🏦GTI raises up to $250M Debt at 7% Interest

GTI $250M Notes @ 7%. AWH $80M IPO. Cansortium $71M TL @ 13%. Hydrofarm raises $269.3M, acquires HEAVY 16 for $78M. PA $900M Market LTM. MD $1B Market past 3 years.


🌿Industry

Branding pays off for Cannabis companies.

Analysis of first-quarter market share data provided by marijuana analytics firm Headset shows some clear winners, particularly in consumer packaged goods categories such as edibles and beverages. While these segments don’t have the overall market share that flower does, they tended to be dominated by fewer brands when compared to flower in the states analyzed. The top brands in other categories, such as concentrates, flower and vape, often are more spread out between brands. In California, 28 brands accounted for the top 50.7% of flower sales compared to two brands making up 49.2% of edible sales. The flower category also has added competition from house or store brands in many markets. For example, house brands were responsible for 63% of flower sales in Colorado for the first quarter of this year. But some regional brands have pushed through. Pacific Stone in California topped flower brands in the state with 4.7% of sales in the first quarter. Some states, like Washington, don’t permit house brands, allowing Phat Panda to top the flower market there with with 7.7% of flower sales. Top brands have a bit more market share in the concentrates and vape categories, but rarely attain more than 15% of sales. The STIIIZY vape brand is the exception, topping the California vape market with 20.2% of sales.

Bengal Capital — “affinity for brands doesn’t begin or end in a vacuum. Customers pick brands on a relative basis once they’ve tried other products in that category.”

Headset Estimates Pennsylvania Medical Cannabis Sales Exceeded $900M between April 2020 and March 2021. Pennsylvania's medical markets brought in $909.4M. Pennsylvania stands out among other U.S. markets with the largest average basket sizes so far this year, at $123.88 per basket; Pennsylvania's average basket size was 2x as high as Michigan's and 1.5x as high as Oregon's. In addition, concentrates had the highest average item price at $61, and tinctures, flower and vapor pens followed closely behind with an average item price of more than $50.

Marlboro-Maker Philip Morris Keeps Cannabis Options Open. After keeping its distance from cannabis, Marlboro-maker Philip Morris International Inc. is beginning to take a closer look at the suddenly hot market. The company is assessing factors like the toxicity of cannabis, efficacy and differences between pharmaceutical and consumer options, Chief Executive Officer Andre Calantzopoulos told Bloomberg News Tuesday. The company is still analyzing the industry because the market is so young and there isn’t robust regulation yet, he said. “We are doing all this work and will determine one day what avenues to pursue,” he said in an interview. “But our priority is what we’re doing with our smoke-free products, and that’s where I would stay on cannabis.” If Philip Morris opts to pursue cannabis, it could be part of the company’s “Beyond Nicotine” strategy, which includes adding botanicals to expand risk-reduced products with new flavors like cloves, star anise or chamomile. Areas of opportunity could also include sleep aid, energy or calm control, the company said at an investor day in February.

What it’s like to live in Weed, the historic Northern California logging town turned punchline. At The Weed Store, you can buy a T-shirt that reads, “I (heart) Weed,” “The Weed Police” or “University of Weed.” You can also buy shot glasses, mugs, magnets, key chains, lighters and pretty much any item you could possibly desire with the town’s distinctive name emblazoned on it. “[The store has] been around since 1946 … but the name didn’t become ‘haha funny’ until maybe 20 or 30 years ago. It was the '90s when people really started giggling about it,” Taylor explained. The Weed Store already sold tons of touristy knickknacks, but in 2007, the owners decided to fully capitalize on the name. "We were like, 'Hey, let’s go all out, just "I heart Weed,"'" said Taylor. "And we keep it completely tongue-in-cheek, like we don't know what's so funny about it, we just really love the town." What you won’t find at the Weed Store, however, are any designs that are too obvious: no marijuana leaves or 420 references. But that doesn’t mean they aren’t in on the joke — they’re just trying to keep things family friendly. “Sometimes we get folks who just bust right in here and go, ‘Where the weed at?’ Like oh my god guys, no,” laughed Taylor. “So we give them business cards to the dispensary downtown.”

Other highlights:

Akerna Flash Report — 420 Cannabis sales totaled over $111.8M

Maryland medical marijuana sales hit $1B since launch (December 2017)

Oklahoma judge suspends state’s cannabis seed-to-sale requirement

Cannabis cultivation is hard: Operators explain why


💵Deals

GTI — $217M Senior Debt Financing. $217M senior non-brokered private placement financing through the issuance of senior secured notes. The Company intends to use the proceeds to retire the Company’s existing $105M senior secured debt due May 2023 and for general working capital purposes as well as various growth initiatives. The Notes have a maturity date of April 30, 2024 and will bear interest from the date of issue at 7% per annum, payable quarterly, with an option, at the discretion of the Company, to extend an additional 12 months. The financing permits the Company to borrow an additional $33Mover the next twelve months. The purchasers of the Notes also received an aggregate of 1,459,043 warrants. Each Warrant is exercisable to purchase one subordinate voting share of GTI at an exercise price of $32.68 per share, for a period of 60 months from the date of issue.

AWH — Prices IPO, raises $80M. 10,000,000 shares of its Class A common stock at $8.00/share, for total gross proceeds of $80M. AWH has also granted the underwriters a 30-day option to purchase up to an additional 1,500,000 shares of its Class A common stock at the offering price to cover over-allotments, if any. The offering is expected to close on May 4, 2021 and will trade on the CSE under the ticker symbol AAWH. The Company also expects its shares to become quoted on the OTCQX® Best Market in the days shortly following the closing of the offering.

Cansortium — Completes $71M Debt Financing. Cansortium, a vertically-integrated cannabis company operating under the Fluent™ brand closed a $71M Senior Secured Term Loan due April 29, 2025 with a syndicate led by U.S.-based institutional lenders. The Term Loan will bear interest of 13% annually, with a four-year maturity and 18 months of call protection. The Term Loan consists of a $50M tranche priced with an original issue discount of 3% that includes warrants to acquire 12.5M common shares of common stock at an exercise price of $1.20/share, as well as a $21M tranche priced with an original issue discount of 7% with no equity component.  Subject to certain conditions of the Term Loan, the Company can increase the Term Loan by up to $20M.

Columbia Care — Buys New York Greenhouse for $42.5M. The 34-acre cultivation site in eastern Long Island, New York expands Columbia Care’s cultivation and production footprint by ~1M square feet. The Company’s first harvest and sales from this property for the state’s medical marijuana program is expected in Q4 2021, pending regulatory approvals. Columbia Care will pay a total purchase price of $42.5M, which includes $15.0M in cash and $27.5M in stock. The initial payment of $30.0M has been made. The remaining $12.5M in stock payment will follow in August 2021 upon completion of the second phase of the transaction.

The Valens Company — Enters US Market with Agreement to Acquire Leading CBD Company, Green Roads, for up to $60M. Valens, a leading manufacturer of cannabis products, has entered into a definitive agreement to acquire Green Roads in a cash and share transaction for $40M (63.5% stock, 36.5% cash), plus up to an additional $20M in contingent consideration payable upon the business achieving certain EBITDA milestones. With the Acquisition of Green Roads, The Valens Company strengthens its capabilities to supply US domestic and global markets with an expanded product offering. Additionally, the Acquisition provides immediate entry into the US market with a trusted and leading CBD health and wellness brand with an established manufacturing and distribution platform. If all the Milestones are met in 2022, the transaction represents ~4.5x FY2022E EBITDA. On a pro forma basis, the combination of Valens and Green Roads results in a business which generated total revenue of C$111.6M in 2020.

Driven By Stem — Expanding into Michigan by teaming up with Organic Guyz. Stem will introduce its Budee e-commerce and delivery platform for the first time in the Midwest through Organic Guyz, the newest dispensary in Kalamazoo, Michigan which opens in June.

Hydrofarm — Acquires Premium Nutrient Maker HEAVY 16 for $78M. HEAVY 16 delivers a full line of premium nutrients with nine core products used in all stages of plant growth, helping to increase the yield and quality of crops. Available across the U.S. in more than 300 retail stores. Hydrofarm will fund the full transaction consideration of up to $78.1M using a combination of cash, the Company’s existing credit facility and $15.0M in newly issued HYFM common stock. The transaction consideration includes a potential earn out payment of up to $2.5M based on achievement of certain performance metrics. The transaction represents an acquisition value of <7x HEAVY 16’s estimated 2021 Adjusted EBITDA, excluding synergies but including the net present value of tax benefits resulting from the transaction.

Other highlights:

Hydrofarm Raises $269.3M Selling ~4.8M Shares at $59/share

Red White & Bloom Closes Acquisition of Florida Operations from Acreage Holdings

Headset Raises $1.8M led by Silverleaf Venture Partners

Neptune Wellness Secures Supply Agreement with Alberta Gaming, Liquor and Cannabis (AGLC), Extends Company's Canadian Footprint over 1600 Retailers

GrowGeneration — Belushi's Farm Partnership


📄Earnings

GAGE — Q4 2020 & FY2020

FY2020 — Revenue increased 1,972% Y/Y to $39.9M; $45M Cash after closing the first tranche of oversubscribed Regulation A, Tier 2, equity financing

Q4 2020 — Revenue increased 615% Y/Y to $10.5M

Operational — Eight cultivation facilities in operation today (three Gage operated and five contracted cultivation assets) expecting to expand to 13 cultivation facilities by year end. Cultivation capacity expected to increase to 3,000lbs/month in June/July 2021 and further expand to 7,000lbs/month by year end. Expects to operate in-house processing asset in the third quarter of 2021 leading to further margin expansion

Updates — March monthly revenue of $7.5M+ and April revenue expected to exceed March results by a 5-6%. Michigan posted $146M of cannabis sales in March (~$1.8B annualized)

SOL Global — Q1 (ended February 2021)

  • Positive Net Income of $208M vs. $2.9M Y/Y

  • Total gain from investments of $244M vs. $2.6M Y/Y

  • NAV per share of $7.12 vs. $1.98 Y/Y

  • Guidance into the Company’s Q2 results: Bluma acquired by Cresco Labs in an all stock transaction valued at $213M. Intends to increase ownership interest in Captor Capital (the parent company of One Plant California) to 15.7%. Co-led Fyllo’s $30M Series B with a $4M investment. Made its first investment in the psychedelic sector, investing $2.6M into Wesana Health. Led a recent financing into Green Scientific Labs, LLC (GSL), investing ~$2.8M for a 14.5% interest. The Company intends to increase its ownership in GSL by investing further into its RTO financing round, which is imminent.

Fire & Flower — Q4 2020 & FY2020

FY2020: Revenue — $128.1M (35.5% GM), up 150% Y/Y; Adjusted EBITDA — $0.02M; $30.6M Cash

Q4 2020: Revenue — $43.2M (38.0% GM), up 30.5% Q?Q; Adjusted EBITDA — $1.5M

Currently, the Company operates 80 cannabis retail stores with 40 located in Alberta, 29 stores in Ontario, 9 stores in Saskatchewan and 1 store in each of Manitoba and Yukon territory. Fire & Flower's focus on four-wall retail economics, the optimization and expansion of its retail network was a contributing factor in achieving positive Adjusted EBITDA.


🧔People

Greenlane + Kushco — Leadership Team For Proposed Combined Company. Nick Kovacevich will lead the combined company as CEO. Greenlane's Bill Mote will serve as CFO, with Greenlane Co-founder Aaron LoCascio serving as President and Greenlane Co-founder Adam Schoenfeld serving as Chief Strategy Officer.

Acreage — Katrina Yolen joins as CMO. Yolen brings more than 15 years of CPG experience from Kraft Foods and GlaxoSmithKline. Most recently, Yolen was SVP Marketing at another cannabis MSO, Curaleaf, where she built and led the marketing function. Prior to her role at Curaleaf, Katrina also held numerous marketing leadership roles at Dancing Deer Baking Company, Weetabix, and GlaxoSmithKline.

Fire & Flower — Nadia Vattovaz joins as COO, Judy Adam as new CFO. Vattovaz joined the Company in 2018 and was previously the CFO and EVP, Operations. In her new role as COO, Ms. Vattovaz will lead the Company's ongoing operations and oversee the successful execution of the Company's aggressive retail growth plan. Adam is a Chartered Professional Accountant and brings more than 25 years of public company experience as a financial executive to Fire & Flower including experience with both the TSX and NYSE listed companies. Prior to joining Fire & Flower, Adam was the CFO of MAV Beauty Brands and under her leadership, supported the company's growth following its IPO in July 2018 by enhancing financial controls and processes as well as completing the acquisition of its fourth brand in November 2019. Prior to that, Ms. Adam was at Corus Entertainment for nearly 20 years.

Jim Belushi (Belushi's Farm): Chasing the magic in cannabis.

“I’m always chasing magic. It’s magic when I do the Blues Brothers. And I chase magic on a film set when I’m acting, and chase magic when I’m singing. I mean, I’m always chasing magic, and I’m going to do this cannabis business because there’s magic here.”

Mike Bitar (Grupo Flor): How To Create A Fantastic Retail Experience That Keeps Bringing Customers Back For More.

“Most retailers may have 10–20 SKUs of pre-rolls, but we carry over 100 or 150 SKUs of pre-rolls. The convenience and selection elevates the customer experience.”


🏬Retail / Product

Curaleaf — South Portland, ME (106th Dispensary). Curaleaf has been operating in Maine since 2014 at its three other branded locations but this will be the first Curaleaf-branded adult-use store in Maine.

Ayr Wellness — Opens 50th Dispensary under the Liberty Health Science (LHS) banner, it’s 34th in FL. The Company plans to have 42 stores open in Florida by the end of 2021. The Florida medical marijuana market continues to show robust growth with the Florida Office of Medical Marijuana Use reporting over 540,000 registered patients as of April 23, 2021, up 61% Y/Y. Ayr’s now has 50 stores across seven states (including the pending acquisition in New Jersey).

MariMed — Opens Fourth Illinois Dispensary in Metropolis. Thrive Metropolis, which is situated close to the Illinois/Kentucky border, is expected to be one of MariMed's most successful dispensaries. It will benefit from being the first dispensary located in (and the only one the city intends to license) the hometown of legendary DC Comics superhero Superman. Metropolis is a mecca for legions of fans who flock to the city annually to visit the Super Museum and sites made famous by Clark Kent, Jimmy Olsen and their friends. The city also generates significant tourism traffic to Harrah's riverboat casino and the popular Fort Massacre campgrounds.

MedMen — Opens First Miami Location in South Beach. The Company’s first Miami location is located in the heart of South Beach on Collins Avenue, just two blocks from the historic Art Deco District and lively beach.

Gage Cannabis — Battle Creek Dispensary (8th in MI).

Broken Coast (Aphria) — Enters the Concentrates Category by Adding Wax to its Product Offerings. Broken Coast Wax is made from its premium B.C. flower and joins its award-winning roster of cultivars in Canada. As the latest innovation for the brand, Broken Coast's high THC (70%+) wax offers a clear expression of each cultivar's profile. Broken Coast uses Hydrocarbon Extraction to extract desired cannabinoids and terpenes from the flower, bringing out rich and complex aromas in the wax product.

GrowGeneration — Prepares to Enter Mississippi's Medical Cannabis Market. GrowGeneration (NASDAQ: GRWG) has signed a lease in Jackson, Mississippi, for the future site of a state-of-the-art GrowGen garden center.  This will be the Company's first location in the state of Mississippi, with 40,000 square feet of warehouse and showroom space, and will feature indoor vertical farming and controlled environment agriculture.

BellRock Brands — Completes New Manufacturing Facilities in Desert Hot Springs, CA and Jackson, MI. The opening of these two facilities provides BellRock complete control over the manufacturing of its four brands, Mary's Medicinals (Mary's), Dixie Brands (Dixie), Rebel Coast and Défoncé, in the markets where those brands are sold. The Desert Hot Springs, CA facility is a 12,000 square foot building that has begun producing the Company's food and beverage products. BellRock will maintain its second California manufacturing facility in Grover Beach, which currently produces Mary's non-ingestible products. The 16,000 square foot Jackson, MI facility has begun producing both Mary's and Dixie products.

Green Goddess — Gets An Architectural Makeover. Founded in 2006, Green Goddess is located in the heart of Venice. The eclectic cannabis industry retail storefront is now reborn after undergoing a fresh, design-forward architectural makeover. To put this new design to good use, the dispensary celebrated its grand re-opening on April 20, 2021. The Green Goddess is among the longest established cannabis collectives in California, founded only behind The San Francisco Buyer’s Club in San Francisco, CAC, and CAPGC in Los Angeles.


💻Hiring

REBUD — Vice President Of Engineering (Los Angeles)

Natura — CFO (Sacramento)

Curaleaf — Head of Investor Relations (New York)


🤷‍♂️Somewhat Relevant

Psychedelic drugmaker MindMed stumbles in Nasdaq debut, CEO says “still very early innings.” Shares fell 29% in their first day of trading on the Nasdaq, but that’s after they ran up 65% Friday and 33% Monday on the OTCQB market in anticipation of the up-listing. The stock continues to trade on Canada’s NEO Exchange (MMED) and in Germany (MMQ). MindMed’s co-founder and CEO JR Rahn said graduating to the Nasdaq is a major milestone not just for his company, but for the industry, signaling a rapid shift in investor interest for psychedelics to treat addiction and mental health disorders such as anxiety and depression.

Seven Key Areas to Focus for Consumer Brands.


👋 Newsletter curated by Dai Truong.