📉 Aurora Cannabis not in compliance with Nasdaq Listing Rule

California Cannabis leaders call for industry, regulators, and legislators to all come together. Cannect Wellness (IL) raises $7.5M. AYR closes sale of AZ assets. Curaleaf delays Earnings Release.

Mar 28, 2023

🌿 Industry

Leaders of California’s cannabis industry painted a bleak picture at Senate Business, Professions and Economic Development Committee. “The industry is in peril,” said Ron Gershoni of Jetty Extracts. “We are at grave risk. We need your help,” said Genine Coleman of the Origins Council. — Sac Bee

Steps proposed include allowing more retail sales (by over-riding the control of local governments that have blocked them), cutting taxes (excise tax) and stepping up enforcement of the illicit market
Wesley Hein, President of the California Distribution Association and Head of Corporate Development at Mammoth Distribution/Heavy Hitters believes that the task of fixing legalization is too big to simply rely on the same tools as before
He believes we need industry, regulators, and legislators to all come together; and because of California’s dual licensing structure, local policymakers will need to be included as they are part of the problem, and part of the solution as well
Fortunately, we have 5+ years of data that we can use to make informed decisions, which eliminates the guesswork experienced the first time around

U.S. Cannabis Sales to reach $71B in 2030 without Federal Legalization at Current Pace. Legal cannabis sales in the U.S. totaled $30B in 2022 and are projected to reach $35B+ in 2023. — New Frontier Data

If the pace of state-level legalization continues in the absence of federal policy reform, legal cannabis sales are projected to reach $71B by 2030. If that pace stagnates, it would still reach $58B

An estimated 54M U.S. adults will consume cannabis in 2023 across both legal and unregulated markets, growing to 69M U.S. consumers by 2030

High & Dry: Banking crisis to further choke funding for cannabis sector. The global banking turmoil threatens to squeeze U.S. cannabis companies already struggling with meager funding sources by drying up support from regional lenders and tightening fundraising from alternative avenues. — Reuters

U.S. cannabis borrowers could also see already higher interest rates go up
ETF flows into the sector fell to ~$404M in 2022, down from ~$2.3B in 2021

Massachusetts Cannabis regulators putting out “a series of fires” involving a Russian oligarch and data breach. Thousands of employees in the Massachusetts cannabis industry received an email about a major data breach (name, home and email address, phone number and date of birth) that had been made public in an “inadvertent release of agency documents.” — GBH

In response to a public records request, a blogger received the internal communications and other confidential information—~17,000 rows of cannabis employees' personal data—due to an error made by the commission
The personal data never went public and his blog post only published details relating to the internal communications between commissioners regarding the Curaleaf investigation. In January, the Cannabis Control Commission became the first state agency to launch an investigation into Curaleaf

“Cannabis in Germany will be a success story” Europe’s biggest economy moves closer to Cannabis legalization. Germany would become the world’s largest regulated national cannabis market and the first country in the EU to permit its commercial sale— with potentially sweeping implications for the bloc. — CNBC

Steffen Geyer, director of Hanf Museum, a Berlin-based hemp museum believes May 1, 2023 will be seen as the day Germany legalized cannabis for personal news, noting that commercial legalization would likely follow next year

Vermont Cannabis Control Board Gets Funding for a Laboratory. A large spending package includes money that will allow the Vermont Cannabis Control Board to build and run its own testing lab. — Seven Days

While the new state lab won’t be open to the public, it will allow the control board to run tests without gumming up the private labs that licensed growers use
Aside from investigations, the control board plans to perform random sampling to ensure that growers, manufacturers & retailers are following the laws

The growing Chinese involvement in illicit Cannabis. Mexican cartels have a long history of importing, growing and redistributing illicit cannabis in the United States. But Chinese investors, owners and workers have emerged in recent years as a new source of funding and labor for illicit cannabis production. — POLITICO

In Oklahoma, close to 3,000 of the state’s ~7,000 licensed cannabis cultivation have been flagged for suspicious activity by law enforcement over the last year
The agency believes that 2,000 of those farms have a Chinese connection. Of the 800+ cultivations the OBN has shut down in the last two years for operating illegally, ~75% are linked to China

Proposed New York Bill To Require Health Insurance Coverage Of Medical Marijuana Clears Assembly Committee. New York lawmakers have approved a bill that would require public health insurance providers in the state to include medical marijuana as a covered prescription drug and authorize private insurers to do the same. — Marijuana Moment

The Assembly Health Committee passed the legislation. It now heads to the Ways & Means Committee before potentially advancing to the floor
Private health insurers wouldn’t be forced to provide coverage for medical marijuana, but the bill clarifies that they can if they choose to

💵 Deals

Cannect Wellness, an IL-based cultivator and product manufacturer, secures $7.5M. The funds will be used to complete construction of phase one of a 62,000 sq. ft. art cultivation and product manufacturing facility located just outside of Chicago. Cannect Wellness was awarded one of the first Craft Grower licenses issued by Illinois.

AYR Wellness closes sale of Arizona assets. The sale includes two licensed entities operating three Oasis-branded dispensaries in the greater Phoenix area, a 10,000 sq. ft. cultivation and processing facility in Chandler, and an 80,000 sq. ft. cultivation facility in Phoenix, and AYR’s majority interest in Willcox OC, LLC, a joint venture developing an outdoor cultivation facility. AYR received consideration of $20M in cash, with additional cash proceeds from net working capital to be received in the next six months. In addition, the Buyer has assumed lease obligations that resulted in the elimination of ~$15M in long-term lease liabilities for AYR.

📄 Company Updates / Earnings

Curaleaf delays Q4 2022 and 2022 Earnings Release. The company will delay its fourth quarter and full year earnings release and conference call, which were originally scheduled for March 28, 2023. Curaleaf said the delay was due to the complexities of converting three years of financials from IFRS to U.S. GAAP coinciding with year and quarter-end reporting, and the review of the treatment of various accounting matters.

Planet 13 — Q4 2022 Financial Results.

Revenue of $24.8M, compared to $29.9M in Q4 2021 (down 17%)
Net loss of ($38.6M) driven by $32.8M impairment charge
Adjusted EBITDA loss of ($0.8M) vs. $1.9M in Q4 2021
Full year 2022 Operating Cash flow of $3.8M. Cash of $52.4M as of 12/31/22

Body and Mind — Q2 2023 Financial Results.

Revenues were $7.7M, a slight decrease Q/Q from $7.8M
Gross profit of $2.26M, up Q/Q from $1.6M
Adjusted EBITDA loss of ($1.3M), a slight improvement Q/Q from ($1.6M)
Improvements in wholesale pricing in NV and wholesale growth in OH helped with Quarter, current focus is to develop new IL and NJ dispensaries

Aurora Cannabis has until September 20, 2023 to regain compliance with Nasdaq Minimum Bid Price Requirement. Aurora stock closed at less than $1.00/share over the last 30 consecutive business days (Minimum Bid Price Requirement) from 2/8–3/23, 2023. The company must close at or above $1.00/share for a minimum of ten consecutive business days to maintain its listing.

Metrc Expands Track-And-Trace Government Contract with Maryland for Regulation of its Adult-Use Cannabis Market. Metrc has been the state’s partner in the regulation of its medical cannabis market since 2016.

2nd lawsuit filed against IIPR. Ross Weintraub accused Executive Chair Alan D. Gold, CEO Paul Smithers and other company officials of breaching their fiduciary duty by either failing to discover or declining to disclose key facts about one of the company’s main investments, Kings Garden. In IIP’s filings, the company “admitted that rather than check whether King had been cleared by the United States Department of Justice for federal licensing and had been ‘screened and cleared at all levels,’ IIPR merely accepted King’s word that it was true,” Weintraub’s lawsuit alleges.

MedMen changed its auditor from MNP to Marcum. On March 17, 2023, the Company engaged Marcum LLP as its new independent registered public accountant for the fiscal year ending July 1, 2023.

Tinley's decommissions its Long Beach manufacturing facility. The company will relocate its bottling and related assets to the new Blaze Life Holdings 45,000 sq ft cannabis manufacturing and distribution facility located in Canoga Park, CA. It also paused plans to re-enter Canada indefinitely. President, Rick Gillis, has agreed to step down from his role, while Kirsten Chapman has resigned from the Company's Board.

POSaBIT Expects FY 2023 Revenue of $60–$63M, Gross Profit of $15–$17M. This includes being Adjusted EBITDA Positive. The Company expects to report financial results and FY 2023 Guidance on April 26, 2023.

🏬 Retail

TYSON 2.0 opens branded coffeeshop in Amsterdam. The coffeeshop will offer select TYSON 2.0 branded products, accessories and a premium lounge. The 1,200 sq. ft. coffeeshop is centrally located near Soho House and the W Hotel and walking distance from Central Station.

C3 Industries open High Profile Detroit, MI. C3 now has 13 dispensaries in Michigan and 20 dispensaries nationwide. High Profile Detroit opens in partnership with Najanava Harvey-Quinn of Clean Smoke Community Investment Project.

TerrAscend opens Lemonnade Center Line, the first sativa-focused provisioning center in Michigan. Gage will open a 4,600 sq. ft. dispensary in Center Line, a suburb in the heart of Metro-Detroit, that will feature an exclusive selection of the most flavorful and uplifting sativa strains on the market.

Ascend Opens New Outlet Dispensary in Michigan. The dispensary is Ascend's eighth in the state of Michigan, and fourth outlet dispensary across its entire business, which consists of 26 dispensaries throughout the Midwest and East Coast.

Ayr Wellness Expands Florida Footprint with Four New Retail Locations. New locations in Lake Mary, Land O’ Lakes, Orlando and Palmetto Bay. This brings the Company’s Florida footprint to 57 stores.

Schwazze opens R.Greenleaf Carlsbad, NM. This brings R.Greenleaf's total number of New Mexico retail dispensaries to 18.

🌱 Product

Curaleaf Launch JAMS™ Cannabis-Infused Edibles. JAMS is a flavor-forward cannabis edibles brand designed to meet the needs of new cannabis consumers and those seeking an introduction to edibles. JAMS is now available in Florida and is coming soon to Arizona with additional states to follow in the coming months.

The Parent Company Expands Value Cannabis Offering with the Launch of New Cruisers Brand. Cruisers combines the Company's existing brands, Fun Uncle and DELI, streamlining these products into a single consumer-centric destination.

🧔 People

Schwazze appoints Bradley Stewart to the Board as Sal Wahdan resigns. Stewart currently serves as Senior Advisor at Sixth Street, as Chairman at Perch and as an independent board member at Private Medical and Semper Paratus (Nasdaq: LGSTU).

CRAFT 1861 Global Holdings Director Ryan Boone resigns. Reasons given were due to personal considerations and his desire to pursue and focus on other challenges.

🎙️ Interviews

MariMed, CEO, Jon Levine. I caught up with Jon Levine last Thursday to catch up on Earnings, M&A (acquired a MA dispensary out of receivership), Owned Brand vs. Licensing, How MariMed plans to get investors’ attention, and more..

Why are R.O.s about to sue New York State regulators? | High Rise

What's the Next Catalyst for Cannabis? | Cannabis Investing Network

John Lykouretzos, CEO, Focus Growth Asset Management | CannaCast

1933 Industries, CEO, Paul Rosen | Proactive Investors

Adam Bierman | The Hoban Minute

👋 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.