💰The Parent Company invests $50M into competitor, Glass House (Mercer Park SPAC)

Alabama Governor signs Medical Marijuana Legislation. Curaleaf acquires Los Sueños for $67M (CO). Aurora $300M ATM. IIP $300M 5.50% Senior Notes Due 2026.

May 24, 2021

🌿Industry

Alabama Governor Signs Medical Marijuana Legislation. Alabama Gov. Kay Ivey signed medical marijuana legislation as Republican opposition to the issue faded after decades of debate. The program will allow people with a qualifying medical condition to purchase medical marijuana with the recommendation of a doctor. The approval came eight years after a medical marijuana bill in 2013 won that year’s so-called “Shroud Award” for the “deadest” bill of the year in the House of Representatives. Ivey called signing the bill an “important first step” and thanked the sponsors of the bill for their work. The state Senate had already approved the bill last February by a 21-8 vote after just 15 minutes of debate. But the House of Representatives had traditionally been more skeptical of medical marijuana proposals and sent the bill through two committees before approving it 68-34. More than a dozen conditions, including cancer, a terminal illness, depression, epilepsy, panic disorder and chronic pain would allow a person to qualify. The bill would allow the marijuana in forms such as pills, skin patches and creams but not in smoking or vaping products.

Yes, Pot Is Legal. But It’s Also in Short Supply. About 25 miles south, over the border in New Jersey, an industrial complex once owned by the pharmaceutical giant Merck will be converted into an even bigger marijuana-growing hub. In Winslow, N.J., about 30 miles outside Philadelphia, a new indoor cultivation complex just celebrated its first harvest. The advent of legalized adult-use marijuana in New York and New Jersey is an entrepreneur’s dream, with some estimating that the potential market in the densely populated region will soar to more than $6 billion within five years. But the rush to get plants into soil in factory-style production facilities underscores another fundamental reality in the New York metropolitan region: There are already shortages of legal marijuana. Within New Jersey’s decade-old medical marijuana market, the supply of dried cannabis flower, the most potent part of a female plant, has rarely met the demand, according to industry lobbyists and state officials. At the start of the pandemic, as demand exploded, it grew even more scarce, patients and business owners said.

The supply gap has narrowed as the statewide inventory of flower and products made from a plant’s extracted oils more than doubled between March of last year and this spring. Still, patients and owners say dispensaries often sell out of popular strains. “There’s very little stock,” said Shaya Brodchandel, the chief executive of Harmony Foundation in Secaucus, N.J., and president of the New Jersey Cannabis Trade Association. “Almost no wholesale. As we harvest we’re putting it straight into retail.” The number of dispensaries has tripled since 2019. There are now 500,000 plants being grown throughout the state, up from 50,000 in 2018. In March, 20,000 pounds of cannabis products were on hand in New Jersey, up from 8,000 pounds the previous March.

Landlord sues Fire & Flower for $3M over ritzy Toronto dispensary that never opened. The Edmonton-based cannabis retail chain's landlord is demanding millions in damages over a location that has yet to sell a single joint, more than two years after the lease was signed. Fire & Flower claims it should be excused from the contract, and has brought a third-party claim against its realtor for missing a critical flaw at 95 Bloor Street W. that prevented the location from being licensed for cannabis sales by the province. The company, which operates a network of about 80 dispensaries in Canada, saw the premium multi-storey retail space as a way to introduce legal cannabis to the well-heeled shoppers who frequent the nearby Hermes and Prada boutiques. Now, the property's landlord claims Fire & Flower should pay $3M in damages for breaching its lease contract, after the company failed to obtain a license from the Alcohol and Gaming Commission of Ontario (AGCO).

Other highlights:

No Longer the “Devil’s Lettuce”: How the Town of Weed Embraced Weed

Colorado — $562M in Q2 2021 Sales (up 22% YoY)

Berner, Chris Webber Launch Cannabis Training Scholarships

💵Deals

The Parent Company invests $50M into Mercer Park Brand Acquisition Corp. PIPE. The Strategic Investment is expected to close concurrently with the closing of Mercer Park Brand’s qualifying transaction. In connection with the Strategic Investment, The Parent Company has also entered into a non-binding letter of intent with Mercer Park Brand pursuant to which the parties have agreed to negotiate towards a long term cannabis biomass offtake agreement and a retail distribution agreement which would enable The Parent Company’s suite of branded products to be sold across all Glass House retail locations, each of which are expected to be entered into upon closing of the Qualifying Transaction. In addition, TPCO has signed a definitive binding agreement to acquire four acres of licensed high-quality outdoor cannabis cultivation located in Sonoma County, California from a consortium of experienced cannabis farmers, Mosaic.Ag an affiliate of Soma Rosa Farms, for a total consideration of up to $17M in cash and common shares. The Cultivation Acquisition is expected to close in Q2 2022. The Company has also entered into a cultivation and supply agreement pursuant to which the consortium of farms will continue to provide cultivation services and supply the Company with high-quality cannabis.

Curaleaf — acquires Colorado-based Los Sueños for $67M. Los Sueños is the largest outdoor grow in Colorado. This will significantly expand Curaleaf's Colorado presence, vertically integrating in the state with large-scale outdoor cannabis cultivation. The proposed transaction includes three Pueblo, Colorado outdoor cannabis grow facilities covering 66 acres of cultivation capacity, including land, equipment and licensed operating entities, an 1,800 plant indoor grow and two retail cannabis dispensaries. Total consideration for the proposed acquisition is ~$49M for the Los Sueños operating companies and $18M for the real estate and farm assets. Total consideration of $67M to be paid 61% in Curaleaf subordinate voting shares, 29% in cash at closing, and 10% in assumed debt maturing in five years. Additional contingent consideration of up to $8M in stock will be paid based upon operating cash flow-based targets for 2022. This complements Curaleaf's existing Colorado presence through its Select brand.

Stability Cannabis — closes $44M series A funding round. Established in 2018 as the largest indoor cannabis cultivator in Oklahoma, Stability Cannabis now expands to a multi-state footprint as one of the largest cultivators and distributors in the American Midwest. Stability's production capacity now includes 60 acres of greenhouse and outdoor cultivation capacity, 95,000 square feet of high-tech indoor cultivation, as well as an edibles kitchen and a specialized processing lab producing products under our Perfect Ratio brand. Stability Cannabis also acquired a minority equity position a Missouri-based cultivation, processing and retail operation. The transaction remains subject to regulatory approval.

HempFusion — acquires CBD Brand Apothecanna. HempFusion Wellness, a leading health and wellness Company offering premium probiotic supplements and products containing CBD will acquire 100% interest in APCNA Holdings LLC (Apothecanna). Established in 2009, Apothecanna pioneered cannabis-powered body care and topicals, and was the first topicals brand to expand nationally and obtain a Federal Trademark. Focused on the premium recovery, pharmacy, and spa segments, Apothecanna has established itself as an industry leader in the development of innovative, all-natural CBD products.

Altmore Capital — Addresses Massive Demand For Funding In The Cannabis Industry. Altmore Capital, a leading senior debt lender, has closed its first cannabis debt fund exceeding its goal by over 200%. The new fund is available to plant-touching businesses with more than $10M in revenue. To date, Altmore Capital has invested in and led over $130M in financing in the cannabis industry and expects to complete an additional $200-$300M in the next year. Altmore loans $5-100M to successful operators in the U.S. The firm's current borrowers are both single state operators and large multi-state operators (MSOs). Altmore's cannabis fund is structured for investments in plant-touching businesses that include cultivators, manufacturers and retailers in the cannabis space. The firm looks for strategic and trusted management teams with the ability to execute strategy, and those that have ample collateral on an ongoing basis.

Oxford Cannabinoid Technologies — Begins Trading on LSE. Oxford Cannabinoid Technologies (OCT) has begun trading today on the London Stock Exchange following a capital raise of £16.5M. Casa Verde has a 2% stake in the company, 21% of the firm is owned by Kingsley Capital Partners, 11% is held by tobacco company Imperial Brands and 8% is owned by Gavin Sathianathan. The company was founded in 2017 to develop cannabinoid-based prescription medications and has a research partnership with Oxford University. John Lucas, CEO, has indicated that the company will not use naturally-derived cannabinoids, rather compounds that resemble natural cannabinoids produced synthetically. The firm said that it aims to get its first drug to market by 2027 and develop a portfolio of four drug candidates for approval. OCT estimated the “addressable pain market” is worth at least £42.5B globally.

Nabis + Jane Technologies — API Integration. Nabis, one of California's largest licensed cannabis wholesale distributors, is partnering with Jane Technologies to incorporate verified consumer reviews from Jane's industry-leading e-commerce platform into product listings on the Nabis Marketplace. Effective immediately, all Nabis Marketplace products will display corresponding Jane customer reviews. Review content includes average rating, total number of reviews and scrollable review content, enabling dispensary buyers to make more objective and informed decisions based on customers' personal experiences with cannabis products. Over the past year, Jane has powered over 18M orders and $2B in cannabis sales. Jane is the trusted e-commerce partner for over 1,800 dispensaries and brands across 34 U.S. markets and the Canadian market.

Arcadia Biosciences — acquires Lief Brands, a Portfolio of CBD and Wellness Brands. Arcadia Biosciences, Inc.® (Nasdaq: RKDA), a leader in science-based approaches to enhancing the quality and nutritional content of crops and food ingredients, acquired the assets of Lief Holdings and its portfolio of wellness products from The Parent Company, along with select assets of Live Zola. The acquisition includes leading consumer CBD brands like Soul Spring™, the top selling CBD-infused botanical therapy brand in the natural category, as well as Saavy Naturals™, a leading line of all-natural body care products. The purchase price for these assets was $4.0M in cash, plus 827,400 shares of Arcadia common stock.

Other highlights:

Aurora Cannabis — Files for $300M ATM, mentions U.S. acquisition possibility

IIP — Prices $300M Private Offering of 5.50% Senior Notes Due 2026

MedMen — $10M (one Share, $0.32 + one warrant, $0.352) Non-Brokered Private Placement to Drive Fenway and San Francisco Store Openings

IIP — acquires Michigan Property and Enters Into Long-Term Lease with Sozo

Petalfast — Closes $2.8M round, led by Merida Capital Holdings

Golden Leaf Holdings — Closes Homegrown (five dispensaries, $9.75M) acquisition

📄Earnings

TerrAscend — First Quarter 2021

Raises full year 2021 guidance for Net Sales to $300M+ and Adjusted EBITDA to $128M+
Substantial cash balance of $234M
Net Sales increased 106% to $53.4M compared to $25.9M in Q1 2020
Adjusted Gross Profit Margin increased to 65% compared to 45% in Q1 2020
Adjusted EBITDA increased more than five-fold to $22.6M compared to $3.7M in Q1 2020
Adjusted EBITDAMargin1 was 42% compared to 14% in Q1 2020
Cash Flow From Operations was $13.3M compared to a loss of $0.8M in Q1 2020

Verano — First Quarter 2021 Results

Revenue: $143M, up 117% Y/Y
Gross Margin: 62%+
Net Income: $126M, including the impact of biological assets, and $8M excluding the impact of biological assets
Adjusted EBITDA: $75M, an industry-leading 52% margin
Cash: $112M (as of 3/31/21)

AWH — Q1 2021 Financial Results

Revenue: $66.1M, up 21.8% sequentially and 192.7% Y/Y
Adjusted EBITDA: $15.8M, up 57.8% sequentially. 23.9% margin represented a 550 basis point increase compared to the fourth quarter of 2020
Net Loss: ($48.2M) which included a ($36.5M) one-time non-cash charge, as compared a net loss of ($7.1M) in the prior year quarter
Cash: $62.6M (as of 3/31/21). After the end of the quarter, AWH raised $86.4M of net proceeds from the Company's IPO

Columbia Care — First Quarter 2021 Results; Reaffirms 2021 Guidance

Combined Revenue of $92.5M, an Increase of 220% YoY

Combined Adjusted Gross Profit of $37.7M, an Increase of 316% YoY
Combined Adjusted EBITDA of $10.4M, an increase of $20M YoY

Reaffirms 2021 Combined Revenue of $500—$530M and Adjusted EBITDA Guidance of $95—$105M. Green Leaf to close early Q3.

Raised $140M, Ended Q1 with Cash Balance of $176M

The Parent Company — First Quarter 2021 Financial Results

Net sales: $39.9M, adjusting for a full quarter of sales beginning January 1, 2021, net sales would have been $45.6M
Gross profit: $7.2M (18% GM)
Adjusted EBITDA loss: ($11.4M)
Cash: $281.0M (as of March 31, 2021), $231M after accounting for Mercer Park PIPE investment

Stem Holdings (Driven By Stem) — First Quarter Results

Revenue: $12.4M, up from $2.7M Y/Y (21.8% GM)
Adjusted EBITDA: $1.7M, up from ($5.8M) Y/Y

🧔People

Cresco Labs — appoint Sidney Dillard to Board. Ms. Dillard currently serves as partner and head of corporate investment banking at Loop Capital Markets, one of the largest privately held investment banks in the U.S. Her clients have included companies in a wide range of industries, including consumer products, retail, and real estate, among others. Prior to Loop Capital Markets, she was SVP and Division Manager at The Northern Trust Bank, focusing on corporate client services and relationship development.

SLANG Worldwide — adds two new independent Directors. Sam Brill has served as the President and CIO of Seventh Avenue Investments (SAI) since August 2017, focused on direct investing in debt and equity securities of a wide range of both growth-oriented and distressed private companies. SAI is the private equity arm of a single-family office in New York City with a multibillion-dollar asset portfolio. In addition to building SAI's diversified portfolio in traditional sectors, Mr. Brill expanded the investments of the family office into the cannabis sector with a total cannabis portfolio that now exceeds $160M. Felicia Snyder was a Founding Executive at Tokyo Smoke, one of Canada's most recognized cannabis brands and a leading Canadian cannabis retailer, where she led the company through its merger with Doja Cannabis and its eventual sale to Canopy Growth. Post-acquisition, she was VP at Canopy Growth, managing Canopy's portfolio of premium cannabis brands.

🏬Retail

AWH — Launches 6,000 Sq. Ft. Flagship New Jersey Medical-Use Cannabis Dispensary in Rochelle Park. The opening marks AWH’s second Ascend location in the state and the first dispensary to operate in Rochelle Park. There are currently 13 medical-use dispensaries in New Jersey serving the state’s more than 100,000 registered medical marijuana patients. Ascend Rochelle Park dispensary is a key addition to New Jersey that will increase supply of medical cannabis products to better meet patients’ needs.

Ayr Wellness — Florida City Dispensary (35th in FL). The Company plans to have 42 stores open in Florida by the end of 2021. The Florida medical marijuana market continues to show robust growth with the Florida Office of Medical Marijuana Use reporting over 556,000 registered patients as of May 14, 2021, up 63% year-over-year.

🌱Product

Rose Delights Is Setting a New Gourmet Standard for Edibles. The OG Delights came in a Rose Hibiscus flavor, perfectly light and sweet—exactly as I imagined those treats in The Lion, The Witch and The Wardrobe would taste. But Rose Delights are known for its seasonal drops that take locally sourced ingredients and complexity of flavor to new heights. Take last winter’s Mezcal Poached Pear, crafted by Enrique Olvera and made with mezcal-poached d’anjou pears from Mt. Hood Organics, finished with the signature Chile Ancho from his restaurant, Pujol, and infused with Orange Acai flower rosin from Sonoma Hills Farm. Then there’s this release crafted by NYC pastry savant Natasha Pickowicz and made in collaboration with Gossamer: a combination of Brokaw Ranch kiwi, oro blanco grapefruit from Bernard Ranches family farm and celery from Catalan Family Farm.

7 pre-ground, ready-to-roll weed packs worth trying (Weedmaps). Old Pal Appalachia ½ oz Ready to Roll, Stone Road ½ oz Garlic Cookies Pre-Ground Pack, Baker's Cannabis ½ oz GMO Pre-Ground Cannabis, Sublime Roll Your Own Infused Sativa 1/8th, Reef Leaf Hybrid Pre-Ground Cannabis, Deli Roll Ups Sativa, Claybourne Co. Chemdawg Power Pack

CANN — Unspiked. Known for its flagship line of low dose THC enhanced beverages, CANN is now branching out of the cannabis and into the broader non-alcoholic beverage space. Unspiked contains no THC, CBD or other functional ingredients and instead focuses on refreshment with a low calorie formulation. Like CANN’s THC-enhanced beverages, these products are packaged in an 8 ounce can and come in the same three core flavors: Lemon Lavender, Grapefruit Rosemary and Blood Orange Cardamom. The formulations have between 30 and 35 calories and 6 to 12 grams of added sugar (from agave nectar) per can.

🎙️Interviews

Cannabis Investing Network x Boris Jordan

Retail investors are hugely important to the Company. Noticed it when Company IPOed in October 2018, they had 260 investors (99% institutional), by June 2019, they had 58,000+ shareholders. Have to communicate / tell the story to retail investors (and not through research reports)
U.S. is capital heavy (inefficient) vs. other countries (capital light in Europe)
Believe they can refinance current debt down (4-year note with 2-year non-call) to 7-8% (without warrants). Only top 5 Cannabis company without warrants outstanding
California — won’t ever be a 55%+ GM / 35%+ EBITDA margin market in its current state (open, highly competitive, big illicit market, high taxes). Intentionally entered CA to learn how to operate a CPG business in a low margin environment, to learn how to compete and win because that’s where they see Cannabis in 5 years
Trulieve + Harvest — essentially spent $2.1B for three States (AZ, PA, MD), while Curaleaf spent $374M to acquire a similar footprint (including Capex)

Irwin Simon's long and winding road to the top of Canada's pot industry

"If the Canadian market doesn't change and legalization happens in the U.S., the Canadian market becomes an afterthought," he said. "What I want to do is take an industry that Canada was first to get to market and make sure we don't get left behind."

White on Green A conversation with Arizona cannabis mogul Steve White

“I think they [small mom-and-pop dispensaries] always will [have a seat at the table], particularly in Arizona, the way Arizona works and the way they allocate licenses by way of a lottery. I do think that this provides an opportunity for other types of businesses other than just large ones. And I think that's what's always been great about Arizona. You have very large, sophisticated companies side by side with people who are running one store. It makes for a really unique environment. And it does make it a lot more fun.”

Built to Produce: Jonathan Sandelman on Ayr Wellness’ Cannabis Acquisitions

“Sometimes distressed assets are distressed for good reasons. … But when we did our deep dive and our diligence in the company, what we did notice is … what are the drivers, what would it take to make this an outstanding business and one of the top competitors in the state? What was clear to us as we looked carefully at this business, you can’t run a business by having flower in your store one or two days a week, because the week is actually 7 days and patients need their medicine on any one of those 7 days.”

Sandelman says that they came up with a plan to reduce crop failures and increase grams per square foot, which would help Liberty with their primary sales problems. He anticipates flower in the stores 7 days a week by July in multiple strains.

ADD and cannabis, with Max Simon (Green Flower)

“Back then a yoga studio is this big deal that it existed and now, there is literally yoga studios on every corner and so that’s the same thing I see with cannabis is I’d love to live in a world where you can have the access to cannabis in as convenient of ways as you have access to everything else that we accept in our world today and that would be a great vision to manifest because I believe that that will inherently further the health and wellness and happiness of the world in which we live in.”

💻Hiring

Dutchie — Director, Government Relations and Public Policy (Remote)

Eaze — Director, Corporate Development (SF)

Grupo Flor — Financial Controller (Salinas, CA)

Alpine IQ — Multiple positions (Accounting admin, Account specialists, Support engineer, Implementations engineers) (Remote)

Natura — General Counsel (Remote)

GABY — CFO (San Diego)

Highly Objective