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🌿 Industry

DEA Says Delta-8 and Delta-9 THCO are Controlled Substances. Attorney Rod Kight received a response from the DEA to confirm that THCO is a controlled substance. Although it can be made from cannabinoids from hemp, THCO is not naturally expressed by the hemp plant. It is a laboratory creation that does not occur in nature, at least not from the hemp plant. D8 falls within the definition of “hemp” because it is a “derivative” as set forth in the 2018 Farm Bill. For this reason, many people assume that THCO also meets the definition of a hemp derivative since it is typically created from a starter cannabinoid. This is not correct. D8 is distinguishable from THCO because the hemp plant naturally produces D8; however, it does not produce THCO. From this perspective, and unlike D8, THCO is properly seen as synthetic THC, not “hemp”.

Florida to open medical marijuana license applications, will increase licenses from 22 to 44. The new licensees would double the number of vertically integrated operators active in the state. Under state law, each individual operator is allowed multiple cultivation and sales locations. The state’s existing 22 operators had a total of 413 locations as of last year, according to the 2022 MJBiz Factbook.

Fresno Losing Millions in Revenue as Legal Cannabis is Slow to Bloom. The city budget approved last June estimated there would be $4M in sales tax revenue in Fiscal Year 2023 (through June 30, 2023), with another $1.4M in application, permit, and renewal fees. Currently, only two dispensries are open (The Artist Tree and Embarc opened on the same day, July 11, 2022). Although the city issued 21 permits in 2021, appeals whittled that down to 19. Council redistricting in 2021 also altered the balance of three licenses in each of the seven council districts. For example, District 4 has four while District 7 has one. The city has yet to announce how it will resolve that imbalance, or award the remaining two licenses. At nearly every proposed location yet to open, work is slow to nonexistent. GV Wire visited the 17 locations that have yet to open. Only one, Culture Cannabis, looks like it is working on renovations.

💵 Deals

Ayr Wellness to sell Arizona Assets and Option to Acquire Ohio Dispensary Licenses. Ayr Wellness has signed a Definitive Agreement to sell Blue Camo which comprises the Company’s Arizona assets, to AZ Goat, a group consisting primarily of the former owners of Blue Camo, who sold the business to Ayr in Q1 2021. The sale includes three Oasis-branded dispensaries in the greater Phoenix area, a 10,000 sq. ft. cultivation and processing facility in Chandler, an 80,000 sq. ft. cultivation facility in Phoenix, and Willcox OC, LLC, a joint venture developing an outdoor cultivation facility. Ayr is to receive consideration of $20M in cash, with additional cash proceeds from net working capital. In addition, the Buyer intends to assume lease obligations that will result in the elimination of ~$15M in long-term lease liabilities for Ayr. In a separate arrangement, all potential earn-out contingent consideration and debt outstanding related to the Q1 2021 purchase of Blue Camo are to be eliminated, reducing Ayr’s long-term debt by $22.5M. Ayr acquired Blue Camo in March 2021 for $75M, total purchase consideration included ~$9.5M cash, 4.6M Ayr shares (valued at $66.5M at the time), and $22.5M in net adjusted seller notes.

Forian sells BioTrack to Alleaves for $30M Cash.

The $30M cash is comprised of $20M paid at closing and $10M paid in equal monthly installments over twelve months, subject to any working capital adjustments. Forian will retain a license to certain cannabinoid-based data to enhance its healthcare information offerings. As a result of the transaction, Forian will focus on its healthcare information business and will no longer provide software solutions to the cannabis industry. The acquisition by Alleaves adds industry leading point of sale and traceability platforms within the cannabis industry, including BioTrack™ and Cannalytics®, to Alleaves™.

Bloomwell Group secures funding from Artemis Growth Partners, Measure 8 Venture Partners, and a leading German family office. Frankfurt-based Bloomwell Group is one of Germany's largest legal private cannabis companies. Founded in 2020, the Company's vision is to become the centerpiece of a new cannabis ecosystem that maps nearly the entire value chain (excluding cultivation), both potentially for cannabis as a future adult-use consumer product, as well as cannabis' current use for medicinal purposes. Bloomwell Group's portfolio of operating businesses currently includes licensed distributor, importer and product developer Ilios Santé; Europe's leading cannabis telemedicine company, Algea Care; and Breezy Brands, the incubator platform for technology solutions and consumer brand building. As part of the transaction, Artemis co-founder and managing member William Muecke has joined the Company's advisory board.

Planet 13 Exercises and Closes Option to Buy Remaining 51% in Illinois Dispensary. The company paid Frank Cowan $866,250 in cash and 1,063,377 common shares of Planet 13 pursuant to an option purchase agreement entered into on August 4, 2022. Planet 13 Illinois holds a dispensary license for the Planet 13 dispensary located in Waukegan, Illinois. The dispensary is in a prominent shopping center with multiple stores, restaurants, hotels, and a recently announced casino project. It is off the Interstate 94 highway between Milwaukee and Chicago, close to the Wisconsin border. Construction at the dispensary is underway with an opening date anticipated later this year. Planet 13 has received all local and state approvals, excluding final approval upon completion of construction.

SNDL Expands Retail Network via Conclusion of Superette Group's CCAA Proceedings. SNDL successfully closed the Transaction contemplated by the agreement of purchase and sale dated August 29, 2022 (as amended and restated on December 12, 2022) and the approval and vesting order issued by the Ontario Superior Court of Justice on December 20, 2022. The Superette Group sells cannabis and non-cannabis branded merchandise and has furthered its market exposure and brand awareness through private-label cannabis offerings. Pursuant to the APS, certain of the Superette entities, have sold their right, title and interest in the: (i) Purchased Assets which includes the five Superette retail locations within Toronto and Ottawa; (ii) the intellectual property rights related to the Superette brand; and (iii) the shares of Superette Ontario.

📄 Company Updates / Earnings

Aurora Cannabis – FY2023 Q2 Results. Cannabis Revenues up ~20% from FYQ1 2023, Net Revenue of $61.7M. Adjusted gross margin before fair value adjustments on cannabis net revenue at 49%, compared to 54% in Q1 2023 and 54% in Q2 2022. Achieves Positive Adjusted EBITDA of $1.4M, ~$340M in Annualized Cost Savings Since February 2020. Debt Reduction of ~$302M in CY2022 (current debt of $193M, cash of $324M). "The net cash position gives us the opportunity to do M&A," CEO Miguel Martin told Reuters. The company will likely focus on acquiring medical assets or medical infrastructure.

Hawthorne Collective Inc and a related entity accused JW Asset Management and TerrAscend of violating U.S. antitrust law. Hawthorne's lawsuit at its core is focused on the future of the cannabis market in New York. RIV Capital, with the help of Hawthorne's investment, acquired Etain for $247M. JW Asset Management, the largest shareholder in RIV Capital, has embarked on a quest to oust three directors nominated by Hawthorne who serve on Toronto-based RIV's board and replace them with the investment firm's "chosen" picks, according to the lawsuit. "Defendants' attacks on, and attempts to take control of, RIV Capital violate federal antitrust law," a lawyer for Hawthorne, Peter Safirstein, wrote in the complaint in the Southern District of New York federal court. Hawthorne said in the lawsuit that the "series of anticompetitive or otherwise wrongful and improper actions" were undertaken "to stop RIV Capital's entry into the New York-New Jersey market." The lawsuit claimed that stopping RIV Capital's move into New York would reduce industry competition, to the benefit of TerrAscend.

🏬 Retail

Embarc opens Redwood City, CA. This is the Company’s 7th dispensary in CA and made it the first to open in Redwood City (total of six allowed).

Columbia Care began adult-use sales on February 4th at Hermann, MO dispensary. The dispensary has been serving the medical patient community since 2021. The Company also operates a manufacturing facility in nearby Columbia, which produces vapes, edibles and pre-rolls.

Shawn Kemp opens second dispensary in Seattle. The new location gives Kemp a presence on the north and south end of Seattle. Kemp’s new dispensary is 3,500 sq ft in a former bank building and carries over 3,000 SKUs.

TerrAscend (Cookies Detroit) Launch Adult-Use Sales. Through its subsidiary Gage Cannabis Co., the Company will now provide adult-use customers in Detroit with access to brands that includes GAGE, Cookies, Pure Beauty, Cali Blaze, Camino, Jeeter, Khalifa Kush, 1906 and more.

Ascend opens third dispensary in New Bedford, MA. This is the Company's first outlet dispensary in Massachusetts and its third overall, following the successful launch of two outlet locations in Pennsylvania. Ascend outlet locations allow customers to purchase the same high-quality products at an everyday low price, making Ascend's top-tier brands accessible to all consumers. Located approximately 15 miles east of the Massachusetts-Rhode Island border, Ascend New Bedford can conveniently serve residents from both states, and summertime visitors to Cape Cod.

Verano opens MÜV Orlando Colonial, its 64th Florida Location and 122nd Retail Location Nationwide. MÜV Orlando Colonial is the third MÜV retail location in Orlando. The Orlando Metropolitan Area is the third largest metropolitan region in Florida, with a population of 2.6M.

Cresco Labs Opens Sunnyside Dispensary in Daytona Beach, FL. Sunnyside Daytona Beach marks the Company’s 23^rd dispensary in the state and 58^th nationwide.

🌱 Product

Embarc launches first flower release with TRADITIONAL. The line includes Meditations—a state of pure bliss, Orange Runtz—Happiness in a bag, and SpaceX OG–Chill mode activated. THC ranges from 26%—28% and priced at $15 (pre-tax).

4Front Ventures Launch Cannabis Blunt Brand "1988" in MA. 1988 is now available at 4Front's Mission Dispensaries in Georgetown, Worcester and Brookline. The new brand will continue to roll out to partner dispensaries in the Bay State and to Illinois cannabis consumers later this year. The 1988 pre-rolled 1 gram blunts are packed full of 4Front's choice nugs, rolled into tobacco-free blunt cones and are available as singles in dube tubes. The filterless, slow-burning blunts are available in a variety of strains and flavors designed to enhance the strain's flavor profile and user experience.

Platinum Vape (Red White & Bloom Brands) launches in Arizona. Additional products offerings are expected to be introduced over the course of the 2023.

🧔 People

Ayr Wellness appoints David Goubert President & CEO. Jonathan Sandelman has transitioned to Executive Chair, where he will continue to serve the Company’s Board of Directors, and David Goubert, current President of Ayr, has assumed the role of President and CEO. Goubert joined Ayr from Neiman Marcus Group (NMG), where he served as NMG’s President and Chief Customer Officer. He previously led NMG’s digital and in-store retail operations as Chief Retail Officer. Previously, Goubert spent 20 years at LVMH as SVP of LVMH’s Starboard Cruise Services subsidiary.

Vireo appoints Amber Shimpa as CEO. Shimpa's appointment to the role follows eight years of cross-organizational leadership at the Company, including serving as the Company's first CFO when it began operating under the name Minnesota Medical Solutions. Dr. Kyle Kingsley will remain actively involved with the Company and continue to support Shimpa on matters related to public affairs, product quality, and as an advocate for safe and affordable access to cannabis for Minnesotans.

Verano Board member, Ed Brown, departs. Ed Brown has stepped down from its Board of Directors to return to the alcohol industry. He was previously President & CEO of The Patron Spirits Co. and President & CEO of Patrón Spirits International.

POSaBIT adds Sarah Mirsky-Terranova as Chief Compliance Officer. Most recently, she served as Chief Compliance Officer at Synctera.

Safe Harbor Financial adds Karl Racine, former Washington, D.C. Attorney General as Board Member. Racine is a litigation partner at Hogan Lovells law firm, representing clients in a wide range of civil and white-collar litigation and investigations. He became the first elected and independent Attorney General for the District of Columbia in 2015 and was reelected to a second term in 2018.

Akanda CEO, Tejinder Virk, resigns. Virk’s resignation was a result of disagreement with the company regarding contractual obligations owed pursuant to the Service Agreement between Virk, Halo Labs (guarantor), and a subsidiary of the Company, Canmart. According to Virk, the Company and Canmart committed a breach of the Service Agreement by failing to pay him monies and benefits owed.

🎙️ Interviews

Missouri shows the nation how to open up a legal cannabis market with efficiency | High Rise

Wana Brands CEO Nancy Whiteman on Growth with Conviction | Cannabis Investing

👋 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.

Highly Objective

🌵 Ayr Wellness exits AZ, appoints new CEO