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🐎New Mexico recreational sales launches April 1st, potential supply issue within a few months
Jointly – $5M Seed. Cronos – Founder Mike Gorenstein returns as CEO. Earnings – Ayr Wellness, TerrAscend, MariMed, Glass House Brands, Body and Mind.
🏖️ I’ll be in Miami for the Benzinga Cannabis Capital Conference (4/20-21), let me know if you plan to attend as well.
New Mexico is set to roll out the nation’s newest adult-use marijuana market on April 1st. MJBizDaily projects that adult-use sales will build gradually from $100–$125M in the first year to $325–$400M by the fifth year of the program. Ultra Health conducted a study that shows 40%–42% of all adult-use cannabis will be derived from out-of-state purchases, particularly Texas. The state had 38 million visitors in 2019. Duke Rodriguez, CEO of Ultra Health, the state’s largest medical cannabis operation, predicted big problems down the line. He noted that the state capped plant production at 20,000 per grower while allowing an unlimited number of retail licenses. Within a year, “We will probably need to pare back as many as 100 locations, and there will be a lot of small business that will be hurt very badly” in conversation with the Santa Fe New Mexican.
Court ruling clears way for 60 new craft cannabis grower licenses in Illinois. The development came as a judge lifted the injunction that had held up awarding the licenses until litigation was settled. Sangamon County Judge Gail Noll on Monday restored the applications of 11 applicants who had sued, challenging their disqualifications by the Illinois Department of Agriculture. Last summer, the state awarded the first 40 craft grower licenses, along with infuser and transporter licenses. As an indication of the difficulties in getting started in the cannabis industry, many of those businesses are still trying to get up and running. The state was required by law to award another 60 craft grow licenses by Dec. 21, 2021, but was held up by court orders. On Tuesday, state officials announced a new, simplified online application for 55 new dispensary licenses to be awarded this year. Currently, there are 21 licensed cannabis cultivation sites, and 110 retail stores in Illinois.
Puerto Rico cannabis market ‘saturated,’ seeks immediate freeze to new licenses. Puerto Rico’s medical cannabis industry generates close to $300 million in annual revenue, from which the government has collected close to $65 million in taxes, according to a study commissioned by the Association of Members of the Medical Cannabis Industry (MICaM). However, five years since the first location was established on the island, the study validated an “excessive proliferation of clinics throughout the island and the precipitous drop in sales,” MICaM confirmed. Currently, 277 medical cannabis clinic licenses have been granted, mostly distributed in the metropolitan area, which creates market saturation and is unfavorable for dispensary owners. The study also shows that there are about 432 patients for each dispensary on the island. The average in states with medical cannabis markets is 1,898 patients per dispensary. The study also shows that monthly sales per dispensary have dropped from $69,732 in January 2021 to $39,423 in January 2022.
Washington Revises State Code to Change “Marijuana” to “Cannabis.” The governor said the term ‘marijuana’ had “a racist history in the United States. It was used in anti-immigrant rhetoric in the early 20th century.” Stating “we are tied to our history of language,” he suggested the change “signals that we acknowledge the history of that language that targeted communities of color.” The legislation to shift from using a common slang term in state law to the scientific name for the plant took over a year, spanning two legislative sessions, before delivery to the Governor’s desk.
Sonoma County Board of Supervisors adopts temporary 45% reduction of local cannabis cultivation tax rates. The County of Sonoma Board of Supervisors agreed to amend the Cannabis Business Tax ordinance to reduce the fiscal year 2021-2022 cannabis cultivation tax rates by 45% through June 30, 2023. The reduced rates will be retroactive to July 1, 2021 and are intended to mitigate financial hardship for local operators. The county revenue loss from the tax reduction will be offset by current and projected county cannabis tax revenue surplus in excess of program operating costs. County tax revenue collected in fiscal year 2020-2021 from 183 permitted cannabis operators has totaled $3.6M compared to $2M in annual operating costs.
Denver approves first social equity hospitality license for Cannabis. The Tetra Lounge in Downtown Denver is on track to become the city's first social equity applicant approved for a marijuana hospitality establishment license. Denver’s previous cannabis hospitality program only allowed smoking outdoors, and with this there was only one operator in the city, The Coffee Joint. After an overhaul of marijuana regulations last year, the new hospitality program came to fruition. The city has two other social equity applications: one for another hospitality establishment and one for a hospitality/sales establishment.
Arkansas posts $21.1M in February medical cannabis sales. There are currently 82,410 active medical marijuana patient cards in Arkansas—purchasing 3,658 pounds of cannabis in February. Overall, patients have purchased ~80,000 pounds since MMJ dispensaries opened in May 2019. Arkansas’ 38th licensed MMJ dispensary opened on March 7th.
Jointly — Raises $5M in Seed Funding. Since launching its consumer app in early 2020, consumers have tracked over 200,000 cannabis experiences and rated tens of thousands of legal cannabis products in pursuit of better well-being and product performance. On the Jointly platform, consumers discover products based on authentic ratings from the Jointly community and track their own experiences to improve their results. Jointly's proprietary product database includes over 3,000 brands and 75,000 products.
Chicago Atlantic — Funds $30M Senior Secured Credit Facility to Single-State Cannabis Operator in Florida. At closing, Chicago Atlantic funded $17.5M of its total $22.5M commitment. The facility will fund a new cultivation and processing facility in Florida that is expected to be fully operational early this year, repay existing indebtedness and build out over 20 dispensaries during the next two years. Since completing its IPO in December 2021, Chicago Atlantic has funded a total of $73.6M of principal under 7 new loans and credit facilities to 6 separate operators as well as an additional $36.1M of principal to existing borrowers under current credit facilities in 18 states ($109.7M total).
Schwazze — Acquire Urban Health & Wellness. The proposed transaction includes the adult use Urban Dispensary, located at West 38th Avenue and Clay Street, in Denver's vibrant Highlands neighborhood as well as a 7,200 sq ft indoor cultivation facility (2,700 sq ft of canopy) located in Denver, Colorado. This will bring the Company's total number of Colorado dispensaries to 23 and grow facilities to four.
Item 9 Labs — Acquires The Herbal Cure in Denver, Colorado. The Herbal Cure was founded in 2010 and generated $5.4M in 2021 revenues. Located in Washington Park in Denver, the 1,500 square-foot medicinal and recreational dispensary will be the Company's future flagship location for the brand.
Jushi — Completes Acquisition of Las Vegas, Nevada Dispensary and Establishes Fourth Vertically Integrated State-Level Operation. The acquisition of Apothecarium Nevada, together with the April 2021 purchase of Franklin Bioscience NV, LLC, a holder of medical and adult-use cannabis cultivation, processing, and distribution licenses, enabled Jushi to become vertically integrated in Nevada. Nevada represents Jushi’s fourth vertically integrated state, accompanying Pennsylvania (by way of its affiliated subsidiaries), Virginia, and Massachusetts.
InterCure x Clever Leaves — International Strategic Partnership. Over the term of the Agreement, InterCure will have access to Clever Leaves’ high-THC medical cannabis flower to serve several medical cannabis markets, including the Israeli market. As part of the partnership, Clever Leaves will cultivate InterCure's high quality strains to launch InterCure's EU-GMP compliant branded products within the EU, UK and South American markets.
📄 Company Updates / Earnings
Ayr Wellness — Q4 and FY 2021 Earnings
On March 16, 2022, the Company entered into a $26.2M mortgage loan agreement with a community bank with an annual interest rate of 4.625%
Guidance: the Company expects financial results in the first half of 2022 to remain relatively flat, in-line with industry trends, followed by a step-function in growth beginning in Q3 2022 and continuing through Q4 2022. Assuming the Company receives these regulatory approvals sufficiently early in Q3 2022, the Company anticipates an annualized run-rate of $250M of Adjusted EBITDA, $100M of operating income and $800M of revenue for Q4 2022
TerrAscend — Q4 and FY 2021 Earnings
Q4 — Revenue: $49.2M, down (1%) Y/Y; Gross Profit: $20.8M (42.3% GM); Adjusted EBITDA: $11.9M (24.2% margin); CFO: ($3.8M)
FY2021 — Revenue: $210.4M, up 42% Y/Y; Gross Profit: $66.3M (53.3% GM); Adjusted EBITDA: $65.6M (31.2% margin); CFO: ($31.8M)
Cash and cash equivalents: $79.6M as of December 31, 2021
MariMed — Q4 and FY 2021 Earnings
Q4 — Revenue: $31.0M, up 52% Y/Y; Gross Profit: $15.5M (50% GM); Adjusted EBITDA: $8.3M (26.6% margin); CFO: $7.9M
FY2021 — Revenue: $121.5M, up 139% Y/Y; Gross Profit: $66.3M (54.6% GM); Adjusted EBITDA: $43.1M (35.5% margin); CFO: $35.9M
2022 Guidance: Revenue of $145–150M. Adjusted EBITDA of $47–$52M.
CAPEX spend of $25M
Cash and cash equivalents: $29.7M as of December 31, 2021
Glass House Brands — Q4 and FY2021 Earnings
Net Sales increased 7% to $18.4M in Q4 2021, compared to $17.2M in Q3 2021. In 2021, net sales increased 44% to $69.4M from $48.3M in 2020
Equivalent Dry Pound Production in Q4 was 29,738 lbs vs 28,268 lbs in Q3
Gross Profit decreased 116% to $(0.4M)in Q4 compared to $2.3M in Q3. In 2021, gross profit was $16.0M compared to $18.7ZM in 2020
Gross Margin in Q4 was (2)% compared to 14% in Q3. Gross margin in 2021 was 23% compared to 39% in 2020
Adjusted EBITDA decreased 71% to $(9.1M) in Q4 compared to $(5.4M) in Q3. In 2021, Adjusted EBITDA was $(11.8M), compared to $(0.3M) in 2020
Adjusted EBITDA Margin was (50)% in Q4 2021, compared to (31)% in Q3 2021. In 2021, Adjusted EBITDA Margin was (17)%, compared to (1)% in 2020
Cash balance was $51.1M (as of December 31, 2021)
Body and Mind — Q2 FY2022 Earnings
Revenue of $8.05M, up 27% Y/Y, and up 6% over Q1 FY2022 revenue of $7.57M
Gross profit of $3.0M, up 10% increase over Q2 FY2021 Gross profit of $2.8M
Net Loss of ($2.7M); Adjusted EBITDA loss of (0.4M)
At January 31, 2022, $4.6M in cash
Chicago Atlantic — Q4 and FY2021 Earnings
Net income of $4.4M in Q4, or $0.57/share
Adjusted Distributable Earnings of ~$4.6M, or $0.61/share
Net income of ~$9.5M in 2021 (4/1–12/31/21), or $1.47/share
Adjusted Distributable Earnings of ~$9.9M in 2021 (4/1–12/31/21), or $1.54/share
As of December 31, 2021, total loan commitments of ~$235.1M ($200.4M funded, $34.7M unfunded) across 21 portfolio companies
Upsized revolving credit facility from $10M to $45M on December 16, 2021
Akerna — Q4 and FY2021 Earnings
Software revenue of $19.0M, up 59% Y/Y; total revenue of $20.7M, up 49% Y/Y
Gross profit was $12.6M, GM was 61% in 2021 compared to 54% in 2020
Net loss was ($33.6M), up $6.7M Y/Y
Adjusted EBITDA loss was ($7.9M) compared with a loss of ($11.7M) in 2020
Cash and Restricted Cash was $14.4M as of December 31, 2021
Planet 13 — Initiates Florida Dispensary Roadmap. The Company’s first location of its planned Florida footprint is located in the town of Orange Park, a thriving suburb of Jacksonville and one of the hottest real estate markets in the US. This is the first signed lease of Planet 13’s initial six planned neighborhood style stores all focused on major population centers and heavily trafficked retail locations.
Schwazze — Receives Final Approval from NEO. The common shares are expected to begin trading on the NEO on March 23, 2022, under the symbol SHWZ. Schwazze is currently listed on the OTCQX and believes that the additional listing onto the NEO, a senior exchange in Canada, will provide additional exposure to an increased number of retail and institutional investors.
CanPay — Exceeds $500M in Retail Purchases. CanPay is now used at more than 800 participating merchant locations in 31 states in the U.S. and is accepted by 10 of the top 13 public MSOs. CanPay provides an easy-to-use app that allows consumers to pay for purchases at cannabis retailers with a simple debit from their checking account. Merchants with a compliant bank account at a CanPay-approved financial institution may join the CanPay network quickly and easily.
Texas Original — Medical Cannabis Dispensary in Houston. Texas Original Compassionate Cultivation (TXOG), will open a permanent dispensary in Houston this summer. The Houston dispensary will operate six days per week and will offer TXOG’s full suite of medical cannabis products—including gummies, tinctures and lozenges—to qualifying patients. Since medical cannabis licensees are prohibited under the Compassionate Use Program from storing inventory overnight in multiple locations, TXOG and its fleet of delivery drivers will supply daily inventory to the Houston dispensary and return it to Austin after operating hours. It is the company’s latest effort to bring its medicine closer to patients.
Verano — Opening First West Virginia Medical Cannabis Dispensary, Zen Leaf Morgantown. Zen Leaf Morgantown marks the company’s first dispensary in West Virginia, a medical cannabis market projected to record sales as high as $40 million by 2025, according to MJBizDaily. Across West Virginia, Verano has permits issued by West Virginia’s Office of Medical Cannabis to operate a cultivation and processing facility that is nearing full operational status, along with seven total medical cannabis dispensaries that are projected to begin opening throughout 2022.
Verano — Opens Two MÜV Dispensaries in Florida’s Tampa Bay Area, Raising Company’s Total to 43 Storefronts Statewide. The new MÜV Brandon and MÜV New Tampa dispensaries expand Verano’s footprint to six locations in Hillsborough County and ten in the greater Tampa Bay area.
Cresco Labs — Opens 50th Operating Retail Store in Lady Lake, FL. The Company’s total retail footprint to 50 locations across seven states and 16 total stores in the state of Florida.
Parallel — Opens Surterra Wellness Dispensary in Crestview, FL. This marks Surterra's first new store opening in two years, with more opening in 2022. Parallel operates 40 Medical Marijuana Treatment Centers in the state of Florida.
AUDACIOUS — Opens Medical Cannabis Clinic in Southeast Asia, Expanding Global Footprint into Thai Medical Cannabis Market. AUDACIOUS will partner with Thai-based partner Golden Triangle Health to open the first Herbidus Medical Center in Bangkok. Herbidus is among the first clinics in Asia that can prescribe cannabis for medical treatments in compliance with the law. It uses medicine approved by the Government Pharmaceutical Organization and is staffed by doctors that follow global standards for use of cannabis in patient treatment. GTH is a spin-off from Thai public company NR Instant Produce PCL (~$400M market cap). Following a soft launch, Herbidus has already seen close to 800 patients.
Cresco Labs — Expands Brand Portfolio to Florida. The company will launch of its High Supply, Good News, and Remedi brands in Florida. In addition, the Company released a new edibles brand, Sunnyside Chews, available only in the state. Cresco Labs will soon expand to Florida its premium craft-quality flower brand, FloraCal Farms, and bestselling flagship brand, Cresco.
Miss Grass x AWH — Multistate Expansion Partnership. The partnership comes on the heels of Miss Grass' full-scale rebrand launched earlier this month. Through this partnership, Miss Grass products will be produced and initially distributed at Ascend retail locations beginning in Massachusetts today with Illinois to follow this year.
Wynk x AWH — Exclusive Partnership in Michigan. Wynk’s all-natural flavors of Juicy Mango, Lime Twist and Black Cherry Fizz, each 8.4 ounce can of has a 1:1 ratio of 2.5 milligrams of THC and CBD.
Crypto Cannabis Club — Brings Together NFTs and Premium Flower in Collaboration with CampNova and V-Fi. The three premium strains come in limited-edition packages, complete with a QR code, powered by blockchain authentication platform V-Fi. Customers will use their smartphone to scan the QR code on the package, initiating a process powered by the V-Fi app to unlock a collectible NFT featuring CCC’s packaging art. The newly launched strains—Grapes and Cream, Purple Granimals and Garlotti—retail for $50 for an eighth ounce (3.5 grams). CCC’s community of NFTokers receive a special 30% discount for this release.
Cronos Group — Founder Mike Gorenstein Returns as CEO. Cronos announced that the Board of Directors has appointed Mike Gorenstein as Chairman, President, and CEO, in connection with Kurt Schmidt’s retirement. Gorenstein’s immediate areas of focus include: Delivering margin accretive growth focusing on adult-use product formats; continuing to drive rare cannabinoid development and commercialization strategy; cutting costs and focusing investments to the highest ROI opportunities, specifically “borderless” investments that can create incremental revenue as new markets come online; leading a successful transition from Peace Naturals Campus to a more agile supply chain; and positioning Cronos to win in the U.S. cannabis market.
Clever Leaves — Appoints William Muecke to Board of Directors. Muecke is a co-founder of Artemis Growth Partners, an impact-focused ESG cannabis investment fund with $350M+ of assets under management. Prior to founding Artemis Growth Partners, Muecke was a co-founder and managing partner of CoreCo Private Equity and held senior leadership positions at DLJ and at Goldman Sachs.
TILT Holdings — Appoints Lynn Ricci VP of Investor Relations and Corporate Communications. Prior to joining TILT, Ricci was head of investor relations and communications and led ESG and DEI initiatives at Trulieve. Previously, she managed IR and communications at Momenta Pharmaceuticals, SoundBite Communications, and Authorize.net.
Karan Wadhera, Casa Verde Capital, on the firm’s investment philosophy and pipeline
Kate Miller, Miss Grass, on shaking up traditional stoner culture
Dustin Moore, Embarc, on the California retail market
Laurie Holcomb, Gold Flora, on ramping up California footprint with M&A
Bohb Blair, Jones Soda, on launching the Mary Jones cannabis-infused drinks brand
Alisia Ratliff, Victus Capital Ventures, on the European and global cannabis markets
👋 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.