💼 NY Cannabis Regulators sued by group that includes Registered Organizations (ROs)
💼 NY Cannabis Regulators sued by group that includes Registered Organizations (ROs)
Avextra closes €17M Convertible Note. Lowell Farms divests Brands and IP. Cresco Labs Q4 Rev. of $200M, down (8%) Y/Y. TerrAscend Q4 2022 Rev. of $69.0M, up 50% Y/Y. More layoffs at Leafly.
🌿 Industry
NY’s cannabis regulators sued again, this time by MSOs. The complaint alleges unconstitutional overreach and policymaking, egregious abdication of duties, and actions that put New Yorkers’ health and safety at risk. — Syracuse.com
Made up of at least four registered organizations–Acreage Holdings, PharmaCann, GTI, and Curaleaf–whose chairman recently warned of litigation over New York’s approach to social justice
“Rather than perform the tasks required by the MRTA—which would promote a safe and regulated cannabis industry for medical patients and adult-use consumers alike–CCB and OCM have improperly assumed the role of the Legislature to impose their own policies over those of New York’s elected officials and, by extension, their constituents” the suit alleges
With cannabis cultivator cap lifted, growers face New Jersey’s challenges. A competitive market for limited/expensive real estate and a challenging capital raise environment should keep the market from oversupply for awhile. — MJBizDaily
As of February 13, the Cannabis Regulatory Commission (CRC) reported 415 cultivation license applications
As of March 14, New Jersey had 17 operational cultivators and 25 annual licensees on their way to becoming operational
Shergoh Alkilani (ElevenEleven Wellness) believes that while there’s lots of room for new cultivators, it’ll cost another $15–$20M to become operational
Dispensaries a slow burn in Fresno after nearly a year. “Some of them will never open.” — The Fresno Bee
More than a year after preliminary licenses were given to 19 businesses across the city, only two dispensaries (Embarc, The Artist Tree) are open and operating. While Embarc was able to open one store, the company was awarded two retail cannabis licenses, and are hoping to open their second location later this year
Thirteen have had CUPs approved
According to the city, several cannabis businesses are rehabbing old buildings and may not have known exactly what they were getting into. Others are dealing with landlord issues, like waiting on current tenants to move out of a location
New customer-friendly legal recreational cannabis in Missouri cuts into Illinois’ market. Illinois had a three-year head start on legalizing recreational marijuana, but in many ways, Missouri has surpassed it after just one month. — Chicago Tribune
In February, its first month of legal sales, legal marijuana sales in Missouri totaled $103M. In Illinois, sales to out-of-state shoppers dropped 15% in that time
Voters approved legalizing recreational cannabis by referendum in November 2022 in Missouri. In Illinois, lawmakers wrote a much more restrictive law when they voted to legalize recreational Cannabis effective in 2020. Missouri also has nearly three times as many licensed cultivation sites
Importantly for customers, Illinois products often cost roughly twice as much. Missouri taxes sales at a flat 6%, while Illinois has a scale that goes up to 35%
Why Can’t Legal Cannabis Sellers Open Shops? Sometimes NY State is their Adversary. So far, not a single Conditional Adult Use Retail Dispensary (CAURD) license holder who wants to open on their own have done so. — The City
The state Dormitory Authority offered The Cannabis Place a location for a dispensary in Jamaica, but The Cannabis Place turned it down after concluding that bus lanes in front of the store would make deliveries tricky
After locating another site, in Astoria, they didn’t hear back for three weeks regarding approval. By the time regulators replied, the landlord had already walked back his interest in leasing them the location
California Cannabis Operators in Peril as American Dream Turns to Nightmare. With wholesale prices hovering near production costs, cultivators are essentially holding on and weathering the storm. — Cannabis Business Times
Origin Council, a nonprofit that advocates on behalf of small and independent cannabis businesses, about 85% of their 750 members are owed money
Overall, more than 1,400 cultivation licenses have exited the market since the start of 2022, according to DCC
Michigan Cannabis sales up 4.4% from January to $216.4M. Sales are up 39.8% from last February 2022. — NCV
In February, the average price of $1,282/pound was up 7.3% sequentially but down 46.3% from a year ago
So far in 2023, sales have grown 35.9% compared to the first two months of 2022
Wisconsinites paid over $36M in taxes to Illinois on cannabis in 2022. A recent memo from the nonpartisan Legislative Fiscal Bureau (LFB) found that $36.1M of Illinois cannabis tax revenues in 2022 were attributable to sales of cannabis made to Wisconsin residents.
Wisconsin’s loss of potential revenue is even larger if taxes paid to Michigan were to be included
Kentucky Senate committee passes medicinal cannabis bill. Senate Bill 47 passed 8 to 3. The Senate chamber of the Kentucky legislature had not before heard a bill related to cannabis. — WKTY
The bill will now go to the full Senate
If made into law, it would allow medical cannabis to be used for cancer, chronic pain, epilepsy, multiple sclerosis, chronic nausea, and other conditions approved by the Kentucky Center for Cannabis Research
The bill only allows pills or edibles as form factors. Smoking is not allowed
AB 1610 bill introduced to create greater transparency in cannabis testing. SC Labs is sponsoring AB 1610 for improved transparency. — HIGH TIMES
Would require blind proficiency testing, past recalls to be publicly shared online, in-person annual audits of labs, randomized testing of products available for sale
💵 Deals
Avextra closes €17M (£15M) Convertible Loan Note (CLN). The CLN will automatically convert into equity at the next raise (at a 20% discount), which is currently in preparation.
Avextra cultivates proprietary genetics and runs an R&D program in Germany and Portugal with cultivation in Portugal and manufacturing in Germany (100,000 sq ft)
The Company plans to expand sales and distribution channels into new European markets, expedite Cannabis-based medication clinical trials, advance its R&D activities as well as further its expansion into the German market
Successfully exported oil-based cannabis medicines to the U.K. last month
Co-CEO, Bernhard Babel, was previously CEO of Risk Dynamics, a McKinsey company that helps clients create sustainable modeling and analytics platforms. He was a Partner at Mckinsey for ~11 years. The Company’s other Co-CEO is David Reckeweg-Lecompte, who also serves as CEO of Dr. Reckeweg & Co, which produces homeopathic medicines and CEO of Psilo Pharma, focused on providing psilocybin across Europe
SEED Innovations Limited (CEO, Ed McDermott, is Co-Founder of EMMAC) owns a ~6.6% stake in Avextra valued at €5M/£4.4M based on their last NAV (Sept. 2022). SEED did not participate in this round
Lowell Farms divests Brands and IP for Debt Forgiveness. Lowell Farms agreed to sell its “Lowell Smokes” and “35s” brands and associated intellectual property to Lowell Brands to BrandCo. (George Allen). In return, noteholders have agreed to forgive all debts the company owed under the Debentures. — Green Market Report
$23M of debt maturity from various debentures coming up in October 2023
BrandCo will acquire ~100 million shares of the company’s subordinate voting shares which represent no more than 49% of the outstanding shares
📄 Company Updates / Earnings
Green Dragon (Eaze) adds six additional dispensaries in Florida and launches flower from new grow. The Company opened locations in Jacksonville, St. Petersburg, Madison, South Pasadena, Orange City, and Orlando.
Green Dragon now has 28 dispensaries across the state, with the goal of opening 50 locations by the end of the year
The new stores coincide with the launch of its new flower with an expanded strain variety from the first harvest at its cultivation facility in Palatka, FL
Cresco Labs Q4 Revenue of $200M, down 8% Y/Y.
Adjusted Gross Profit of $90M (45% GM)
Adjusted EBITDA of $31M (15% margin)
Adjusted gross profit margin and adjusted EBITDA margin were impacted by ~$10 million of non-cash, non-recurring items. Normalized for these adjustments, adjusted gross margin would have been 50% and adjusted EBITDA margin would have been 20%
Operating cash flow of $4M. Cash of $122M, Debt of $381M
TerrAscend Q4 2022 Revenue of $69.0M, up 4.2% Q/Q and 50.3% Y/Y.
Gross Margin was 44.6%, compared to 47.0% in Q3 2022 and 49.1% in Q4 2021
EBITDA of $30.0M, compared to ($317.9M) in Q3 2022 and $15.3M in Q4 2021. A $331.2 non-cash impairment charge was recorded in Q3 2022 against goodwill and intangibles for the Company's Michigan business (Gage, Pinnacle), which was reduced by $20.2M in Q4 2022
Adj. EBITDA Margin of 17.7%, compared to 19.6% in Q3 and 28.6% in Q4 2021
Cash Flow from Operations of $7.3M vs. $1.5M in Q3
Cash of $26.2M, Debt of $194.2M
WM Technology Q4 Revenue of $49.3M, down 9% vs. $54.2M in Q4 2021.
Avg. mo. paying clients was 5,689 compared to 4,766 in Q4 2021
Avg. mo. revenue per paying client was $2,888 compared to $3,789 in Q4 2021
Adjusted EBITDA was $1.5M as compared to $3.8M in Q4 2021
Cash of $28.6M, no debt
Q1 2023 guidance of $47M, Adjusted EBITDA of ~$4M
Leafly Q4 Revenue of $12.1M, in line with Q4 2021.
Average MAUs of 8.0M, down (7%) from 8.7M in Q4 2021, Retail accounts up 10% to 5,806, Average Revenue Per Account down (7%) at $554 vs. $595 in Q4 2021
GM was 88%, consistent with Q4 2021
Adjusted EBITDA loss was ($4.2M) compared to EBITDA loss of ($4.1M) in Q4 2021
Cash of $24.6M, $28.9M of convertible promissory notes
TILT Holdings Q4 revenue up 9% Q/Q to $44.3M but down (18%) from Q4 2021.
Gross profit of $8.3M in Q4 (19% GM), compared to $11.2M (21% GM) in Q4 2021
Net loss was ($73.1M) in Q4 compared to a net loss of ($20.1M) in Q4 2021, driven by a $54.6M goodwill impairment related to current market conditions
Adjusted EBITDA was $(0.4M) in Q4 compared to $4.5M in Q4 2021, driven by price compression in Massachusetts. As of February 28, 2023, the Company had a cash balance of ~$5M and debt of ~$46M
🏬 Retail
William Jane opens in Ithaca, NY. Around 40 Ithacans stood in line for the dispensary’s grand opening at 4:20 p.m.
Nuggets Dispensary, the First Black-owned, legacy Detroit dispensary opens. Nuggets Dispensary is owned by Louis Radden, a physician who specializes in the diagnosis and treatment of back and spine conditions.
NJ Leaf medical cannabis dispensary opens in Freehold, NJ. The 3,375 sq ft dispensary expects to transition to recreational sales as well. NJ Leaf joins two other cannabis sellers in the county, Ayr in Eatontown and Zen Leaf in Neptune.
ERBA Sawtelle opens in West Los Angeles. The 8,000 sq ft dispensary is the Company’s third in LA.
Solar opens a third dispensary in Dartmouth, MA. Solar has a 67,000 sq ft. cultivation and two other dispensaries in Seekonk and Somerset.
Fluent opens Jacksonville, FL dispensary, its 30th in Florida and 33rd nationwide. The company plans to open a fourth store on the westside of Jacksonville in Q4 2023.
Exclusive Brands opens 9th MI dispensary in Gaylord, MI. Exclusive Brands plans to expand on their retail footprint in Michigan (Ann Arbor, Coldwater, Gaylord, Grand Rapids, Kalamazoo, Lapeer, Lowell, Monroe, Muskegon) with additional dispensaries in Oxford and Saline in 2023.
🌱 Product
Timeless Vapes Unveils Artist Legacy Collaboration with Tati Suarez. The Timeless Artist Legacy program provides artists, musicians and creatives with a platform to share their unique stories through the lens of cannabis culture. Suarez's flip case and battery combo will be available in AZ, CA, OK, OH & MO.
14th Round to serve as Cookies’ hardware and packaging partner, Final Bell to provide co-manufacturing in CA and Canada. This will include upgraded packaging, vaporization hardware, pre-rolls, edibles, vape products, and concentrates.
Mitten Extracts Launches Wholesale Brand Mitten Distro in Michigan, Adds Wonderbrett and Ric Flair Drip to Portfolio. With the success of Mitten Extracts, Mitten Distro has expanded its product portfolio to offer both Wonderbrett and Ric Flair Drip.
Lobo launches in MA. The company is bringing its Presidente Infused Glass-Tip Blunt and Minis 7-Pack Half-Gram Infused Joints to MA. Lobo is also available in CA, OR, CO, AZ, IL, NY, and Canada.
Viola to launch at RISE NJ. Founder Al Harrington grew up in Orange, NJ.
MAKR House Launches Disco Jays Infused Pre-Rolls in CA. Disco Jays pre-rolls are rolled with diamond-infused, indoor-grown flower and coated with THCA diamonds, packing a potent punch with an uplifting effect.
FIND WUNDER partners with Petalfast in CA. FIND WUNDER’s brands include Godspeak, Higher Vibes and Sessions.
Flora Craft Brands enters into a licensing agreement with Revenant, a brand founded by ex-NFL players Kyle Turley, Eben Briton, and Jim McMahon. Based in Elgin, IL, Flora Craft Brands was awarded a craft grow license in 2021 as a social equity applicant. The Company operates a 51,000 sq ft. Cultivation and Manufacturing Facility.
🧔 People
Additional Layoffs at Leafly. Headcount reduction of ~40 positions—or 21% of the company’s workforce—through a combination of layoffs and attrition. The company expects total annual cash savings of ~$8M, beginning in Q2.
AFC Gamma appoint Brandon Hetzel as CFO and Treasurer. Hetzel’s appointment follows the departure of Brett Kaufman, who was previously the Company’s CFO and Treasurer. This move was made as part of the Company’s efforts to rightsize the accounting team. Hetzel is AFC Gamma’s current EVP, Controller.
Columbia Care Executive Chairman transitions to Chairman. Michael Abbott co-founded Columbia Care with CEO Nicholas Vita in 2012.
4Front Ventures adds Kris Krane to the Board. This fills the vacancy created from the resignation of Kathi Lentzsch. Krane has continued to serve as a strategic advisor to the Company since stepping down as President of Mission Dispensaries.
AVD (Advanced Vapor Devices) adds Doug Fischer as General Counsel. Fischer previously served as GC at Ascend Wellness Holdings and GC at Greenlane.
Red White & Bloom Brands adds Edoardo Mattei as CFO. Mattei was previously CFO at DCL Corporation (chemical manufacturing) and CFO at Ignite (Dan Bilzerian’s Cannabis company).
🎙️ Interviews
The Bloomwell Group is a Frankfurt,Germany-based holding company for medical cannabis companies. The company raised a $10M Seed led by Measure 8 in October 2021, and recently extended the Convertible Note to take additional capital from Artemis Growth. I spoke to CEO, Niklas Kouparanis, about the Company, German market, fundraising, differentiators from competitors (Sanity Group, Cansativa Group, and Avextra) and more.
Ricky Williams, Highsman | The Plant Lady
Glass House Brands, CEO, Kyle Kazan | NCV
Talking about banking, again | High Rise
Trulieve, CEO, Kim Rivers | NCV
Unpacking Glass House Q4 Earnings | Twitter Spaces
👋 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.