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📉 Cannabis Stocks Shows Pessimism on SAFE
Canopy USA converts C$125.5M in TerrAscend Debt to Exchangeable Shares. CT Recreational Cannabis to start on January 10th. Wyld Launches in Illinois. MariMed CEO dies unexpectedly.
If MSOS/Cannabis stocks serves as any indication of potential for SAFE Banking to get done, things don’t look so rosy with MSOS down (34%) over the past 6 trading days.
Jackson BevCo Inc., a subsidiary of the Jacksons Food Stores convenience-store chain, is partnering with CordovaCann Corp. to open cannabis retail stores within or beside c-stores owned and operated by Jackson BevCo. Jackson BevCo, Boise, Idaho, has 65 convenience stores in the Western United States under the Big Smoke and Tobacco Connection brands. CordovaCann is a Toronto-based cannabis-focused consumer products and retail company. The companies on Nov. 29 entered a non-binding letter of intent to execute a managed services agreement (MSA) and facilitate the opening of the stores. Cordova will facilitate the opening of the cannabis retail stores, with a primary focus on regulatory process, compliance, training, security, inventory selection and inventory procurement. The stores will be owned and operated by Jacksons BevCo, and the retailer will pay Cordova a royalty based on a percentage of revenues generated by these cannabis retail stores. Initial locations being discussed are in Washington, Oregon and Arizona.
Connecticut Recreational Cannabis Sales to start on January 10, 2023. The law requires at least 250,000 square feet of growing and manufacturing space in the aggregate be approved for adult-use production before retail sales can begin at licensed retailers, including hybrid retailers. With all four producers successfully converted, the 250,000 square-foot threshold has been met. The following Medical Dispensaries have been notified that they successfully completed the necessary steps for conversion to a hybrid license and may begin selling recreational cannabis:
Vangst relesaes “The State of the Cannabis Economy: An Inside Look.” Vangst released the white paper which covers the economic pulse of the cannabis industry based on results from their 2022 Salary Guide survey that closed in September. Key insights include:
Less than 50% of those in traditional industries see their capital spending or hiring numbers growing in the next six months. Nearly 70% of surveyed cannabis companies feel their capital spending and hiring will grow
While cannabis companies face troubles a mainstream business could never imagine — like 80% effective tax rates thanks to U.S. Tax Code 280E — inflation, labor, an uncertain national economy are all big worries for business leaders, no matter their industry
The top challenge facing both the cannabis industry and traditional industries is reported to be inflation
Canopy USA — Converts C$125.5M in TerrAscend Debt to Exchangeable Shares at C$5.10/share. The aggregate loans plus accrued interest comes out to 24,601,467 exchangeable shares of TerrAscend at a notional price of C$5.10 per Exchangeable Share and 22,474,130 new common share purchase warrants to acquire common shares in the capital of TerrAscend at a weighted average exercise price of C$6.07/share. All of the New Warrants expire on December 31, 2032. Following the issuance of the New Securities, Canopy USA holds 63,492,037 Exchangeable Shares and 22,474,130 New Warrants and is deemed to own 1,072,450 Common Shares that are subject to an option for an aggregate exercise price of $1.00.
Glass House Brands — Closes $50M Series B Preferred Stock Offering. The final closing of the Offering included approximately $7.8M of cash. Of this amount, about $7.0M was fresh capital, while about $0.8M was used to fully redeem the remaining issued and outstanding shares of Series A Preferred Stock of GH Group. Combined new cash raised from all three closings is ~$26.5M, not including the amount used to redeem the shares of Series A Preferred Stock. The intended use of net proceeds from the Series B offering of approximately $26.5M includes $10M which was used to repay an interim bridge loan from the Company's senior lender immediately following the first closing, and approximately $16.5M for working capital and transaction costs.
XS Financial — $30M Upsized CapEx Facility for PharmaCann. “PharmaCann is able to match the useful life of the equipment with the leasing term which optimizes our cost of capital and preserves our liquidity and other financing sources for other longer-term growth investments" said Patrick Unzicker, CFO.
HEXO — Repayment of 8.0% Unsecured Convertible Debentures. The debentures were issued December 5, 2019, which matured on December 5, 2022 in the amount of C$40.1M together with all accrued and unpaid interest.
Grown Rogue — $2.0M Convertible Debenture Financing led by Mindset Capital. The Convertible Debentures bear an interest of 9% per year, paid quarterly, and mature 36 months from the date of issue. The Convertible Debentures are convertible into common shares of the Company at a conversion price of $0.20 CAD per Common Share. Additionally, on closing, the Company issued to the purchasers of the Convertible Debentures an aggregate of 6,716,499 warrants, that represent 50% coverage of each purchaser's Convertible Debenture investment. The Warrants are exercisable for a period of three (3) years from issuance into Common Shares at an exercise price of $0.25 CAD per Common Share.
Freehold Properties REIT — Withdraws $115M IPO. Freehold is an internally managed real estate investment trust focused on financing specialized industrial cultivation/processing and retail/dispensary cannabis properties. As of its most recent filing, the company's portfolio was comprised of six mortgage loans and one note receivable. The Franklin, TN-based company was founded in 2019 and booked $4 million in revenue for the 12 months ended September 30, 2021.
📄 Company Updates
POSaBIT — Continues to Champion PIN Debit Solution for Cannabis to Reduce Cash Reliance. While the cannabis industry continues to struggle with cash-based or alternative—and often risky—payment options, POSaBIT continues to champion the POSaBIT payments platform. Leveraging the compliant and highly resilient PIN debit system, POSaBIT payments take the risk out of other, less reliable industry payment platforms like point of banking, clunky ACH or expensive third-party ATMs. Cashless ATM solutions (also known as point of banking), once seen as the digital solution to cannabis’ cash problem, were blocked from accessing traditional ATM networks in early December. POSaBIT has successfully worked to move most of its customers to PIN debit, accelerating the shift to more reliable and compliant PIN debit in recent months. Unfortunately, many payment providers in the cannabis industry continued to rely on cashless ATM as it became increasingly clear that it was a risk to retailers. As a result, the December shut down left many retailers without a safe alternative to cash. For those retailers struggling with cashless ATM, POSaBIT has offered a rapid and low-cost conversion to PIN debit. Dutchie has also recommend using a PIN Debit solution.
Green Flower — GF Institute Launches Cannabis Workforce Development Programs For Retail, Cultivation, and Manufacturing Professionals. Each program contains six hours of expert-led online courses, a final exam consisting of 50 multiple choice questions (passing score is 70% or more), and an official GFI Certificate & digital badge upon completion. Passing the exam automatically grants GFI Membership, which gives the Certificate-holder access to the Employer Network filled with companies looking to hire people with this type of training and credential, new continuing education opportunities, and a vibrant community of passionate cannabis professionals. The company also partners with careersincannabis.com, which has more than 1,000 cannabis jobs available at any given time. Green Flower has also partnered with Curaleaf/Grassroots for select employees to take part in its curriculum—built, led, and taught by the renowned Ganjier council.
Petalfast — Partners with Eagle Eyes Transport for Secure Cannabis Distribution in Massachusetts. Through this partnership, Eagle Eyes Transport will supply Petalfast’s growing brand portfolio with full-service transport, distribution, warehousing and fulfillment services in the state.
🏬 Retail / Delivery
Calyx Peak — Opens in Swampscott, Massachusetts. The storefront will be under the "Local Cannabis Company" retail banner, Swampscott is 15 miles northeast up the coast from Boston. This is Calyx Peak’s third state, following California and Missouri.
Cresco Labs — Expands Retail Presence in Orlando, Florida. The new location is Cresco’s 21st store to open in the Sunshine State and 55th nationwide.
Aeropay x HighHello — Offer Digital Payments for Monthly Cannabis Subscription Club in Michigan. HighHello customers will utilize Aeropay's compliant bank-to-bank transfers for HighHello's cannabis home delivery service. The partnership includes the integration of Aeropay's digital and cannabis-compliant payment solutions with HighHello's subscription-based home delivery service. Aeropay allows customers to pay with ACH online and in-store by providing simple integration with leading eCommerce platforms; state-compliant and secure payments; and modern API infrastructure.
Wyld — Launches in Illinois. The company's expansion into Illinois follows its launch in Oklahoma in September servicing medical patients. Additionally, earlier in 2022, Wyld launched its line of sour gummies in Oregon, California, Colorado, Nevada, Arizona, Michigan and Washington. According to data from Headset, Illinois cannabis sales have grown 11% throughout 2022 and the edibles market has increased by 8.5%, sitting as the 3rd highest category in growth.
Fyllo — Launches Interactive Retail Media Network for Cannabis, Fyllo Connect. With Fyllo Connect, cannabis retailers can inspire in-store customers while they're actively browsing and buying, with fully-interactive and inventory-aware digital screens that deliver targeted campaigns.
Jointly — Matches Cannabis Retail Sales Software. Jointly Matches is a goal-based, data-driven cannabis shopping cart builder for the modern cannabis retailer. Using Jointly Matches, a budtender engages in a focused conversation about a customer's purpose and intention. Guided by the 12 goals that comprehensively cover the reasons why people shop for cannabis.
Jushi — Launches Comprehensive Product Suite in California. The launch includes three brands crafted to meet cannabis consumers’ preferences and price points—Sèchè Pre-Roll Singles, Tasteology Fruit Chews and The Lab Vapes.
Select (Curaleaf) — Expands "The Farmer's Select" Program In Partnership with Autumn Brands. Autumn Brands cannabis is grown using sustainable farming techniques, natural sunlight and 100% no-spray cultivation. Utilizing a closed-loop watering system, Autumn Brands ensures that no water is wasted during the growing process and all organic waste is composted. This focus on quality, consistency and sustainability ensures nothing but the best cannabis reaches consumers. Select's latest collaboration transforms Autumn Brands' top-quality, limited-batch cannabis flower into the same Select Elite Live Oil that customers know and love. The limited-edition product line is now available at dispensaries across California in three strains including Jetlato (sativa), Pineapple MAC (hybrid) and Banana Jelly (indica).
Trulieve — Launches Khalifa Kush Cannabis in Pennsylvania and Maryland Through Exclusive Partnership with Wiz Khalifa. Khalifa Kush products are also available in Trulieve owned and operated locations in Florida, Arizona and Maryland.
Good Supply Cannabis (Tilray) — Launches ‘Peppermint Phatty’. Peppermint Phatty is packed with peppermint and vanilla aromas and topped off with a slight cooling sensation. These 1g 510 cartridges deliver a potent vape yet and provide a refreshing touch with every minty pull.
MariMed — Chairman and CEO Robert Fireman Dies Unexpectedly. Fireman served as CEO of MariMed since 2017 and a member of its Board of Directors since the company’s formation. The Company will provide further information on succession once the Board has had an opportunity to determine the best path forward.
GTI — Expansion of Executive Leadership Team. The leadership promotions include Anthony Georgiadis to President, Matt Faulkner to CFO, and Bret Kravitz to General Counsel and Secretary, as well as the appointments of Rachel Albert to Chief Administrative Officer and Dawn Wilson Barnes to the Company’s board of directors.
WM Technology — Reduces Workforce by up to 175 Employees, ~25%. On November 29, 2022 and December 1, 2022, the Board approved plans to reduce the Company’s current workforce by up to 175 employees, representing ~25% of the Company’s total global workforce. The Company currently estimates that it will incur charges of ~$10.7M in connection with the reduction in force, primarily consisting of cash severance payments, employee benefits and related costs.
Goodness Growth Holdings — Departure of COO, Christian Gonzalez-Ocasio. Gonzalez had been serving as COO since November 2020. He previously served as EVP Operations, supporting manufacturing and retail initiatives, beginning in October 2019.
Greenlane — Appoints Lana Reeve as CFO and Chief Legal Officer. Reeve served as President and Chief Legal Officer at Authentys; SVP, Legal M&A at RealPage; and EVP, Finance and Legal, and Chief Legal Officer at NWP Services Corporation.
Grön produces handcrafted cannabis-infused edibles (gummy candies, sugar-coated pearls and mega pearls). The Oregon-based company is also sold in Nevada, Arizona, Missouri, and Canada. Listen to hear what other markets Christine Smith (CEO) is excited about and how they look to compete with larger edibles companies.
Joe Biden Signs the Medical Marijuana Research Bill into Law | High Rise
This Small New York Town is Going All-in on Legal Cannabis | Syracuse.com
People to know in NY cannabis: Kristina Adduci Lopez | Syracuse.com
👋 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.