☠️ Lantern Shuts Down after Drizly Spinoff and $40M in funding <18 months ago
☠️ Lantern Shuts Down after Drizly Spinoff and $40M in funding <18 months ago
Connecticut recreational sales launches. Detroit recreational sales begins. Tilray sales declines 7% Y/Y / ($61.6M) Net Income Loss in MRQ. Jushi COO resigns, new CFO appointed.
🌿 Industry
Detroit dispensaries begin selling recreational cannabis. Recreational marijuana officially went on sale in Detroit last Wednesday when House of Dank opened its doors to recreational buyers. A few hours later on the opposite side of the city, DaCut, started recreational sales. Detroit received 90 applications for the 60 limited recreational marijuana licenses available in the first round. The second application round could open as soon as the end of January, pending City Council approval. In the second round, the city will award up to 30 retail licenses, 20 microbusiness licenses and 20 consumption lounge licenses.
Cowen “Not At All Constructive” about Federal cannabis reform chances in the new Congress.
After ascribing 75% odds of SAFE Banking Act legislation passing in the 2022 lame duck session of Congress, Cowen has significant dialed back their hopes for federal cannabis reform in 2023 & 2024. According to Managing Director and Senior Research analyst Vivien Azer, the firm believes reform has a minimal chance of passing over the next two years.
Appeals put Ventura cannabis operations on hold as frustration sets in. Appeal hearings for cannabis businesses in Ventura will start next month, but frustration is setting in for some applicants who applied for a permit in the summer of 2021. Last year, four businesses hoping to open a cannabis operation were selected by the city to receive a permit. Five applicants who did not get permits are appealing the decision. Some finalists are now in limbo, waiting for the go-ahead to open shops. The process is taking so long that Ventura is losing potential tax revenue to cities that have approved cannabis dispensaries such as Port Hueneme, Ojai, Thousand Oaks and, most recently, Oxnard.
Montana reports $202M in recreational sales during first year. The Montana Department of Revenue data shows $303.5M exchanged hands in combined recreational and medical marijuana transactions across the state in 2022. $202.9M of that came from adult-use sales, compared to $93.6M in medical marijuana. During this year’s legislative session, state lawmakers will consider potential updates to the laws on marijuana sales. One bill, House Bill 128, would make a number of tweaks, including extending a moratorium on new marijuana businesses for two more years. Currently, only providers that were operating in the medical marijuana system before the legalization vote in 2020 are allowed to make adult-use sales.
💵 Deals
Canopy Growth closes retail divestiture to OEG Retail Cannabis and FOUR20. OEGRC has acquired ownership of 23 Tokyo Smoke and Tweed store locations across Manitoba, Saskatchewan, and Newfoundland and Labrador. As part of the OEGRC Transaction, the Tokyo Smoke brand has been transferred to OEGRC and all purchased stores currently branded as Tweed will be rebranded. FOUR20, a licensed cannabis retailer, acquired five of the Company’s corporate stores in Alberta.
Glass House Brands closes $4.7M Series C Preferred Stock Offering. The financing raised $4.7M of new capital on top of the ~$26.5M of incremental capital raised from the Company's Series B Preferred Stock offering that closed on December 6, 2022. Holders of the Series C Preferred Stock will be entitled to an annual dividend at a rate of 20% for the first two years after the date of initial issuance of Series C Preferred Stock, 22.5% for the third year and, thereafter, 25% until the 54-month anniversary of the Initial Issuance. The dividend will accrue and be paid quarterly with an annual amount equal to 10% of the initial investment being payable in cash and the balance of the dividend being paid in kind, accumulating and compounding on a quarterly basis until paid.
The Parent Company revises Strategic Agreement with Roc Nation, SC Branding and affiliate. As part of the restructured arrangement, Shawn 'JAY-Z' Carter and affiliates and Roc Nation will return ~7.1M common shares of The Parent Company and enable the organization to save ~$33.5M in top-line costs over an eight-year period. As to preserve shareholder value, Roc Nation has agreed to forgo future The Parent Company equity payments pursuant to the original partnership and SC Branding has agreed to forego future cash and/or equity payments. The mutually-agreed upon terms allow for Roc Nation and JAY-Z affiliates, who are expected to remain substantial shareholders, to continue work with The Parent Company across innovation, brand strategy and social justice fair equity opportunities.
Unrivaled Brands enters into binding Letters of Intent with two California Cookies dispensaries. The Company entered into binding LOIs with Green Door Redding, LLC (Cookies Redding) and 510 Retail & Events, Inc. (Cookies Oakland) pursuant to which Unrivaled is purchasing an Option to Purchase each of the dispensaries and will also negotiate and enter into a Management Services Agreements to operate the respective dispensaries.
Scottish National Investment Bank Invests £2M in Hemp Insulation Company, IndiNature Mill. This follows an initial £3M investment in 2021, Insider reports. The 2021 investment unlocked another £800,000 in grant funding from Zero Waste Scotland’s Circular Economy Investment Fund and £250,000 from South of Scotland Enterprise. IndiTherm, a flexible thermal insulation, is made using industrial hemp sourced from farms throughout the United Kingdom. The bio-based insulation is manufactured for retrofit, new and offsite construction.
📄 Company Updates / Earnings
Tilray Brands — Q2 FY 2023 Financial Results.
$144.1M in Revenue (down from $155.2M in Q2 FY 2022), $40.1M Gross Profit (27.8% GM). Adjusted EBITDA of $11.7M (8.1% margin), and ($61.6M) Net Income Loss. $433.5M in cash and marketable securities. In the U.S., Tilray plans to continue investing in, acquiring or building compelling and profitable lifestyle CPG brands across craft beverage-alcohol and wellness consumer products that are cannabis adjacent, resonate powerfully with consumers, and are strongly positioned in key markets. In Europe, they believe they are well-positioned overall in the cannabis market. And, in Canada, Tilray Brands plans to be patient and strategic.
Lantern Shuts Down. The Company launched in May 2020 and spun off from Drizly with $40M in capital in October 2021. CEO, Meredith Mahoney cites challenging regulations as reasons for the company’s inability to expand successfully outside of its home state in Massachusetts. The company provided delivery software to licensed partners to provide delivery (similar to Eaze’s offering before it decided to obtain license and operate omnichannel retail).
Unrivaled Brands reopens its Blum San Leandro dispensary, spins off two Oregon assets, and names Sabas Carrillo as CEO, Tracy McCourt as CRO, and Jim Miller as COO. On December 28, 2022, the Company closed on a MSA with Brick City Productions (Operator) to re-open and fully operate the Company’s San Leandro dispensary, including operations management, inventory management, labor administration, vendor relations, and customer service for a term of 12 months. The Operator is also providing the working capital required to re-open the store pursuant to a promissory note providing for up to $400,000. As consideration for such services, the Company will pay a management fee equal to 25% of the gross revenue less discounts, refunds and credits payable in shares of the Company’s common stock at the completion of the MSA. The Company will receive a monthly fee equal to 4% of the gross revenue of the San Leandro dispensary. In addition, the Operator will dedicate and use up to 50% of the San Leandro dispensary to sell the Company’s licensed products.
1933 Industries — Q1 2023 Financial Results. Total revenues of $5.6M, Gross margin of $2.0M before fair value adjustments, Adjusted EBITDA of $0.1M. Cash of $3.3M.
TILT Holdings — Pays Down $7.5M in Senior Debt, Extends Maturity of Remaining Senior Secured Notes Until February 28, 2023. The company retired $7.5M of its secured promissory notes in Q4 and entered into amendments to the remaining senior secured promissory notes held by certain senior noteholders totaling $2.1M to extend the maturity dates of such notes from December 31, 2022 to February 28, 2023. With the payments, the Company has successfully retired ~$33.7M of the $35.8M principal of senior secured notes that were originally scheduled to mature in November 2022.
🏬 Retail
Cloud Cannabis becomes one of the first to commence recreational sales in Detroit. Situated on the border of Detroit and Grosse Pointe, Cloud's Detroit dispensary is an ideal destination for both residents and visitors. Brands sold include Mitten Extracts, Wonderbrett, Stiiizy, Pressure Pack, Backpack Boyz, CREAM, Northcoast, and more.
Fine Fettle to open three of seven recreational cannabis in Connecticut on January 9th. The locations are in Newington, Stamford and Willimantic, with a Manchester location tentatively set to open in February.
StateHouse opens Urbn Leaf West Hollywood dispensary. The introduction of Urbn Leaf WeHo expands the Company's retail footprint to 14 dispensaries in California. Located on the iconic Sunset Strip, Urbn Leaf WeHo includes 60 parking spaces.
Glass House Brands Expands Retail Presence with New Farmacy Dispensary in Santa Ynez. The dispensary is in the primary business district just north of Mission Drive (Hwy 246), a few blocks from the Chumash Casino Resort Hotel.
Ayr Wellness opens Tarpon Springs and Orlando dispensaries in Florida. The Tarpon Springs store features 3,470 sq. ft. of retail space and is located in a highly populated, residential area near popular destinations including downtown Tarpon Springs, Tarpon Sponge Docks and Tarpon Square. The Orlando Turkey Lake location, featuring 4,800 sq. ft. of retail space, is near the Orange County Convention Center and hotels, theme parks and attractions.
Schwazze opens R.Greenleaf in Alamogordo, New Mexico. This brings R.Greenleaf's total number of New Mexico retail dispensaries to 16.
🌱 Product
Snoop Dogg’s Death Row Launches Cannabis Brand. Death Row Cannabis products will launch diamond-infused pre-rolls at select Cookies stores in California.
Lowell Farms expands to Arizona with The Pharm. The strategic licensing agreement will also see Lowell Smokes at The Pharm’s two dispensaries: Sunday Goods Tempe and Sunday Goods Phoenix. Following its debut, Lowell Smokes products will be available to dispensaries state wide on a wholesale basis. Lowell Farms’ entry into the market comes on the heels of its recent expansion into MA, MI, IL, CO and NM.
🧔 People
Jushi Leadership Appointments and Management Changes. Michelle Mosier appointed as CFO, Leonardo “Leo” Garcia-Berg resigns as COO. Nichole Upshaw appointed as Chief People Officer and has designated Shaunna Patrick as Chief Commercial Director and Trent Woloveck as Chief Strategy Director. Mosier previously served as CFO at Hamilton Beach Brands Holding Company (NYSE: HBB). Also, The company noted that due to the decline in M&A activity which the Company expects to remain muted, there are no singularly focused business development personnel compared to five such employees during 2022.
Fire & Flower appointed John Chou as CFO. Chou has served as interim CFO since November 2022. Chou previously served as CFO of The Flowr Corporation, CFO of Terrace Global, VP Finance of Gran Colombia Gold and VP Finance of Frontera Energy.
🎙️ Interviews
Leafly, CEO, Yoko Miyashita | NCV
Amber Senter, CEO of MAKR House and Chair of the Board of Supernova Women | NCV
Interview with Nick Gastevich: What to Expect in 2023 | Green Giants
Q&A with Greenlight CEO John Mueller | MJBizDaily
👋 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.