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🌿Industry

Cannabis VCs comments on Cannabis outlook in 2021.

"The set up for 2021 is very similar to 2020 where the big get bigger and continue to pull away," — Sean Stiefel, Navy Capital

"In 2021, we expect to see continued consolidation across the industry. Moreover, we anticipate that there will be at least 2 new states legalizing adult-use cannabis." — Yoni Meyer, Casa Verde

"We see no indication that the shortage of compliant high-quality flower will dissipate — the black market is too strong, and in California, it probably absorbs a majority of the flower that is grown compliantly. As to consumer demand for combustible flower, the category that has arguably attracted the least investor attention: we expect it to remain robust."
— Wilder Ramsey, Gron Ventures

A detailed prediction for 2021 from Poseidon

First city-approved Dispensary opens in Pasadena. The dispensary will offer ~500 items in a 5,000 sq ft retail area at 3341 E. Colorado Blvd. Varda received its CUP in July. The company was one of six cannabis companies chosen from a pool of 122 applicants in the city’s selection process. Of the six companies, only two other dispensaries. Harvest of Pasadena and Integral Associates Dena, have received CUPs. Atrium, Sweetflower and MedMen did not advance in the process for various reasons. Atrium filed for a CUP in District 3 but was denied because Harvest had already filed for a CUP in the council district, and Sweetflower was removed after the City Council determined owners turned in an incomplete application. MedMen was kicked out of the city’s process due to a change of control triggered given management departures.

Raw Garden plans Arizona expansion. The company in the process of getting into Arizona and hopes to do so by the end of 2021 or early 2022.

Aurora Cannabis – extends debt maturity, cuts production.

Given Aurora's liquidity position, the credit facility ($101.2M term loan, $15M revolver) transition to a minimum liquidity covenant rather than a minimum EBITDA covenant and extends the maturity to December 31, 2022.
Expanded its network of external supply by implementing spot purchasing of outsourced third-party supply. Expects to further expand external supply of dried flower across its brand architecture to reduce cultivation risks and improve its cash conversion cycle.
Shuttered operations at the Aurora Sun facility and reduced production at its Aurora Sky facility by 75%.

AltMed suing the city of Miami Beach for right to open. AltMed is suing the city of Miami Beach in efforts to overturn a city board decision that blocks medical cannabis dispensaries from being located within 1,200 feet of each other. Medical cannabis company AltMed has filed an appellate court petition to overturn a city board decision in Miami Beach, Florida that denied them a dispensary building permit in the “South of 5th” neighborhood, The Real Deal reports. AltMed also filed suit against MedMen, which was granted a permit to open a medical cannabis dispensary in the neighborhood but has not yet opened the location. The complaints arise from a 2019 ordinance passed by the city commission that says dispensaries can not be located within 1,200 feet of each other. AltMed attorneys say the ordinance violates the Florida Constitutional Amendment legalizing medical cannabis passed by Floridians in 2016.

Canadian cannabis sales pick up pace to C$270M in October. The monthly sales figures imply an annual run rate of roughly C$3.24B for Canada’s recreational cannabis sector. Ontario led the charge in terms of monthly sales growth, with October sales increasing by 7.6% M/M to C$83.9M. The next-largest province by population, Quebec, reported sales of C$48M, up 6.7% M/M. Alberta, which has the most licensed cannabis stores of any Canadian province, retained its spot as the country’s second-biggest marijuana market up 5% M/M to C$56.4M. Monthly marijuana sales grew at a more modest 2.8% in British Columbia, reaching ~C$38M.

💵Deals

Aphria + Tilray $3.9B reverse merger. More details/analysis here. More so than a combination for U.S. entry, this helps the Company potential own the #1 market share in Europe (in addition to Canada). There are compelling reasons to target Europe: The EU has around 446M inhabitants compared to ~328M in the U.S. And while cannabis is mostly limited to medical use for now, recreational use is advancing. Switzerland is doing a pilot program to temporarily try out distribution for recreational programs, and the Netherlands recently chose 10 growers to participate in a similar program.

Verano Holdings – RTO to raise $50-100M at $2.8B pre-money valuation. Securityholders of Verano and AltMed will receive subordinate voting shares and proportionate voting shares of the Resulting Issuer which, in the aggregate and on an as-converted basis, will initially constitute approximately 77% and 23%, respectively, of the Resulting Issuer’s outstanding shares. In addition to the share consideration issuable under the RTO, the Resulting Issuer will pay certain AltMed security holders a total of $35M in cash installments. In connection with the RTO, a concurrent subscription receipt offering is being conducted which is expected to raise between $50–$100M. The subscription receipts are anticipated to be priced at $10 per subscription receipt and are based on a $2.8B pre-money valuation of the Resulting Issuer.

Cresco Labs — Extend Maturity of Senior Secured Term Loan and Increase Facility to $200M. The increased Senior Loan proceeds will be used to fund the expansion of Cresco Labs’ operations in its strategic 9-state footprint and capitalize on other targeted growth initiatives in key markets. Of the $100M increase to the Senior Loan, $85M has been provided by existing lenders, as well as several new, large institutional investors to the Company. Additionally, $15M of the short-term liability with Opaskwayak Cree Nation was consolidated into the Senior Loan under the terms of the new agreement.

TerrAscend — $120M Senior Secured Term Loan. The loan is solely secured by the Company’s PA-based Ilera Healthcare Division. The Term Loan will bear interest of 12.875% per annum, with a 4 year maturity and is callable any time. There are no warrants being issued as part of the offering. Subject to certain conditions of the agreement, the Company has the ability to increase the facility by up to $30M. The loan proceeds, combined with expected cash balances, will be used to satisfy the remaining 2021 Ilera earn-out payments.

AWH continues Chicago expansion with Midway Dispensary acquisition. Midway Dispensary first opened under Illinois’ medical cannabis program in 2016 and has since expanded its menu to adult-use. Its location is in an ideal location in the southwest Chicago area.

Indus Holdings – C$34.5M underwritten public offering. 23M Units at C$1.50/Unit, with each Unit consisting of one share and 1/2 share purchase warrant at C$2.20/share.

Jushi — acceleration of warrants results in ~$32M cash. Each Warrant issued in conjunction with the Offerings entitled the holder to purchase one subordinate voting share in the capital of Jushi for a period of 24 months from June 10, 2019 – June 10, 2021 at an exercise price of $2.00 per share. Jushi retained the right to require the acceleration of the expiry date of these Warrants if the Company's twenty-trading-day volume-weighted-average-price (VWAP) on the Canadian Securities Exchange (CSE) exceeded $3.00. This was achieved during the trading period from October 27, 2020 through November 23, 2020.

Gage Cannabis – $20M Reg A+ Commitment from JW Asset Management. The first tranche of ~$10M of the $20M commitment from JWAM has been received by the Company. Gage expects to receive the remaining funds prior to year end 2020. In consideration for JWAM's participation in the Offering ($1.75 per share), the Company has agreed to issue an equivalent number of warrants to purchase subordinate voting shares of the Company. Each Warrant shall entitle the holder to purchase one subordinate voting share in the capital of the Company for $2.60.

Schwazze closes acquisition of 6 Star Buds Dispensaries (CO) for $37M. This is the first 6 of 13 Star Buds Colorado retail locations. Total consideration was ~$37.1M (1.5x 2020E Revenue, 4.3x 2020E EBITDA), consisting of $13.9M in cash, $13.9M in a seller’s note, and $9.3M in Preferred Stock (at a price of $1,000 per share). The acquired dispensaries are located in Denver, Commerce City, Longmont, Niwot, Pueblo and Pueblo West and are projected to generate proforma revenue of ~$24M and ~36% EBITDA in 2020.

Red White & Bloom acquires IL THC Cultivation Center License and Associated Assets. One of twenty-one original Illinois issued “super licenses” allowing for 220,000 sq ft of THC cultivation canopy as well as processing and manufacturing of extract-based products. Acquisition comes with an operating 23,572 sq ft grow and manufacturing facility currently selling to the State’s dispensaries as well multiple approved genetics. Transaction considerations: $32.5M total – $16.25M cash at closing, $16.25M, 8%, interest only, 18 month note to the seller with $8.75M due within 30 days after the State’s approval for permit relocation. The Company signed a term sheet for a $60M non-revolving credit facility with an arm’s-length institutional lender with a 3-year term and 7% interest. $40M provided at closing and $20M upon closing the IL THC Cultivation assets. Latest company presentation.

Jushi acquisition of Vireo’s Pennsylvania Dispensary Solutions closes. The transaction resulted in cash proceeds to Vireo of ~$5.7M.

GrowGeneration acquires CA-Based Grassroots Hydroponics. Founded in 2008, Grassroots Hydroponics is one of the largest hydroponic operations in Southern California, with annual revenues approaching $20M. This is GrowGenerations's second acquisition in the state within a one-month period; in November, GrowGen acquired The GrowBiz, the nation's third-largest chain of hydroponic garden centers, with stores in Northern California and Oregon.

Other highlights:

4Front Ventures completes $33M sale-leaseback

Harborside completes acquisition of San Francisco dispensary

📄Earnings

C21 Investments — Q3 2020

Revenue: $9.5M (47.4% GM), same-store sales up 5% Q/Q
Adjusted EBITDA: $2.7M (28% margin)
CFO: $3.1M
NI: $2.3M
Cash: $3.4M (10/31) | Debt: $15.8M

🧔People

Acreage Holdings – Peter Caldini, former President Pfizer North America Consumer Healthcare, joins as CEO. Caldini was most recently the CEO of Bespoke Capital Acquisition Corp., a $360M SPAC listed on the TSE with the focus to acquire high growth cannabis companies in the US and around the globe. Additionally, he has served for the past year as a Senior Advisor to Tuatara Capital. Caldini served as President Pfizer North America Consumer Healthcare as well as Regional President Consumer Healthcare of EMEA during his time with the company. Prior to Pfizer, he held similar senior leadership positions in other global markets, including China and Europe, while at Bayer Consumer Health and Wyeth Pharmaceuticals. Caldini started his career in brand management at Unilever, where he held various roles with increasing responsibility.

Mark Harms, Joint Managing Partner of Bespoke Capital Partners, appointed CEO of BCAC. He replaces Peter Caldini. The SPAC will now extend its focus to targets in the alcoholic beverage and consumer products sectors as well. As its merger process is now focused on certain US based businesses, the Company also announced that it is pursuing a listing of its Class A Shares and Warrants on the Nasdaq stock market by the end of January 2021.

Zeeshan Hyder steps down as MedMen CFO. Reece Fulgham (MD at SierraConstellation Partners) to serve as Interim CFO.

🏬New Store Openings / New Product Launches

Urbn Leaf — San Jose (6th in CA). Formerly, The Guild, which Urbn Leaf bought through an auction back in June 2019 for $8.25M. The Guild San Jose generated $5M+ in total retail sales in 2018. The business’ assets include a 23,500 sq ft facility with a 2,400 sq ft retail space, two 1,200 sq ft indoor cultivation rooms and 11,000 sq ft of vacant warehouse space.

Trulieve — Davenport (69th in FL)

BEYOND / HELLO (Jushi) — Sauget, IL (13th Nationally, 3rd in IL). The location is right across the state line from St. Louis.

Cresco Labs’ Good News Brand Expands into Michigan

Zenleaf (Verano) — Naperville, IL (21st overall)

💻Hiring

Miss Grass — Senior Designer (LA)

Potli — SoCal Territory Sales Lead (LA)

Humboldt Farms — Controller (Remote)

🤷‍♂️Somewhat Relevant

Cookies is now also getting into the Mushroom space. The Company released a one-minute teaser video with more details to come in 2021 for CAPS by Cookies.

City Of Oakland urges CA to Decriminalize Psychedelics and allow Healing Ceremonies. The Oakland City Council unanimously approved a resolution that calls on California state lawmakers to enact policies decriminalizing a wide range of psychedelics and allowing local jurisdictions to permit healing ceremonies where people could use entheogenic substances.

👋 `Newsletter curated by` `Dai Truong, who leads` 🌿`brand and` 🏪`retail acquisitions at` `Left Coast Ventures, a CA-based Cannabis holding company.`

Highly Objective

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