🍬 Canopy USA Exercise Options to acquire Wana and Jetty
🍬 Canopy USA Exercise Options to acquire Wana and Jetty
DEA Administator declines to comment on Rescheduling proposal. Cookies to acquire FL Assets from TRP. Canopy Growth $50M Convertible Debt. C21 C$4M Private Placement. Embarc x Cali Roots.
Given all the news/comments last week around the DEA moving to reclassify cannabis to Schedule 3, I decided to skip last week’s newsletter and instead summarize the news and reactions here.
🌿 Industry
DEA Head says it would be “inappropriate” to comment on Marijuana Rescheduling Proposal due to “Ongoing” Administrative Process. Anne Milgram briefly touched on the issue at the 2025 DEA budget hearing. — Marijuana Moment
Ahead of Tuesday’s committee meeting, the prohibitionist group Smart Approaches to Marijuana (SAM) said sources familiar with the matter have told them that Milgram did not personally sign the proposed rescheduling rule
If true, that wouldn’t necessarily mean that she disagrees with the decision—but the administrator made clear to lawmakers that she would not be shedding any light on the process at this point
However, she did notably respond to one question about past precedent and said that “stepping out of marijuana,” she’s unaware of any instance where a DEA administrator hasn’t signed a scheduling order
Missouri municipalities may ‘stack’ taxes on cannabis operators, judge says. The lawsuit was filed by Robust Missouri 3 LLC. The company saw its Florissant dispensary’s tax rate on cannabis products rise to 15% after both the city and St. Louis County approved 3% sales taxes on adult-use marijuana. — Missouri Independent
The constitutional amendment that legalized recreational cannabis sales included a 6% statewide excise tax — but it also authorized “any local government” to charge a sales tax of up to 3%
At the heart of Robust’s lawsuit is whether the law intended for local governments to be able to impose a maximum of 3% sales combined, or if they can each impose a 3% sales tax
Illinois issues 35 conditional social equity adult-use licenses. The 35 recipients were among a group of 55 applicants selected from Illinois’ Social Equity Criteria Lottery, which was held in July 2023. — Illinois.gov
An additional 13 conditional licenses are also expected to be issued soon, for a total of 48 new conditional licensees
Applicants issued a conditional license will now have 365 days to build their dispensary and receive final approval from IDFPR for their Adult Use Cannabis Dispensing Organization License. They may also apply for a 180-day extension of their conditional license by completing and submitting an application to IDFPR
There are currently 202 adult use cannabis dispensaries in Illinois, including 92 social equity dispensaries
‘Ridiculously bleak’: NY’s cannabis growers still waiting on regulators to approve their licenses. New York’s Cannabis Control Board will meet this week—potentially to license a large cohort of applicants—but the state’s early cultivators say they haven’t been able to get straight answers. — Syracuse.com
Cultivators are grappling with a serious situation: their licenses are set to expire within the next eight weeks, regulators are not responding to their requests to extend them, and their applications for permanent licenses are being reviewed via the same queue as new applicants
KPMG exits Cannabis over “elevated risk.” KPMG in Canada has decided to cease providing financial-statement audit services to Cannabis businesses. — MJBizDaily
A briefing note to Canadian Finance Minister Chrystia Freeland and obtained through an access-to-information request spelled out systemic “financial distress” facing the country’s cannabis producers
Some of the issues covered in the report included:
Snowballing excise-tax debt by cannabis producers
The amount of excise debt deemed “uncollectable,” $37M as of Feb. 29, 2024
Almost no sustainable profits are being earned by private-sector cannabis companies, while government-owned wholesalers rake in record profits
A disproportionate number of cannabis producers entering creditor protection
New Mexico seizures by Border Patrol continue. U.S. Customs and Border Protection agents seized more than $90,000 worth of products from state-licensed cannabis operators in New Mexico during two separate stops last week. POLITICO goes inside the surprising federal crackdown on New Mexico cultivators.
California sales of $358.7M for April. According to Headset, total sales declined (1.6%) from March and down (7.1%) Y/Y.
Arkansas sales of $22.7M in March, up slightly from $22.1M in February. The state’s medical marijuana industry will soon reach five years in operation as the first dispensary opened in May 2019. Overall, more than $1.1 billion has been spent since that time across the state’s 38 dispensaries. There are more than 102,000 active MMJ patient cards in Arkansas.
Utah medical marijuana patient count passes 83,000.
Wholesale flower prices were up ~5% Y/Y across the 13 state markets tracked by LeafLink in March 2024.
Canada exported ~$189M worth of medical marijuana for FY 2023-24 products for commercial and scientific use, up 36% Y/Y.
Germany imported 31,398 kilograms (34.6 tons) of cannabis products in 2023.
2024 Winners Unveiled for "Best of Weedmaps" Program. Weedmaps used a methodology matrix that considered a variety of factors including listing quality on the Weedmaps platform, customer service ratings, and consumer engagement.
💵 Deals
Cookies to Acquire Cookies-Related Florida Licensed Cannabis Assets from TRP Co. According to Cookies’ President Parker Berling, acquiring direct ownership of all of the Florida assets by exercising the Company’s contractual option to do so enables them to deliver on its original corporate strategy—full control over the supply chain, stores and products. TRP currently operates 8 Cookies dispensaries in Florida with another 3 opening soon.
Canopy Growth confirms Canopy USA's Exercise of Options to Acquire Wana and Jetty. Following the initial closing, Canopy USA will own 100% of the outstanding equity interests in Wana and approximately 75% of the outstanding shares of Jetty. There is no additional consideration to be paid by Canopy USA for the exercise of the options. The exercise of these options allows Canopy USA to fulfill its intent to establish a leading, brand-focused powerhouse and enable Canopy USA to to drive revenue growth and realize cost synergies across the Canopy USA ecosystem.
Canopy Growth entered into an exchange and subscription agreement with a single institutional investor for ~$50M and exchange ~C$27.5M of existing debt maturing in September 2025 for a new senior unsecured debt. The Investor will acquire a Convertible Debenture in an aggregate principal amount equal to C$96.4M and the Company will issue to the Investor an additional 3,350,430 warrants. Each Warrant will entitle the holder to acquire one common share at an exercise price equal to C$16.18 per Common Share for a period of five years from the Closing Date. The Convertible Debenture will bear interest at a rate of 7.50% per annum, payable in semi-annual payments in cash or, at the option of the Company, in Common Shares for the first four semi-annual interest payments after the Closing Date.
C21 Closes C$4M Private Placement of Convertible Debenture Units. The net proceeds raised from the Private Placement will be used by the Company to fund the Company's wholly-owned Nevada subsidiary, Silver State, acquisition of Deep Roots assets related to the operation of their 6,500 sq ft, purpose-built, operational retail cannabis dispensary located in Southern Reno, Nevada.
LEEF Brands issues equity for a portion of its outstanding 11% convertible debentures due 2024. It also extended the maturity on the remaining balance of its outstanding convertible debentures until 2027. An aggregate principal amount of ~$4.0M (plus accrued and unpaid interest thereon) will be settled for an aggregate of 224,045,353 Units at a conversion price of C$0.029 per Unit. Each Unit is comprised of one Common share of the Company and one Common share purchase warrant exercisable at a price of C$0.15 per Common share for a period of 24 months from the date of issuance.
Grown Rogue Increases Ownership of Golden Harvests (MI). The company has increased ownership in its Michigan operations from 52.2% to 80% in two transactions for total consideration of $2.8M ($0.2M cash, $2.6M 4-year sellers' notes). Golden Harvests is the entity that controls its Michigan operations, operating out of an 80,000 sq ft facility that contains ~15,000 sq ft of flowering bench space.
Rainbow Realty Group Completes $8.5M Loan to New York based Cannabis Company. The 70-acre Property in in Hudson Valley, NY has been operated by the purchaser—Rainbow's borrower—for over a year. The Property includes 200,000 SF of gutter-connected modern greenhouse, 100,000 SF of heated hoop houses, and 70,000 SF of supporting warehouse structures.
Sunshine Enclosures acquires Full Scale. The acquisition of Full Scale aligns seamlessly with Sunshine Enclosures’ commitment to providing comprehensive packaging design and manufacturing services to its customers. Full Scale, known for its 360-degree branding, design, and manufacturing services, will continue to operate under its existing name as a division of Sunshine Enclosures.
📄 Company Updates / Earnings
Ascend Wellness Q1 2024 sales of $142.4M, up 25% Y/Y and 2% Q/Q. Adjusted EBITDA of $32.5M (22.8% margin), As of March 31, 2024, cash and cash equivalents were $72.9M and net debt was $237.6M.
Goodness Growth Q1 2024 revenue of $21.1M excluding discontinued operations and NY, up 44.5% Y/Y. EBITDA (which includes gain on Grown Rogue warrants) of $6.8M (28.2% margin). Cash of $12.6M. On May 2, 2024, the Company announced that it filed an application with the Supreme Court of British Columbia for summary determination in its ongoing litigation with Verano.
Chicago Atlantic Q1 2024 total gross originations of $22.5M. $6.7M was funded to a new borrower and $15.8M towards an existing borrowers. Net interest income of ~$13.2M, a sequential decrease of (10.8%) from $14.8M in Q4 2023 due to no prepayments and related fees received. As of March 31, 2024, total loan commitments of ~$401.3M (all of which are funded) across 28 portfolio investments.
Scotts Miracle-Gro comments that RIV Capital is in the late stages of a merger with another industry player. As part of this transaction, Scotts’ convertible note with RIV would convert to exchangeable shares in the combined business.
High Times receiver puts assets up for sale with May 17th deadline. This is significantly shorter than the usual timeframe of several months given active operations that are still losing money.
AVD (Advanced Vapor Devices) Rebrands to Active. The rebrand to ACTIVE™ reflects the company’s proactive approach to meeting the needs of its clients. ACTIVE™ designs hardware and is a globally diversified manufacturer and distributor of cannabis vaporizer technology. It controls every aspect of its operations, from R&D and distribution in the U.S. to manufacturing in China and Southeast Asia.
Cronos Enters U.K. Cannabis Market. The Company is expanding its medical brand, PEACE NATURALS, with its first shipment of cannabis flower to GROW® Pharma, a leading distributor of prescribed medicinal cannabis products in the UK.
Sunnyside River North (Cresco Labs) workers join Teamsters. The River North dispensary is the sixth location to organize with Local 777.
RIV Capital Fiscal Quarter and Nine-Month Transition Period Ended December 31, 2023. Etain White Plains, its first adult-use dispensary in NY, processed 7,500+ transactions in its first full month of operation in March. Etain’s ROD License permits opening two additional co-located adult-use and medical dispensaries in the state later this year, which it plans to do. Ended the year with $81.9M of cash to support operationalization of New York market and growth initiatives. Net loss of ($47.3M), primarily related to a non-cash pre-tax impairment charge on goodwill and intangible assets of $48.7M.
MedMen Goes Bankrupt With $411M In Liabilities. MedMen’s subsidiaries will have their operations and assets dissolved or sold off in compliance with U.S. laws. According to bankruptcy documents, 11 secured creditors have claims in excess of $148M, including Treehouse REIT ($74M) and Hankey Capital ($60M).
Ispire Technologies Inks Long-Term Agreement with Acreage. Ispire will supply Acreage with the Company's Ispire ONE™ vapor products and filling machines – a comprehensive solution that aims to streamline vape production and enhance reliability in Acreage's retail facilities. The key features of Ispire ONE™ include: capless technology, bottom filling and ability to work with its proprietary filling machine.
🏬 Retail
Embarc Launches 'The Smoke Show' at Cali Roots Music Festival. This will be the first activation to introduce onsite cannabis sales and consumption at the renowned Monterey event, aligning with Embarc’s mission to destigmatize cannabis through safe, regulated experiences that allow consumers and the curious to learn about California’s diverse cannabis landscape.
Embarc opens Madera, CA and second Fresno, CA dispensaries. Embarc now has a total of 15 locations in California. Madera native Will Oliver, a former member of the Madera City Council, is the co-owner of Embarc Madera.
The Travel Agency opens third dispensary on Fifth Avenue. Its located next door to H&M’s flagship store and across the street from Lululemon and Sephora.
Purple Lotus opens second dispensary in downtown San Jose, CA. The dispensary is located a few blocks from bustling San Pedro Square.
Arkansas ABC revokes Hot Springs medical marijuana dispensary’s license. Arkansas’ Alcoholic Beverage Control Division revoked a Hot Springs medical marijuana dispensary’s license, the first revocation of its kind since medical cannabis sales started. The revocation is the result of ongoing violations, most recently for selling more than 1,800 expired products.
Verano opens Zen Leaf in Naugatuck, CT, its fifth in the state. The Naugatuck store joins Zen Leaf Newington and Zen Leaf Norwich as the third of six planned equity joint venture dispensaries across CT.
Blossom Dispensary opens in The Heights Jersey City, NJ.
Trulieve opens dispensary in North Palm Beach, FL.
🌱 Product
Treez Introduces Treez Ecommerce. Treez Ecommerce enables cannabis retailers to create customized, high-performing online storefronts without the need for third-party developers or agencies while integrating seamlessly with the SellTreez POS system. With the launch of this native ecommerce solution, Treez now provides a full suite of in-house retail technology solutions – including point of sale, retail analytics, and cashless payments.
Ric Flair Drip Launches in Michigan in Partnership with Goldkine. The initial product lineup includes premium flower and infused pre-rolls.
🧔 People
Goodness Growth Interim CEO Josh Rosen appointed CEO. The Company also plans to change its corporate name change to Vireo in the coming months.
Motif Labs appoint Jason Macintosh as CFO. Macintosh was previously CFO at Moneta Gold, a Canadian gold developer.
High Tide appoints Mayank Mahajan as CFO. Mahajan was previously CFO at Everyday People Financial, CFO at Metamaterial, Jubilant Bhartiya Group (Canada, India and USA), Genpact, and S.P. Nagrath & Co.
GrowGeneration appoint Star Carter to Board following Paul Ciasullo’s Retirement. Carter is currently a Leadership Advisor and Consultant at Egon Zehnder in Dallas, Texas. Previously, she served on the Board of Directors of Kanarys and Legal Aid Texas.
🎙️ Interviews
The DEA Agrees With Schedule III w/ Boris Jordan and Hirsh Jain | Higher Exchanges
How Nancy Whiteman and Wana Brands Found Sweet Success | mg
Cresco Labs Returns to 'Core' After Terminating Columbia Care Deal | CBT
MI CRA Names Director For New State-Run Marijuana Testing Lab | MI Tech News
C3 Industries’ Brotherly Model for MSO Success | CBE