Mexico Passes Bill to Legalize Cannabis

Metrc outages. BAT acquires 19.9% of Organigram. Silver Spike Acquisition Corp II $250M IPO. Harborside $5M investment in Loudpack. AeroPay raises $5M. AYR Strategies Q4/2020 earnings.

Mar 15, 2021

🌿Industry

Mexico’s lower house approves landmark cannabis legalization bill. Mexico is on the verge of creating the world’s largest legal marijuana market, a move that could pressure President Joe Biden to embrace weed, too. Mexico’s Chamber of Deputies passed landmark legislation. The Senate is expected to back the billing the coming days. President Andrés Manuel López Obrador, whose party strongly backs the proposal, is expected to sign the bill, sandwiching the U.S. between the world's two biggest legal marijuana markets. With a population of nearly 130M people, Mexico would become the largest country in the world to legalize cannabis at the national level. By comparison, the two other countries that already took that step — Canada (37.6M) and Uruguay (3.4M) — have a combined population that adds up to less than a third of Mexico's.

Metrc outages in California. Problems with California’s seed-to-sale tracking system are causing cannabis companies to spend thousands of dollars in extra time and money to remain in compliance with state regulations. Industry officials in California complain that over the past two months, Metrc has been down frequently, with outages lasting up to nine hours at a time. The downtime prevents cannabis growers, distributors, retailers and other businesses from performing basic functions, such as invoicing and making product transfers to other companies. In December, Metrc COO Lewis Koski told Marijuana Business Daily that the issues were largely resolved. However, the California Department of Food and Agriculture – speaking on behalf of Metrc as well as the state – confirmed that Metrc has experienced “intermittent performance issues” since Feb. 17, with the most severe issues occurring Feb. 25 and March 1. “However, neither Metrc nor its API were ever offline,” the CDFA noted.

The root of the problem is third-party software used by cannabis companies for compliance can’t communicate with Metrc’s database through the API when the tracking system experiences issues. The CDFA blames a small number of integrators for using the API in a way that affects Metrc’s overall performance. “Specifically, the API is being impacted by the amount, method and time of the data requests being sent by these integrators, as many of the requests are redundant,” according to the CDFA. The repeated requests consume Metrc’s technology resources and slow performance, according to the state. And while Metrc has upped its system resources significantly to address the increase in API traffic, the issues persist. The state has been working with Metrc since October to add tweaks to the system – such as data optimization and rate limiting – to moderate integrator traffic and alleviate any unnecessary stress on the system.

Distru has more details on the API outage and how they dealt with it here.

The Future of Weed: 12 Bold Predictions for the Next Decade of Consumer Cannabis. Experts and entrepreneurs comment on the developments that will come to define their industry:

Getting Stoned Out of Your Gourd Will No Longer Be the Goal
We Will Stop Thinking about Weed in Terms of Indica or Sativa
THC and CBD Are Only Part of the Equation
The Stigma of Being a Weed Smoker Will All but Disappear
Cannabis Won’t Continue to Be Relegated to Cannabis-Only Locations
We Will See Major Brand Segmentation
Things Will Still Progress at a the Local Level
The Cannabis Industry Will Come to Look like Just about Every Other Industry
You Will Know Much, Much More about What You Put in Your Body
Get That Cooler Full of Weed Drinks Ready
Scientific Research on the Efficacy of Cannabis as a Medical Treatment Will Ramp Up
The Racist Indiscretions and Wrongdoings of America’s Drug Policies Will Need to Be Addressed

Other highlights:

Virginia Governor considers speeding up legalization of Cannabis

~400 paid $25,000 apiece for one of 13 new permits in Arizona lottery

“We won't see full legalization until second half of Biden's term” — Boris Jordan

CWNevada’s receivership might offer blueprint for financially strapped businesses

Dutchie named one of the 10 most innovative North American companies

Oakland’s Longest-Running Dispensary (Purple Heart) Still Recovering From Last Year’s Crime Spree

Michigan to spend $20M from cannabis tax revenue on MMJ research

Tilray receives approvals to expand and commercialize Medical Cannabis Products in New Zealand

💵Deals

Silver Spike Acquisition Corp II — $250M IPO. The Company intends to focus on businesses in the cannabis industry that are compliant with all applicable laws and regulations within the jurisdictions in which they are located or operate. The management team and board are composed of veteran cannabis and finance industry executives and founders, including Scott Gordon, founder and CEO of the Company, who began investing in the cannabis industry in 2014 and in 2016 co-founded Egg Rock Holdings, parent company of the Papa & Barkley family of cannabis products with related subsidiary assets in manufacturing, processing and logistics and served as its Chairman until 2019; and Dr. Orrin Devinsky, director of the Company, who is the director of the NYU Langone Comprehensive Epilepsy Center and is a Professor of Neurology, Neuroscience, Psychiatry and Neuroscience at the NYU School of Medicine and who, since 2016 has served as the Chair of the Medical Advisory Board at Tilray, a pharmaceutical and cannabis company.

Organigram and BAT — Form Product Development Collaboration – Includes Strategic Investment from BAT for 19.9% Equity Interest. Organigram (NASDAQ: OGI) announce a C$221M strategic investment from a wholly-owned subsidiary of BAT (LSE:BATS and NYSE:BTI). The BAT subsidiary has subscribed for ~58.3M common shares of OGI, which represents a 19.9% equity interest on a post-transaction basis for total proceeds of approximately C$221M at a price per share of C$3.792, based on a five-day volume weighted average price on the TSX ending March 9, 2021. Organigram and BAT have also entered into a Product Development Collaboration Agreement pursuant to which a “Center of Excellence” will be established to focus on developing the next generation of cannabis products with an initial focus on CBD.

Harborside — $5M Strategic Investment in Loudpack. Harborside (CSE: HBOR) has completed a $5M strategic investment in LPF JV, LLC (Loudpack), through a 15%, secured convertible note due December 2022. In connection with the Funding, Harborside has engaged Loudpack to provide services aimed at identifying production efficiencies as well as improving harvest yields at the Company's cultivation facility located in Salinas, California. In addition, Loudpack will be providing contract manufacturing services for a suite of Harborside branded products and Harborside will be increasing the availability of shelf space for Loudpack branded products including Kingpen, Loudpack, Dimebag, and Smokiez at the Company's retail stores.

AeroPay — Digital Payments Platform Raises $5M Led by Chicago Ventures. While AeroPay services all verticals, the company has seen significant success with cannabis businesses since launching into the industry. The AeroPay platform is supported by Safe Harbor Private Banking (a division of Partner Colorado Credit Union), the leading banking provider for cannabis businesses. The partnership leverages AeroPay's technology to facilitate payments, with Safe Harbor Private Banking providing a seamless compliance process and additional banking services.

AeroPay utilizes strategic partnerships with other ancillary technology providers such as Blackbird, a cannabis software and delivery company, and Olla, an eCommerce platform built for cannabis retailers, to accelerate their growth in the space.

High Times — acquires Desert's Finest (Desert Hot Springs, CA) for $6.2M. The transaction is valued at $6.2M, of which ~$5.350M is convertible debt. The company now has five operational stores in California.

Akerna — acquire Viridian Sciences. Viridian Sciences is a cannabis business management software system built on SAP Business One. The all-stock deal is accretive to revenue and earnings and is expected to contribute positive cash flow. As a result of the acquisition, Viridian's 30+ clients will gain access to Akerna's Compliance Gateway, feature-rich reporting, and the recently launched MJ Retail app. Akerna has partnered with ERP solutions such as SAP and other leading providers for integrated financials & tax planning.

Other highlights:

IIP — acquires Parallel’s Texas Property for $27.4M (63,000 square feet property)

Indus Holdings — completes name change to Lowell Farms

Australis —completes acquisition of 51% Interest in ALPS

ManifestSeven — Triples Distribution Fleet

WeedMD — closes $17.25M Bought Deal Offering

📄Earnings

AYR Strategies — Q4 & FY 2020 Results

Q4 Revenue up 48% Y/Y to $47.8M; 2020 Revenue up 25% despite Covid-related Shutdowns in 2Q
Q4 Adjusted EBITDA up 111% Y/Y to $19.4M; 2020 Adjusted EBITDA up 63%
Successfully Raised $110M in Debt and $48M in Warrant Exercise, Ending 2020 with $127M of Cash; Raised Additional $118M in Equity Subsequent to Year-End
Generated Over $7M in Cash from Operations in Q4 and $36M for the Year
Closed on its Two Acquisitions in Pennsylvania in Q4; Opened Second Pennsylvania Dispensary in February
Recently Closed Acquisition of Liberty Health Sciences, Adding 31 Retail Dispensaries, the Fourth Largest Footprint in Florida
Arizona and Ohio Acquisitions Expected to Close Later this Month
Pending Acquisitions in Arizona, Ohio and New Jersey Will Bring Addressable Market to Over 73M in Seven States

Acreage Holdings — Q4 & FY2020 Results

Q4 Revenue: $31.5M / 2020 Revenue: $114.5M, increased 50% and 55%, respectively, compared to the same periods in 2019
Q4 Gross margin: 46.1%, a 900 basis point increase compared to the same period in 2019, and a 360 basis point increase compared to Q3 2020
Q4 AEBITDA: ($3.5M) compared to a loss of ($18.3M) in the same period in 2019
Net Loss: $36.9M, while adjusted net loss was $9.2M

🧔People

Body and Mind — adds Alexis Podesta to Board. Alexis was entrusted by both Governor Gavin Newsom and Governor Edmund G. Brown, Jr. to manage the sprawling California Business, Consumer Services and Housing Agency. As Secretary of the Cabinet-level Agency, she directed its $4.75B budget and nearly 6,100 employees.

Lowell Farms — appoints Bryan Dunmire to Chief Product Officer. Dunmire joined the Company in April 2020, when it operated under the name Indus Holdings, as SVP, Strategy, overseeing multiple growth initiatives, including the 2021 acquisition of Lowell Farms by Indus, and the subsequent name change and rebranding of the company. He previously served as Chief Development Officer for cannabis-focused restructuring and growth fund Geronimo Capital; and as Director of M&A and Corporate Strategy for Acreage Holdings.

VEXT — appoints Vahan Ajamian as CFO. Ajamian replaces VEXT CFO Denise Lok, who has left the Company for personal reasons. Ajamian will also assume the responsibilities of Corporate Secretary from Brian Cameron.

🏬New Store Openings / New Product Launches

GTI — enters California Retail Market with Opening of Essence Pasadena. Essence Pasadena is Green Thumb’s first retail location in California and 53rd store in the nation.

BEYOND/HELLO (Jushi) — Irwin, PA (17th nationally)

Harvest-affiliated Dispensary — Whitehall, PA (9th in PA)

Inner Spirit Holdings — Opens 80th Spiritleaf Retail Cannabis Store

High Tide — Opens 75th Branded Cannabis Retail Store in Canada

GrowGeneration — expands Southern California footprint with new Super Hydroponic Garden Centers. Located in the heart of downtown Los Angeles and near the Long Beach Ports, the leases represent an additional 122,000 square feet of retail and distribution space in Los Angeles County, making them the largest hydroponic garden centers in Southern California. With these leases, GrowGen will operate close to 800,000 square feet of retail and warehouse space across 52 locations nationwide, with 10 of those locations in the important Southern California market and 19 in the state of California.

Cannabis Delivery Company Zip Run Readies for Launch in Massachusetts

Supreme Cannabis — Launches Sugarleaf THC Gummies