💳 Curaleaf $425M, 8% Senior Secured Notes // Glass House $100M 10% Senior Secured Term Loan

Clio Cannabis 2021 Award Winners. Chicago Atlantic Prices $100M IPO. Tilray acquires Breckenridge Distillery for $102.9M. New Jersey approves 30 more medical dispensaries. Fire & Flower $30M Debt.

Dec 14, 2021

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🌿 Industry

MSOs Target Cannabis Product Brands in Bid for Retail Dominance. Just a decade or so into North America’s adult-use cannabis experiment, we have a strong sense of where the biggest companies (multistate operators, or MSOs) plan to assert their dominance. As states make the inevitable shift from illicit to medical or recreational sales, major operators have been gobbling up as many retail and cultivation licenses as possible, hastily assembling vertical infrastructures in a bid to control regional markets and enter the federal legalization era on strong footing. They have proven adept at raising and deploying capital to accumulate cultivation, manufacturing, and retail operations, but they have been notably less bullish on cannabis product brands. The article covers recent M&A, California, Michigan, Licensing vs. Acquiring, and Wholesale Agreements.

Clio Cannabis — 2021 Award Winners.

Clio Cannabis, the awards competition celebrating creators at the forefront of cannabis marketing and communications, announced the winners of its third annual program. Zerotrillion’s “Nothing to Hide” spot for Flowr Cannabis won the competition’s highest honor, the Grand Clio Cannabis Award, in the Film/Video medium.

Visa Warns Against Misuse Of ‘Cashless ATMs’ Used By Cannabis Retailers To Skirt Restrictions. Visa recently issued a compliance memo to customers warning them that miscoding point-of-sale transactions through the use of so-called cashless ATMs—a practice used by some cannabis retailers as a workaround to accept credit or debit cards for purchases—could lead to penalties or other unspecified enforcement action. “Cashless ATMs are POS devices driven by payment applications that mimic standalone ATMs. However, no cash disbursements are made to cardholders,” the memo explains. “Instead, the devices are used for purchase transactions, which are miscoded as ATM cash disbursements. Purchase amounts are often rounded up to create the appearance of a cash disbursement.”

New Jersey approves 30 more medical cannabis dispensaries. New Jersey continues to make big moves to strengthen the state’s medical cannabis market in anticipation of launching recreational sales in 2022. State marijuana regulators on Tuesday approved 30 additional MMJ dispensary licenses, only two months after awarding 10 cultivation permits and four vertically integrated licenses. The new dispensary licenses will more than double the number of MMJ outlets, which currently stand at 23, according to the state’s website. Existing MMJ businesses, many of which are multistate operators, argue that they are producing enough supply to start selling recreational marijuana products now, but so far, regulators have resisted. New Jersey has 121,111 registered patients, according to the state’s website. The program had 44,000 patients in early 2019.

Colorado cannabis sales drop for third consecutive month. Cannabis sales in Colorado have declined for three months in a row and are off nearly 12% compared to the same period a year ago, according to state data for October. It’s not unusual for sales to be somewhat softer during that part of the year. But October sales in Colorado totaled only $176M, a drop from $200M in October 2020, according to Department of Revenue figures. Despite the sales decline in the past three months, total marijuana sales of $1.9B for the first 10 months of 2021 are marginally ahead of last year’s $1.8B for the same period, according to the state data.

Malta to legalize cannabis for personal use in European first. Malta will this week become the first European country to legalize the cultivation and possession of cannabis for personal use, pipping Luxembourg to the post, as the continent undergoes a wave of change to its drug laws. Possession of up to seven grams of the drug will be legal for those aged 18 and above, and it will permissible to grow up to four cannabis plants at home, with up to 50g of the dried product storable. The move by Malta, the EU’s smallest member state, is likely to be followed by reform across Europe in 2022. Germany recently announced a move to establish a legally regulated market, following announcements from the governments of Switzerland, Luxembourg and the Netherlands. A referendum in Italy is planned, while Canada, Mexico and 18 US states have already enacted similar legislation.

New Mexico now accepting applications for all cannabis business licenses. The division began taking cultivator applications in August, which resulted in more than 1,500 applications being filed by November. The state has no cap on the number of permits it will issue. But no retail or manufacturing licenses will be awarded until the CCD is finished writing industry rules for those sectors, which is expected to happen before the end of 2021, according to the release. Adult-use marijuana sales are slated to launch in New Mexico on April 1, 2022.

💵 Deals

Curaleaf — $425M Private Placement Of 8% Senior Secured Notes Due 2026. The Notes, which will be issued at 100% of face value, will be senior secured obligations of the Company and will bear interest at a rate of 8.0% per annum, payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The Notes will be governed by a trust indenture to be entered into on closing of the Offering. The Indenture enables the Company to issue additional notes on an ongoing basis as needed, subject to maintaining leverage ratios and complying with the other terms and conditions of the Indenture. In addition, the Indenture permits up to an additional $200M of senior bank financing.

Glass House Brands — Secures up to $100M Senior Secured Term Loan. The $50M Initial Term Loan has a variable interest rate currently set at 10% per annum, and in no event shall be more than 12% per annum. The gross proceeds of the Loan will be used to fund the phased retrofit of the Company's ~5.5 million square feet cultivation facility currently under renovation in Camarillo, California (SoCal Facility) and for general corporate purposes. The Initial Term Loan shall be repayable in monthly installments beginning on December 1, 2023, at an aggregate amount equal to 1.25% of the original principal amount of the Initial Term Loan. Two subsequent draws of $25M (Delayed Draw Term Loans) each will be available at future dates provided certain terms and conditions under the Loan Agreement have been met and shall be repayable in monthly installments beginning on December 1, 2023, at an aggregate amount equal to 1.25% of the original principal amount of the Delayed Draw Term Loans. The conditions of the Loan Agreement include the creation and issuance of 2,000,000 warrants that will be freely tradable.

Chicago Atlantic — Prices $100M IPO. The Company priced 6,250,000 shares of its common stock at a public offering price of $16.00 per share, pricing at the bottom of the proposed $16.00—$18.00 range.

Unrivaled Brands — Sells Inoperative Dyer Property for $13.4M. The sale is expected to close in January 2022, and the Company will retire $9.0M of outstanding debt on the property. Notwithstanding the sale of the real estate at Dyer, the Company retains, through a wholly owned subsidiary that is not party to the sale, local approval to seek a license to open a cannabis dispensary at the Dyer building location. However, following the Company’s acquisition of the highly successful People’s dispensary, the Company is evaluating its options to develop the license, including consideration of the retail density in the area. The Company expects to make a final determination regarding the dispensary license in or about the first quarter 2022. If the city of Santa Ana grants approval to relocate licenses elsewhere in the city, the Company may consider using the dispensary license to open a dispensary in an underserved part of Santa Ana.

Fire & Flower — $30M Secured Debt Facility with Circle K Owner Alimentation Couche-Tard. ACT shall loan to the Company $30m which may be drawn down in three separate tranches of $10M. Subject to the terms of the Agreement, the Loan will accrue interest at a rate of 8.0% per annum, payable quarterly, and matures on October 1, 2022. The Agreement contemplates prepayment of amounts drawn from the net proceeds received by Fire & Flower upon the exercise of Series B Warrants held by ACT which become exercisable by ACT as of January 1, 2022 until September 30, 2022. The Company also acquired Pineapple Express Delivery for $5.3M cash (assuming the company’s debt) and ~$5.5M debt, the Company had LTM Revenues of ~$10M as of 10/31/21.

Audacious — $20M Convertible Bond Funding Commitment with LDA. Under the terms of the agreement with LDA, AUDACIOUS has the right to draw up to $10M in tranches, with an option to draw down up to $20 million subsequent to completion of the first five tranches of $2 million each, with certain provisions for accelerated or larger tranches. The Funding is structured as a convertible bond with a zero coupon, issued at a 15% discount to the 5-day VWAP on the date a tranche is exercised. Maturation of the instrument is 24 months. Additionally, the Company closed the first tranche of a non-brokered private placement for proceeds of ~$3.1M.

Cresco Labs — Closes Acquisition of Pennsylvania Vertically-Integrated Clinical Registrant, Laurel Harvest. The company has 52,000 sq. ft. of indoor grow/processing space with a foundation for an additional 52,000 sq. ft. of indoor cultivation space. Laurel Harvest also has one operational dispensary in Montgomeryville and a second dispensary in Scranton is currently under construction. They have the ability to open an additional four dispensaries throughout the state.

Tilray — Acquires Breckenridge Distillery in $102.9M All-Stock Deal.

Breckenridge Distillery Restaurant Releases New Menu by David Burke

Founded in 2008, the Breckenridge Distillery is most widely known for its blended bourbon whiskey, a high-rye mash American-style whiskey, and a collection of artisanal spirits offering that brings to life the best that Colorado has to offer. Tilray believes the acquisition will lead to the commercialization of “new and innovative products through the development of non-alcoholic distilled spirits, including bourbon whisky, that is infused with cannabis.”

Agrify — Acquires PurePressure, the Leader in Solventless Extraction and Advanced Ice Water Hash Processing in the Cannabis and Hemp Industry. PurePressure projects to generate ~10M in 2021E revenue. Agify will acquire the company for $9M ($4M cash, $5M stock). There is also an additional earnout opportunity that can bring the total purchase price up to $12M if certain financial milestones are achieved in 2022 and 2023.

📄 Company Updates

Ayr Wellness — Launches “12 Days of Giving” Initiative to Provide Support for Local Communities and Individuals and Families Impacted by Cannabis Prohibition. The donations will support nonprofits with local ties, need, and impact across each of Ayr’s key regional markets (Arizona, Florida, Massachusetts, Nevada, New Jersey, Pennsylvania). At a national level, Ayr will donate $1.12 from every transaction made over the twelve-day period to The Last Prisoner Project, expecting to generate ~$100,000 of donations for Last Prisoner Project.

🏬 Retail

Unrivaled Brands — Opens People’s Downtown LA. The downtown location (1149 S Los Angeles St) is the Company’s second People’s-affiliated and fifth overall dispensary in California. Further, a People’s Riverside location is expected to be operational in Q1 2022, and licenses are pending for two additional southern California locations.

Verano — Opens MÜV Orange Park Dispensary, the Company’s Third Jacksonville Area Location and 40th Florida Storefront Statewide. The new storefront is positioned at the heart of the city's shopping corridor directly across the street from Orange Park Mall, a high-traffic commercial area.

Cresco Labs — Opens 44th Dispensary in Pensacola, FL. Cresco Labs now operates 12 Florida stores and 44 nationwide. Sunnyside Pensacola is centrally located in the city near Cordova Mall, across the bridge from Pensacola Beach and the suburb of Gulf Breeze, and a few blocks away from Interstate 110—offering broad accessibility to daily commuters and residents.

Trulieve — Opens Okeechobee, FL Dispensary. The Okeechobee location is Trulieve's 111th in the state. Patients can access nationally-beloved brands such as Bellamy Brothers, Bhang, Binske, Blue River, Black Tuna, Love's Oven, O.pen, and Sunshine Cannabis, all available exclusively at Trulieve in Florida.

Jushi — Opens 27th Nationwide Dispensary in Pittsburgh, PA. The dispensary will carry dry leaf, concentrates, cartridges, tinctures, topicals, capsules, pills and various ancillary products such as approved batteries and devices. Since acquiring Franklin Bioscience-Penn LLC and its subsidiaries in 2019, Jushi has grown the number of Pennsylvania BEYOND / HELLO™ stores from two to 17.

🌱 Product

Goodness Growth Holdings — Launches New Line of Cannabis Edibles. HiColor™ gummies will be available in Maryland through the Company's wholesale and retail channels. HiColor Gummies are offered in 10 mg THC, 10:10 CBD:THC, and 5:5 CBD:THC formulations built to meet the needs of a variety of cannabis consumers. At launch, the gummies are available in Key Lime, Concord Grape, Hawaiian Pineapple, Alfonso Mango, Oxnard Strawberry, and a variety pack. The gummies are vegan, gluten free, non-GMO and use only natural flavors. Subject to regulatory approvals, the Company plans to expand the HiColor brand to other markets, including New York and Minnesota, which just announced the allowance of cannabis-infused edibles in the state's medical cannabis program starting August 2022.

Garden Society — Launches Wine Country-Inspired Gummies.

Incorporating a new, proprietary cannabis extract to enable its rapid effect, and infused with real wine concentrate, the edibles are available in three flavors: Tart Cherry Pinot Noir, Peach Prosecco, and Sparkling Strawberry Rosé. Each has a varying blend of THC + CBD that provides a desired effect in around 15 minutes.

🎙️ Interviews

Cannabis consumption lounges gain in popularity (CNBC)

Investing in Cannabis through Sale-Leasebacks (Newlake Capital Partners)

Imagining a Cannabis Culture That Isn’t Just for Bros (Etain Health)

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