🏡 Canopy Growth Forms Canopy USA (Acreage, Jetty, Wana)
NY releases guidelines for Dispensaries. NJ awards 18 annual adult-use cannabis business permits. SEC charges Cronos and former Senior Executive with Accounting Fraud.
👥 If you’re a dispensary operator or invests in dispensaries + going to MJBizCon, let me know as I’m organizing an event there.
New York Releases Guidelines for Cannabis Dispensaries. The guidelines lay out what is needed to acquire a Conditional Adult-Use Retail Dispensary (CAURD) license. They include key recordkeeping requirements, and define terms such as "attractive to individuals under 21," "brand" or "branding," "community facilities" and other terms, as well as requirements for staffing, training, and hours of operation. They also lay out where licensees can acquire product to sell, and what sorts of products can be sold inside the dispensaries. Complete guidance here.
New York’s first round of dispensary licenses seem to be stalled, with no clear solution on horizon. As of today, it’s been four weeks since applications were due for New York State’s first adult use cannabis dispensary licenses to be awarded since the Registered Organization program was created in 2016. But despite the deadline, the 903 applicants for 150 new dispensary licenses have little idea when they’ll receive notice of who wins a license – or much else. The success of the CAURD program rests on a number of complex plans. First, the state has to select license winners from the 903 applicants who must be both majority owned by a justice-involved applicant, someone who was at least arrested in New York for a cannabis-related crime, and second, majority-owned by someone with a business with at least two years of profitable operation. As of today, the state has not selected a contractor to score applications, a step that could take an unknown length of time. Second, the state issued a complex request for proposals through its Dormitory Authority of the State of New York (DASNY), basically its in-house building construction group, to build uniform dispensaries that are fully fitted out with vaults, point-of-sale systems, product displays and more for the 150 winning dispensaries. DASNY would also site and lease all of the dispensaries, and then re-lease those locations to the license winners. However, so far DASNY has not announced the design-build firms selected to construct the facilities. Also, the facility building ties into CAURD’s third complicated plan, which is its funding.
New Jersey awards 18 annual adult-use cannabis business permits. New Jersey regulators approved the first 18 annual adult-use cannabis business licenses for the state’s marijuana market. The New Jersey Cannabis Regulatory Commission (CRC) approved eight applications for annual licenses and another 10 applications to convert existing conditional permits to annuals. Conditional licenses are an important step for those new businesses to work on securing real estate and financing, gaining municipal approvals and, ultimately, receiving annual licenses. The eight new cultivation licenses are expected to help ease ongoing supply concerns. The CRC also approved 297 more conditional licenses, bringing to 801 the total number of such permits awarded since March and extended the length of time for certain conditional licensees to apply for conversion to an annual license.
SEC Charges Cronos and Former Senior Executive with Accounting Fraud. The Securities and Exchange Commission (SEC) charged Cronos Group, for improperly accounting for millions of dollars of revenue and for other accounting misconduct in multiple reporting periods. The SEC also charged Cronos’s former Chief Commercial Officer, William Hilson, with fraud and aiding and abetting the company’s violations. In agreeing to settle with Cronos, the Commission determined that the company should not incur a financial penalty, given its timely self-reporting, significant cooperation, and remediation. According to the SEC’s order, in three separate quarters between 2019 and 2021, Cronos submitted financial statements with the SEC that contained material accounting errors related to, among other things, revenue recognition and goodwill impairment. The order also found that, in one of the quarters, Hilson entered into an undisclosed oral agreement to sell cannabis raw material and to repurchase cannabis product in the following quarter. This agreement was neither known nor accounted for by Cronos, which discovered the $2.3 million accounting error during an internal investigation. After discovering the accounting errors, Cronos promptly reported the misconduct to the SEC and provided extensive cooperation that meaningfully advanced the Commission’s investigation. It also took effective remedial steps to enhance its internal accounting controls. Without admitting or denying the SEC’s findings, Cronos and Hilson offered to settle the matter by agreeing to cease and desist from future violations of the charged provisions.
Trailblazers Cannabis Executive Event Punches Well above Its Weight. Unlike the more well-known business events vying for scraps of budget at this time of year, Trailblazers speaks directly to the executives and founders, and stands out for an unwavering commitment to quality over quantity. “People come to Trailblazers because they’re investing in themselves as leaders,” said Tyler Wakstein, cofounder of Trailblazers and its holding company, OpenNest. “Everyone here is good at what they do, but even better at who they are.” The tightly curated event is anchored around the tenets of “connection, collaboration, and support”, placing professional development and personal growth at its core. With its onsite stay in the 5-star resort, impeccable family-style cuisine, yoga sessions and sound baths, Trailblazers is far closer to a retreat than a conference, and its creators see this as a key differentiator from everything else out there. With only around 200 people in attendance, and the vast majority staying at the resort, Trailblazers is extremely intimate, with high-profile guests who are considerably more approachable than they might be at MJBizCon or a Benzinga Capital Conference.
Canopy Growth — Forms Canopy USA to Fast Track Entry into U.S. Cannabis Market by Triggering Full Ownership of U.S. Cannabis Investments.
Canopy USA will hold the Company’s U.S. cannabis investments, which will enable it to exercise rights to acquire Acreage, Wana and Jetty. In addition, Canopy USA controls a conditional ownership position, assuming conversion of its exchangeable shares and the exercise of its option but excluding the exercise of its warrants, of approximately 13.7% in TerrAscend. Canopy Growth has also reduced its cash interest costs by paying down its $187.5M Term Loan (March 18, 2021), this will enable the Company to continue to pursue growth investments, acquisitions and other strategic initiatives. In connection with these proposed transactions, assuming approval and adoption of the Amendment Proposal, Constellation has expressed its current intention to convert all of its Canopy Shares into Exchangeable Shares.
Mina Minshrikey points out that if Canopy Growth is able to remain on the Nasdaq, it should be viewed as a positive sign for U.S. MSOs giving implications of being able to uplist. Jefferies Analyst, Owen Bennett suggests that MSOs could potentially put the U.S. assets into a holding company under a parent company, with ownership via non-voting shares—Boris Jordan (Curaleaf) and Jason Wild (TerrAscend) seems to agree. The MSO could then access institutional capital, and loaned to the U.S. HoldCo as debt. There’s also a view that this will open up a pathway for other Canadian LPs to take ownership in U.S. Cannabis companies
Regardless of anything happening, Canopy Growth has a stage to talk about Cannabis on a national/global scale, Canopy Growth CEO went on Mad Money to discuss the consolidation.
Verano — Refinances existing $350M Credit Facility, Extending the Maturity Date to October 30, 2026. The refinanced indebtedness bears interest at a floating rate based on the prime rate, with a current rate of 12.75% per annum. The refinanced facility provides the Company flexibility to secure additional future indebtedness of up to $270M, comprised of $120M in third-party mortgages secured by real estate that is currently unencumbered, a $100M accordion under the new credit facility to be funded at the option of the existing lenders, and a $50M third-party revolving credit facility upon the passage of cannabis banking legislation, in each case subject to certain conditions.
Flora Growth — Signs Definitive Agreement to Acquire Franchise Global Health, a Prominent Pharmaceutical and Medical Cannabis Distributor with Principal Operations in Germany. FGH's German reportable segment achieved revenues of CA$30.1 million, gross profit of CA$2.1 million and net income of CA$0.4 million in the first half of 2022. FGH’s German businesses operate primarily in the export pharmaceutical and medical cannabis import and distribution markets, servicing 1,200 pharmacies in Germany and providing non-cannabis medical products to 28 additional countries. As consideration for the acquisition of 100% of the issued and outstanding FGH common shares, at the completion of the Arrangement, Flora will issue between 36,615,060 and 43,525,951 of its common shares, based upon a formula set forth in the Arrangement Agreement.
Greenlane Holdings — $7.5M Public Offering. The Company will issue 8,333,335 units at a public offering price of $0.90 per unit. Each unit consists of one share of Class A common stock (or a prefunded warrant in lieu thereof) and two common warrants each exercisable for one share of Class A common stock at an exercise price of $0.90 per share. The common warrants will be immediately exercisable and expire seven years from the date of issuance. The pre-funded warrants and accompanying common warrants are identical to the units, except that each pre-funded warrant is immediately exercisable for one share of Class A common stock at an exercise price of $0.0001, the purchase price for a pre-funded warrant and accompanying common warrants is $0.8999 and the pre-funded warrants do not expire until exercised.
📄 Company Updates
Cookies —Opens NYC Store. The store (merchandise only) is located at 958 6th Ave, on the corner of 35th Street a few blocks from Madison Square Garden and Penn Station. You can’t miss the giant baby blue mural, or five-story building, which will include cannabis education and a cultural hub. Lines were around the block.
AFC Gamma x Viridescent Realty Trust — Amend $150M Credit Facility to Acreage Holdings. Under the terms of the Amended Credit Facility, an additional $25M is now available for immediate draw by Acreage, with a further $25M available in future periods under a committed accordion option upon achieving certain predetermined milestones. The terms of these additional draws replace the prior $50M accordion option. The Amended Credit Facility now includes a variable interest rate equal to prime + 5.75 % per annum, payable monthly in arrears, with a Prime floor of 5.50%. Acreage intends to use the proceeds to fund expansion initiatives and provide additional working capital. AFC Gamma has committed to up to $90M under the Amended Credit Facility, with an additional commitment of up to $15M syndicated to an affiliate and the remaining $45M committed by Viridescent. The facility is secured by first-lien mortgages on Acreage’s owned real estate properties and other commercial security interests.
The Parent Company — Strategic Corporate Update. Completes an additional 14% reduction in total workforce, total year to date reduction in workforce of ~33% and $10.0M in annualized payroll savings. Accelerates cost-saving initiatives by outsourcing cultivation and manufacturing operations. Reduced annualized cash operating expenses by $1.8M and annualized payroll expenses by ~$4.0M.
Metrc — Sustainable Tag Solution For Seed-to-Sale Tracking. To ensure the success and adoption of the new plant tags, Metrc is initiating a pilot test program for select state agencies and licensees to provide feedback on the tag’s design, durability and readability. The sustainable paper plant tags maintain durability and RFID technology efficiency. Metrc’s sustainable RFID tags are designed to improve compliance auditing and reporting, carrying embedded security advantages over other systems and arriving regulation-compliant and ready for use. Licensees do not need special printing equipment to create tags and labels, reducing errors and waste while saving businesses time and money.
Audacious — Corporate Update on NJ and NY. New Jersey State issued AUDACIOUS its Conditional Class 1-Cultivator and Conditional Class 2-Manufacturer licenses. The Company can now submit conversion licenses applications to convert these conditional licenses to Annual Adult Usage Cultivation and Manufacturing licenses. Once received, the annual licenses allow AUDACIOUS to grow, manufacture, sell and distribute adult use cannabis in the State of New Jersey. It is expected that the state will soon open the application process to allow Class 1&2 holders to officially apply for Class 3&4 licenses. The Company recently announced it had completed its first harvest in New York with its partner Hempire. The harvest has now been pre-processed and will now be further processed into vapes and edible products, to be sold to social equity dispensaries. The Company is in discussions with many of the applicants, with licenses anticipated to be granted shortly.
Curaleaf — Expands Brand Portfolio With Launch of Find™ Cannabis Flower.
Find offers a variety of affordable, high quality everyday flower products for cannabis consumers. At launch, customers will have access to the brand's strain-specific pre-rolls and whole flower. Available in bulk quantities, those who prefer to roll their own can also choose from a selection of small flower and pre-ground offerings.
Miss Grass — Launches in New Jersey. CEO, Kate Miller was born and raised in New Jersey. The brand will be partnering with AWH for launch of their products in NJ.
TILT Holdings — Expands Partnership with Highsman, Launching “H” by Ricky Williams in PA. The brand is now available in five states with Pennsylvania marking its second state launch in partnership with TILT.
Jushi — Launches Newly Formulated Cannabis Infused Fruit Chews by Tasteology. Made with real fruit purées, Tasteology Fruit Chews are now available in three new varieties — Blood Orange Boost, Blueberry Calm and Passion Raspberry Balance.
TILT Holdings — Brings CCELL’s® New EVO Together With Jupiter Research’s Customer Service. CCELL built the EVO with a customer-centric approach, focusing on consumer desires and market trajectory. EVO features an entirely new atomizer for better thermal output, leading to consistent performance and a stronger user experience. The atomizer includes refined ceramics with even pore sizing that supports even distribution of product across the heating element, which is also modified to be larger and thinner. EVO’s consistent pore sizes and large heating surface have proven in side-by-side comparison studies to improve the detection of terpenes, increase vapor clouds and maintain quality consistency from first use to last.* CCELL EVO is compatible for use with traditional distillates, as well as high terpene extracts.
Cresco Labs — Board Director Sidney Dillard’s Resigns. Dillard has accepted a board position at a large national health insurance provider and is resigning from her Cresco Lab’s board position to avoid any potential regulatory conflicts.
Leafly — Adds New Chief Commercial Officer, Carlos Pinto. Prior to joining Leafly, Carlos served as Chief Commercial Officer at Adnet Global, and prior to that, Getty Images where he worked on the go-to-market strategy for expansion into LATAM.
Glass House Brands — Appoints Benjamin Vega as General Counsel and Corporate Secretary. Prior to joining Glass House, Vega served as Deputy General Counsel for Covetrus, a $4B public company in the animal health industry. Vega has also served as General Counsel for Manhattan West and for the Meruelo Group.
Jetty Extracts — Appoints Rob Wilson as VP Sales. Wilson joins Jetty Extracts and will focus on expanding Jetty’s retail footprint in California from 400 doors to over 800 doors. Prior to joining Jetty, Wilson served as VP Sales and Services at Central Coast Agriculture (Raw Garden).
Call of the Wyld: Aaron Morris’ edibles success story | Seed to CEO
Jigar Patel, CEO, NorCal Cannabis Company | Authority Magazine
House of Puff's Kristina Adduci on the Power of Art and Cannabis | Muse by Clio
Genevieve Towne, GM, Kush Alley (North Hills, CA) | Meadow
👋 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.