Cannabis Industry Daily News

Marijuana ancillary firm Greenlane raises $32 million in equity

Greenlane Holdings, a Florida-based ancillary marijuana company, said it entered into definitive agreements with institutional investors to raise $32 million from the sale of stock and warrants.

A company news release didn’t specify how the money would be used, but Greenlane has said in previous regulatory filings that proceeds will be used for working capital and to fund acquisitions.

Greenlane in March announced an all-stock agreement to acquire California-based KushCo Holdings, with plans for the combined company to sell vaporizers, rolling papers, child-resistant packaging and other cannabis-related supplies.

The stock and warrant sale, which is expected to close Aug. 11, includes:

  • The sale of 10.1 million shares plus warrants giving the buyers the right to purchase up to 6.1 million shares of stock.
  • The effective purchase price of the stock and warrants is $3.16 per share, according to the release.
  • The warrants have an exercise price of $3.55 per share, can be exercised immediately and have a term of five years.

Greenlane shares, which trade on the Nasdaq as GNLN, were down 7% to $2.85 as of midday Monday.

Cannabis platform Leafly goes public with $385M valuation via SPAC merger

Leafly, an online cannabis guide and news website based in Seattle, plans to go public via a merger with Merida Capital Holdings, a special purpose acquisition company (SPAC) in New York.

At closing, the combined company is expected to be valued at roughly $385 million with equity value of approximately $532 million, according to a news release.

Existing Leafly shareholders are expected to own approximately 72% of the combined company.

The deal will give Leafly up to $161.5 million to expand its business in states that recently legalized marijuana, including New York, according to Reuters.

Merida, a so-called blank-check company, will adopt the Leafly name, and the combined company’s common stock is expected to be listed on the Nasdaq under the ticker symbol LFLY, according to the release.

Options for raising capital are limited in the cannabis industry, so SPACs have gained popularity as a viable alternative to more traditional funding methods.

Leafly offers a subscription-based platform for more than 7,800 brands and 4,600 paying retail subscribers, the release noted. Approximately 55% of North American retail cannabis licensees use the company’s services.

“With this transaction, we are looking forward to … creating more personalized consumer experiences, driving more value to our retail partners, amplifying brands on our platform and further scaling our presence in local markets as legalization continues,” Leafly CEO Yoko Miyashita said in the release.

Pure Sunfarms posts quarterly profit on surging marijuana revenue

Licensed cannabis producer Pure Sunfarms reported a significant jump in adult-use marijuana revenue for the three months ended June 30, further separating itself from most of its large-scale competitors with consistent sales growth, analysts said.

British Columbia-based Pure Sunfarms, a subsidiary of Village Farms International, booked net sales of $24.8 million (31.2 million Canadian dollars) for the second quarter, a 42% increase over the previous quarter’s sales of $17.5 million.

The quarterly revenue was roughly 160% higher than the same period one year earlier.

Pure Sunfarms’ net income for the quarter was $3.2 million, compared with a loss of $2.8 million for the three months ended March 31, 2021.

Adjusted EBITDA, a measure of profitability, for the second quarter was $7.4 million, a nearly 200% increase over the first quarter’s $2.5 million. The increase was driven by higher sales, gross margin and operating profit, according to the company.

“Many provinces began their COVID-19 re-opening plans as COVID-19 pressures began subsiding and capacity restrictions decreased, particularly in Ontario, which helped spur demand in the latter half of Q2 2021,” the company said in a regulatory filing.

In a note to clients, Andrew Partheniou, a GMP analyst with St. Louis-based investment banking firm Stifel, said Village Farms continues to outperform in the Canadian cannabis industry “with its fourth consecutive quarter of 20+% sequential (recreational) sales growth, setting itself apart from its peers, as it takes share in the (recreational) market and does so profitably.”

The increase in net sales from the first to the second quarter was helped by a 22% increase in Pure Sunfarms-branded sales and a 121% increase in unbranded sales.

The company attributed the increase in unbranded sales to its ability to fulfil demand from other licensed producers in the wholesale market for high-potency flower and trim.

Pure Sunfarms sells adult-use cannabis in five Canadian provinces: British Columbia, Ontario, Alberta, Saskatchewan and Manitoba.

Village Farms entered the U.S. hemp market in early 2019 by establishing the joint venture Village Fields Hemp USA for multistate outdoor hemp cultivation and cannabidiol extraction.

However, the company reported no hemp sales for the three months ended June 30, 2021.

The hemp business lost $86,000 in the second quarter.

Overseas, Village Farms sees “significant long-term potential” in nascent cannabis and CBD opportunities in the Asia-Pacific region.

Earlier this year, Village Farms increased its investment in Australia-based CBD platform Altum International Pty to just under 12%, representing “a capital efficient means for Village Farms to participate in opportunities in this region,” the company said in the same filing.

Cannabis is one of three revenue segments reported by Village Farms. The others are vegetable and energy production.

Besides cannabis, Village Farms reported $45.5 million in produce sales and $74,000 in energy sales.

Village Farms’ net loss for the second quarter was $4.5 million for all of its segments.

Shares of Village Farms International are traded as VFF on the Nasdaq and Toronto Stock Exchange, respectively.

Former owners of Curaleaf subsidiary to pay $500K to settle cannabis lawsuit

(This story has been updated with a statement from Curaleaf.) 

The former owners of Oregon-based Cura Cannabis, one of the subsidiaries now owned by Massachusetts-based multistate operator Curaleaf, agreed this week to pay more than $500,000 to settle a class action lawsuit over mislabeled marijuana vape cartridges.

According to The Oregonian, the settlement stems from a case last year in which state regulators concluded that the Portland company had mislabeled 186,000 vape cartridges under its Select brand as 100% marijuana when in fact employees had cut the cannabis oil with additives.

The business has already paid $110,000 to the state in penalties for the incident.

An attorney for Cura did not respond to a request for comment by The Oregonian on Friday.

But in a statement emailed to MJBizDaily on Monday, Curaleaf said: “This is a disputed claim that originated from activity prior to Curaleaf’s acquisition of Cura Partners, as has been previously reported, and the settlement will be paid for entirely by the former shareholders of Cura Partners.”

After the incident last year, Cura Cannabis – which also does business as Cura Partners – finalized an all-stock acquisition deal by Curaleaf, which was originally announced in 2019 and valued at nearly $1 billion.

At the time of the sale in 2020, Cura was Oregon’s “largest marijuana company,” The Oregonian reported.

Cura also settled a separate lawsuit in July with a California investing consultant, Arcadia Capital, which claimed in a court filing that it was owed a portion of the acquisition deal price. The two sides reached an out-of-court settlement, and the terms were not disclosed.

Curaleaf trades on the Canadian Securities Exchange under the ticker symbol CURA and on the over-the-counter markets as CURLF.

Connecticut prioritizes residents of 35 cities, towns for marijuana licenses

As part of an effort to make the cannabis industry more equitable, people living in 35 Connecticut cities and towns will receive priority for recreational marijuana business licenses, state officials announced.

The Hartford Courant reported that more than 200 of the state’s 833 census tracts fall under the social equity definition of disproportionately impacted by drug prohibition, based on drug conviction and unemployment rates.

In June, Gov. Ned Lamont signed into law the state’s adult-use legalization legislation, Senate Bill 1201. Language in the legislation says residents of those areas will pay less for licenses.

Half of all cannabis business licenses must go to applicants from those areas.

The newspaper also reported that a few of the designated areas are neighborhoods in towns with smaller Hispanic and Black populations.

Sales are expected to begin as early as May 2022, and MJBizDaily estimates the state will reach $700 million in sales within the program’s first few years.

Native American tribe in North Carolina legalizes medical cannabis

The Eastern Band of Cherokee Indians legalized its own medical marijuana market this week, likely providing the first foothold for the cannabis industry in the state of North Carolina.

According to The Charlotte Observer, the tribe said its decision, announced Thursday, reflects the growing recognition that cannabis has medicinal value.

But details of how exactly the Cherokee medical marijuana market will function were not immediately available, the newspaper reported, including information on:

  • How the industry will be structured.
  • What medical ailments will qualify patients to purchase MMJ.
  • Whether the medicine will be sold to patients who aren’t members of the tribe.

“Passing this ordinance is just the first step, but we are excited to begin building this program,” Principal Chief Richard Sneed told The Charlotte Observer.

The tribe’s Cannabis Control Board will handle business licensing for the program as well as patient certification.

The program also marks the latest Native American move into the industry.

Other tribes in various states across the country have been running marijuana companies for years, particularly in markets that have their own functional medical or recreational cannabis markets.

Attempts at legalizing MMJ through the North Carolina Legislature have thus far been met with defeat, but another measure to do so is still alive in a legislative committee as of Aug. 5, The Charlotte Observer reported.

Marijuana firm Canopy Growth posts CA$136M in net revenue for fiscal Q1

Canadian marijuana producer Canopy Growth Corp. reported net revenue of 136.2 million Canadian dollars ($108.4 million) for the first quarter of its 2022 fiscal year, an 8.2% decline from the CA$148.4 million reported in the fourth quarter of 2021.

However, the latest quarterly net revenue total is up 23.4% growth versus the same quarter last year.

The results come as Canopy’s CEO signaled the company would strike additional deals in the United States to position the producer to enter the American THC market if and when the federal government legalizes marijuana.

Canopy Chief Financial Officer Mike Lee characterized quarterly revenue as “softer than expected” on a Thursday earnings call.

Adjusted EBITDA, a nonstandard measure of profitability, was negative CA$63.6 million, an improvement over the previous quarter’s adjusted EBITDA loss of CA$94 million.

Canopy management has committed to achieving positive adjusted EBITDA by the end of this fiscal year.

The company’s first-quarter net income was CA$390 million, which was mostly attributable to a noncash fair-value change worth CA$601 million in Canopy’s “other income” category, according to a Friday news release.

The company’s net-income performance was up sharply from a loss of CA$128.3 million recorded in the same quarter a year earlier.

On the earnings call, Canopy CEO David Klein said he “(remains) really bullish on U.S. THC permissibility, but even without permissibility, we’re doing things today that allow us to be real significant players in the U.S. THC market post-permissibility.”

Klein added that Canopy was “not finished” with U.S.-focused transactions such as deals with Acreage Holdings and TerrAscend.

“We’re going to continue to do that sort of activity between now and the time we get to permissibility,” Klein said.

The Smiths Falls, Ontario-based company claimed to have the highest recreational cannabis market share in unspecified Canadian provinces, relying on an “internal proprietary market share tool.”

Canopy’s $136.2 million in quarterly net revenue comprised:

  • CA$60 million from Canadian recreational cannabis.
  • CA$13.5 million from Canadian medical cannabis.
  • CA$19.4 million from international medical cannabis and hemp-derived CBD.
  • CA$43.3 million from consumer products, including Storz & Bickel, This Works and BioSteel.

Canopy’s cash and short-term investments were valued at CA$2.1 billion as of June 30.

Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq exchange.

Push begins to put medical cannabis on Wyoming ballot in 2022

Members of the national and local Libertarian Party are teaming up with Wyoming activists to get a medical cannabis legalization initiative on the state ballot next year.

According to the Casper Star-Tribune, the campaign – which doesn’t yet have a formal name – got the go-ahead this week from the Wyoming secretary of state to begin the signature-gathering process.

In addition to the Wyoming Cannabis Patient Act of 2022 – which would legalize medical marijuana – backers are also trying to get adult-use MJ decriminalized with a second ballot initiative, titled the Wyoming Cannabis Amendments 2022.

The group has 30 days, starting Aug. 2, to collect and remit the first 100 signatures to the secretary of state’s office in order to prove additional support for the initiatives. A campaign spokesperson told the Star Tribune that goal could be reached by Friday.

After that, the campaign must gather at least 41,776 signatures of registered Wyoming voters for each of the two initiatives to be placed on the 2022 ballot.

A University of Wyoming survey in December found that 85% of voters support MMJ legalization and more than half back full legalization, the Star-Tribune reported.

Campaigns are also underway in Arkansas and Missouri to legalize recreational marijuana next year, and another is expected in Nebraska.

There are also bills in the Mississippi and Ohio legislatures to legalize medical and adult-use marijuana, respectively.

Lawsuits pile up over Illinois social equity marijuana licensing

No surprise here: The do-over of social equity marijuana business licensing in Illinois is sparking litigation.

But these lawsuits point to specific alleged scoring errors, rather than challenging the entire process, so it looks unlikely at this point that the claims will derail additional licensing rounds later this month.

According to Law360, High Haven Dispensary claims in a lawsuit filed in a state court late last week that state regulators deprived it of the social equity points it deserved based on the background of two of its owners.

One owner lives in a designated disadvantaged area, according to the report, while the other was arrested in 2008 for possession of drug paraphernalia.

Together, the owners reach the 51% threshold for social equity ownership, according to the complaint.

But High Haven claims the scorers instead came to the “absurd result” of giving them zero points in the category without providing a reason for doing so.

The company, which wants to be included in a licensing round later this month, said in its complaint that it has invested nearly $500,000 in the process, Law360 reported.

Also last week, three other applicants sued the state in federal court, claiming they were wrongfully excluded from a recreational marijuana retail licensing round.

Meanwhile, after a yearlong delay, Illinois awarded 55 adult-use retail licenses in July, with another 130 to be awarded via two lotteries this month.

Hawthorne reaches deal to acquire cannabis firm HydroLogic

Hawthorne Gardening Co., which is increasingly making inroads in the cannabis cultivation-supply sector, said it entered an agreement to acquire HydroLogic Purification Systems, a California-headquartered provider of water filtration systems for cannabis growers.

According to a news release, the two companies are aiming to have the acquisition completed by Aug. 27, after which New York-based Hawthorne will be the exclusive provider of HydroLogic products.

Terms of the deal were not disclosed, but a Hawthorne spokesperson told MJBizDaily that the company expects HydroLogic to add $20 million in annual sales to its revenue streams.

Hawthorne is a division of Ohio-based Scotts Miracle-Gro, which has been steadily expanding its cannabis industry footprint its traditional agricultural roots.

Marijuana SPAC Greenrose secures up to $103 million from Canadian firm

Marijuana industry special purpose acquisition company (SPAC) Greenrose Acquisition Corp. said it has reached agreements for up to $103 million in funding from SunStream Bancorp.

“SunStream’s investment comprises $78 million in a multi-tranche senior secured loan facility and $25 million in unsecured convertible notes,” Amityville, New York-based Greenrose said in a Thursday news release.

Alberta-based SunStream is a joint venture between two Canadian businesses, cannabis company Sundial Growers and Canadian investment management firm SAF Group.

The new financing is expected to leave Greenrose with as much as $276 million “to fund its growth strategy,” the company said.

Greenrose might also raise more capital via a private placement of unsecured convertible notes and common shares, the company added.

In March, Greenrose announced a $210 million deal to acquire four marijuana companies operating in multiple states, after which it will be renamed The Greenrose Holding Co.

“The closing of the SunStream financing is expected to occur simultaneously with Greenrose’s anticipated closing of its de-SPAC business combination,” Greenrose noted.

Greenrose recently delisted from the Nasdaq Capital Market, relisting its shares on over-the-counter markets as GNRS.

Cannabis REIT acquires Illinois property for $50.25M; 4Front to operate

Innovative Industrial Properties (IIP) closed on its acquisition of a property in Illinois, valued at $50.25 million, and entered into a long-term lease with a subsidiary of 4Front Ventures to run the business.

According to a news release, the San Diego-based real estate investment trust (REIT) bought the property for $6.5 million and plans to build about 250,000 square feet of industrial space at the property.

IIP agreed to reimburse the construction costs up to $43.75 million, and assuming full reimbursement, the company’s total investment in the property is expected to be $50.25 million.

Arizona-based multistate marijuana operator 4Front is planning to operate a licensed cannabis cultivation and processing facility on the property.

IIP also completed sale-leaseback deals with 4Front for cannabis cultivation and production facilities in Massachusetts and Washington state.

Including the Illinois deal, IIP’s total investment in properties leased to 4Front is expected to total $83.25 million and 431,000 square feet.