👨🌾California Eliminates Cannabis Cultivation Tax
👨🌾California Eliminates Cannabis Cultivation Tax
NY sends cease & desist letters to 52 unlicensed retailers. OK and AR have enough signatures to put Legalization on November ballot. Jeeter launches special edition products through D2C.
👥 BellRock is hiring a VP Sales based in Denver, if you or someone you know is interested, feel free to reply with a resume and I can send along to the CEO.
🌿 Industry
California Governor Signs Tax Relief for Cannabis Businesses into Law. Gov. Gavin Newsom signed California’s 2022-23 state budget into law and, in doing so, enabled a significant shift in cannabis taxes that had long been sought by the industry. The finalized budget eliminates the state marijuana cultivation tax and caps the 15% excise tax where it’s at for a minimum of three years. Although some suggested tax changes would have cut marijuana taxes even more drastically – such as lowering the excise tax to 5% – industry interests were able to head off a proposal to raise the excise tax instead of capping it temporarily. Though some in the industry are still concerned the excise tax could be raised in 2025 after the cap expires, others are celebrating the victory. Kyle Kazan, CEO, Glass House Brands in an email to Forbes — “We appreciate the governor and legislature taking a step, and we are hoping it’s a significant step but not the only step. It is my hope and most in the industry that the state will continue and cut the excise tax from 15% to 5% before the end of calendar year. The legal market is competing with a generationally entrenched legacy market and pricing matters giving the inflation in everybody’s daily lives which is hitting our consumer.” [MJBizDaily / Forbes]
NY Works to Weed Out Illegal Cannabis Retailers. State regulators Thursday identified 52 unlicensed merchants who are illegally peddling cannabis in the open before New York has even issued licenses to sell cannabis. In cease-and-desist letters, the Office of Cannabis Management threatened to whack the illegal weed sellers by denying them a license to operate dispensaries legally — if they don’t stop the illicit activity. Landlords offering space to the weed operators also will be denied the right to rent space to cannabis lounges or dispensaries, if they condone black market sales on their property, the letters threaten. Eighteen of the 52 entities cited were located or doing business in New York City, most with storefronts. [New York Post]
Minnesota Legalizes Cannabis Edibles, Catching Some Republicans Off Guard. A Minnesota law went into effect last Friday legalizing edibles containing small amounts of THC, apparently surprising some Republicans, at least one of whom said he voted for the provision unknowingly. The law permits the sale of edibles and beverages containing up to 5mg of hemp-derived THC per serving. Most edibles in states where recreational cannabis is fully legalized contain 10mg per serving. The law, which passed the Republican-controlled state Senate in May, was signed into law by Democratic Gov. Tim Walz last month. But some Republicans told the Star Tribune after the law went into effect that they were caught off guard. State Sen. Jim Abeler, a Republican from a Minneapolis suburb, said that he hadn’t realized the bill broadly legalized products containing THC. He said he thought it had only permitted delta-8 THC, though it also legalized the sale of delta-9 THC. [Spokesman]
Most Cannabis Markets Experience Annual Declines in May Sales. Looking at a per-day basis, sales decreased sequentially in 9 out of 11 states according to BDSA. Compared to a year ago, sales were down in 7 markets, mostly driven by declining flower growth. In May, year-over-year growth ranged from (10.2%) in Maryland to 23.6% in Michigan. In May, year-over-year growth ranged from (25.4%) in Nevada to (10.2%) in Arizona compared to a year ago. [NCV]
Oklahoma and Arkansas Cannabis Activists Submit Signatures To Put Legalization On November Ballot. Oklahoma activists have submitted what they say are more than enough signatures to qualify a marijuana legalization initiative for the November ballot. The Oklahomans for Sensible Marijuana Laws (OSML) campaign turned in over 164,000 signatures to the secretary of state’s office. They needed 94,911 of the submissions to be valid in order to qualify the proposed statutory amendment. Responsible Growth Arkansas submitted just over 190,000 signatures to the secretary of state’s office for the constitutional amendment, which would allow adults 21 and older to purchase and possess up to an ounce of cannabis from licensed retailers. They just need 89,151 valid signatures to qualify for ballot placement. Another state with full legalization on the horizon is Missouri where advocates have turned in more than double the amount of signatures needed to qualify a marijuana legalization initiative for the ballot. [Marijuana Moment]
Denver's First Cannabis Delivery Service Shuts Down. Cannabis delivery has been legal in Aurora and Denver for nearly a year now, but the ripple effect has been minimal. No other cities in the metro area have approved cannabis delivery since then, and fewer than thirty dispensaries between Aurora and Denver combined have partnered with delivery drivers. Local rules in Denver mandate that delivery licenses must involve social equity business owners, with the programs in both cities intended to help entrepreneurs who were directly or indirectly harmed by the drug war. However, it hasn't turned out that way so far. Doobba, Denver's first cannabis delivery service, announced last month that it was shutting down after less than a year in business. Doobba founder Ari Cohen had been vocal about the challenges to cannabis delivery, including a lack of dispensaries opting in and burdensome regulations.[Westword]
Washington Liquor and Cannabis Board to formally use “Cannabis,” not “Marijuana.” The Washington State Liquor and Cannabis Board on Wednesday morning adopted a motion to implement 2022 legislation replacing the word “marijuana” with “cannabis” in state law. House Bill 1210 makes the switch in terminology to combat what it calls the historical racism associated with the word “marijuana.” After passing the Legislature unanimously, HB 1210 was signed into law by Gov. Jay Inslee on March 11. Although the terms are often seen as interchangeable, the Spanish word “marijuana” was once used to emphasize the foreign nature of the drug at a time of increased xenophobia. [Big Country News]
New Mexico Dispensaries Sold $37.7M of Products in June. While June's numbers reflect a decrease from the statewide sales numbers in May, which were $38.5M, strictly adult-use sales figures were up. $21.2M in recreational cannabis was sold in June versus $21.1M in May, and the adult-use figures in June accounted for a larger share of the market than in May. Recreational cannabis made up 56.2% of total sales in June versus 54.7% of total sales in May. June's share topped even April by a hair, when recreational sales made up 56.1% of all sales. [Las Cruces Sun News]
Calabasas Man Agrees to Plead Guilty to Charges for Scamming Cannabis Vaping Business Investors Out of at Least $28M. A former UCLA decathlete who also competed with the Philippines national team has agreed to plead guilty to two federal criminal charges for fraudulently raising more than $37M from investors who were told their funds would be used to finance companies marketing cannabis vape pens. According to his plea agreement, going back to 2010, Bunevacz created several business entities – including Holy Smokes Holdings LLC and Caesarbrutus LLC – that he claimed were involved in the cannabis industry and the sale of vape pens. Instead of using the funds to finance business operations, Bunevacz misappropriated the vast majority of the funds to pay for his own opulent lifestyle, including a luxurious house in Calabasas, Las Vegas trips, jewelry, designer handbags, a lavish birthday party for his daughter, and horses. [U.S. Department of Justice]
Clint Eastwood Wins Second Big Lawsuit Against CBD Industry. The latest verdict, which was handed down last week, awards Eastwood and Garrapata (agency which owns the rigths to Eastwood’s name and image outside of movies) $2M in damages. The claim was made against a California-based marketing company, Norok Innovation, which leveraged Eastwood’s celebrity status to drive online traffic—via a “hidden metatag game”—to a website selling CBD products. Fabricated news articles and manipulated search results made it appear as if Eastwood endorsed the products. The claim argued that these were “products he likely would have been unwilling to endorse in the first place.” In October last year, Eastwood and Garrapata won a $6.1 million dollar claim in a similar lawsuit against Mediatonas UAB, a Lithuanian company, which also featured false articles in which it appeared that the actor endorsed CBD products. [Vanity Fair]
💵 Deals
Bespoke Financial x BLAZE® Solutions — Partner to Provide Dispensaries with B2B Buy Now Pay Later. The partnership establishes an embedded lending product providing cannabis retailers access to Bespoke’s financing at the click of a button within BLAZE’s Dispensary POS software. As a solution, BLAZE and Bespoke have launched a dispensary financing program exclusively in California and Massachusetts, allowing dispensaries on the BLAZE platform to easily view financing terms without having to provide financial information or undergo an extensive underwriting process. By allowing easy access to funds for vendor payments, the financing program will boost retailers’ ability to make timely payments that trickle up the supply chain, operate at a larger scale to increase profitability, and carry an assortment of brands. [🎙️ Podcast w/ Bespoke Financial CEO, Head of Revenue & Blaze CEO]
Columbia Care — Approval of Business Combination with Cresco Labs at Special Meeting of Shareholders. Shareholders of the Company approved the proposed business combination with Cresco Labs. 98.6% of the votes were for the transaction.
Chalice Brands — Acquires Four Cannabliss Retail Locations in Oregon. The Company signed an amending agreement July 1, 2022, to improve the terms of its previously disclosed Asset Purchase Agreement, which was originally executed on September 16, 2021, to acquire four retail stores branded Cannabliss from Acreage, for total consideration of $6.5M. This brings Chalice Brands statewide retail footprint in Oregon to 18 locations with iconic dispensary locations added such as the Fire Station store in Southeast Portland.
NewLake Capital Partners — Invests $50M Across Three Properties. NewLake acquired two properties from a leading publicly-traded MSO and amended its existing lease with another publicly-traded MSO to fund an already completed expansion. As of June 30, 2022, NewLake has ~$28.7M of unfunded commitments. The two properties NewLake acquired include an ~38,000 sq ft operational cultivation facility in Pennsylvania for $14.5M and an ~56,500 sq ft operational cultivation facility in Nevada, a new market for NewLake, for $13.6M. NewLake is also providing an additional $750,000 for tenant improvements at the Pennsylvania property. NewLake’s $21.0M investment in an existing operational cultivation facility funded an ~50,000 sq ft expansion as well as other capital improvements at the site.
Akerna— Closes $10M Public Offering. The units were sold at a public offering price of $0.23 per unit and the pre-funded units were sold at a public offering price of $0.2299 per pre-funded unit. The pre-funded warrants are immediately exercisable at a nominal exercise price of $0.0001 or on a cashless basis and may be exercised at any time until all of the pre-funded warrants are exercised in full. The common warrants have an exercise price of $0.23 per share subject to certain adjustments, are immediately exercisable and will expire five years from the date of issuance.
High Tide — Acquires Nine Operating Retail Cannabis Stores from Choom Holdings. The Stores include locations in Vancouver (2), Ontario (1), and Alberta (6). For the three months ended April 30, 2022, collectively, the Stores generated annualized revenue of CAD$10.2M and annualized Adjusted EBITDA of CAD$1.3M. The purchase price represents 3.8x annualized Adjusted EBITDA for the three months ended April 30, 2022.
📄 Company Updates
Simplifya — Forms Relationship with Burns & Levinson to Bring Real-Time Financial and Lending Guidance to Help Cannabis Ecosystem Stay Compliant. Simplifya, a regulatory and operational compliance software platform serving the cannabis industry, formed a relationship with Burns & Levinson, a national law firm with nearly a decade of experience in the cannabis industry. Burns & Levinson will provide real-time finance and lending regulatory guidance to Simplifya Market Guide, a new RegTech platform that arms cannabis and cannabis-related businesses with comprehensive, user-friendly regulatory summaries for all 50 states.
springbig — Exclusive Partnership with Subscription-Based Service Kind+. This exclusive partnership offers a multi-faceted platform that powers a subscribe-and-save offering at scale in cannabis. The platform allows retailers to earn recurring revenue while creating a concentrated base of high-value end consumers, who receive special everyday member pricing as well as additional consumer benefits.
SC Labs — Michigan’s Can-Lab Joins SC Labs National Cannabis and Hemp Testing Network. Michigan cannabis lab Can-Lab has joined the SC Labs national testing network. CA-based SC Labs is now licensed to test cannabis in four states—California, Oregon, Colorado and Michigan, with national hemp testing facilities located in Colorado and California, after the recent addition of Colorado’s Agricor and Botanacor Laboratories to the portfolio. This represents one of the largest testing laboratory footprints in the U.S. cannabis industry.
🏬 Retail
Burb — Receives Approval for 8th Store, First-Ever Cannabis Retailer Approved by Major University in Canada at University of British Columbia (UBC). Burb, a cannabis culture brand and high-end retailer of branded products and apparel has received final approval from the Metro Vancouver Regional District (MVRD) Board of Directors to open a cannabis retail store at the University of British Columbia, marking it's eighth location in British Columbia (BC), the maximum allowable per the province's current retail cap for any single brand. Burb's eighth dispensary marks the first-ever cannabis retail store approved on a major university campus in Canada.
The Artist Tree — Opens First Fresno Dispensary. Improvements for the space are complete, with only final touches remaining. Construction and renovation for The Artist Tree’s Fresno location is expected to be north of $1M. The Company is anticipating anywhere from 300 to 500 customers a day at the Fresno location.
Embarc — Set to Open Fresno’s Second Dispensary. Following The Artist Tree’s Monday soft launch will be Embarc’s July 13th debut at a former T-Mobile location. The Fresno location will be Embarc’s fifth store, with existing locations in Alameda, Fairfield, Martinez and South Lake Tahoe. The Fresno location is the farthest south the company has expanded.
Planet 13 — Closes on Florida Property Acquisition for Campus Concept. The 23-acre parcel has a 10,500 sq ft building currently located thereon, for its planned cultivation and processing expansion in Florida, for $3.3M. The staged cultivation facility is planned to be a 63,000 square foot building for indoor cultivation, estimated to annually produce 12,000 pounds of premium flower, 2,400 pounds of premium small flower buds, and 6,000 pounds of trim at our 23-acre parcel. The staged cultivation facility is a modular facility designed similarly to the specifications of Planet 13's existing premium California's cultivation facility. Until that building is completed, Planet 13 will continue to use the existing 10,500 sq ft building for cultivation and processing activities in Florida.
Verano — MÜV Tamarac, 49th Florida Location. MÜV Tamarac is located at a busy thoroughfare with an average daily traffic count of 53,000 vehicles. The dispensary is based in Broward County, the second largest county in Florida with a population of 1.9 million.
Schwazze — Debuts Star Buds Brand Evolution With The Remodel Of Star Buds Aurora, Colorado. The Star Buds brand evolution moves away from a color theme traditionally used within the cannabis industry and incorporates a warmer color scheme of kelly green, yellow, and orange. The dispensaries feature in-store signage that highlight distinctly unique Star Buds phrases such as, "Good Vibes This Way," "Find Your Happy," "The Freshest Greens Served Daily," including brand pillar messaging of the Company's core values: "Top Quality, Widest Selection, Stellar Service." The new design provides an enhanced consumer experience and more space for budtenders to better serve customers.
Trulieve — Opens Morgantown, WV Medical Dispensary, 5th in WV. The 5,100 square-foot dispensary is situated in a highly trafficked area of Morgantown, adjacent to University Town Center and within the Granville Square Shops outlet mall. The Company also opened dispensaries in Hurricane, WV and Coral Springs, FL.
🌱 Product
Jeeter — Launches Direct-To-Consumer (D2C) Market Platform.
Jeeter’s new D2C platform will feature exclusive products that are not available in retail storefronts. The company will only be releasing special-edition, limited, artful boxes of cannabis products for its D2C platform. The inaugural box offers a Live Resin vape, called Jeeter Juice, along with a Liquid Diamonds cartridge, Baby Jeeter joints, and a blunt. Jeeter’s D2C platform follows the brand’s recent launch of its Live Resin and Diamonds lines, as well as expansion into two new states (AZ, MI).
The Parent Company — Enters into Exclusive Brand Licensing and Cultivation and Production Agreements in Maryland with Curio Wellness. Initial brands to be introduced under the terms of the Licensing Agreement include Monogram, Caliva, Mirayo by Santana, Deli and other TPCO owned brands, in a variety of product form factors including jarred fresh flower, pre-rolls, premium vapes, and infused gummies and chocolates. Some of the products will feature signature strains of cannabis cultivated by Curio in collaboration with The Parent Company. The Parent Company brands are expected to initially be available at Curio's Far & Dotter dispensaries, with broad wholesale distribution to dispensaries across the State to follow. The Licensing Agreement has an initial term of four years with further renewal terms and anticipates a potential expanded partnership into additional states.
🧔 People
OCRC — Board Appoints Permanent President & CEO. Following the completion of a competitive national search, the Board of Directors of the Ontario Cannabis Retail Corporation (OCRC) is pleased to announce the appointment of David Lobo to the position of President and Chief Executive Officer of the Ontario Cannabis Store (OCS) on a permanent basis. David has held the role of Interim President and CEO since March 2021, during which time the organization has undergone unprecedented growth. During his interim leadership, the OCS scaled its operations to move over 84 million units of cannabis to all corners of Ontario—resulting in $1.5B of retail sales, and 40% of Canada’s legal recreational cannabis market.
Seed Talent — Names Greg Healy Chief Product Officer. Seed Talent is a community-based knowledge platform that supports the education and advancement of cannabis industry professionals. Greg Healy is a former Britannica executive with a successful track record of building transformative business models to help businesses leverage emerging technology platforms and create new markets at scale, Healy will be responsible for leading the development of the company’s Learning Experience Platform (LXP), a talent management and development marketplace.
AUDACIOUS — Appoints Jill Swainson to Board. Swainson will replace Avi Gellar who served as board member since November 2020, and who has resigned for personal reasons. Swainson previously served as Chief Legal Officer & Corporate Secretary at Aurora and previously was a Partner in Corporate, Commercial, IP at Brownlee.
Flora Growth — Appoints Brandon Konigsberg to Board. Konigsberg is a seasoned leader in finance and will focus on Flora’s key growth drivers to advance the Company’s global expansion. Konigsberg is a former executive of JP Morgan Chase, and has held various leadership roles, serving as CFO and COO for various growing and turnaround business units. After 24 years at JPMC, Konigsberg retired to focus full-time on consulting, advising and entrepreneurial endeavors. He is currently the President and CFO of Fynn, an education financing company he joined as a consultant in 2021. Konigsberg also holds various board director, chair and audit committee memberships including Chicago Atlantic Real Estate Finance.
🎙️ Interviews
Niklas Kouparanis, CEO, The Bloomwell Group on Anticipating Germany’s Adult-Use Cannabis Market (Ganjapreneur)
Socrates Rosenfeld, CEO, Jane Technologies, on Digital Personalized Cannabis Experience (Eighth Revolution)
Erick Dickens, CEO, Kadenwood (MJBulls)
Matias Pino, CFO, POSIBL (Highly Capitalized)
Lauren Fontein, Founder & Chief Compliance Officer, The Artist Tree (Alchemy)
Audrey Roy, Hazy, Co-Founder (Muse)
👋 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.