🍎 New York approves 99 dispensary license, 155/300 CAURD licenses have been awarded

NBA allows Cannabis promotion and investments. Cannabis Tech M&A: POSaBIT + Hypur, Leaf Trade x Sweed, Happy Cabbage Analytics + ZolTrain. AYR COO resigns. TerrAscend promotes President to CEO.

Apr 04, 2023

California’s Retail Logjam Leaves Legal Cannabis in Jeopardy. Many operators blame overregulation and overtaxation for the state’s still robust illicit market, but one elephant in the room remains: limited retail access. — Cannabis Business Times

In the licensed market, Tamara Kislak of That Good Good, who runs a 300-acre family property in Mendocino County, said she’s paid anywhere from 10% to 22% in distribution fees. That’s before retail markups
“We’re stuck in this crazy situation where we’re legally mandated to work with distributors, and we’re not even going to be able to get distribution,” Kislak said
In California, player dynamics have been partly responsible for instability in the supply chain, which includes a ~7-to-1 ratio of cultivation to dispensary licenses

The NBA will allow players to promote and invest in cannabis companies. The measures will be included in a new seven-year collective bargaining agreement between the NBA and the National Basketball Players Association. — The Athletic

New York just approved 99 more dispensaries. Of the 99 licenses awarded, 53 are in NYC and 24 are in Long Island. — Time Out

3 in Brooklyn, 9 in the Bronx, 21 in Manhattan, 17 in Queens and 3 in Staten Island
In late 2022, OCM issued just 36 licenses across the state. In total, the state has issued 155 of the 300 CAURD business licenses.
The Second Circuit lifted restrictions on Social Equity dispensaries last week

Headset Highlights Key Industry Trends In 2023 Demographics Report. Comprehensive report provides insights into the age, gender and geography of cannabis sales across key markets in Canada and the United States. — Headset

Millennial and Gen Z consumers account for 72.1% of all tracked sales in Canada and 63% in the U.S.
Vape has the highest share of total sales among Gen Z in the U.S. with 33.6% of total sales in January and February, the first demographic to dethrone Flower as the top consumer category

Paychex ceasing direct deposits, other services to cannabis operators. U.S. cannabis operators are scrambling to find a new payroll provider after receiving a memo from Paychex advising that the company will no longer process direct deposits or offer other services for marijuana-related businesses. — MJBizDaily

Services Paychex are suspending include: automatic payroll tax administration,
Direct deposit, time and attendance services

Germany imports record amount of Cannabis, but growth slows. Germany imported a record amount of Cannabis in 2022, according to data from the country’s Federal Institute for Drugs and Medical Devices (BfArM). — MJBizDaily

While the top-line number suggests the import business is booming, a deeper look shows that 2022 posted the slowest annual growth since the BfArM started reporting cannabis import data in 2018
Moreover, a good chunk of those imports appears to have never reached patients, possibly because of poor quality or product being reexported to another country, experts suggest
Reimbursements of medical cannabis have been relatively flat since 2020

💵 Deals

Greentank Technologies closes $16.5M Series B. The Series B was led by a strategic investor group with 15+ years of manufacturing experience and Organigram. Organigram CEO Beena Goldenberg said “Greentank’s vape technology will introduce a new way of heating cannabis oil without the need for a ceramic coil and will provide consumers with a 510 solution that does not contain ceramic or ceramic particle emissions” More details on the transaction here.

POSaBIT acquires Payments Solutions Provider Hypur for up to $7.5M. Hypur is a provider of compliant, sustainable payment and bank compliance solutions for high-risk industries, including cannabis businesses. Hypur has extensive partnerships with banks and credit unions throughout the United States who have used Hypur’s technology to provide banking and payment services to the cannabis industry since 2016. Included in the acquisition is Hypur Comply, Hypur Pay, and Hypur’s PIN debit merchant processing solution. The acquired assets generated ~$5.3M in revenue and $1.3M in gross profit during the 12 months ended December 31, 2022. Adds over 150 active merchant locations, generating $100M+ of annualized payment GMV. As consideration for the acquisition, POSaBIT issued an aggregate of 6,210,729 shares and $1.5M in cash. POSaBIT will pay up to an additional 1,242,146 shares following the achievement of certain milestones.

Curaleaf acquires Deseret Wellness (UT) for $20M (cash + stock). The proposed Transaction with Deseret includes three retail dispensaries located in the cities of Park City, Provo and Payson, with a combined annualized revenue run rate of $14M (1.43x run-rate revenue). Following the close of Deseret, Curaleaf's retail footprint will increase to four dispensaries in Utah and 150 nationwide.

Leaf Trade x Sweed merge to create a fully integrated solution for Cannabis Operators. Leaf Trade, a wholesale cannabis marketplace with ~$3 billion in annualized orders, agreed to merge with Sweed, a retail operating platform. The merger will enable businesses to manage their entire retail operations in a single place. With Sweed, Cannabis businesses own their consumers through a private-label eCommerce experience, in-store kiosks, and native apps. They do not have to share their customer’s data with other conglomerates. More details on the transaction here.

Happy Cabbage Analytics acquires ZolTrain. Happy Cabbage Analytics, the cannabis industry’s first retail optimization platform, has announced its acquisition of ZolTrain, a brand activation platform designed for cannabis brands and retailers to deliver engaging employee and consumer education. The combination of their capabilities will help cannabis operators grow revenue, educate staff, recommend products, and optimize their businesses. Andrew Watson will lead as CEO, Danny Gold will be COO and Eric Cobb will be CTO of the combined company.

Sweet Leaf Madison Capital (SLMC) Secures $100M Financing Facility. A prominent New York-based global institutional special situations asset manager will be providing $100MM of financing.

Columbia Care Extends Maturity of 13% Senior Secured Notes to May 2024. Under the terms of the Indenture, the Company had the discretion to extend the 2023 Note Maturity Date to May 14, 2024. Other than the change in maturity date, all other terms of the Indenture remain in place, including the Company’s right to redeem the 2023 Notes and the Company’s obligation to make an offer to repurchase all or any part of the 2023 Notes upon a change of control.

📄 Company Updates / Earnings

Verano Reports Q4 and Full Year 2022 Results. 2022 Revenue of $879M, up 19% Y/Y, Gross profit of $423M (48% GM), SG&A expense of $357M (41% of revenue), Adjusted EBITDA of $324M (37% margin), Cash Flow from Operations of $94M, Net loss of $(269M), which includes a $229M impairment charge, primarily of intangible assets related to the AZ cultivation license and PA and AZ retail reporting units.

Columbia Care Q4 and Full Year 2022 Results. 2022 Revenue of $511.6M, up 11% YoY, Gross Profit of $201.2M, up 4% YoY, Adjusted EBITDA of $67.4M , up 17% YoY.

Jushi Q4 and Full Year 2022 Results. 2022 Revenue of $284.3M, up 35.8% Y/Y, Gross profit of $95.5M, up 14.5% Y/Y, Adjusted EBITDA of $7.1M, Net loss of ($202.3M) driven primarily by non-cash asset impairment charges and increased expenses to support the expansion of the Company’s operational footprint, including acquisitions in Nevada, lower fair value gain on derivatives, loss on redemption of the 10% senior notes, and higher interest expense. As of December 31, 2022, the Company had ~$27.1M of cash.

Schwazze Q4 and Full Year 2022 Results. 2022 Revenues of $159.4M, up 47% Y/Y, Gross Profit of $85.0M, up 72% Y/Y, Adjusted EBITDA of $52.0M (33% margin), compared to $32.2M (30% margin) in 2021. Net Loss of ($18.5M) compared to Net Income of $14.5M for 2021, driven by an impairment charge of $8.0M, interest expense of $30.1M, and loss on disposition of assets of $4.7M.

4Front Ventures Q4 and Full Year 2022 Financial Results. 2022 Systemwide Pro Forma Revenue up 6% Y/Y to $139.4M, Adjusted EBITDA of $27.7M as compared to $33.9M for 2021, cash totaled $15.2M as of December 31, 2022.

The Parent Company Q4 and Fiscal Year 2022 Results. Cash and cash equivalents of $93.7M as of December 31, 2022.

Goodness Growth Holdings Q4 and Fiscal Year 2022 Results. 2022 Revenue of $74.6M, up 37.1% Y/Y and up 57.8% excluding discontinued operations. GM of 41.4%, up from 36.4% in 2021. EBITDA of ($10.0M). As of December 31, 2022, cash of $15.1M.

Lowell Farms Q4 and Fiscal Year 2022 Results. 2022 Revenue of $43.5M (-4.2% GM), out of state licensing of $1.6M, Adjusted EBITDA of ($9.6M).

Goodness Growth Holdings amends Credit Facility. This is the fifth amendment to the Company’s Green Ivy (Chicago Atlantic) credit facility which reduces cash outlays through the removal of a required amortization schedule and extends the maturity date on the credit facility loans to April 30, 2024 with opportunities for performance-based extensions. The Company will issue up to 15M shares to the lenders in consideration for the credit facility amendment. In addition, the Company is in advanced discussions with a separate affiliate of Chicago Atlantic to finalize a U.S. $10.0 million secured convertible loan financing. Preliminary terms for this convertible note offering include a three-year term and an interest rate of 12.0%, including 6.0% paid-in-kind and warrants to purchase 6,250,000 shares.

Safe Harbor Financial enters into agreement to resolve $64.7M in Payment Obligations. Under the terms of the Agreement, the Company has agreed to resolve approximately $64.7M of total payment obligations owed from the September 28, 2022 business combination in exchange for a 5-year, $14.5M senior secured note bearing a 4.25% annual interest rate and issuance of 11.2M shares (SHFS closed at $0.47/share the day prior to announcement) of stock.

Sweet Flower employees ratified their first union contract with UFCW Local 770. The three-year agreement covers over 100 florists, delivery drivers, and inventory associates. The contract raises the wage floor for drivers, florists and inventory associates, and establishes annual wage increases. It provides for employer contributions towards health and welfare for full-time workers, along with paid holidays, paid community volunteer hours, and seniority based vacations with pay.

Aurora repurchases ~$47M Principal Amount of Convertible Notes, saving $2.6M in annualized interest payments. Following completion of this repurchase, Aurora will have ~$76M of Notes outstanding.

🏬 Retail

Good Graces (Queens) opens New York State's first woman-owned dispensary. Good Grades is the first city dispensary to open outside of Manhattan. The news was also mentioned on this past weekend’s SNL.

Goodblend (Parallel) opens its first brick-and-mortar dispensary in Austin, TX. The South Austin dispensary will provide non-smokable product, including gummies, chocolates and tinctures to patients enrolled in the state's medical marijuana program. Currently, goodblend offers product to patients in San Antonio and other Texas cities through deliveries at set locations with scheduled pickup times.

Verano opens Zen Leaf Buckhannon, WV. This is Verano’s fifth dispensary in WV and 126th retail location nationwide. Buckhannon has a population of 23,000+.

Columbia Care opens Cannabist in Huntington, WV. This is also the Company’s 34^th Cannabist location and fifth in WV. Huntington has a population of 46,000+.

🌱 Product

Breez launches Goldmine Gummies. Leeds, UK-based studio Robot Food helped creat an identity for Goldmine Gummies, using playful illustrations to demystify the benefits of its cannabis-infused products for new consumers. Goldmine Gummies wanted to offer something different to a crowded market with a brand “that breaks through the noise just by the joy it sparks for our fans”, says Breez CEO Austin Hice.

Kiva Confections Partners with Fatburger to Elevate Your Munchies This 4/20. Kiva Confection has partnered with burger chain Fatburger this 4/20 holiday to release a limited edition cannabis-infused Kiva x Fatburger Ketchup. The first-of-its-kind Cannabis Ketchup, available for a limited time only beginning April 6th at participating Artist Tree and Sweet Flower Los Angeles locations, encourages consumers to heighten their favorite munchies, Fatburger’s famous burgers and french fries, while furthering Kiva’s mission to continue the conversation around cannabis normalization in California and beyond. Kiva x Fatburger Ketchup will feature 10mg of THC per packet, making it the ultimate “canndiment” for all of your Fatburger made-to-order burgers and fries ahead of the popular 4/20 holiday.

Jetty Extracts Launches in New York. Jetty's New York launch will feature several of the brand's most popular strains from its High THC vape cartridge line. As in California, Jetty's process in New York begins with premium sun-grown cannabis, fresh from the Hudson Valley. Jetty partners with small, family-owned farms that focus on regenerative, biodynamic farming practices. Such farms include Hepworth Farms, a female-owned organic farm established in 1818. Jetty Extract's HIGH THC product line are now available for purchase at New York dispensaries including Union Square Travel Agency, Housing Works Cannabis Co. and Smacked Village, and will become available at additional retailers in the coming months.

YourWay Launches Diamond-Infused Pre-Rolls and Live Resin All-in-One Vape in Arizona. The VenomX brand is available in 60+ locations across Arizona.

Headset and CASA Partner to Optimize Dispensary Performance. Headset and CASA have created a partnership to help dispensaries generate more revenue by combining in-depth sales, market, and competitor data analysis with proven procurement and inventory practices.

🧔 People

TerrAscend promotes Ziad Ghanem to CEO. Ghanem was most recently TerrAscend's President and COO since January 2022. Before entering the cannabis industry, Ghanem spent 15 years at Walgreens and Walgreens Boots Alliance across operations, strategy and innovation.

AYR COO Jen Drake resigns. Drake had been with the company since inception and previously held COO positions at two credit-focused alternative investment firms.

Final Bell Appoints Robert Meyer as CEO. Greg Boone, the Company's prior CEO, will remain a director and focus his operational attention on the business of the Company's wholly owned subsidiary, Final Bell Canada. Meyer is the founder and Managing Partner of Angsana, a private venture firm that is focused on direct investments in early-stage opportunities. Prior to launching Angsana, Meyer co-founded SGX-listed Halcyon Agri Corporation Limited and served as its CEO.

Goodness Growth Holdings Directors resign. Chelsea Grayson and Amber Shimpa have resigned from its Board of Directors, effective immediately. Grayson had been serving on the Company’s Board since March of 2019. Shimpa had been serving on the Company’s Board since its formation from the amalgamation of two predecessor companies in January 2018. The resignations of Grayson and Shimpa result in a reduction in the current number of members of the Company’s Board to five.

🎙️ Interviews

Earnings Review w/ Matt McGinley, Needham | High Rise

Kristina Lopez Adduci, CEO, House of Puff | alpharoot

FundCanna, CEO, Adam Stettner | Blunt Business

Lisa Hurwitz, President, Happi | How to Do the Pot

👋 Highly Objective is a weekly Cannabis newsletter and podcast 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.

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