💨 Combs Enterprises will purchase Cresco Labs/Columbia Care divestiture in IL/MA/NY for up to $185M
Tilray Brands acquires Montauk Brewing Company. Treez acquires Swifter. JARS Cannabis acquires Euflora (CO). Doug Francis back as CEO at WM Technology. Metrc appoints Sam Peterson as CTO.
👥 With the Sean Combs/Combs Enterprises news last week, results from ballot initatives and more earnings to come (GTI reported last week. Curaleaf, Acreage, MariMed, WM Technology reported today. Trulieve, Ayr Wellness, AWH, Planet 13 to announce this week. Verano, Jushi, 4Front, TILT, springbig, TerrAscend, TPCO, and Cresco Labs next week)—there will be a lot to talk about at CannaVest/MJBizCon.
🌿 Industry
Here are the states voting on Cannabis legalization on Election Day. Voters in a handful of states — including four that traditionally favor Republicans — are set to decide Tuesday whether to legalize recreational marijuana, paving the way for its sale and cultivation in newly regulated markets across the country. Arkansas (a poll by Talk Business & Politics and Hendrix College shows 50.5% support, 43% oppose, rest undecided), Maryland (a Washington Post-University of Maryland poll found 73% of voters favor), Missouri (a poll by Emerson College Polling and The Hill showed 48% support), North Dakota (legalization did not pass when it appeared on ballots in 2018, losing by a margin of 41% to 59%) and South Dakota (a poll from Emerson College Polling shows 40% support, while 51% oppose) could join 19 other states and the District of Columbia, which have already legalized recreational marijuana. Additional overview from Vox.
Leafly Report: Cannabis is America’s 6th Most Valuable Crop in 2022.
Key findings:
In 2022, adult-use cannabis farmers in the U.S. have legally grown ~2,834 metric tons of cannabis (enough to fill 36 miles of dump trucks parked end to end)
Adult-use cannabis now supports more than 13,297 American farms, in 15 legal states with legal adult-use and medical cannabis markets
Prices are the highest in Alaska, Illinois, Maine, Massachusetts and Nevada
Marijuana is the No. 1 cash crop in Alaska, Massachusetts, and New Jersey, but regulators do not publish production totals in two of those states
Amid Layoffs and Falling Sales, Colorado’s Cannabis Industry Grapples With an Economic Downturn.
Jonathan Spadafora knew things were bad when April 20, 2022, the high holy day of cannabis, failed to deliver the windfall Colorado’s marijuana retailers were used to. Across the state, dispensary sales fell around 25 percent compared with 4/20 the year before. But it wasn’t until this past May, when demand continued to plunge, that Spadafora, president of Veritas Fine Cannabis, realized the industry was in a free fall. For the first time since licensed recreational weed sales began in Colorado in 2014, two years after legalization, the Centennial State’s cannabis sector is experiencing a prolonged downturn. Mid-2022 saw the fourth consecutive quarter of declining sales, a near reversal of the record-setting revenues the industry boasted during the early days of the pandemic. (The medical and retail sectors have experienced nearly identical downturns.) In response to waning demand, dispensaries that had stocked up for 4/20 found themselves stuck with excess inventory and slashed purchase orders to growers such as Veritas, which produces flower and pre-rolled joints for stores around the state. Even big companies are struggling; chains Buddy Boy and TweedLeaf shuttered seven stores each during the summer. Spadafora believes a number of factors (pandemic boom, inflation, decline in cannabis tourism) have contributed to cannabis’ tailspin.
Growth in Cannabis Sales Remains Weak in September.
BDSA provides coverage for Florida, Illinois, Maryland, Massachusetts, Michigan, Pennsylvania, Arizona, California, Colorado, Nevada and Oregon. FL—up 2.1% sequentially, IL—up 0.2% sequentially, MD—down (4.2)% sequentially, MA—up 2.1% sequentially, MI—up 2.0% sequentially, PA—down (0.5%) sequentially, AZ—down (2.5%) sequentially, CA—down (5.5%) sequentially, CO—down (3.9%) sequentially, NV—down (9.7%) sequentially, OR—down (1.4%) sequentially.
Holyoke City Council seeks stricter regulating of cannabis industry in light of worker’s death. The City Council called on the mayor and Board of Health to develop enforcement and inspectional mechanisms for the cannabis industry in the aftermath of a worker’s death in January. Ward 5 Councilor Linda Vacon filed an order after the worker died at Trulieve. The council approved the order and findings Tuesday. Vacon said she shared a conversation with a Massachusetts Cannabis Control Commission staffer. The commission is part of an ongoing investigation of Trulieve, which also involves the federal Occupational Health and Safety Administration. She said Trulieve has been under active investigation since early 2021.
💵 Deals
Cresco Labs & Columbia Care — Divestiture in Three Markets (NY, MA, IL) to Sean "Diddy" Combs, Creating the First Minority-Owned, Vertically Integrated MSO. The divestiture of the Assets is required for Cresco to close its previously announced acquisition of Columbia Care. The Transaction is expected to close concurrently with the closing of the Columbia Care Acquisition. Total consideration for the Transaction is an amount up to $185M (at close: $110M cash, $45M seller notes).
Assets divested in the Transaction:
New York: Brooklyn (CC), Manhattan (CC), New Hartford (CL), and Rochester (CC) retail assets and Rochester (CC) production asset
Massachusetts: Greenfield (CC), Worcester (CL), and Leicester (CL) retail assets and Leicester (CL) production asset
Illinois: Chicago – Jefferson Park (CC) and Villa Park (CC) retail assets and Aurora (CC) production asset
Additional Coverage: Wall Street Journal, CNBC, BillBoard
Tilray Brands — Acquires Montauk Brewing Company. Montauk Brewing is well-known for its beloved product portfolio, premium price point, and distribution across over 6,400 points of distribution, including top national retailers such as Target, Whole Foods, Trader Joe’s, Stop & Shop, King Kullen, Walmart, 7-Eleven, Costco, BJ’s, and Speedway. The acquisition is expected to be accretive to the Company’s adjusted EBITDA. Tilray Brands intends to leverage SweetWater’s existing nationwide infrastructure and Montauk Brewing’s northeast influence to expand their distribution network and drive profitable growth in their beverage-alcohol segment. This distribution network is part of Tilray’s strategy to leverage our growing portfolio of U.S. CPG brands and ultimately to launch THC-based product adjacencies upon federal legalization in the U.S.
Treez — Completes Acquisition of Swifter. Swifter is a payment solutions platform tailored to meet the unique needs of the cannabis industry. Through the acquisition of Swifter, Treez will be able to provide embedded partner-powered fintech solutions that will ultimately lead to more transparency, stability and better processing rates for retailers. Additionally, Treez will be able to leverage and further build upon the Swifter technology to allow more traditional banks and fintech providers to more easily enter the space as legislation efforts like SAFE banking get closer to passing.
JARS Cannabis — Acquires Euflora, Expanding Retail Footprint in Colorado. Adding one cultivation center and greenhouse, along with 6 recreational storefronts to its portfolio, the completion of the transaction will increase JARS' retail operations to include a total of 26 storefronts across three states and solidify its positioning as a leading purveyor of affordable and accessible cannabis products in the nation's second and third largest cannabis markets.
SNDL — Acquires Zenabis Business. The Zenabis Business' core asset is the 380,000-square-foot indoor growing facility in Atholville, New Brunswick, which has an annual production capacity of approximately 46,000 kilograms of dried cannabis and 15,000 kilograms of extraction capacity. The facility previously received EU GMP certification and has exported cannabis shipments to Malta, Israel and Australia. SNDL completed its first international shipment of dried cannabis flower in August of 2022, and as the Company works to expand its international export business, the Atholville facility and Zenabis Business' customer relationships are valuable assets.
📄 Company Updates / Earnings
Curaleaf — Q3 2022 Results
Revenue of $340M, up 1% sequentially and 7% YoY
Adjusted EBITDA of $84M, an increase of 18% YoY
$60 Million of Operating Cash Flow
Added six new retail dispensaries across Arizona, Nevada and Florida and closed one in Colorado bringing total current store count to 142
$198M of cash and $599M of outstanding debt net of unamortized debt discounts
GTI — Q3 2022 Results
Revenue increased 3% sequentially and 12% year-over-year to $261M
YTD 2022 revenue increased 17% to $758M compared to the same period in 2021
$10M net income or $0.04 per basic and diluted share
Adjusted Operating EBITDA grew 7% sequentially to $84M (32% margin)
Cash Flow from Operations of $48M net of income tax payments of $31M
Cash and cash equivalents of $147.3M
Acreage Reports — Q3 2022 Results
Revenue was $61.4M, up 28% Y/Y. GM of 35% compared to 50% Y/Y. Excluding non-cash inventory adjustments, GM was 45% for Q3 2022
Adjusted EBITDA was $8.8M, compared to $6.5M Y/Y
$26.6M in cash and cash equivalents
MariMed — Q3 2022 Results
Revenue of $33.9M vs. $33.2M in Q3 2021 (48% GM vs. 55% GM in Q3 2021)
Adjusted EBITDA of $8.6M (25% margin) vs $12.6M (38% margin) in Q3 2021
$11.1M cash and cash equivalents
Guidance: Revenue of $132–$135M (48%–49% GM), Adjusted EBITDA of $32 –$35M. Capital expenditures of $16–$17M
WM Technology — Q3 2022 Results
Revenue was $50.5M vs. $50.9M Y/Y. Average monthly paying clients was 5,576 vs. 4,444 Y/Y. Average monthly revenue per paying client was $3,019 vs $3,817 Y/Y
Net loss was ($10.5M) as compared to net income of $49.2M Y/Y
Adjusted EBITDA was $(9.6M) as compared to $10.4M Y/Y. Prior to provision for doubtful accounts (non-cash), Adjusted EBITDA was $0.5M
Basic and diluted net loss per share was $0.06
Cash totaled $34.2M as of September 30, 2022, with no long-term debt
Unrivaled Brands — Files Suit Against Frank Kavanaugh, Jay Yadon, and Bernard Steimman for Fraud Related to the Acquisition of People’s First Choice LLC. Unrivaled alleges in the Cross-Complaint, among other things, that around the time of the sale, Kavanaugh, Yadon, and Steimman, through an entity New Patriot Holdings, Inc., siphoned away over $5M from Unrivaled through backdated accounting entries and write-offs related to the People’s Dispensary. According to the Cross-Complaint Unrivaled assumed over $4M in IRS tax debt accrued by the People’s Dispensary while under the leadership of Kavanaugh, Yadon, and Steimman. In addition, the Cross-Complaint alleges that $17,000,000 in cash was required to be paid by Unrivaled before the deal had even closed. The Cross-Complaint notes that part of the substantial up-front cash payment was demanded because Kavanaugh, Yadon, and Steimman required funding for a pending project in Salinas, California.
The Parent Company — Divesture of Wholesale Extraction Division (SISU). Under the terms the of Agreement the purchaser has agreed to enter into a multi-year strategic supply agreement for both cannabis oil and flower brokerage services. The company stated that given the underperforming wholesale market, the decision will allow them to focus on their profitable omni-channel retail business and brand-building activities closer to the consumer experience.
Agrify — Successful Commercialization of Recently Launched PX10 Hydrocarbon Cannabis Extractor. PX10 aims to provide customers the most advanced and scalable hydrocarbon extraction technology. The extractor will soon be installed at three customer facilities, including through a new engagement with Alchemist in Maryland.
Tilray Brands x Charlotte’s Web — Strategic Alliance in Canada. The strategic alliance which includes licensing, manufacturing, quality, marketing and distribution for Charlotte’s WebTM CBD hemp extract products in Canada.
Greenlane — Strategic Agreement With Leaf Trade to Increase B2B Visibility. The Leaf Trade agreement is part of the Company's business strategy to capitalize and accelerate growth and profitability by including Greenlane as an ancillary brand on Leaf Trade's business-to-business (B2B) marketplace and increasing its visibility.
🏬 Retail
Curaleaf — Expands New Jersey Adult-Use Sales to Bordentown Dispensary. Curaleaf Bordentown, located at 191 Route 130, is the Company's third and final location to sell adult-use cannabis in the Garden State. According to the New Jersey Cannabis Regulatory Commission, the state generated more than $79M in recreational cannabis sales from April 21 to June 30.
Planet 13 — Announces Illinois Dispensary Location. The company submitted its proposed Illinois location in Fountain Square, Waukegan, Illinois to the Illinois Department of Financial & Professional Regulation (IDFPR) and local regulators for approval.
Jushi — Opens Relocated Scranton Dispensary in Pennsylvania through its Subsidiary, Pennsylvania Dispensary Solutions. The new store location, Beyond Hello™ Dickson City, is centrally located in a hub of economic activity in the Greater Scranton Area.
Ayr Wellness — New Retail Locations and LEVIA Availability in Florida. Ayr opened two new retail stores in Florida, located in Daytona Beach and Lake Worth, and expanded LEVIA’s water-soluble cannabis tinctures to its Florida retail menus.
STIIIZY — Opens Second Michigan Location in Kalamazoo. STIIIZY plans to open another 7-10 locations in Michigan in the next 12 months with the next dispensary slated for Battle Creek.
[note: If you’re interested in a Michigan deep dive, I worked on one with Headset linked here]
🌱 Product
Jetty Extracts — OCal ‘Comparable-To-Organic’ Certification For Its Cannabis Concentrates. Jetty Extracts’ solventless extraction process has been certified under the state’s OCal Program, which certifies that cannabis products have been grown and manufactured under “comparable-to-organic” standards. Jetty will be the first brand to introduce OCal-certified solventless products to the California market beginning January 2023. To qualify for OCal certification, cannabis plant material must be non-bioengineered and cultivated without the use of most conventional pesticides and fertilizers made with synthetic ingredients or sewage sludge and not be subjected to ionizing radiation. OCal-certified manufactured products must also be made without artificial preservatives, colors or flavors. Only specific types of extraction, including solventless extraction, are eligible for certification.
Verano — Launches BITS, Company’s New Low-Dose, High-Function Edibles. Each of BITS’ five initial flavors offer a blend of 5 mg of THC, complementary cannabinoids and adaptogens designed to enhance not overtake, and to make the cannabis edible experience less intimidating, more accessible and enjoyable.
🧔 People
WM Technology — Co-founder and Executive Chair, Doug Francis succeeds Chris Beals as CEO. Beals has decided to step down from his role as CEO and from the Board of Directors. Francis was previously CEO of the Company prior to Beals and has worked closely with the Company’s management team over the last quarter since being appointed as Executive Chair.
Metrc — Appoints Sam Peterson as CTO. Before joining Metrc, Peterson served as CTO at Boats Group, a Florida-based advertising and software company for the marine industry. Prior to that, he served as CTO at both Overstock and Open English.
Lowell Farms — Adds Summer Frein and Ann Lawrence to Board of Directors. Frein currently serves as CMO at Turning Point Brands with oversight of brand management, creative services, e-commerce, business intelligence, marketing services, and consumer insights. Lawrence is an attorney currently serving as CEO of a Southern California collection of cannabis companies (distribution and two dispensaries—The Rose Collective and The Farmacy Westwood).
🎙️ Interviews
Q&A with craft alcohol pioneer Rhonda Kallman | MJBizDaily
Winery Owner And Cannabis Consultant Stephanie Honig On The Future Of Bud, Hospitality, Dining And More In Napa Valley | Forbes
Michael Reardon, Co-Founder and CEO of Happy Valley | The Green Rush
Kyle Sherman, Founder and CEO of Flowhub | High Rise
Springbig Co-Founder and CEO Jeffrey Harris | New Cannabis Ventures
👋 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.