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🌿 Industry

Oklahoma State Question 820 Fails.

61.7% voted "No" while only 38.3% "Yes." Even in larger cities, the ballot measure failed to get to yes, with Oklahoma County (Oklahoma City) at 50% “no” while Tulsa County (Tulsa) was 54% “no.” The “no” side was actually outspent with supporters spending $4.9M vs. $219,000 against. Oklahoma already has one of the most liberal medical marijuana programs in the country, with ~10% of the state’s adult population having a medical license and 2,800+ dispensaries.

Georgia House Votes to increase the number of Medical Cannabis Production Licenses from 6 to 15. This allows the nine companies that went to court after they were denied licenses a new opportunity to compete. The 2019 law created a state commission to oversee the program by issuing six licenses to winning bidders, two Class 1 licenses (awarded to Botanical Sciences, Trulieve) allowing marijuana to be grown in spaces up to 100,000 square feet. Class 2 licenses were to be awarded to the other four for a smaller growth space of up to 50,000 square feet. — Albany Herald

How a NY Cannabis Insider experiment led to statewide policy change. NY Cannabis Insider bought the eight highest-potency strains of legal recreational cannabis available in New York State on Feb. 24, drove them straight to a state-certified laboratory, placed them in anonymized Ziploc bags and submitted them for potency testing. What came back has kicked open a hornet’s nest within the NY cannabis ecosystem and led to a regulatory policy change shortly after that affects every cannabis grower, processor and consumer in the state. The lab results showed that the majority of the best-selling Cannabis available in the nascent marketplace contained drastically lower THC than advertised. — NY Cannabis Insider

Kush Queen CEO’s LinkedIn Post on TPCO lawsuits.

After Olivia Alexander posted about the lawsuit last Wednesday between former TPCO VP, Cathi Clay and the Company, an SFGate writer picked up and ran with the lawsuit. Shortly after, other publications like MJBizDaily, VIBE, and Daily Mail, among others picked it up, likely due to the original, misleading headline that Jay-Z’s cannabis brand, not the company that his brand has a licensing deal with, was involved in the lawsuit. Access to the lawsuit is available here.

Missouri demand continues to outstrip supply. Missouri is on track to be the fastest state to reach $1 billion in cannabis sales.

Fresh Karma (dispensaries in Kansas City, St. Joseph, Parkville) expected sales to increase 2-3x with adult-use, but instead have been seeing 5x sales. In addition to fans coming to Kansas City for the Big 12 tournament (where every school is located in a state without adult-use), Kansas City will be hosting the NCAA March Madness Midwest Regional games on March 24th and 26th. Demand will definitely exceed supply for the month, once again. Next month, Kansas City will also be hosting the NFL draft (last month saw a spike in sales for the Chiefs Super Bowl parade). I’m not sure I’ve seen a better first three months of adult-use sales with events bringing in tourists on top of local demand.

A group bar graph shows declining product availability in "flower" "cartridges" "concentrates" "edibles" and "pre-rolls" — Source: Leaflink

Ben Burstein, Strategy Analyst at LeafLink, believes that the state could reach $2 billion in sales next year based on patterns that other states have shown. From the beginning of February to the end of the month, LeafLink reported that flower inventory dropped 50%. The limited supply is because Missouri has 50 licensed cultivators with 30,000 sq ft facility caps, serving ~200 dispensaries. In addition, prices are actually rising—outdoor bulk pricing is up $150-250/lb from ~$750/lb in January to almost $1,000/lb as of 3/8.

Connecticut’s cannabis sales topped $18.4M for February. Adult-use sales came in at $7.0M, and medical marijuana sales were at $11.4M. Recreational sales began on January 10th.

Acreage Releases Impact Analysis on the New York Cannabis Market. The report claims that based on New York’s current adult-use existing and proposed regulations:

Illicit market operators capture $7.2B in revenue between 2023 and 2030 due to the lack of legitimate retail outlets
Loss of up to 20,600 direct cannabis and ancillary jobs per year
More than $2.6 billion in state tax revenue lost over eight years; and
New licensees will open during great supply chain uncertainty causing needless operating risks

💵 Deals

MariMed closes acquisition of Ermont Operating Assets. The deal was previously announced on February 21, 2023. The transaction closed on March 9, 2023, and the dispensary began operations under the Panacea Wellness brand name the following day in the Quincy, MA location. MariMed plans to open a third MA location in Beverly, MA soon. This is the first cannabis receivership in New England and a first-of-its-kind transaction.

JARS Cannabis completes acquisition of Euflora, expanding retail footprint to CO. Euflora adds one 7,200 sq ft greenhouse and six recreational storefronts to JARS’ portfolio, bringing the company to 25 dispensaries nationwide.

📄 Company Updates / Earnings

Skymint sued over $127M+ owed to Tropics LP (SNDL). Skymint operates 24 dispensaries in Michigan and generated $110M of revenue in 2022, missing its forecast by $153M ($263M forecasted for 2022 revenue) while burning $3M/month. Tropics alleges in the court filing that Skymint’s daily sales dropped from $356,953 (~$130M annualized) in April 2022 to $184,579 (~$67M annualized) in January 2023. A second lawsuit from Merida (lent $8M towards the purchase of 3Fifteen, which Merida was a majority shareholder) alleges misrepresentation of financials and mismanagement. SunStream, an affiliate of SunStream Bancorp, a joint venture sponsored by SNDL originally lent $5M for general working capital purposes in May 2021, $70M in connection with SKYMINT's acquisition of 3Fifteen in September 2021, and an additional $6.25M Senior Secured Term Loan in November 2022. Loans issued under the Financing will bear interest at a rate of 12.5% to 16.5% per annum and matures on September 17, 2025.

Trulieve Q4 and FY2022 Results

Source: Trulieve Q4 2022 Earnings Presentation

Q4 2022: Revenue of $302M (down (1%) q/q, up 32% y/y), up ; 50% Gross Margin. Net loss of $77M. Adjusted net loss of $35M. Adjusted EBITDA of $85M (28% of revenue). Operating Cash Flow of $55M and Free Cash Flow of $21M.

2022: Revenue of $1.2B, up 32% Y/Y. 55% Gross Margin. GAAP net loss of ($246M) and adjusted net loss of ($30). Adjusted EBITDA of $400M (32% of revenue). Cash at year end of $219M.

Others: Commenced cultivation operations in Georgia to support retail launch in 2023. Opened 25 dispensaries in 2022, increasing retail footprint to 181 retail locations nationwide (32% of retail locations outside of Florida). Estimates Operating Cash Flow of $100M in 2023, up from $23M in 2022.

AWH Q4 and Full Year 2022 Results. Q4 2022 revenue of $134.5M, up 0.2% Q/Q and up 31.9% Y/Y, Adjusted EBITDA was $28.2 (25.1% margin). FY 2022 revenue of $487.7M, up 28.2% Y/Y, Adjusted EBITDA was $93.2M (23.0% margin). As of December 31, 2022, cash and cash equivalents were $74.1M, and net debt was $256.5M. Net revenue, which excludes intercompany sale of wholesale products, was driven by an increase in retail sales, particularly in New Jersey, and an increase in third party wholesale sales in New Jersey and Massachusetts.

Ayr Wellness Q4 and Full Year 2022 Results

Q4 2022: Revenue of $124.6M up 4.2% Q/Q, 44.2% GM, ($176.2M) Operating Loss ($149M goodwill impairment), $26.0M Adjusted EBITDA (20.9% margin).

2022: Revenue of $465.6M, up 30.2% Y/Y, 40.9% GM, ($243.0M) Operating Loss ($149M goodwill impairment), $86.8M Adjusted EBITDA (18.6% margin). Cash balance of $80.6M, $444.0M debt, $90.1M in contingent consideration and $46.0M in income tax payable.

Glass House Brands Q4 and Full Year 2022 Results. Q4 revenue of $32.2M (32% GM), up 14% from Q3 2022, Adjusted EBITDA was $(2.6M). Cash balance of $14.1M. 2022 revenue of $90.9M (24% GM), up 31% from 2021, Adjusted EBITDA loss was ($21.4M). Q1 2023 Outlook of $27–$29M and 32% GM, expect adjusted EBITDA to be slightly negative. Ending cash balance for Q1 23 is forecast to be ~$12.5M. Maintaining revenue guidance of $160M for 2023 but shifting sales between segments with wholesale projection to go from $60M to $85M, while reducing CPG revenue from $35M to $25M given the difficult retail landscape and retail revenue from $65M to $50M.

springbig Q4 and Full Year 2022 Results. Q4 Revenue increased to $6.8M (78% GM), up 2% year-on-year, Adjusted EBITDA loss was $(3.2M). Net dollar retention rate was 105% for 2022. Cash and cash equivalents totaled $3.5M at year end. 2022 Revenue was $26.6M (75% GM), up 14% from the prior year, Adjusted EBITDA loss was $(12.6M). Guidance of $7.1–7.4M Revenue / $(1.4–1.2M) Adjusted EBITDA for Q1 2023 and $31–34M Revenue / $(3–1.4M) Adjusted EBITDA for CY2023.

TerrAscend applies to list Common Shares on the Toronto Stock Exchange (TSX). In connection with the Company's proposed listing on the TSX, and in order to qualify for the TSX's minimum listing requirements, the Company expects to implement an internal reorganization. The Reorganization will require approval from the Company's shareholders. The listing of the Common Shares on the TSX remains subject to the review of the TSX and is contingent on the satisfaction of all listing and regulatory requirements. There is no assurance that the TSX will approve the listing application or that the Company will complete the Reorganization and the listing on the TSX as currently proposed.

Unrivaled Brands and People’s California Reach Settlement Terms to Terminate all Pending Litigation. Upon execution of the binding term sheet, the parties agreed to inform the court of the settlement and request a stay of all pending litigation.

Jane and Wyld selected as a part of Forbes America’s Best Startup Employers. In partnership with market research company Statista, America’s Best Startup Employers 2023 was compiled by evaluating 2,600 U.S.-based businesses with at least 50 employees based on three criteria: employer reputation, employee satisfaction and growth. The final list ranks 500 employers. Wyld was ranked #438 and Jane Technologies as #444.

StateHouse Joins the Cannabis Research Coalition. Cannabis Research Coalition is a collaborative research partnership between The Hemp Mine and Clemson University. The partnership will address cannabis cultivation and postharvest challenges. The CRC partners with cannabis industry stakeholders to advance the exploration of the cannabis plant and implement science-based research to develop the techniques required to create a sustainable, efficient and profitable industry.

🏬 Retail

Cresco Labs Continues Florida Expansion with openings in Palm Harbor and Lake Worth. The Company’s Florida retail footprint has grown to 28 total dispensaries with today’s store openings, bringing its nationwide store count to 63.

🌱 Product

Alpine IQ’s Spring Release Launches Updated Platform For a Better Way to Grow in Highly Regulated Markets. Addition includes in-app shopping, re-ordering, and the ability to review historically purchased products. The updated platform also allows app designers to completely redesign their loyalty app theme and consumer-facing features, providing a seamless shopping experience for customers and optimizing conversions.

Cann saw 300% increase in transactions during Dry January. When comparing January 2023 to January 2022, there was a 232% increase in revenue and a 364% Y/Y increase in transactions. The Company saw a 300% increase in transactions in January and February in tandem with their Dry January campaign, Cannuary. The Company was also named to the 2023 Drinks Innovators by Food & Wine.

Springbig x Alleaves Two-Way Enrollment Integration. With the integration, consumers will have the opportunity to sign up for a dispensary's loyalty and communications program through any of springbig's enrollment methods, including website forms, text-to-join codes, QR codes and more. Additionally, consumers have the option to sign up through a dispensary's POS system.

Stiiizy expands to Illinois. Retailers carrying Stiiizy products in Illinois include Green Rose Dispensary, Windy City Cannabis, Ivy Hall, Dispensary 33 and Rise, among others.

Toast enters Michigan through manufacturing partnership with 42 Degrees Processing. The company will introduce Toast Classic pre-rolls, Toast Minis, and Toast Infused pre-rolls to the market. Michigan is Toast’s 4th active state.

Mary Jones Cannabis Sodas & Edibles Expanding to Michigan and Nevada. The Mary Jones line debuted last June in California and is slated to launch in Washington State in Q2, continuing a planned national rollout to all recreational use markets. Mary Jones manufacturing and distribution in Michigan and Nevada will be handled by Maxxx Labs, a cannabis contract manufacturing and distribution company specializing in beverage manufacturing.

Curaleaf and Fab 5 Freddy Launch B Noble Cannabis Brand in Florida. In partnership with Curaleaf's corporate social responsibility program, Rooted in Good, the B NOBLE brand launched in 2021 and became the Company's first large-scale, social equity-focused venture. The brand has expanded its complete suite of advocacy-based products to nine states.

CLS Holdings' City Trees Products Maintain #1 Concentrate Brand Ranking in Nevada. From January to December 2022, CITY TREES generated $21.2M in retail sales and sold 1.1M units of vapes and dabbable concentrates, according to BDS Analytics. CLS Holdings has grown by 43% YoY as a house brand and secured a 6.5% brand share within the vape category. "Although wholesale and retail prices have adjusted to be more competitive, we have been able to capture increased market share by supporting and attracting local and out-of-town price sensitive customers," stated Yuhanna El, Director of Sales.

🧔 People

Cansortium appoints Jeffrey Batliner as CFO. Batliner most recently served as CFO of Unrivaled Brands. Prior to this role, Batliner held various executive positions covering financial reporting and analysis for Iteris, Sage Software, and Canon USA.

Raphael Mechoulam, “father of cannabis research,” dies at 92. In the 1960s, Mechoulam and his team of researchers began cannabinoid experiments in Israel, becoming the first to isolate delta-9 THC, the psychoactive component of cannabis. Among his other achievements: designing and synthesizing several novel cannabinoids with therapeutic potential as pharmaceutical drugs.

AFC Gamma appoints Robyn Tannenbaum, previously the Company’s Managing Director, Head of Originations and Investor Relations, to serve as its President. “Robyn has assumed a crucial role at AFC Gamma since its inception, and we look forward to her taking on additional responsibility for its leadership as the Company expands its investment focus,” said Mr. Thomas Harrison, the Company’s lead independent director.

🎙️ Interviews

A Fresh look at vape following vape gate | High Rise

Paul Yau, CEO, Union Square Travel Agency: A Cannabis Store | Alchemy

Bill Healy, Co-Founder of Silver Spike Capital | Green Rush

Milan Patel, CEO, PathogenDx | Ganjapreneur

👋 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.

Highly Objective

🏃 Missouri on track to be fastest state to…