📜 Minnesota becomes 23rd State to Legalize Recreational Cannabis
Trulieve exits third CA dispensary and MA Market. Tilray Brands $150M Offering. SpringBig $4.0M Offering. Skymint's creditor, Tropics LP, bids $109M for Assets. Cronos Group exits U.S. hemp.
🌿 Industry
Minnesota Governor Signs Law Legalizing Recreational Cannabis. Under a new state law, Minnesotans 21 and older will be able to legally consume and grow cannabis for personal use as of August 1st — Axios
10% excise tax and 6.875% state sales tax (one of the lowest in U.S.)
Minnesota is bordered by four states—Wisconsin, Iowa, South Dakota and North Dakota—that have yet to legalize. ~1.9 million people live outside of Minnesota within a 50-mile radius
Will not allow local government from completely denying the establishment or operation of licensed cannabis businesses within their areas
Leili Fatehi, a leader of a coalition that pushed for legalization, told Axios she expects licenses to be issued beginning in late 2024, with doors opening in 2025
Food and beverages containing up to 5mg of hemp-derived THC will remain legal, though new language adds label requirements and limits drinks to two "servings" per container
Link to full 321-page recreational cannabis bill
California reports 94% of cannabis excise taxes paid as sales, revenue dip. According to California Department of Tax and Fee Administration (CDTFA) data, 94% of excise taxes due had been paid as of May 16. — MJBizDaily
CDTFA reported $5.38 billion in taxable cannabis sales in 2022, and total taxes due on that amount is $1.11 billion
Both cannabis sales and taxes declined between 2021 and 2022, with $1.3 billion in tax revenue in 2021 sales of $5.781 billion
Q1 2023 sales in California slid to $1,249,584,223, down (5.9%) from Q1 2022 and the lowest since Q2 2020, when sales were $1,153,285,028
At the last minute, New York State extends critical deadline for cannabis distribution. Members of the State Assembly and Senate passed legislation that gives Adult-Use Conditional Cultivation and Adult-Use Conditional Processing licensees permission to continue distributing to dispensaries until June 1, 2024. — Syracuse
Gov. Kathy Hochul signed the bill early Thursday – less than 24 hours before New York’s cannabis marketplace was set to shut down
If legislators waited even an additional day, licensed growers and processors would have no legal way to get their products to dispensaries, because the Office of Cannabis Management hasn’t yet begun licensing distributors
Creditor Tropics LP bids $109M for Skymint Assets. Tropics LP is Skymint’s largest creditor. Tropics LP is an affiliate of SunStream Opportunities LP, which itself is an affiliate of SunStream Bancorp Inc. — MJBizDaily
In March, Tropics filed a lawsuit claiming Skymint owed them more than $127M, prompting the Ingham County Circuit Court to place the company in receivership
Assets include leases on 23 dispensaries and two cultivation sites
Megan Schellong (WKAR) spoke with Dustin Walsh (Crain’s Detroit Business) to discuss what Skymint's downfall means for the company and its implications for the future of Cannabis in Michigan
April medical marijuana sales in Arkansas near $24M. Total medical marijuana sales for the first four months of 2023 totaled $94.4M, with 18,847 pounds being sold in the state. — 5NEWS
Based on data, if this continues, sales for 2023 should surpass the $276 million spent in 2022, with sales totaling $276.4M
Suite 443 in Hot Springs sold the largest amount at 537 pounds, while Natural Relief Dispensary in Sherwood followed with 477 pounds sold
California’s Artisanal Cannabis Farms Were Supposed to Help Build The Legal Market—Then the Bottom Dropped Out. Cannabis farmers in California were ready for big returns when legalization passed in the state. Now, they’re just hoping to break even. — Modern Farmer
In the fall of 2022, Nevada County, which stretches from California’s central valley to the state border with Nevada, counted fewer than 20 canopy acres of cannabis growing across 112 assigned permits
“light dep” is also mentioned as drastically changing the economics by flooding the supply during the Fall harvest
💵 Deals
Tilray Brands Prices Registered Offering of $150M of 5.20% Unsecured Convertible Senior Notes due 2027. Tilray intends to use a portion of the net proceeds from this offering to finance the concurrent repurchase of a portion of its outstanding 5.00% Convertible Senior Notes due 2023 and 5.25% Convertible Senior Notes due 2024. Noteholders will have the right to convert their Notes into shares of Tilray’s common stock at their option, at any time, until the close of business on the second scheduled trading day immediately before June 15, 2027. The initial conversion rate is 376.6478 shares per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $2.66 per share. The initial conversion price represents a premium of approximately 12.5% over the last reported sale price of $2.36 per share of Tilray’s common stock on May 25, 2023.
In connection with the Company’s offering of the Notes, the Company entered into a share lending agreement under which it will lend to the Share Borrower 38,500,000 shares of the Company’s common stock. The borrowed shares will be newly-issued shares issued in connection with the offering of the Notes and will be held as treasury shares upon the expiration or early termination of the share lending agreement. Marc Hauser points out that this increases the “short interest” on the stock, creating downward pressure on the stock price and increases volatility.
Contemporaneously, Tilray entered into separate privately negotiated transactions with certain holders of the 2023 notes and certain holders of the 2024 notes to repurchase ~$12.5M aggregate principal amount of 2023 notes and ~$122.5M aggregate principal amount of 2024 notes.
SpringBig Prices $4.0M Public Offering. The company priced 13,061,014 shares at an at-the-market price of $0.30. The gross cash proceeds to the Company from the offering are expected to be ~$3.0M. Additionally, ~$1.0M of the Company’s existing Senior Secured Convertible Note held by L1 Capital will be canceled in exchange for shares in the offering at the offering price. The Company intends to use the net proceeds from this offering for working capital and general corporate purposes, which includes the repayment of $750,000 of principal amount of the Note to L1 Capital upon the closing of the offering.
Canopy Growth and Indiva enter into Assignment Agreement. This provides Canopy Growth exclusive rights and interests to manufacture, distribute, and sell Wana™ branded products in Canada which accelerates Canopy Growth’s ability to leverage the Wana brand. Simultaneously, to support continuity of quality supply and aligned to Canopy Growth’s asset light strategy for sourcing of cannabis 2.0 formats, Canopy Growth and Indiva also entered into a contract manufacturing agreement. Canopy to acquire 19.99% interest in Indiva as part of the transactions
📄 Company Updates
Trulieve Closes Third California Retail Location (Two Remain) and Plan to Wind Down Massachusetts Operations. Trulieve has elected to close the retail location in Grover Beach, CA, they still operate two locations in Chula Vista and Napa. This closure follows the exit of dispensaries last year in Palm Springs and Venice (Palm Springs was owned by Trulieve prior to the Harvest acquisition—while Venice, Napa, Palm Springs, and Grover beach were originally Harvest locations—Chula Vista was a Harvest application) . In addition, the Company has decided to wind down its operations in Massachusetts. Dispensaries located in Framingham, Northampton and Worcester will close on June 30, 2023. The Company expects to cease Massachusetts operations by the end of 2023. The company has 128 employees in Massachusetts, according to MassLive.
Trulieve opened its Framingham dispensary on April 3 2022; Worcester dispensary on August 14, 2021; Northampton dispensary on May 26, 2021. IIPR entered into a sale-leaseback on its Cultivation facility in Holyoke, MA (150,000 sq ft) for $43.5M total in July 2019 (property purchased for $3.5M with $40M in Tenant Improvements).
The company also announced that it had received 965,000+ Signatures for Florida's Smart & Safe Campaign.
Cronos Group Plans to Exit Existing U.S. hemp-derived CBD Operations by end of Q2 2023. Cronos has made this decision to improve its cash flow in the near term and position itself to directly enter the U.S. THC market when the necessary changes in U.S. regulatory conditions occur. Cronos is also increasing its previously announced 2023 operating expense savings target from a range of $10–$20M to a new range of $20–$25M, partially due to its decision to wind down and exit its existing U.S. operations. In connection with the exit of its existing U.S. operations, Cronos expects to incur expenses in the second quarter of 2023, of up to $1.8 million comprised of inventory write-offs, severance and other employee costs, and asset impairment charges. As of March 31, 2023, Cronos has $836M in cash.
C21 Investments Full Repayment of $30M Senior Secured Note. The Promissory Note was originally issued in January 2019 in connection with the Company's acquisition of 100% of the membership interests of Silver State, both Nevada limited liability companies, from Sonny Newman, the sole owner of Silver State. The Promissory Note carried an annual interest rate of 10% (subsequently reduced to 9.5%) and was secured against the Silver State companies and their assets. In connection with the Debt Retirement, the security against Silver State has been fully discharged. The Debt Retirement eliminates the Company's annual principal repayment obligation of $6.0 million plus interest.
Tilray Expands to Italy and Partners with Pharmaidea. Tilray’s medical cannabis division, Tilray Medical and FL Group, the Company’s subsidiary in Italy, have received authorization from Italy’s Ministry of Health to distribute three new medical cannabis compounds. These medical cannabis compounds will be distributed by FL Group to pharmacies across Italy. Tilray also entered into a partnership with Pharmaidea, a Petrone Group company, to market and educate over 12,000 pharmacies across Italy on the benefits of medical cannabis and medical cannabis patient care.
Goodness Growth Holdings and Grown Rogue International Strategic Advisory Agreement. Grown Rogue will support Goodness Growth in the optimization of its cannabis flower products, with a particular focus on improving the quality and yield of top-grade “A” cannabis flower across its various operating markets, starting with Maryland and Minnesota. Under the terms of the agreement, which expires on September 30, 2025, Goodness Growth will provide compensation to Grown Rogue for sustained consulting support, including input on systems and processes, and recommendations to improve Goodness Growth’s cultivation operations. Grown Rogue will be entitled to receive additional incentive compensation if its services result in improved cash flow performance as compared to Goodness Growth’s baseline expectations over the term of the agreement. In addition, Goodness Growth will issue 10,000,000 warrants to purchase subordinate voting shares of Goodness Growth to Grown Rogue. Similarly, Grown Rogue will issue 8,500,000 warrants to purchase subordinate voting shares of Grown Rogue to Goodness Growth.
Latest Earnings for StateHouse, Vibe, Red White & Bloom, POSaBIT, C21 Investments. Link here. [note: I’ve ordered based on size of last quarter revenue, but let me know if it’s better to do it based on latest released]
🏬 Retail
Body and Mind open Markham, IL Dispensary. The Markham dispensary is conveniently located near the intersection of Highways I-57, I-294 and I-80 with over 400,000 cars per day passing within a mile of the dispensary. The store will be carrying brands that include 93 Boys, Wyld, Stiizy, Kiva, along with brands from GTI (Rhythm), 4Front, Grass Roots, PTS, Aeriz and Cresco.
Verano opens Zen Leaf Pittsburgh McKnight, the Company’s 17th Affiliated Pennsylvania Dispensary and 128th Retail Location Nationwide. The dispensary is based in Allegheny County, the second largest county in Pennsylvania with a population of over 1.2 million. This is the sixth retail location in the greater Pittsburgh area, joining existing local outlets in Cranberry, Monroeville, New Kensington, Pittsburgh Robinson and Washington.
Verano Opens MÜV Miami Kendall, the Company’s First Medical Cannabis Dispensary in Miami-Dade County and 68th Florida Location. Miami-Dade County is Florida’s most populated region, with 2,673,837 residents. In 2021, the greater Miami area recorded a total of 24.2M tourists.
🌱 Product
Dablicator Retail Revenues Surpass $100MM for Partners, Enters Brand Partnership with TerrAscend. Dablicator, a California-based producer of custom-branded, high-quality cannabis hardware and TerrAscend team up for the Dablicator™ Oil Applicator Brand Partner Program for TerrAscend's in-house brands—Gage Cannabis, Kind Tree and Ilera Healthcare. To date, Dablicator has generated over $100 million in new retail revenue for its brand partners, allowing them to efficiently offer new SKUs using existing infrastructure and oil without additional capital expenditure.
Jointly x Cova: Jointly Matches, a Goal-Based Data-Driven Sales Platform. Jointly Matches is fueled by nearly half a million goal-specific product performance ratings, collected from users of Jointly's mobile consumer app, where consumers learn to find success with cannabis by practicing “Purposeful Cannabis Consumption.”
New Frontier Data and Hearst Partner for All-in-One Mainstream Marketing and Customer Acquisition for the Cannabis Industry. The all-in-one marketing and customer acquisition tool combines Hearst’s vast online and offline publishing capabilities with NXTeck’s precise cannabis audience targeting to provide cannabis companies with everything needed to identify, attract and acquire new customers.
🧔 People
Schwazze promotes President, Nirup Krishnamurthy, to CEO. Justin Dye, the company's former CEO and Executive Chairman, will continue to lead the Board as its non-executive Chairman. The appointment is part of a succession planning process that began nearly a year ago when Justin Dye informed the Board of his desire to transition into a Chairman role.
Miss Grass adds Tiana Arriaga as Chief Product Officer. Miss Grass currently operates in five markets (CA, NJ, IL, MA, NV). Arriaga previously served as SVP Operations & Business Development at Papa & Barkley and has ~20 years of experience in the Cannabis industry. The addition of Arriaga marks Miss Grass’ continued investment to build valuable brand IP through focus on community, high quality products, and reach.
Agrify Promotions, COO Resigns. David Kessler, who joined Agrify in 2020 as VP of Horticulture & Customer Success, has been promoted to EVP, Chief Science Officer and GM, Cultivation Division. Brian Towns, who joined Agrify with the acquisition of Precision Extraction Solutions in 2021, has been promoted to EVP and GM, Extraction Division. Sheryl Elliott, who joined Agrify in 2020 as the Director of Human Resources, has been promoted to SVP of Human Resources. Stuart Wilcox, who joined Agrify’s Board in 2021, and then as COO in 2022, has resigned to pursue other ventures.
🎙️ Interviews
FlowerHire, Jason Desentz & Mike Siebold | Highly Objective
Nancy Whiteman Built A $350 Million Cannabis Edibles Empire | Forbes
Trulieve CEO Kim Rivers | @mayortoby
Q4 + Q1 2023 Financial Review of the Big 5 MSOs | Cannabis Investing Network