🗳️ Adult-Use to Launch in Missouri February 2023, Maryland July 2023
🗳️ Adult-Use to Launch in Missouri February 2023, Maryland July 2023
Federal judge blocks cannabis licenses for several NY regions. CA voters approved 12 local ballot measures. Nancy Whiteman (Wana Brands), donates $3M to fund Cannabis research. Cronos gets new CFO.
👥 If you’re still be in Vegas Friday and want to get together with a small group for lunch, let me know.
🌿 Industry
Two more states just voted to legalize marijuana.
Last Tuesday, voters in Missouri and Maryland legalized cannabis, pushing the total number of states where adults can legally consume marijuana to 21, along with Washington DC and Guam. Legalization votes failed in deep-red South Dakota, North Dakota, and Arkansas. South Dakota previously voted to legalize cannabis in 2018, but the law was struck down in court. Missouri recreational cannabis sales can begin as early as February 2023. Maryland recreational sales will take effect July 2023.
Ontario Securities Commission (OSC) alleges Cormark Securities was part of 'illegal' short-selling scheme. Canada’s largest capital markets regulator accused Cormark, William Jeffrey Kennedy, who was the investment dealer’s head of equity capital markets, and client Marc Bistricer of a complex scheme involving Canopy Growth Corp. The regulator is not alleging any wrongdoing against the cannabis company. According to the 10-page statement of allegations, Cormark, Kennedy (who goes by Jeff Kennedy) and their client devised a complex series of transactions in 2017 that would profit — “virtually risk-free” — from an anticipated spike in demand for Canopy shares when the cannabis firm joined the S&P/TSX Composite Index. According to the events laid out by the OSC, Saline sold short shares of the cannabis company in the open market, bought an equal number of Canopy shares in the private placement, swapped the private placement shares for free-trading Canopy shares under a securities lending agreement, and used the free-trading shares to settle the short sales. More details outlined here.
Federal judge blocks cannabis licenses for several New York regions. U.S. District Court Judge Gary Sharpe issued the injunction amid a legal challenge brought by the owner of Variscite. The company is challenging the provisions in the law that require that licenses for retail cannabis dispensaries be awarded to people who have affected by drug laws in New York state. Variscite's primary owner was previously convicted of a marijuana-related offense in Michigan. The regions of New York affected by the injunction are areas in which Variscite had sought a license to operate. The regions impacted by the 29-page injunction are the Finger Lakes, Central New York, western New York, the Mid Hudson and Brooklyn—affecting 63 of the 150 licenses.
California voters approve a dozen cannabis ballot measures to expand retail.
California voters approved 12 local ballot measures (70 new retail licenses) in the 2022 midterm elections that will either expand or create retail cannabis markets in a dozen municipalities, with most of the gains centered in Los Angeles and San Diego counties.
💵 Deals
Happy Cabbage Analytics — Oversubscribed Strategic Financing Round. New investors include Merida Capital Partners, Poseidon Asset Management, GreenAxs Capital, Emerging Ventures Fund, Ensemble Brands, and Hilltop Ventures. Existing investors Delta Emerald Ventures, West Creek Investments, Yaax Capital, and Silverleaf Venture Partners also participated. The company plans to invest the round in strategic partnerships, continued product expansion, and broadening its geographic footprint, having launched five new states in 2022.
High Times — Acquires Moxie’s California Production, Cultivation and Distribution Operations. The all-stock deal (1,363,654 shares), includes Moxie’s 11,000 sq. ft. manufacturing facility as well as 46,000 sq. ft. of flowering canopy cultivation, which is capable of producing up to 3,500 lbs of dry flower and more than 25,000 lbs of fresh frozen cannabis for High Times and its associated branded products per year. As part of the transaction, the deal also includes an exclusive 99-year license to use the Moxie, MX and HighNow brands in California.
📄 Company Updates / Earnings
Trulieve — Q3 2022 Results. Grew revenue by 34% Y/Y to $301M (56% GM), 94% of revenue from retail. Adjusted EBITDA of $99M (33% margin). Net loss of ($115M). Adjusted net income of $4M (excludes $26M of transaction, acquisition, integration, and other non-recurring charges; $93M in asset impairments, disposals and discontinued operations, primarily associated with the strategic repositioning away from margin dilutive and CF negative assets through the closure of dispensaries in CA, redundant cultivation in FL and exiting wholesale operations in NV). Ended Q3 with $114M in cash, invested $38M in CapEx.
Verano — Q3 2022 Results. Revenue increased 2% sequentially and 10% Y/Y to $228M. Growth was driven by strength from adult use sales in New Jersey. Gross profit was $123M (54% GM), compared to $98M (44% GM) in the prior quarter, and $98M (48% GM) in Q3 2021. Net loss was $(43M), compared to a loss of $(10M) in prior quarter, and $(13M) Y/Y. Adjusted EBITDA was $82M (36% margin), compared to Adjusted EBITDA of $76M (34% margin) in the prior quarter. Cash and cash equivalents of $76M and total debt of $392M.
Columbia Care — Q3 2022 Results. Revenue of $133M, up 2.4% QoQ, Gross Profit of $52M (43% GM), up 2.5% QoQ. Adjusted EBITDA of $21M (16% margin).
TerrAscend — Q3 2022 Results. Net Revenue increased 3.4% sequentially and 36.4% Y/Y to $67 million. Gross Profit Margin was 36.3%, compared to 35.5% in Q2 2022 and 43.7% in Q3 2021. AEBITDA was $11.3M, an increase of 96% sequentially and 22.8% Y/Y. AEBITDA Margin was 16.9%, compared to 8.9% in Q2 2022 and 18.8% in Q3 of 2021. GAAP Net Loss was $311M, a $331 non-cash impairment charge was recorded against goodwill and intangibles for the Company's Michigan business. Cashflow from Operations was $1.5M, compared to ($16.1M) in Q2 2022. Cash and Cash Equivalents of $34.3M. Subsequent to Q3, the Company closed on a $45.5M non-brokered senior secured term loan.
AWH — Q3 2022 Results (earnings review with Green Giants). Gross Revenue up 14.1% sequentially and 27.8% Y/Y, to $134.3M. Net revenue, which excludes intercompany sale of wholesale products, increased 14.1% sequentially and 17.9% Y/Y, to $111.2M. Net loss of ($16.9M), compared to a net loss of ($21.2M) in Q2 2022. Adjusted EBITDA was $27.8M (25.0% margin). Cash and cash equivalents of $91.4M, and net debt was $219.0M.
Ayr Wellness — Q3 2022 Results. Revenue up 24% Y/Y to $119.6M, up 9% sequentially. Adjusted EBITDA up 10% sequentially to $21.7M, Operating Loss improved 17% sequentially. $7.9M of CapEx, ended quarter with $100.8M cash.
Planet 13 — Q3 2022 Results. Revenue of $25.6M vs $33.0M in Q3 2021, a decrease of 22.2%. Gross profit was $10.6M (41.2% margin), as compared to $17.7M in Q3 2021 (53.8% margin). Net loss of ($6.3M) as compared to a net loss of ($2.7M). AEBITDA of $0.4M as compared to AEBITDA of $2.6M in Q3 2021. Cash of $50.9M.
Jushi — Q3 2022 Results. $72.8M revenue, up 34.9% Y/Y and sequentially. $27.7M Gross Profit (38% GM). Adjusted EBITDA of $0.7M. $31.1M cash.
Goodness Growth — Q3 2022 Results. Revenue of $18.9M, up 41% Y/Y (50.6% GM), ($8.4M Net Loss), ($1.2M) EBITDA. $21.8M cash.
TILT — Q3 2022 Results. Revenue of $40.5M (vs. $53.4M QoQ), Gross Profit of $9.5M (24% margin), ($15.7M) Net Loss), $0.6M Adjusted EBITDA. $16.6M cash.
4Front Ventures — Q3 2022 Results. $37.3M Revenue, up 9% from Q2 2022 and 13% Y/Y. Adjusted EBITDA of $9.3M, up 2% from Q2 2022 and up 24% Y/Y. $5.3M cash, $49.5M of related-party debt not due until May 2024.
Schwazze — Q3 2022 Results. Revenues of $43.2M, up 36% Y/Y. Gross Profit of $26.0M (60.1% GM), compared to $15.1M (47.3% GM). AEBITDA of $15.9M (36.7% margin), compared to $8.8M Y/Y. Cash and cash equivalents of $38.7M.
The Parent Company — Q3 2022 Results. $19.6M (34% GM) revenue (excluding bulk wholesale business which is shown as discontinued operations at September 30, 2022). Adjusted EBITDA of ($15.9M). $107M cash.
Leafly — Q3 2022 Results. Revenue was $11.8M, up 8.1% Y/Y. GM was 87.1%, compared to 88.4% Y/Y. Adjusted EBITDA loss was ($5.2M), compared to Adjusted EBITDA loss of ($3.6M) Y/Y. $27.8M of cash, after repurchasing over 3M shares of common stock using $31.3M of restricted cash. Expects revenue to be between $47.0–$48.0M and Adjusted EBITDA loss to be ~$26.0M for 2022.
SpringBig — Q3 2022 Results. $7.4M Revenue, up 22% Y/Y and up 13% sequentially. Adjusted EBITDA of $(3.5M). $6.8M cash.
Lowell Farms — Q3 2022 Results. Revenue of $8.7M; down 34% sequentially and down 31% Y/Y. Adjusted EBITDA of ($3.5M) compared to ($1.1M) sequentially. Licensing—Collectively out-of-state revenues grew 13% from $274k in Q2 to $310k in Q3. Lowell Farm Services revenue decreased $1.8M sequentially to $0.3M. $3.3M cash and cash equivalents.
AFC Gamma — Q3 2022 Results. Net Income of $11.5M, or $0.57 per basic weighted average share of common stock, up 45% from Q3 2021. Dividend of $0.56 per common share on October 14, 2022 for Q3 2022, up 30% from Q3 2021. Closed $203.8M of new commitments and funded $167.6M of new and existing commitments YTD as of November 1, 2022, including ~$32.0M which was refinanced from existing borrowers, Total loan commitments of $426.2M ($368.6M of which has been funded) across 12 portfolio companies.
Chicago Atlantic Real Estate Finance — Q3 2022 Results. As of September 30, 2022, total loan commitments of ~$348.9M ($330.4M funded, $18.5M unfunded) across 22 portfolio companies. Net Income of ~$9.8M, or $0.55 per weighted average diluted common share, up 31.0% sequentially. On October 14, 2022, paid a regular quarterly cash dividend of $0.47 per share of common stock.
Hydrofarm — Q3 2022 Results (vs. prior year). Net sales decreased to $74.2M compared to $123.8M, Gross Profit decreased to $5.9M compared to $30.0M. Net loss was $(23.5M), or $(0.52) per diluted share, compared to net income of $17.3M, or $0.37 per diluted share. The Company attributes declines to a COVID overhang and uneven state legislative rollouts. Adjusted EBITDA decreased to $(9.0M).
urban-gro — Q3 2022 Results. Revenue of $12.4M. Net loss of ($8.7M), which includes one-time operating expenses of $4.2M and a $1.7M impairment for the entirety of a previous investment. Third quarter AEBITDA of $(2.3M). Project backlog of $67M, a sequential increase of $45M. $18.6M cash and no debt.
Akanda — Arrival of First Shipment and Sales of Medical Cannabis to Germany. Akanda recently entered into an agreement to deliver at least 1,000 kilograms of high-grade medical cannabis flower to Germany through the Cansativa platform. The deal ranks as one of the largest supply agreements in the European medical cannabis industry. Cansativa is also the only company in Germany permitted to distribute domestically grown cannabis.
Calyx Peak — Debuts 82,500 sq ft Cultivation and Extraction Facility in MO. Calyx This new facility will vertically integrate Local Cannabis Company's flagship location in the state, located in Kansas City. Calyx Peak has operations in CA, MO, and MA—operating multiple dispensaries and over 200,000 sq ft of legally licensed cultivation, extraction, and distribution facilities.
BLAZE — New “Insights Advanced” Product for Enterprise and MSO Cannabis Retail Customers + Partners with Proper. BLAZE Insights remains available for all clients to use, while the Insights Advanced option now allows large operators a more nuanced ability to track, evaluate and compare their performance among their outlets and competitors on a daily—or hourly—basis. BLAZE has also partnered with Proper to helps brands turn their website into a direct e-commerce platform, allowing consumers to instantly place and receive orders from 100+ integrated brand websites.
🏬 Retail
Columbia Care — Opens 5th VA Dispensary in Richmond. Columbia Care and its subsidiary entities, together, are licensed to operate a market-leading total of 12 dispensaries in Virginia. To support this retail footprint, the Company operates nearly 148,000 square feet of cultivation and production capacity and has a fleet of delivery vehicles able to serve the entire state.
🌱 Product
Mike Tyson x Evander Holyfield — Partner to Launch ‘Holy Ears’ cannabis-infused edibles. The former opponents are reuniting under the newly formed cannabis company Carma Holdings, which also houses Tyson 2.0, Tyson’s existing cannabis company. Tyson 2.0 already sells cannabis-infused products called Mike Bites, which are shaped like ears with a bite mark. Carma plans to release Holyfield’s in 2023.
Old Pal — Launches Baked at Home Brownie Mix.
Old Pal is teaming up with TILT and Big Pete’s to launch a new Cannabis-infused brownie mix. Baked at Home, the punny name of the brownie mix, will make it quite easy to cook up a classic. The 100mg brownie mix will cost ~$25, and is available in Massachusetts and California.
Curaleaf — Unveils Strategic National Rebrand for Grassroots and Expands to CA with Diamond Infused Pre-Rolls.
The rebrand of Grassroots coincides with the launch of its Grower's Reserve program, an ongoing series of limited-edition collaborations with craft farmers and diverse operators in California. Grassroots' new branding has rolled out in California and Maryland, and will expand to all seven markets in the coming months.
TSUMo Snacks — Launches Limited-edition Lineup of THC-infused Holiday-flavored Chips. The Company is launching a Turkey Dinner Popped Potato Chips and Cinnamon Sugar Churro Crispy Tortilla Chips. Available in California dispensaries, these perfectly shareable 100mg bags bring a whole new meaning to the “holidaze” with cannabis-infused delights.
4Front Ventures — Launches Island Mini Infused Prerolls. Made in small batches, each 10-pack features single strain, all-natural flower infused with highly potent THCA diamonds to deliver a rich and flavorful cannabis experience. California consumers can choose between six premium launch strains, including Purple Fritter; Alien OG; Papaya Rosé; White Runtz; Blue Dream; and Black Jack.
TILT Holdings x Curaleaf International —Jupiter Research has entered into an exclusive five-year manufacture, supply and distribution agreement with Curaleaf International to bring the Jupiter manufactured Liquid Que™ vaporizer to new territories abroad, for use as a medical device with extracts developed by Curaleaf International, subject to obtaining regulatory approvals in the relevant territories.
Treez — Advanced Access to New Enterprise Retail Analytics and Integration Hub Products for Cannabis Retailers. Treez Integration Hub unlocks access to integrations with best-in-breed technology providers from cannabis and beyond, including enterprise-grade CRMs, business intelligence, communications software, ERPs and supply chain software solutions. Retailers can now expect to leverage systems like Odoo, Salesforce, SAP, NetSuite, as well as, bring their own tools all through one integrated platform.
Lantern — Expands On-Demand Cannabis Delivery Service with iOS App. The Lantern app features a Discovery Guide that asks users a series of questions and uses that feedback to create a collection of personalized product recommendations. Additionally, the app allows consumers to shop from multiple dispensaries, browse through collections of their favorite products, filter by desired effects or feelings and on-demand delivery options, and purchase products at in-store prices. The app will also provide delivery updates once products are purchased and offer information regarding special promotions and events.
🧔 People
Wana Brands CEO, Nancy Whiteman, Makes $3M Donation to Fund Cannabis Research. Wana Brands founder and CEO Nancy Whiteman is stepping up her charitable activities with $3M for cannabis and psychedelic medicine research at Johns Hopkins University—the largest donation yet from the Wana Brands Foundation. Whiteman said the Johns Hopkins donation aligns with the cannabis edibles maker's emphasis on mental health, a cause that she called "close to my heart." The Wana Brands Foundation, which Whiteman established with $50M from the company's $297.5M payment from Canopy Growth, made its first donations in the spring of 2022.
Cronos Group — Appoints James Holm as CFO. Holm most recently served as the Global VP of Finance Transformation at Vertiv, a global provider of critical digital infrastructure and continuity solutions, where he led the company’s centralization, standardization and optimization to a Global Shared Service hub for finance processes. Before joining Vertiv, Holm worked at Worldpay and Procter and Gamble.
🎙️ Interviews
Educating the Cannabis Industry, Green Flower, CEO, Max Simon | The Dime
Curaleaf, CEO, Matt Darin | New Cannabis Ventures
Cookies, CEO, Berner | MJBizDaily
Ayr Wellness, Chairman & CEO, Jon Sandelman | New Cannabis Ventures
Cannabis Industry After the Midterms | Prof G Markets
👋 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.