startup.
🎙️ Interviews
High Design by LMC: Discover YouTube’s best cannabis documentaries. Launched in 2019, Carlin now has more than 2,000,000 views on his High Design series, which features documentaries about weed powerhouses like Cookies and Compound Genetics. Carlin’s mission is to provide education on the history of cannabis culture and the business strategies behind the most well-known legacy-to-legal brands in the culture today. The Seattle native’s successful execution of that goal has taken him around the world as his audience continues to grow to new heights, including recently to New York City and Colombia. Here’s how LMC blew up by digging into the hidden gems and underground trends that define today’s legal industry.
Boveda CEO Sean Knutsen Talks Tech, Terps and Branding | CannabisNow
Housing Works CEO: “I Have No Doubt We'll Be Profitable” | Green Market Report
New York’s Cannabis Market and California’s interstate letter | High Rise
👋 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.