🗳️ Arkansas Recreational Cannabis on for November ballot
Founders of The Blacklist become public. LeafLink surpasses $1B in Payments Volume. Vireo sues Minnesota over new THC edbiles legalization. CT selects 6 Retailers, 2 Micro-Cultivators in lottery.
👥 I’m looking forward to checking out the third iteration of MJ Unpacked this week. Please say hi if you happen to be in attendance!
🗣️ The following week, I’ll be at Hall of Flowers (Santa Rosa) and organizing a kick-off event with friends at Alpine IQ and Paradise Club. RSVP here.
Arkansas Supreme Court clears recreational marijuana for November ballot. The Arkansas Supreme Court overturned a decision by the state Board of Election Commissioners, paving the way for legal recreational marijuana to be included on the ballot for the November general election. The decision also calls into question the role the Board of Election Commissioners have when it comes to declining certification of ballot titles. The state Supreme Court granted a petition made by Responsible Growth Arkansas to vacate the determination of the state Board of Election Commissioners and the secretary of state not to certify the ballot for a proposed constitutional amendment authorizing the adult possession and use of cannabis.
The Messy Breakup Behind the Hottest Instagram in Weed. At its peak, The Blacklist was the front page of the internet for the U.S. cannabis industry. Lured by an intoxicating “user generated” mix of insider leaks, industry rumor and gossip, and aggregated content that appeared to be copy-pasted directly from reputable news sources and spun into viral social-media posts, The Blacklist built an audience now totaling more than 400,000 Instagram followers. The result was “the most disruptive force in weed,” as cannabis website MerryJane described the outfit after interviewing one of The Blacklist’s shadowy, “anonymous” operators in 2019. Whatever The Blacklist may currently be, the people behind the controversial outlet are no longer anonymous. A dispute over the company’s ownership is the focus of a spiraling legal battle—and the latest episode in an increasingly ugly, increasingly public beef that’s equal parts personal drama and industry sideshow. What’s not in dispute is that The Blacklist’s registered founder and owner, as per Delaware corporate filings attached to a lawsuit filed earlier this year, is a Los Angeles-area woman named Shalon Doney. Doney is (for now) still married to Adam Campbell, a long-time cannabis grower who spent years fighting a federal pot case in Montana. A divorce proceeding filed in 2021 is not yet final. That means The Blacklist is community property—that is, an asset that should belong equally to both spouses—and Campbell is entitled to half, as Doney’s lawsuit admits.
Cannabis companies are reeling from the market downturn, and they're slashing jobs and reining in spending to survive. The cannabis industry is in a full-on downturn. In the past few months, cannabis companies from publicly traded giants like Curaleaf to tech startups like Flowhub have laid off employees, retreated from markets, and started struggling to raise money. While there are specific reasons for each firm, the general story is the same: Legal cannabis sales have slowed down in states like California and Colorado as consumers feel the pinch of inflation. Red tape and regulation have slimmed margins and choked profits. Because the rest of the economy is suffering, cannabis — as a fledgling industry — is feeling the worst of it. And there are fewer investors to bail them out.
"Among the turmoil in capital markets, rising interest rates, and general investor weariness about the industry, companies are going to have to get very creative, and accept a lot of dilution, to sustain themselves in a very capital-intensive business." — Marc Hauser, Hauser Advisory
Michigan Sales/Growth Remains Strong vs. Rest of U.S.
Of all the markets Headset tracks, Michigan has grown the most of any US market this year. Between January and August 2022, total cannabis sales in Michigan grew 32.3%, while markets in the rest of the US grew 0.8% collectively. In July, Michigan had their biggest month of sales ever recorded at $210 million. Many product categories in the Michigan market are seeing growth. Sales of Pre-Rolls, the fourth largest category in Michigan, have increased 79.6% when comparing total sales in the first eight months of 2022 with the same period in 2021. Beverages, one of the smallest categories, grew 254% over the same time period. Tinctures & Sublinguals are an exception, decreasing -23.3% YoY. *This analysis looks at total sales between January 2022 and August of 2022 from CA, WA, OR, NV, FL, MD, IL, MI, MA, CO, AZ.
New York’s Cannabis Control Board Approves additional conditional licenses for 19 cultivators and 10 processors. This brings he number of businesses holding conditional cultivator and conditional processor licenses to 261 and 25, respectively.
Connecticut DCP Selects 6 Retailers, 2 Micro-Cultivators in Licensing Lottery. The general lottery included all general lottery applicants and all applicants who were not selected in the first round of the Social Equity Lottery, which took place in August. The Social Equity Council approved six retailers, two micro-cultivators, and three Equity Joint Venture applicants in the first round.
California Governor Newsom legalizes interstate commerce in cannabis. California’s world-class cannabis farmers could legally sell their crop to patients and connoisseurs in other states thanks to a new bill signed by Gov. Gavin Newsom. Senate Bill 1326 adds a new chapter to the Business and Professions code that gives the state Governor new powers to sign pot trade agreements with other legal weed states. The catch? The changes won’t take effect unless federal law or policy changes. Marijuana remains a federally illegal schedule 1 drug deemed as dangerous and medically useless as heroin or LSD. Other states are also moving to enact similar bills, giving their Governors the power to sign interstate pot trade deals. Oregon passed one in 2019.
San Diego could get more cannabis dispensaries, as proposed rule changes get key OK. 12 of the 27 dispensaries with city permits will shift from one council district to another under the new boundaries, which take effect in November. That significant upheaval matters because current city regulations allow no more than four dispensaries per council district. The proposed rule change would allow council districts to have more than four if the re-drawn boundaries are the cause of such an increase. Only north coastal District 1 would see an increase to five permitted dispensaries, but the change would open other opportunities for more dispensaries. The re-drawn boundaries are expected to raise the number of approved dispensaries to well over 30. Of the 27 that have been approved, 24 have begun operations.
Mississippi Brings in $6M from Medical Marijuana License Fees Before Sales Even Begin. Through Monday, the state has culled nearly $6 million in license and one-time application fees from dispensaries, cultivators, transportation companies, processors, and testing operations in the state, according to information posted on the state’s Department of Health website. While sales aren’t expected to begin until November, there are already 113 licensed dispensaries on file with the state’s Department of Revenue, the entity collecting fees and taxes.
Germany's Adult Use Cannabis Laws Steeped In Optimism And Uncertainty At The Moment. Luxembourg and Malta became the first two European nations to pass adult use cannabis laws in October and December 2021, respectively. In June 2022, Germany set the global market abuzz when Health Ministry officials announced legislation to be introduced later this year and implemented in 2023. If legalized, Germany could earn €4.7bn ($4.6bn) per year, according to the Düsseldorf Institute for Competition Economics. It is unclear if the country, which legalized medical marijuana use in 2017, will reach its goal. But since making the statement, lawmakers have listened to the global market, visiting various marketplaces and hosting experts. While market optimism was apparent among sources Benzinga spoke with, so was uncertainty around legalization's actual timeline.
Inflation is making it tougher to open a cannabis business. Inflation hasn’t had much impact on demand among American marijuana consumers, but it’s having a major impact on cannabis startup companies—especially those in newly legal states. A new analysis of market conditions by Whitney Economics finds that startup cannabis operators in 2022 are facing a difficult double whammy: increased borrowing costs and increased building costs. In other words, it’s more expensive to build out a store or processing facility, and it’s more expensive to raise the capital needed to get those projects off the ground. Those higher startup costs could slow the expansion of the legal cannabis industry in newly legal states like New Jersey, New York, Connecticut, and Rhode Island. Consumers may have to wait a little longer before a legal cannabis store opens near them—simply because it costs too much to actually build out a cannabis facility.
Maine’s Adult-Use Cannabis Sales Continue to Climb in Second Year. Despite a dismal municipal opt-in rate since coming on board with commercial adult-use cannabis sales nearly two years ago, Maine’s retail market has shown consistent month-over-month growth throughout 2022. In August, licensed dispensaries recorded more than $17M in adult-use sales, representing 4.1% growth over July and a staggering 68% increase from August 2021 sales, according to the state’s Office of Cannabis Policy (OCP). Last month featured the largest sales total since Maine launched adult-use sales in October 2020. Roughly 59% of the $17M in adult-use sales last month came from usable cannabis (flowers, prerolls, shake/trim), while nearly 23% came from concentrates and 18% came from infused products, according to OCP.
Benzinga Cannabis Conference Returns Just When the Industry Needed It Most. Given Benzinga’s primary focus is the business of capital, the conference couldn’t have come at a more opportune moment. The macro outlook has seldom sounded bleaker, and around the conference terms like “extinction event” or “Darwinist” were heard to describe the looming cull of the weak and the unprofitable. And yet, despite these considerable headwinds, the mood within the conference was undeniably optimistic. “If you look at the data, the industry is expected to grow 14 to 15 percent this year. For any other industry you’d say that was phenomenal,” said Wendy Berger. “Outside of this conference everyone is doom and gloom, but here, the vibe is very positive. People actually want to make deals and are exploring partnerships.”
Hall of Flowers Toronto Successfully Launched, Commits to 2023. With over 100 exhibitors and 670 buyers in attendance, the collective purchasing power of more than 1475 retail stores was on site, representing nearly 70% of the cannabis retail industry in Ontario. “We're happy with how Toronto turned out. Bringing a show to a new market is always stressful but the team did a great job.” says Dani Diamond, Founder of Hall of Flowers. “We'll definitely be back. Maybe earlier in the year, but now that exhibitors and retailers know what to expect we’ll be able to increase the show size and number of attendees.”
Curaleaf — Completes Majority Stake Acquisition of Germany's Four 20 Pharma. Curaleaf completed its agreement to acquire a 55% stake in Four 20 Pharma GmbH, a fully EU-GMP & GDP licensed German producer and distributor of medical cannabis. With the close of the transaction, Curaleaf has solidified a strategic pathway to acquire complete control of Four 20 Pharma after two years of the commencement of adult-use in Germany, which is slated to begin in early 2024.
📄 Company Updates
LeafLink — Surpasses $1 Billion Payments Volume. LeafLink's industry-leading platform offers a variety of services to help cannabis businesses in all sectors streamline their operations and eliminate common pain points. Such offerings include Flexible and Direct Payments to help scale growth and facilitate seamless transactions, allowing retailers and brands to choose when and how they are paid. LeafLink Payments solutions increase the speed and security of wholesale transactions for businesses across the country. LeafLink's solutions have now transacted over $1 billion in payment volume to date across 1700 active operators and 22 markets.
Vireo — Sues Minnesota over new THC edbiles legalization. Vireo Health of Minnesota, one of just two distributors of medical marijuana in Minnesota, is suing the state and local governments over the state's sudden legalization of hemp-derived THC edibles, arguing that it's facing unfair regulation over essentially the same product. The suit, filed last week in Minnesota District Court, argues that Minnesota laws "unconstitutionally discriminate against Vireo in the market for edible products that contain tetrahydrocannabinol (THC)." Minnesota still tightly regulates the use of THC products made from marijuana — the sort made by Vireo and RISE Minnesota, another medical marijuana producer. But cannabis products derived from hemp were legalized by the Minnesota Legislature last session, and THC-infused edibles and drinks — chemically identical to marijuana-derived THC — are already proliferating in the market with far less regulation. The Star Tribune reports that the fight isn't likely to end with the court case; hemp companies are expecting more lobbying from medical marijuana makers in the next legislative session.
Northern Lights Acquisition Corp. — Second Amendment of Unit Purchase Agreement. Northern Lights Acquisition Corp. (Nasdaq: NLIT) has entered into a second amendment to its Unit Purchase Agreement to provide for the deferral of a total of $50M of the $70M due to the Seller at the closing of the Business Combination. The increased deferral of the Deferred Cash Consideration will provide the Company with additional cash to support its post-closing activities.
POSaBIT — Enters Illinois Market. This marks the twentieth state in which POSaBIT’s solutions are currently active, and the fourth new state the company has entered this calendar year. POSaBIT’s stated goal of entering eight new US markets in 2022 is close to fruition, as they have contracted merchants in four new states which are all slated to go live in Q4. The company’s record month in August marked the seventh straight month of payments revenue growth for the company.
Green Flower — Cannabis Compliance and Risk Management Education Certificates Coming to Schools Across U.S. 17 of Green Flower's university partners will launch the Cannabis Compliance and Risk Management Certificate Program for their November 2022 cohort, while the University of California Riverside (UCR) will launch the program in Spring 2023. Part of this training includes the industry-adopted Cannabis Risk Assessment Framework, which gives students a step-by-step blueprint for becoming a successful cannabis compliance professional. This includes learning how to perform risk assessments on cannabis companies, designing and implementing risk management processes to solve potential issues, establishing compliance policies and procedures that comply with all applicable laws, and training other employees to follow compliance and risk management best practices inside the cannabis industry.
Red White & Bloom — Restructuring of C$110M+ of Debentures and Management Changes.
An Aggregate of $70M of current loans amended with maturity now in 2024. C$17M new convertible debenture issued at a conversion price representing a 67% premium to the closing price and maturity in 2024. C$2.1M current loan amended with maturity now in 2024. Over C$100M of current liabilities to be moved to long-term liabilities
Appointed strategic investor and entrepreneur Colby De Zen as President, Gabriel Bianchi has agreed to join the Company's Board of directors
C21 Investments — Q2 Earnings Results
Revenue of $7.2M, down 4% sequentially, in line with the 5% decline in State of Nevada sales. Gross Margin of 53.8%
Adjusted EBITDA of $2.2M (31% Margin). Cash Flow from Operations of $1.8M. Earnings Per Share of $0.02
Cash of $2.3 million, down $0.2M from Q1. The Company's senior secured note was reduced by $1.5M in Q2 and Total Liabilities were reduced by $1.6M during the quarter. Subsequent to the quarter, the Company has paid down its senior secured note by an additional $1.0M, with $4.1M outstanding as of 9/1/22
Aurora Cannabis — FY 2022 Q4 and Full Year Results
Medical cannabis net revenue was $36.6M , a 4% increase from the prior year period, delivering 72.8% of Aurora's Q4 2022 consolidated net revenue
Consumer cannabis net revenue was $12.6M, as compared to the prior quarter net revenue of $10.3M. The 22.2% increase was primarily due to the addition of Thrive's consumer cannabis net revenues of $1.4M
Q4 2022 total cannabis net revenue was $50.2M, as compared to the prior quarter total cannabis net revenue of $50.4M
Adjusted EBITDA loss increased to ($12.9M) in Q4 2022 vs. $11.4M in Q3 2022
At June 30, 2022, the Company had $488.8M of cash, including $51.0M in restricted cash, and no secured term debt
TRP — Brings Cookies to Los Angeles' Westside with Brentwood Opening. Cookies Brentwood is situated next to Brentwood Country Mart. TRP was able to open the very first dispensary located in the Westside neighborhood, standing beside other high-profile retailers including James Perse, goop, and Christian Louboutin, beloved by the community for decades.
Curaleaf — Opens Allentown, Pennsylvania Dispensary. Curaleaf Allentown is the Company's sixth new location to open within the Keystone State this year, expanding its retail presence to 18 locations in Pennsylvania and 137 nationwide. In addition to Curaleaf Allentown, the Company serves patients in Altoona, Bradford, Brookville, City Avenue, DuBois, Erie, Gettysburg, Greensburg, Harrisburg, Horsham, King of Prussia, Lancaster, Lebanon, Morton, Philadelphia, State College, and Wayne.
Trulieve — Opens Relocated Edgewater, FL Dispensary and Milton, WV and Belle, WV Dispensary. Trulieve operates medical dispensaries across West Virginia in Belle, Milton, Hurricane, Parkersburg, South Charleston, Weston, and two locations in Morgantown, with plans to open an additional dispensary location by the end of the year in Huntington.
Trulieve — Wins Georgia Production License. Georgia's "Hope Act" was signed into law in 2019 to authorize the Commission to oversee the selection process to launch a medical cannabis program in the state. After evaluating and scoring the competitive submissions, GMCC announced in July 2021 of its intent to award Trulieve a license in part due to the Company's ability to make products available to patients across the entire state. Trulieve will have an initial allocation of five medical cannabis dispensaries in Georgia and will seek to open additional dispensaries in the state as the patient population grows. Trulieve is building an indoor cultivation facility in Adel, Ga., to produce low-THC oil products. Botanical Sciences, a local company, also received a license.
Flowhub — Launches Maui™, A New Platform to Help Dispensaries Reimagine the Cannabis Retail Experience. Maui is an intuitive, flexible, and performant solution focused on helping cannabis retailers increase profits, operate more efficiently, and create superior customer experiences. Based on benchmark data from live customers, the platform's brand new backend architecture is more than 20x faster than Flowhub's legacy application, allowing dispensaries to accelerate growth and increase transaction volume. Unlike other POS companies in the space, Flowhub Maui is an open, highly configurable system that allows businesses to easily integrate a custom tech stack on their choice of hardware.
Alpine IQ x Terpli — AI-driven Recommonder. The integration engages retail purchasers with a personalized shopping experience, collects valuable consumer preferences, and helps retailers and brands grow their audiences with integrated loyalty sign up and rewards. By leveraging Alpine IQ’s technology and using Terpli’s platform, this integration provides retailers and brands with an easy-to-install AI-driven recommender for their e-commerce websites.
Cresco Labs — Flagship Brand Cresco Launches in Florida. The multi-market leading vape and concentrate brand arrives with a robust lineup of Live Resin products available exclusively at all Sunnyside dispensaries. Cresco is now available in CA, AZ, IL, MI, OH, MD, PA, MA and FL. The premium brand offers one of the widest assortments of forms in the Company’s brand portfolio, ranging from flower and pre-rolls to concentrates and vapes.
Ayr Wellness — Introduces Brand Lost in Translation (LIT) Across Four Additional States. Originally produced by six-time Jack Herer Cup winning cultivators Tahoe Hydroponics Company (Tahoe Hydro), Lost in Translation has made its name with consumers through its extensive library of well-known strains with unique flavors and aromas, including Bubble Bath, WAP, and Temptation. The brand is now available in AZ, FL, NJ, PA, MA and NV.
Fluent — Launches Collection of THC-infused Agave Nectars. The collection includes natural flavor, maple, vanilla and caramel, with more flavors to launch later this year. This is the first cannabis-infused agave nectar available in Florida, allowing consumers to add it to their coffee, tea and cereal. Spread on toast and waffles, swirl into your yogurt, or combine with any recipe for an inspiring treat.
Item 9 Labs — Launches New Line of Infused Pre-Rolls in AZ. The brand's 1 gram infused pre-rolls are crafted with award-winning flower and live resin sugar, live resin badder or crumble concentrates which are grown and extracted in-house. Each infused pre-roll is individually packaged and made with ultra-thin, unrefined French paper to ensure a superior cannabis experience.
Coda Signature — Partners with Illinois Kindness to Bring Hand-Crafted Cannabis Edibles to Illinois. The strategic partnership will bring Coda Signature’s line of chocolate bars and French Fruit Notes, to the Illinois market in 2023. Illinois Kindness is custom-creating a facility dedicated to manufacturing our luxury line of edibles, all of which are always hand-crafted.
TerrAscend — Appoints Karim Bouaziz as President of Northeast Region. Karim brings nearly 6 years of experience in the cannabis industry, starting as Co-Founder and SVP of Operations & Retail with VidaCann, before taking the role as a Regional President at Parallel. Prior to joining the cannabis industry, Karim held finance and operational roles at Newell Brands, United Technologies, and Disney.
Revolution Cannabis — Names Craig Johnson as CEO. Most recently, Craig was CEO at BigName Commerce, running three successful ecommerce businesses specializing in customized paper products for businesses. Previously, Craig was the CEO of Harry & David, a leading retail and direct-to-consumer gift business.
TRP has quietly built out its 14-State footprint (NCV)
LeafLink Powers Through a Challenging Year (NCV)
Insider Q&A: Roy Bingham, CEO, BDSA (AP News)
Greenlight CEO Dives Into Midwest Mission in Missouri (Cannabis Business Times)
Kim James, the Lawyer behind Detroit's legal marijuana regulations (Crain’s Detroit)
👋 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.