💨 Cannabis use outpacing cigarette use for the first time
Glass House raises $14.7M through Series B Preferred Stock (20-25% dividends + warrants). NOXX (MI) raises $15M Debt. Alabama Medical apps open. Earnings - Jushi, RWB, RIV Capital, GABY, Flower One.
🎙️ I caught up with Dutchie Co-Founder/Chief Product Officer, Zach Lipson, yesterday on their recent Dutchie POS and Dutchie Pay product launches. We talk about the build vs. buy decision (acquired Leaflogix and Greenbits in March 2021) decision, working on Dutchie POS/Dutchie Pay in parallel, how the company uses the data it collects, and what products the company may build next.
🙋♂️I’ll also be at Benzinga Cannabis Capital Conference (9/13-14) and MJUnpacked (9/28-30) this month. Let me know if you’ll be there and interested in meeting up—I’m looking to organize small gatherings at both.
Cannabis use is outpacing cigarette use for the first time on record. More people in the U.S. are now smoking Cannabis than cigarettes, according to a Gallup poll. Cigarette use has been trending downward during the past decades, with only 11% of Americans saying they smoke them in a poll conducted July 5 to 26, compared to 45% in the mid-1950s. 16% of Americans say they smoke Cannabis, with 48% saying they have tried it at some point in their lives. In 1969, only 4% of Americans said they smoked Cannabis. Attitudes around both substances have also shifted dramatically. In 2019, 83% of Americans said they thought cigarettes were "very harmful" to smokers, while 14% said they are "somewhat harmful." Nine out of 10 adults said in 2013 that smoking causes cancer, while 91% of smokers surveyed in 2015 said they wish they never started. Meanwhile, 53% of people said in a July poll they think Cannabis has positive effects on those who use it. Still, alcohol is the most popular substance, and has remained consistent for a while. 67% of Americans in the most recent poll said they are drinkers, compared to 63% in 1939. About a third totally abstain from alcohol.
Massachusetts Cannabis Company Still Advertising on I-84 in Connecticut. Drivers along Connecticut’s highways should not see any ads for Massachusetts dispensaries since Connecticut changed the rules on cannabis advertising earlier this year. According to the law passed in May, only businesses licensed in Connecticut can advertise cannabis and cannabis-related services on billboards, and only during certain hours. “When the Attorney General came and said, we couldn't have our cannabis billboards up, we said, no problem. We'll stop advertising cannabis,” said James McMahon, spokesperson for Green Gold Group in Charlton, MA. Green Gold Group removed the words “cannabis dispensary” from its billboards. In the corner, you can see the word Apparel has been added. “We're advertising a separate business that runs alongside cannabis, but as a completely separate lane,” McMahon said. “Separate employees, separate building, it’s its own standalone.” But Connecticut’s attorney general says it’s still a problem.
Alabama Medical Cannabis Commission begins application process for medical cannabis businesses. The application process for medical cannabis business license begins September 1, 2022. Applicants interested in applying for a medical cannabis cultivator, processor, dispensary, secure transporter, state testing laboratory, or integrated facility license may file a Request for Business Application with the Alabama Medical Cannabis Commission (AMCC). Following the evaluation of applications, the Commission, per the statute, may award up to twelve (12) cultivator licenses, four (4) processor licenses, four (4) dispensary licenses, five (5) integrated facility licenses and an unspecified number of secure transport and state testing laboratory licenses.
Six CT Retail Cannabis Companies Advance In License Process. The state got a little closer to retail cannabis sales after six social equity recreational cannabis retailers moved to the next step in the licensing process. The six companies were approved by the Social Equity Council for the first round of licenses. More licenses will be available in future lotteries. Remaining social equity applications not selected in the social equity lottery will be added to the general lottery. Retail cannabis sales are expected to start around the end of the calendar year.
Gov. Wolf, Lt. Gov. Fetterman Announce Effort to Quickly Pardon Thousands of Pennsylvanians from Marijuana-Related Convictions. The Pennsylvania Board of Pardons will accept applications for the PA Marijuana Pardon Project from Thursday, September 1, 2022, through Friday, September 30, 2022. It is estimated that thousands of Pennsylvanians are eligible due to convictions over the past several decades, even pre-dating marijuana’s inclusion as a Schedule 1 drug under the Controlled Substances Act. Anyone with only the two select marijuana offenses noted below on their record is eligible to apply, and there is no limit for the age of the conviction. Lt. Gov. Fetterman said the project will deliver second chances to thousands of deserving Pennsylvanians who are trying to improve their lives amidst the legislature’s refusal to “take the commonsense approach and just legalize it.” “Nobody should be turned down for a job, housing, or volunteering at your child’s school because of some old nonviolent weed charge, especially given that most of us don’t even think this should be illegal,” Lt. Gov. Fetterman said.
Glass House Brands — Closes Initial Tranche of Non-Brokered Private Placement of Equity Securities. The initial closing of the Offering included ~$14.7M of new money invested and ~$22.6M face value of existing Series A Preferred Stock exchanged for new Series B Preferred Stock. A total of 37,337 shares of Series B Preferred Stock were issued, with an aggregate face value of ~$37.4M. The Company expects to complete the Offering in the next 30 days, after which a total of ~$50.0M of Series B Preferred Stock is expected to be outstanding. The Company is using $10.0M of the cash proceeds from the Offering to repay an interim bridge loan from its senior lender. Holders of the Series B Preferred Stock will be entitled to an annual dividend at a rate of 20% for the first two years after the date of initial issuance of Series B Preferred Stock, 22.5% for the third year and, thereafter, 25% until the 54-month anniversary of the Initial Issuance. The dividend will accrue and be paid quarterly with an annual amount equal to 10% of the initial investment being payable in cash and the balance of the dividend being paid in kind, accumulating and compounding on a quarterly basis until paid; provided that if the Series B Preferred Stock remains outstanding after the 54-month anniversary of the Initial Issuance, the annual dividend shall thereafter be payable solely in cash at a rate of 20%. The issuance of each share of Series B Preferred Stock with a face value of US$1,000 per share will be accompanied by the delivery of 200 warrants of the Company. Each Warrant has a five-year term and entitles the holder to purchase one new equity share in the capital of the Company at a price of $5.00 per Warrant Share subject to customary anti-dilution adjustments.
NOXX (MI) — Raises $15M Debt from Altmore Capital. In August, NOXX announced a partnership with Forty Acres Enterprises, with a goal of helping Black cannabis entrepreneurs, opening new Black-owned cannabis companies and serving as an innovation incubator for Black involvement in cannabis in Grand Rapids and across Michigan. The partnership’s first collaboration is a new cannabis dispensary now open in Grand Rapids.
Needham Bank — Closes Cannabis Loan to Bostica (MA). Bostica will use the financing to complete the construction of their 60,000-square-foot cannabis cultivation and manufacturing facility in Lynn, MA. Needham Bank also provided working capital to support Bostica's operations. When completed, the project will be the largest, most technologically advanced and energy-efficient indoor cultivation facility to operate in the Greater Boston area. The facility includes a 35,000 sq ft canopy for cannabis, which has ideal growing conditions 24/7. Bostica's specialty crafted cannabis products will be available for sale at dispensaries in early 2023.
SNDL — Enters into a Bid Agreement to Acquire Superette Assets. SNDL has entered into an agreement of purchase and sale with Superette, pursuant to which it proposes to acquire substantially all of the business and assets of Superette through a hybrid asset purchase and “reverse vesting” transaction. Superette intends to return to Court on September 9, 2022 to seek approval of, among other things, an amended and restated initial order and an order approving a sale and investment solicitation process (SISP). Subject to Court approval at the comeback hearing, the Stalking Horse Agreement will serve as the "stalking horse bid" in the SISP, and is to be supervised by the Court and conducted by PricewaterhouseCoopers, the Court-appointed Monitor of Superette. The Stalking Horse Bid will set the floor, or minimum acceptable bid for potential alternative bids to be submitted in the SISP, which is designed to achieve the highest and best offer for Superette's business and assets.
📄 Company Updates / Earnings
Jushi Holdings — Q2 2022 Financial Results and Non-Reliance on Previously Issued Q1 2022 Financial Statements.
Revenue of $72.8M, up 52.4% Y/Y and 17.6% sequentially
Retail revenue increased 16.1% to $67.3M and wholesale revenue increased 42.1% to $5.5M sequentially. Gross profit of $26.7M, an increase of 17.2% Y/Y and 39.5% sequentially. Net Income of $12.1M. Adjusted EBITDA of $0.5M
Cash and cash equivalents of $43.2M. $200M in principal amount of total debt, excluding leases and PP&E financing obligations. As of August 29, 2022, the Company’s Acquisition Facility had $60M of available capacity, including the $25M accordion feature
RIV Capital — Q1 2023 Financial Results
Initial closing of acquisition of ownership and control of Etaincompleted in April 2022. Ongoing integration of the Etain business to optimally position the Company for the launch of the adult-use cannabis market in New York with ~$170M of cash on-hand to support the Etain Acquisition and long-term expansion plans
Revenue of $1.3M was generated from Etain's dispensaries in Manhattan, Kingston, Syracuse, and Yonkers, and wholesale revenue of $0.2M was generated from sales of Etain-branded products
Net loss of ($3.5M)
GABY — Q2 2022 Results
Revenue of $5.2M. Gross margin improved to 43%. Reduced SG&A expenses by 11% Y/Y. Sale of Company owned brands now makes up 15% of flower sold in GABY's retail dispensary. New brand, Dank Space™ has become top premium flower seller in GABY's retail dispensary
Wholesale flower prices in California dropped 43% over the same period last year as artificially high prices during the pandemic came down as a result of over-supply and decreased consumer demand in the market. These headwinds in wholesale flower pricing have pushed retail revenue downwards over the last 12 months as operators look to pass cost savings on to the consumer, but retail margins have remained stable due to management's ability to control supplier costs while maintaining premium services through it is focus on the customer experience, staff education, a high quality product mix and its focus on the expansion of its proprietary product offering
Cost savings of $0.7M annually from streamlining inventory management
Red White & Bloom — Q2 2022 and Six Months Ended June 30, 2022
Revenue increased 225% to CAD$27.4M, vs CAD$12.2M in Q2 2021
Revenue for the 6 months ended June 30th 2022 increased 235% to CAD$55.4M from CAD$23.6M with Gross Margin excluding biological assets of CAD$16.1M
Executed agreements for much anticipated PV licensed product for distribution in two high potential states (MO and MA with C3 Industries)
Retired CAD$51.7M of debt, eliminated CAD$6.2M of annual interest expense
In Florida, opened Daytona store mid-Q2 and brought St. Petersburg store online in Q3 and both are off to a very strong start. RWB has also started construction of its Hollywood and Miami Beach locations, while further adding a new Clearwater store. This will double RWB’s footprint in the state and see them in the black once fully operational later this year
Flower One — Q2-22 Financial Results
Revenue of $7.9M. Nevada’s cannabis market continues to be harshly affected by the ongoing impact of the pandemic, and a thriving black market, which has resulted in price compression and decreased statewide cannabis sales. While tourism has continued to slowly rebound to pre-pandemic levels, visitor counts still remain far below expectations as a direct result of the reduction in conferences, corporate, and international travel
COGS of $6.9M (18% GM), compared to $11M from the same period in 2021. The decrease in gross margin is a direct result of wholesale price compression driven by topline market softening and increased supply
Cash and cash equivalents of $3.6M, overall liability balance has increased by $11.9M as compared to December 31, 2021
POSaBIT — Begins Trading on OTCQX. POSaBIT Systems Corporation upgraded to OTCQX from the OTCQB® Venture Market. The OTCQX Market provides investors with a premium U.S. public market to research and trade the shares of investor-focused companies. Graduating to the OTCQX Market marks an important milestone for companies, enabling them to demonstrate their qualifications and build visibility among U.S. investors. To qualify for OTCQX, companies must meet high financial standards, follow best practice corporate governance, and demonstrate compliance with applicable securities laws.
Green Flower — Partners with Community College of Denver (CCD). CCD will add three cannabis certificates—advanced dispensary associate, manufacturing agent, and cultivation technician skill training. CCD launched its Cannabis Science and Operations BAS degree in November 2021.
Greenlane — Regains Compliance with Nasdaq Listing Requirements. The company has regained compliance with the minimum bid price ($1.00 or more for 30 consecutive business days) requirement under Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Global Market. Consequently, Greenlane is now in compliance with all applicable listing standards and its Class A common stock will continue to be listed on The Nasdaq Global Market.
RISE Dispensaries — Premier Sponsorship of HeadCount’s Cannabis Voter Project. RISE Dispensaries (GTI) will serve as a premier sponsor of HeadCount’s Cannabis Voter Project, which aims to register and inform voters who support cannabis policy reform. Ahead of this year’s midterm elections, HeadCount and RISE Dispensaries are teaming up to encourage voters to “Roll Up to the Polls” through Cannabis Voter Project resources now available at all RISE-branded locations and online at www.headcount.org/rise.
Cresco Labs — Three New Sunnyside Dispensaries in Florida (Cape Coral, Tampa and Panama City Beach). These additional stores bring Cresco’s store network to 19 locations in Florida and 53 total in the U.S. Sunnyside Cape Coral is the Company’s first dispensary in North Lee County. It resides near a Walmart Supercenter and Publix and is a half mile from city thoroughfare Veterans Parkway. Sunnyside Tampa is in the heart of the city’s primary retail corridor across from Walmart and Best Buy and just five minutes to Raymond James Stadium. It also is accessibly located just off the I-275. Sunnyside Panama City Beach will be opening in a few weeks located a few blocks from scenic Hwy 30A, which is easily accessible to locals, commuters and guests of numerous beachside resorts.
Verano — Opens Three New MÜV Locations, Highlighting the Company’s Ongoing Retail Expansion Across Florida. The openings of MÜV Auburndale, Jacksonville and Titusville extend Verano’s retail footprint to 59 stores across Florida. MÜV Auburndale is located at 2093 U.S. 92 in Auburndale and is the third MÜV dispensary in Polk County. MÜV Jacksonville Skymarks is located at 725 Skymarks Drive in Jacksonville, adjacent to the River City Marketplace shopping mall and just over three miles from Jacksonville International Airport. MÜV Titusville is located at 4520 South Washington Avenue in Titusville, based in Florida’s “Space Coast,” a popular tourist destination, and less than 10 miles from the Kennedy Space Center.
TILT Holdings — Receives Approval to Launch Medical Use Cannabis Operations at its Cambridge, MA Dispensary. CAC’s Cambridge 5,100 sq ft dispensary, located at 1385 Cambridge Street in Inman Square, will offer a wide selection of products from TILT’s house brands including flower, concentrates, edibles and topicals, as well as TILT’s cross-business collaborations such as the Jupiter CAC Infinity vaporizer. In addition, medical patients will have increased access to products from partner brands (AIRO, Black Buddha Cannabis, Her Highness, Highsman, Old Pal, and Toast).
Ayr Wellness — Opens Relocated Dania Beach Store in Florida. The new store, located at 222 N Federal Hwy, Ste. 103, Dania Beach, FL 33004, is just over a mile away from the former location and moments away from the Fort Lauderdale–Hollywood International Airport and the major intersection of US-1 and A1A. The new store spans more than 2,000+ sq. ft. of retail space and offers patients an expansive menu, including brands and products from Ayr’s national portfolio.
Glass House Brands (Allswell) — Launches Value Line of Vegan Cannabis Gummies.
Each package of Allswell gummies contains 100mg of THC (i.e., ten gummies with a dose of 10mg each) for a potent and delicious treat at an unbeatable price point of $10 MSRP per package or $1 MSRP per gummy. Knowing that some consumers like their gummies sweet and others prefer flavors on the sour side, Allswell's line of affordable THC gummies are available in six unique flavors – three sweet and three sour – that span the full spectrum of cannabis, including Sativa, Indica and Hybrid varieties. The six flavor offerings currently available include: Mimosa, Berry Dream, Fruit Punch, Kiwi Strawberry, Blue Raspberry, and Tropical Blast.
MariMed — Nature’s Heritage “LIVE Flower,” The Freshest Cannabis Available.
Nature’s Heritage “LIVE Flower” buds are bigger and brighter than conventional flower, bursting with more vibrant colors and stronger aromas, and delivering a smoother smoke. The unparalleled freshness of Nature’s Heritage “LIVE Flower” is made possible through MariMed’s proprietary FreshCure curing process, which flash-freezes Nature’s Heritage craft flower within hours of being trimmed from the plant, locking in the natural terpenes and cannabinoid profiles. The flower is further refined through the Company’s proprietary barrel-cure guidelines specific to each unique flower strain to achieve optimal moisture levels. Nature’s Heritage “LIVE Flower” is packaged and sold in heavy, opaque glass jars featuring an extra-thick sealing membrane designed to prevent light and oxidation of the plant.
Organic Remedies MO — Strategic Partnership with TYSON 2.0. The agreement will grant Organic Remedies exclusive licensing rights in Missouri to the TYSON brand which includes the company’s second celebrity in-house brand, Ric Flair Drip Cannabis, acquired by TYSON 2.0 in March of 2022. The partnership will also provide access to TYSON 2.0 and Ric Flair Drip Cannabis’ outstanding selection of genetics for cultivation at the Organic Remedies cultivation facility in Chaffee, Mo. Organic Remedies’ high-tech facility comprises approximately 30,000 square feet of indoor cultivation and over 10,000 square feet of processing and production space.
HEXO — To Produce TYSON 2.0, in Canada. Under the agreement, HEXO will produce TYSON 2.0's products in Canada, including TYSON 2.0’s full range of flower, pre-rolls, edibles and vapes. HEXO expects to launch across Canada in fall 2022.
Happi — Launches Cannabis-Infused Seltzer in Maine. Happi will be bringing three of its fan favorite flavors from Michigan to Maine–Lemon Elderflower, Raspberry Honeysuckle, and Pomegranate Hibiscus. Mainers will also get an exclusive taste of Happi’s newest flavor, refreshing Lime Wild Mint. In Maine, Happi is produced by CannaNectar Canning Co.
Verano — Appoints Lawrence Hirsh to Board of Directors and Chair of the Audit Committee. Hirsh spent 18 years as a Managing Director of Alvarez & Marsal, where he co-founded the Atlanta office, and served as co-business unit leader for A&M’s Southeastern U.S. Corporate Restructuring Practice and on the Executive Committee of A&M’s North American Corporate Restructuring Practice. Prior to A&M, Hirsh was a partner at Arthur Andersen.
Lantern — Adds Ngiste Abebe to the Company’s Board. Abebe will assist the company as it strives to provide legal, convenient access to local cannabis dispensaries/products for recreational consumers and medical patients. Abebe currently serves as Vice Chair for the Virginia Cannabis Public Health Advisory Council, President of the New York Medical Cannabis Industry Association and Vice President of Public Policy for Columbia Care.
Ricky Williams' View From on High (San Diego Magazine/Jackie Bryant)
Launching Michigan Cannabis POS (Meadow/David Hua)
Body and Mind Continues to Grow Its Cannabis Operations (NCV)
The Challenge of Scaling Brands (Muse by Clio/Annie Davis)
Rakim Says “Cannabis Helps Set The Mental Stage To Connect To The Universal Infinite” (Forbes/Javier Hasse)
Pistil Data Expands Its Cannabis Data Solutions and Market Reach (NCV)
Terpenes in Cannabis, Explained (UArizona Health Sciences/John Streicher, PhD)
👋 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.