📉 Cannabis Companies have raised $294M in 1H 2022, less than 1/3 the total raised in 1H 2021
📉 Cannabis Companies have raised $294M in 1H 2022, less than 1/3 the total raised in 1H 2021
Canopy Growth issues shares to holders of ~$198M of Convertible Notes. Tyson 2.0 raises $9M Series A led by JW Asset Management. Akerna prices $10M offering. Perfect Union gets new CEO.
👥 If you happen to be in Boston or have friends in town that would be interested in attending a Highly Objective Happy Hour I’m hosting today from 5-8p ET, send them the link here [note: two of the companies that attended a happy hour I hosted last Summer is announcing a meaningful partnership, podcast for that dropping tomorrow].
Scott Jennings (PANTRY) happened to be in Worcester so we were able to grab coffee this morning before I met up with Alex Mazin (Bud’s Goods) to tour their Worcester dispensary (thanks to Michael Markarian, Contempto Speciality Packaging, for connecting me with his college roommate at Babson). I’m looking forward to exploring more dispensaries and brands in MA this week, along with checking out Ayr Boston’s Back Bay store that opens this Saturday, July 2nd.
🌿 Industry
It’s No Longer High Times For Cannabis Funding. Venture investment in the cannabis space has fallen drastically of late. So far this year, just 41 cannabis-related companies globally have raised seed or venture funding. Collectively, they’ve closed on $294 million in 2022, which is less than a third the total raised in the first half of 2021. At the current pace, this year is on track to see the lowest total funding since 2017. “Capital markets have dried up,” echoed John Yang, founder and CEO of Treez. Treez is one of a few startups to secure a big round this year, closing on a $51M Series C. In addition to strong fundamentals, Yang said it helped that the company began fundraising in spring of 2021.
New York Chooses Minority-Led Investment Team to Manage $200M Fund to Support Social Equity in Cannabis Industry. Social Equity Impact Ventures, LLC, a premier minority-led investment team, to sponsor and manage the $200 million New York Social Equity Cannabis Investment Fund. Impact Ventures is a joint venture between an entity led by NBA Hall of Famer and entrepreneur Chris Webber, who is currently an active partner in a fund for cannabis-related ventures, and entrepreneur Lavetta Willis, also a partner in the cannabis-related venture and who has extensive brand building experience; and a firm affiliated with Siebert Williams Shank, one of the nation's leading minority-and women-owned investment banking firms, that will be led by SWS CEO Suzanne Shank and SWS Chief Administrative Officer William Thompson, the former New York City Comptroller.
Fitch downgrades Canopy Growth, citing cannabis market-share losses. Fitch downgraded the rating for Canadian cannabis producer Canopy Growth to CCC, the agency’s fifth-lowest rating, and warned of potential further negative actions. Fitch’s CCC rating carries substantial credit risk with a “very low margin for safety” and a “real possibility” of default, per the agency’s ratings scale. Canopy’s issuer default rating was previously rated B-, or highly speculative. Fitch Ratings said the downgrade reflects: 1) Significant market-share losses in the Canadian cannabis market, 2) Execution missteps and 3) Challenges pivoting its cultivation strategy. “As a result, it is highly doubtful that Canopy can improve EBITDA trends to reach operating cash flow breakeven in fiscal 2025 (by March 31, 2025) as Fitch previously expected, and creates greater uncertainty around capital structure sustainability.” The full Fitch report on Canopy is available here.
Nevada cannabis board green-lights consumption lounges. Nevada’s Cannabis Compliance Board voted to approve regulations paving the way for cannabis consumption lounges in the state, according to a release from the board. The first state-sanctioned cannabis consumption lounges could potentially open before the end of the year, according to the regulatory board. The long-awaited vote by the board — born out of legislation that passed in Nevada in 2019 — means would-be licensees could apply for approval for lounges later this year. The board, according to a news release, plans to award the first licenses this fall.
Huntington Beach to discuss future of cannabis after measure fails. At its next city council meeting, the council plans to discuss whether to ask voters, again, to adopt a special tax on cannabis businesses, the first step to allowing pot shops and manufacturers to operate in the city in the upcoming November election. Measure A failed to get the supermajority votes needed in the recent June election cycle. The measure would place a 6% tax on cannabis retailers and up to 1% on other types of cannabis operations, such as manufacturing and distribution. More than 49,000 registered voters voted on the measure. More than 64% voted in favor of it. Meanwhile, 35% voted against it. The initiative needed at least 66% to pass.
💵 Deals
Tyson 2.0 — $9M Series A to Expand Celebrity Brand Portfolio. Tyson 2.0 has sold over 4,000 pounds of cannabis flower across North America. Today, the Company announced the close of its oversubscribed $9 Million Series A round led by JW Asset Management. Additional investors in the round include K2, Ambria Capital, Tress Capital, and Patrick Carroll. The raised funds will be used to acquire more celebrity intellectual property, scale marketing efforts, accelerate distribution, and further invest in the development of Tyson 2.0's house of brands strategy.
Canopy Growth — Exchanges with Holders of ~$198M of Convertible Notes. Canopy Growth has entered into privately negotiated exchange agreements with a limited number of holders, including Constellation Brands through its wholly-owned subsidiary Greenstar Canada Investment Limited Partnership (GCILP), of the Company's outstanding 4.25% unsecured convertible senior notes due 2023, to acquire ~$198M aggregate principal amount of the Notes from the Noteholders in exchange for common shares of the Company and ~$2.4M in cash for accrued and unpaid interest.
Akerna — Prices $10M Public Offering through ~29.4M Units. The units are being sold at a public offering price of $0.23 per unit and the pre-funded units are being sold at a public offering price of $0.2299 per pre-funded unit. The pre-funded warrants will be 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 will have an exercise price of $0.23 per share subject to certain adjustments, will be immediately exercisable and will expire five years from the date of issuance. The Company intends to use the net proceeds for general corporate purposes, including servicing its ongoing debt obligations under their convertible notes, working capital, marketing, product development and capital expenditures.
IIPR — Expands Real Estate Partnership with GTI at PA Property. The lease amendment in Danville, PA, provided $55.0M in reimbursement to Green Thumb for the recently completed development of a 152,000 sq ft industrial building for cultivation and processing, in addition to a new electric substation on the property to enhance electrical load capacity. The lease amendment also adjusted the base rent under the lease to take into account the additional available funding for the development. IIP funded in full the reimbursement, making IIP’s total investment in the 300,000 sq ft property $94.6M. This lease amendment was made pursuant to the exercise of an option by Green Thumb for IIP to provide reimbursement of these improvements.
iAnthus — Closing of Recapitalization Transaction, $25M Additional Financing. iAnthus has completed its previously announced recapitalization transaction pursuant to the terms of a restructuring support agreement, dated July 10, 2020 and as amended June 15, 2021, between the Company, all of the holders of the 13% senior secured convertible debentures, and a majority of the holders of the 8% unsecured convertible debentures issued by the Company. As of the closing of the Recapitalization Transaction, the Company issued in aggregate 6,072,579,705 Common Shares to the Secured Lenders and holders of the Unsecured Debentures. Following the closing of the Recapitalization Transaction, certain of the Secured Lenders and Consenting Unsecured Debentureholders acquired 8% senior secured debentures in the aggregate principal amount equal to $25M due June 24, 2027 by iAnthus SubCo and guaranteed by the Company and its subsidiaries.
Northern Lights Acquisition Corp — Additional Rescheduling of Special Meeting to Approve Acquisition of Safe Harbor Financial and Confirmation of Funding to Extend Period to Consummate Initial Business Combination. The Company has deposited an aggregate of $1,150,000 (representing $0.10 per public unit sold in the Company's IPO) into the Company's trust account to extend the period of time it has to consummate the Business Combination by three months from June 28, 2022 to September 28, 2022, although the Company currently anticipates that the Business Combination will close by June 30, 2022 subject to satisfaction or waiver of the closing conditions. 5AK, LLC, the Company's sponsor, funded the deposit in exchange for a non-interest bearing, unsecured promissory note.
JourneyOne Ventures — Closes $10M Fund. The fund is dedicated to investing in founders with senior-level executive experience within the cannabis industry. JourneyOne Ventures has already started to invest in startups that are creating B2B software customized for the cannabis industry, biotech and consumer products, including Komplyd, Nabis, Cellibre, Wunder and Plant People.
Greenlane — $5.4M Registered Direct Offering. The Company entered into a definitive agreement with a single institutional investor, for the purchase and sale of 21,600,000 shares of its common stock and warrants to purchase 21,600,000 shares of common stock at a purchase price per share of $0.25 in a registered direct offering. The warrants to be issued will have five and one-half year term, will become exercisable six months following the date of issuance and will have an exercise price of $0.25 per share.
📄 Company Updates
Flower One — FY2021 Financial Results.
Revenue of $58.4M, up 70% Y/Y, 37% GM
Began its debt and corporate restructuring, reducing ongoing debt service obligations
Initiated facility upgrades to further improve product quality and consistency, leading to higher average selling prices from year prior
Net loss of ($24.4M) compared to a Net loss of ($117.5M) for in 2020
As of December 31, 2021, the Company had cash and cash equivalents of $0.9M, compared with $1.1M as of December 31, 2020
WM Technology — Joins Russell 3000®, Russell 2000® and Russell Microcap® Indexes. Annual Russell indexes reconstitution captures the 4,000 largest US stocks as of May 6, ranking them by total market capitalization. Membership in the US all-cap Russell 3000® Index, which remains in place for one year, means automatic inclusion in either the large-cap Russell 1000® Index or small-cap Russell 2000® Index as well as the appropriate growth and value style indexes. FTSE Russell determines membership for its Russell indexes primarily by objective, market-capitalization rankings and style attributes.
MariMed — Files final Non-Offering Prospectus. Concurrent with its prospectus filing, the Company also received conditional approval from the Canadian Securities Exchange (the “CSE”) to list the Company’s common shares on the CSE under the symbol "MRMD". Listing of the common shares is subject to the satisfaction of certain customary conditions, including the receipt by the CSE of all final documentation. The Company anticipates the dual listing on the CSE to be effective in July of 2022.
Tinley's — Brings Three New Clients to Its Long Beach Facility, Announces Debt Settlement and Provides Corporate Update. The company will manufacture infused beverages for three new branded clients, Drippy, Syreness and Vibe. Production at Tinley's Long Beach, California facility for these brands is expected in Q3 2022. Tinley's announces that the Company has entered into a debt settlement agreement with Anthony Yanow pursuant to which it has agreed to settle the previously disclosed $100,000 capital markets advisory fee owing by the Company to the Consultant in connection with the Company's previously announced closing of its up to $3,500,000 principal amount 12% grid note issued to Blaze Holdings, which Indebtedness will be settled by way of the issuance of 1,216,857 common shares.
Unrivaled Brands (Silver Streak) — Confirms Data Breach Stemming from Internal Error. Recently, Unrivaled Brands dba Silver Streak, reported a data breach stemming from a misconfigured web application that caused personal information to be accessible on the company’s website. According to Silverstreak, the breach resulted in the names, dates of birth, addresses, driver’s license numbers, and email addresses of certain individuals being compromised. On June 17, 2022, Silverstreak filed an official notice of the breach and sent out data breach letters to all affected parties.
Canopy Growth — Cointreau Trademark Battle Ends. Remy Cointreau sued Canopy Growth Corporation for alleged trademark infringement over its CBD-infused sparkling water brand Quatreau. Cointreau claimed that Canopy used Quatreau to "trade-off the market dominance and fame of the Cointreau mark," arguing that 'only the "n" sound' differentiated the two brands, Spirits Business reported earlier. The Canadian cannabis giant and its U.S. subsidiary denied fully or partially 112 of the 115 claims Cointreau and its U.S. subsidiary made in the complaint and jury demand in October. Now, according to a filing in Manhattan federal court, the France-based producer of Cointreau orange liqueur has settled the trademark dispute, reported Reuters.
Agrify — Enters New Zealand Cannabis Market with Its End-to-End Cultivation and Extraction Solutions through Sales and SaaS Licensing Agreement with Ora Pharm. Ora Pharm, a Waikato, New Zealand-based health and wellness company developing high-quality, sustainably-produced medicinal cannabis, with a full suite of end-to-end hardware and software products to be utilized at a 5,000-square-foot facility in Auckland, New Zealand. Under the terms of the Agreement, which has a base value of $1.625 million, Ora Pharm, a licensed cultivator and distributor of medicinal cannabis, has committed to purchase 20 Vertical Farming Units (VFUs) that will be used to grow cannabis, as well as several cutting-edge extraction technologies. In addition, Agrify will provide access to the fully integrated Agrify Insights™ seed to sale automation software for five years in exchange for monthly recurring SaaS fees.
SC Labs — New Multi-State Testing Operation for Cannabis and Hemp. SC Labs recently announced its new partnership with Agricor and Botanacor Laboratories in Colorado. As part of the company’s new corporate leadership, long-time operating executive Jeff Journey will serve as the company’s new CEO. Under the SC Labs brand, the new multi-state lab will service cannabis and hemp brands in Oregon, California, and Colorado, and will soon announce a new partnership with Can-Lab in Michigan. Journey previously served as Vice President and General Manager for a $1B+ Biosciences business unit of Thermo Fisher Scientific, and brings experience in lab business intelligence and operations to the new role.
🏬 Retail
Ayr — Launching Adult-Use Cannabis Sales in the Heart of Boston’s Back Bay, the Company’s First Adult-Use Dispensary in Greater Boston. Located next to the Apple Store and across from the Prudential Center, the dispensary is expected to benefit from the significant shopping, dining and cultural activities the Back Bay is known for, and will feature a wide range of cannabis brands and products, including Ayr’s own Kynd premium flower, Secret Orchard vapes, Wicked edibles, Levia THC infused seltzer, and HAZE concentrates.
Sweet Flower — Collaborates with THC Design on an Exclusive New Product Launch. Sweet Flower, Los Angeles' largest owned and operated cannabis retailer, and THC Design, one of California's premier legacy cannabis brands, are launching a co-branded product collaboration featuring THC Design's timeless favorite, Crescendo, exclusively at all Sweet Flower stores. Crescendo is the most well known cultivar from THC Design. The sativa dominant hybrid features a unique phenotype, and is a cross of Chem Dawg, I-95, and Mandarin Cookies.
Verano — Opens MÜV Winter Haven, the Company’s 48th Florida Location. MÜV Winter Haven is located in Polk County, the fastest growing county by population in Florida and the seventh fastest growing county by population in the country. The county experienced growth of 3% from 2020 to 2021. MÜV Winter Haven is located at a busy thoroughfare with an average daily traffic count of 28,000 vehicles.
🌱 Product
Kiva x Jetty Extracts — Limited Edition Collection of Lost Farm Edibles. The limited-edition collaboration will include Lost Farm Gummies and Chews featuring two of Jetty Extracts’ most popular strains, allowing consumers to consume the strains via both vape and edible format. The two collaboration products available at launch include: Honey Apple x Sunshine OG Lost Farm Gummies and Sour Berry x Legend OG Lost Farm Chews.
Cann x Sweet Flower — Passion Peach Maté. This three-way collaboration from beverage brand Cann, SoCal dispensary chain Sweet Flower and Swedish singer-songwriter Tove Lo drew favorable comparisons to Snapple’s iced tea. Made with yerba maté, it’s notable for being the first of Cann’s “social tonics” to include a punch of natural caffeine alongside the cannabis — about the equivalent of one espresso shot per can. Available exclusively at Sweet Flower dispensaries and sweetflower.com.
Petalfast Partners x Turning Point Brands — Expand Distribution of Zig-Zag. Under the terms of the agreement, Petalfast will provide full service sales and marketing support to Zig-Zag and its full complement of products in the cannabis retail channel throughout California. Turning Point’s go-to-market strategy, significant experience navigating federal, state and local regulations, and powerful distribution network has brought their portfolio of brands into over 215,000 retail outlets in North America.
TerrAscend — Introduces Wiz Khalifa's flower, Khalifa Kush, in Gage dispensaries.
At launch, all 12 Gage dispensaries will offer 1g pre-rolls and eighth flower jars with additional KK products, including extracts and concentrates to follow.
Curaleaf — Fab 5 Freddy and Curaleaf Expand B NOBLE Cannabis Brand to New Jersey. The brand's signature 2-pack pre-rolls are now available at Curaleaf's locations in Bellmawr and Edgewater Park, as well as medical and adult-use dispensaries across the state. The New Jersey adult use cannabis market has already generated $24 million in its first month of sales and is projected to exceed $528 million by the end of 2022. B NOBLE is now available in nine states including AZ, CO, IL, MA, MD, MI, NV, NJ and NY.
Jushi — Debuts Line of Concentrate Products Using Hydrocarbon Extraction Diversifying its Offering of The Lab™ Vape and Concentrate Products. The Lab™ Live Resin is the second of several single-source concentrate product lines to be launched by Jushi. Last month, the Company launched its first line of solventless live rosin extracts. Initially, Jushi will exclusively carry The Lab™ Live Resin 500mg full-spectrum 0.5 gram 510 cartridges at Beyond Hello™ retail locations in Pennsylvania. The Company plans to roll out its hydrocarbon-extracted line at partner dispensaries across the Commonwealth in the coming months, as well as in additional states such as Massachusetts, Virginia and Nevada.
MariMed — Launch Betty’s Eddies Brand Into Maine Adult-Use Cannabis Marketplace. The licensing agreement is with East Coast Cannabis Company, a vertical cannabis producer and distributer in the Maine Cannabis market. The licensing agreement provides for the adult-use distribution of MariMed’s top-selling brand, Betty’s Eddies full-spectrum fruit chews and the other successful SKUs in the line-up, including Bedtime Betty’s. The intention longer-term is to roll out other edibles brands in MariMed’s portfolio, including Bubby’s Baked soft and chewy baked goods and Vibations: High + Energy powder energy drink mix.
Garden Society — Reserve Product Line with THCV-Rich Sun Grown, Full Flower Rosettes from Emerald Spirit Botanicals. The first product to launch in Garden Society’s new Reserve tier, the Rosettes feature a THCV-rich sun grown flower of the Pink Boost Goddess strain. This exclusive, award-winning flower is grown by Emerald Spirit Botanicals, a women-led farm in Mendocino, CA. The new Reserve Rosettes will be available in select dispensaries across California including Big Sur Cannabotanicals, Cannabist, Erba, Ganja Goddess, Solful, Sweet Flower, The Apothecarium, Cornerstone Wellness, Sespe Creek, and Velvet in Martinez.
🧔 People
Perfect Union — Names Tom Sheridan as New CEO. Denyelle Bruno had been at the helm for less than a year (joining this past October). Sheridan said that Bruno's departure reflects a change in strategy at MWG. "Based on the state of the industry and the state of the economy, cannabis is contracting," Sheridan said. "Denyelle was a growth-mode CEO and she wanted to scale, but the company's focus now has shifted toward longevity and profitability." One efficiency will be in reworking the company's cultivation operation to lower costs of production. Sheridan is a real estate attorney by trade, helped found MWG Holdings in 2012 and has served on its board since the beginning of the year.
Flower One — Hires Tim Shoemake as COO. Tim Shoemake has over 25 years of experience in global agriculture, and food and beverage manufacturing for some of the largest brands and retailers in the world. His agriculture experience includes complex supply chain and large-scale juice production for industry heavyweights such as Odwalla (The Coca Cola Company), Naked Juice (PepsiCo) and Evolution Fresh (Starbucks). Tim’s career in private label juice manufacturing includes exclusive partnerships with grocery leaders such as Costco and Safeway. Tim has true seed to sale experience across multiple industries. After entering cannabis, Tim has worked in the industry for both multistate and publicly-traded companies in CA, CO, & NV.
Hydrofarm — Departure of President Terence Fitch. Fitch joined the Company in February 2019 after time as CEO of Drink Teck, a functional beverage company, and as SVP & GM, West Region at Coca-Cola.
🎙️ Podcasts
Markets in Price Re-Discovery Mode (Cannabis Investing Network)
Pre-Roll mania with Bryan Gerber CEO & Founder, Hara Supply (High Rise)
Cannabis and the 4th of July holiday (High Rise)
👋 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.