Adam Jackson, Author at Green Market Report

Adam JacksonAugust 12, 2022
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7min2620

Shwazze (OTCQX: SHWZ) posted positive results on Thursday as the company expands in its quest to become a commanding regional MSO.

The Colorado-based seed-to-sale operator — formerly known as Medicine Man Technologies — delivered its second-quarter financial report card ending June 30, 2022.

Shwazze delivered approximately $44.3 million in total revenue during the period, a 44% gain versus the same period last year — right in line with the Yahoo Finance Average analyst estimate for revenues of $44.26 million.

The company said that the increase was due to rising sales of its products as well as revenue from its new retail acquisitions. Additionally, the company is finding profits in newly-recreational markets such as New Mexico since April.

Shwazze said that wholesale revenues in Colorado decreased due to “increased cultivation capacity in the state resulting in an over-supply of wholesale cannabis materials.”

The company also reported a net income of $33.8 million versus a net loss of $4.4 million in the same period last year. The gain is a reversal after losing $26.8 million in the previous quarter.

Diluted earnings per share in the fourth quarter was $0.24 cents versus diluted earnings per share of eight cents in the same period last year — above a diluted loss per share of six cents in the previous quarter, according to SEDAR filings.

“Similar to the rest of the country, the cannabis industry in Colorado is also experiencing a slowdown in growth compared to the last couple of years,” CEO Justin Dye said. “Schwazze, however, is demonstrating that our regional strategy, built on a customer-first approach, developing significant scale, building brands, and leveraging data analytics and technology is not only sound but gaining momentum as demonstrated by revenue and unit sales growth, customer loyalty and by once again outpacing the legacy market growth by approximately 12%.

We believe this model will travel well to other states as we find attractive opportunities. Despite share price weakness driven by broader market influences, we remain bullish on our business and have conviction that as Schwazze continues to deliver superior operating results that our shareholders will be rewarded.”

Shwazze is lowering its guidance for 2022 revenue, citing “challenging Colorado market conditions.” Shwazze’s new forecasted range for revenue is $175 million$200 million, far below a range of $220 and $260 in the previous quarter. Adjusted EBITDA guidance is estimated to be $60 million$72 million, down from previous quarter expectations of $70 to $82 million profit.

“During Q2 we focused on completing integration of our acquisitions and made sure that we used our resources effectively,” said CFO Nancy Huber. “We are focused on reducing operating and SG&A expenses and judiciously investing growth capital to ensure adequate liquidity and profitability despite difficult market conditions in Colorado, which we believe to be transitory and temporary. Our balance sheet remains strong, and we have ample liquidity.”

“We are focused on delivering positive cash flow net of acquisition costs for the year while driving organic growth and making smart acquisitions,” she added.

Adjusted EBITDA was $15 million in the second quarter of 2022, versus earnings of $10 million in the same period last year.

Seeing It Through

The dialogue from leadership this quarter is one a bit more optimistic than the previous.

“As we continued our successful transformation into a Regional MSO in the first quarter of 2022, we met certain challenges, including the comparison cycling of an inflated Q1 2021, which was aided by stimulus checks and COVID lockdowns,” Dye said at the time. “Colorado’s high COVID rates during Q1 2022 also impacted sales and internal staff. The devastating Marshall Fires in and around Boulder in January of this year, caused one store to temporarily close and the store has been further impacted due to a displaced population in and around Boulder County.

Also, overall sales and a decrease in wholesale revenue was largely impacted by wholesale distillate pricing pressure and over-supply in the state of Colorado.”

Dye at the time did, however, express that he remained optimistic that the company would see rising profits as its expansion efforts bore fruit in emerging state markets.

Cannabis deal tracker Viridian Capital Advisors issued a “Buy” rating at a $2.55 price target for the company in last September, calling Shwazze a “profitable and cash generating operator in Colorado with a meaningful and scaling presence in the to-date fragmented state,” wrote Director of Equity Research Jonathan DeCourcey.

“We expect MSOs to increasingly target large established markets like Colorado to support growth in the absence of interstate sales,” DeCourcey wrote. “Furthermore we expect expansion to come in the form of large scale acquisitions of companies that can be plug-and-play contributors to results in order to excite investors and boost valuations. We believe GAGE’s recent takeout by Terrascend and Harvest’s Trulieve deal highlight this theme.

In our view, Schwazze would be a solid takeout candidate for any MSO with Colorado aspirations. We believe even the perception of an acquisition is likely to drive upside in the stock from current levels.”


Adam JacksonAugust 12, 2022
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4min2770

Nova Cannabis Inc. (TSX: NOVC) posted positive results after the market close on Thursday as the company pivots toward more competitive pricing under a new discount banner.

The Canadian cannabis company released its financial report card in the period ending June 30, 2021.

Nova delivered approximately $56.3 million in total revenue during the period, a 90% gain versus the same period last year — beating the Yahoo Finance Average analyst estimate for revenues of $38.66 million.

Nova reported that second-quarter sales rose 90% to $56.3 million over last year and saw a 13% increase over the first quarter of 2022. The company attributed the sales growth to the 29 retail cannabis stores that were opened since March last year, and rising sales from stores that were re-branded to the Value Buds discount banner at various times throughout 2021.

“The performance of our Value Buds stores continues to outpace the growth of the industry as we reported record sales for the second quarter of 2022, underpinned by equally strong sales and gross margin growth that is driving greater operating leverage to the bottom line,” said CEO Marcie Kiziak.

Nova recorded a net loss of $1.4 million, versus a net loss of $7 million in the same period last year. The reduction is primarily a result of the increase in sales and gross margin over the period.

Gross margin for the period was $10.6 million, up $5.4 million or 105.0%, from $5.2 million for the same period in the prior year.  The gross margin as a percent of sales was 18.8% for the period.

During the comparative period for 2021, the stores were operated under the Nova Cannabis, YSS and Sweet Tree banners with a different operating, pricing and margin strategy than in the second quarter of 2022 when sales came primarily from the stores converted to the Value Buds discount banner.

Since then, the company revised prices at certain retail locations where the competitive response has waned which has led to increases in gross margin percentage.

Nova has an uncommitted revolving credit facility with Sundial in an aggregate principal amount not to exceed $15 million. Currently, $8.7 million in principal and accrued interest is outstanding on the credit facility.

The company currently has $6.2 million worth of cash.

Last month, Nova launched an at-the-market equity offering program, which will allow the company to issue up to $20 million of common shares from treasury to the public at the discretion of the company and subject to market conditions and regulatory requirements

“Delivering superior value to cannabis consumers will become increasingly important in the current economic environment, and Value Buds is purpose built for this,” said Kiziak. “We will stay the course by being disciplined in how we expand our footprint, remaining customer focused and choosing the best real estate for our strategy, whether through acquiring stores or building our own.”


Adam JacksonAugust 11, 2022

7min3550

Clever Leaves Holdings Inc. (NASDAQ: CLVR) slid in trading on Thursday as the missed revenue expectations — showing how softening sales and dried financing punches holes in the cannabis sector and pushes them toward opportunities abroad.

The multi-state cannabis operator reported its financial results for the first quarter ending June 30, 2022.

Clever Leaves delivered approximately $4.7 million in total revenue during the period, a gain of 27% versus the same period last year — missing the Yahoo Finance Average analyst estimate for revenues of $5.55 million.

The earnings were for a loss of three cents per share, below analysts’ loss estimates of $0.23 cents a share.

“Across our core markets, we welcomed several key developments that strengthened our overall footprint and positioning,” said CEO Andres Fajardo. “In April, the Colombian government issued Joint Resolution 539, the final regulatory piece needed to complete the country’s framework for dry flower exports. Our preparations for this expanded market opportunity are well underway, and we remain on track to begin dry flower exports in the fourth quarter of this year. We also enhanced our market pathways in Germany, where we became a fully licensed medical cannabis distributor and now have access to an expansive network of wholesalers and pharmacies across the country.

Clever Leaves reported revenues of $4.7 million for the second quarter of 2022 and is maintaining its guidance for 2022 revenue. Clever Leaves’ forecasted range for revenue is $20 million$25 million, in line with the previous quarter. Adjusted EBITDA guidance is maintained to be a loss of $20 million$23 million.

The increase was driven by “continued sales strength across the company’s non-cannabinoid and cannabinoid segments,” it said. Cannabinoid revenue increased 124% versus the same time last year, “primarily driven by Australia, Brazil, Germany, and Israel” — while non-cannabinoid revenue increased 9% compared to the same period last year.

The company also reported a second-quarter net loss of $1 million versus a net loss of $9 million in the same period last year, “driven primarily by a $6.9 million gain on investments following the company’s sale of a portion of its minority equity stake in Cansativa, as well as a $2.2 million decrease in stock-based compensation expense.”

Diluted loss per share in the fourth quarter was $0.03 versus diluted earnings per share of $0.90 cents in the same period last year.

Adjusted EBITDA was a loss of $6.3 million in the second quarter of 2022, versus a loss of $5.8 million in the same period last year, “primarily due to increased cost of sales, including increased inventory provision and additional sales and marketing expenses,” the company said.

“To further support our growth, we took significant steps to improve our balance sheet and align our expenses with our current revenue profile,” Fajardo added. “During the second quarter, we fully repaid our two largest debt obligations, which represents a near elimination of our total debt and gives us greater balance sheet flexibility for the coming quarters. In addition, we completed a global workforce reduction that is expected to yield approximately $2 million in cost savings this year and $4 million in annual cost savings thereafter. We believe these actions have meaningfully enhanced our capital efficiency and pathway to profitability.”

Clever Leaves said it had $19.5 million worth of cash and cash equivalents in the second quarter, versus $44.8 million in the previous quarter. The company expects approximately $2 million to $3 million of annual capital expenditures.

Recently, Cantor Fitzgerald analyst Pablo Zuanic — who asked about held up plans in Columbia due to a bad harvest during the earnings call — said in a new report that Clever Leaves could become one of the world’s top five cannabinoid exporters by the end of this year. The findings came a week ahead of the company’s second-quarter earnings release and half a year since CEO Andres Fajardo was tapped to lead the company out of a desperate cash burn and into new, more profitable markets overseas.

“Still, while we are positive on the company’s top-line growth outlook, profitability and cash burn are key investment risks,” the report said. “In fact, although the cost base has been rationalized, capex lowered, and debt mostly paid down, cash burn remains an issue.”

Cantor Fitzgerald assigned Clever Leaves an “Overweight” rating and a 12-month price target of $4.50. The stock was lately selling at barely over a dollar, but its 52-week high was $12.40. Zuanic wrote, “From a purely trading perspective, positive news flow about regulatory changes, especially in Colombia and Germany, could favorably impact sentiment,” as a reason the price could jump.

“As we look to the remainder of the year, we expect to drive our business forward on all fronts by further enhancing our operations and cost structure, as well as optimizing our positioning for new commercial opportunities within our target markets,” Fajardo added. “We remain committed to further executing on our refined growth strategy, with the goal of becoming a leader in the international cannabis industry and enhancing the value we create for our shareholders.”


Adam JacksonAugust 11, 2022
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8min3540

TerrAscend Corp.  (CSE: TER) (OTCQX: TRSSF) ticked up in trading on Thursday despite missing expectations on revenue, which were buoyed by New Jersey sales and an injection of sales from its recent acquisition of Gage.

The multi-state cannabis operator reported its financial results for the first quarter ending June 30, 2022.

For the key metric of revenue, TerrAscend delivered approximately $65 million in total revenue during the period, a gain of 4.8% versus the same period last year — missing the Yahoo Finance Average analyst estimate for revenues of $77.4 million.

Net revenue increased 30% sequentially to $64.8 million as compared to $49.7 million in the previous quarter, according to SEDAR filings. The company attributed the growth to a “partial quarter of adult-use sales in New Jersey along with a full quarter of contribution related to the acquisition of Gage, partially offset by the Company’s decision to discontinue non-branded wholesale sales in Michigan.”

“We grew revenue 31% sequentially for the second quarter as New Jersey adult-use sales got off to a great start,” said executive chairman Jason Wild. “Growth should continue as we remain on track for each of our stores in New Jersey to achieve at least a $40 million run rate in their first full year of adult-use sales.  Adjusted EBITDA and margins grew sequentially, and I expect this to continue into the second half of the year.  The leadership team, which has been significantly bolstered over the past few quarters, remains focused on building the business for success over the long term and we will continue to make decisions with that mindset.”

The company reported a gross margin in the second quarter of 35.5%. Adjusted gross margin was 47.1% versus 38.4% in the previous quarter, an improvement of 870 basis points quarter over quarter.

The sequential margin expansion was driven by “strong improvements across all of the company’s core businesses,” it said.  Adjusted gross margin excludes the one-time impact of reserves and write-downs related to aged inventory in Pennsylvania, it said, dating back to the revamp of its cultivation facility in the second half of last year.

The company also reported a second-quarter net income of $14.2 million versus a net loss of $23 million in the same period last year. The earnings were for a gain of five cents per share, versus earnings per share of $0.14 in the same period last year.

Adjusted EBITDA was $5.8 million in the second quarter of 2022, versus an income of $24.3 million in the same period last year. Adjusted EBITDA margin improved from 6.6% in the first quarter to 8.9% in the second quarter.

TerrAscend said that the improvement was driven by higher sales and improved gross margin, offset by higher General & Administrative expenses (G&A) expenses “with the addition of Gage for a full quarter and costs associated with the launch of adult-use in New Jersey.”

G&A expenses — excluding stock-based compensation — increased by $10 million versus the first quarter of 2022 to $29.5 million, “mainly driven by the full quarter addition of the Gage acquisition.”

“Excluding Michigan, G&A expenses were up $1.1 million quarter over quarter related to additional staffing and other pre-opening expenses in preparation for the start of adult-use sales in New Jersey. As a percentage of revenue, G&A increased to 45.5% in the second quarter from 38.7% in the previous quarter. The increase as a percentage of revenue was impacted by the addition of Gage for a full quarter as well as staffing for all three stores in New Jersey despite the delayed opening of the Lodi store, which opened subsequent to the quarter. ”

The company said it had $49 million worth of cash and cash equivalents in the second quarter, versus $88.4 million in the previous quarter. It said it possesses “ample liquidity and access to capital, mainly through its capacity for additional borrowing related to its unencumbered owned assets and minimal usage of sale-leasebacks.”

The company also said it has the ability to raise equity should the capital markets improve.

TerrAscend said it used $16.1 million worth of cash from operations due to tax payments of $9.2 million and interest payments of $6.4 million. Current income taxes payable at the end of the period was $13 million.

Capital expenditures — including deposits — were $12.3 million in the quarter, it said, primarily related to the ongoing expansion work at the company’s Maryland and Michigan cultivation and processing facilities. The company said that it also made final note payments of $5 million related to its previous acquisitions of HMS in Maryland and KCR in Pennsylvania.

As of August 11, 2022, there were 318 million basic shares outstanding including 253 million common shares, 13 million preferred shares as converted, and 52 million exchangeable shares.

New Jersey and Gage

Last year, the company signed an agreement to supply COOKIES licensed products and bring COOKIES Corners to all three Apothecarium dispensaries in New Jersey, in addition to inking a deal to acquire Gage Growth in March — and the moves have borne fruit since.

TerrAscend said that between the Cookies and Gage brands’ launches in New Jersey, the company has seen a 40% increase in sales for the first full weekend versus the prior weekend “with continued momentum and growth since launch.”

“Between our state lineup and the wide-open map that will allow us to be selective on where we go next, TerrAscend is set up for strong growth for years to come,” president and COO Ziad Ghanem said. “We will achieve that growth while improving margins and driving profitability.”


Adam JacksonAugust 11, 2022
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Aleafia Health Inc. (OTCQX: ALEAF) delivered positive results on Thursday as it continues to cut costs and find more profit in the Canadian legal market and overseas.

The Canadian cannabis company reported its financial results for the three months ending June 30, 2021. Aleafia Health releases its financial report card on a 15-month fiscal year with five quarters versus a standard 12-month year with four quarters.

Revenue from the fiscal year’s first quarter rose 41% from last year’s $11.7 million to this year’s $16.5 million. Much of the gains derived from the company’s Ontario brand Divvy climbing the market ladder in both pre-roll and flower products.

“Our pivot to a branded cannabis strategy is the success story driving the three pillars of company revenue: adult-use branded cannabis, a ‘sticky’ recurring medical cannabis revenue stream, and growing higher margin international sales,” said CEO Tricia Symmes. “As a result of revenue increases, the company has achieved the 2nd highest growth rate amongst top 12 Canadian LPs in retail sell-through over the prior quarter while achieving a #12 ranking for market share in our core markets for Q2 CY2022.”

Aleafia Health also reported that its net losses increased from last year’s $5.2 million to this year’s $4.5 million.

Non-GAAP income before interest, taxes, depreciation, amortization, and share-based compensation (Adjusted EBITDA) was a loss of $900,000 in the second quarter of 2022, versus a loss of $3.1 million in the same period last year. The company reaffirmed guidance of achieving run-rate breakeven Adjusted EBITDA in the 2023 fiscal year.

“Due to our successful branded growth strategy, the company continues to target a top 10 standing in our key markets and reaffirms our expectation to reach breakeven Adjusted EBITDA profitability during the second half of FY2023,” said CFO Matt Sale. “Showing continued success in retail sell-through provides us the confidence to reaffirm our guidance to deliver at least $53 million in total net revenue in fiscal year 2023, with a current run-rate of $48 million.”

Revenue Dissection

Aleafia Health saw $12 million in net revenue in the quarter and maintained its forecasted range of $53 million$63 million.

The company continued its upward sales growth trend, with overall branded cannabis net revenue increasing 31% to a record $10.0 million, versus $7.6 million in the same quarter the previous year.

Adult-use cannabis net revenue rose 107% to $6.7 million versus $3.2 million in the same period last year.

Medical cannabis net revenue increased 4% to $2.8 million, an uptick from the previous quarter’s figure of $2.5 million — representing an $11 million run-rate net revenue base. The company said it attained a milestone 7.5% market share in the overall Canadian medical market, according to Health Canada data.

The company also said it secured new international partnerships representing approximately $4.6 million in sales commitments.

 “International revenue is a competitive advantage and a differentiating factor for Aleafia, as we leverage our high quality, diversified flower supply and export it to the higher margin international sales markets,” Symmes said. “Current international agreements have led to more than $0.5 million in sales to Germany and Australia this quarter. We have also secured a new European partner with a $4.6 million sales commitment, representing further channel development. International success leverages both the company’s products and its brands.”

Sale agreed, adding “The newly signed agreement improves revenue and cash flow visibility, locks in attractive margins, and improves our overall cash conversion cycle and net working capital performance.”


Adam JacksonAugust 11, 2022
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Goodness Growth Holdings, Inc. (CSE: GDNS) (OTCQX: GDNSF) posted positive results on Thursday — driven by new retail store sales and new regulatory changes in nascent state markets.

The multi-state cannabis company reported financial results for its second quarter ended June 30, 2022.

Goodness Growth delivered approximately $21.1 million in total revenue during the period, a gain of 48.2% versus the same period last year — beating the Yahoo Finance Average analyst estimate for revenues of $19.62 million.

The net loss in the quarter was $6.2 million versus a net loss of $7 million in the same period last year. The company said that the change versus the prior year was driven by the improvement in operating income, offset by increased interest expenses. Operating income in the second quarter was $300,000, a gain of $3.5 million versus an operating loss of $3.2 million in the same period last year. The improvement in operating performance was driven by increased revenue and gross profit dollars, as well as a slight reduction in total operating expenses, the company said.

“Our second quarter results reflect improved margin performance driven by continued growth in our MinnesotaNew Mexico, and Maryland markets, as well as benefits from the recent wind down of operations in Arizona which we discussed last quarter,” said chairman and CEO Kyle Kingsley.

Gross profit was $10.4 million, or 49.2% of revenue, versus a gross profit of $6.9 million or 48.6% of revenue in the same quarter last year. The company said that the improvement in gross profit dollars was driven by higher production volume and increased sales, with relatively stable margin performance.

The company said it saw $10.1 million worth of total operating expenses in the second quarter, a reduction of $100,000 versus $10.2 million in the same period last year.

Goodness Growth said that total other expenses were $5.4 million during the second quarter, versus $2.9 million in the same period last year. It said that the variance in other expenses is primarily attributable to increased interest expenses related to the company’s credit facility.

EBITDA was $1.1 million during the second quarter, versus a loss of $2.4 million in the same period last year.

For adjusted EBITDA, the company posted $2.3 million in the quarter, versus a loss of $1.0 million in the prior year. Diluted loss per share in the second quarter was five cents versus diluted earnings per share of six cents in the same period last year.

“GAAP gross margin performance includes activities related to our Arizona operations, which were wound down prior to the end of the second quarter,” Kingsley added. “Excluding Arizona operations, we estimate that second-quarter pro forma gross margins would have been approximately 55.0 percent.”

The company said it had 128,111,328 equity shares issued and outstanding on an as-converted basis, and 159,619,637 shares outstanding on an as-converted, fully diluted basis.

Total current assets for Goodness Growth were $46.4 million. The company said it had $17 million worth of cash on hand, which included net proceeds received from an increase on its delayed draw loan of $13.5 million during the second quarter. The company’s current liabilities were $18.5 million.

“Strong sales growth catalysts resulting from the recent regulatory changes in Minnesota and New Mexico are expected to persist into next year, and we’re also looking forward to contributions from the launch of edibles products which occurred in Minnesota earlier this month, Kingsley said. “Finally, our expansion project in New York is progressing ahead of the launch of adult-use sales in that important market, and we continue to expect our pending transaction to be acquired by Verano Holdings Corp. will close sometime during the fourth quarter of this year.”


Adam JacksonAugust 11, 2022
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3min3810

Akerna Corp. (Nasdaq: KERN) posted less than positive results as it missed expectations — showing that mixed demand and weaker sales are rippling through the sector. The cannabis tech firm released its second-quarter financial report card ending June 30, 2022.

Akerna missed expectations with total revenues of approximately $6.1 million during the period, a 24% gain from $4.9 million for the same quarter last year — missing Yahoo Finance Average analyst estimate for revenues of $7.1 million.

“We have continued to take important steps to grow revenue, reduce costs, and position ourselves for growth in the future,” said CEO Jessica Billingsley. “While client demand has been mixed thus far in 2022, and with softer sales and bookings in particular during the second quarter throughout the sector, we believe we are on pace for a year of solid growth in 2022, compared with last year.”

Software revenue was $5.9 million, up 33% from $4.5 million in the same time last year — with $600,000 worth of software bookings this quarter.

The company saw a gross profit of $4.2 million, or 69.8% of total revenues — up 42% versus $3.0 million in the prior year.

The company also reported a second-quarter 2022 GAAP net loss of $29.6 million — including a $24.1 million impairment of certain long-lived assets — versus a net loss of $22 million sequentially and a loss of $6.1 million last year. However, the company noted that reductions announced in June are expected to generate material cost savings in the second half of 2022.

Diluted loss per share in the fourth quarter was $0.83 cents versus diluted earnings per share of $0.12 cents in the same period last year.

“On the cost side, we’re pleased with our gross margin improvement over last year at 69%, and the expense reduction program across the board that we announced in Q2 should enable more material improvements going forward, beginning with our Q3 results,” Billingsley said.

Despite taking cost-reduction steps, the company said average new business deals decreased by 9% year-over-year.

Adjusted EBITDA was a loss of $2.1 million in the second quarter — down 22% from a loss of $2.3 in the previous quarter — versus a loss of $1.6 in the same period last year.

The company said it had $14.1 million in cash and restricted cash as of July 5, 2022 — following the closing of a $10 million financing via S-1 filed/effective on June 29, 2022. It said it would continue to “pursue strategic alternatives to optimize the capital structure and strengthen the balance sheet.”


Adam JacksonAugust 11, 2022
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As talks revolving around the federal legalization of cannabis splinter in Congress, the question of whether the nascent industry can eat beverage alcohol’s margins remains a growing one.

In a report, titled, “Is Cannabis a Threat to Alcohol Sales?” BDSA Consumer Insights contends that while the crop is as popular as ever, any real breakthrough of consumer participation in adult-use and medical markets remains stymied in D.C. – casualties of political animosity and procedural acrobatics aimed at slowing progress.

Consumption Is High

“In just a few short years, attitudes towards cannabis across the country have shifted rapidly, with the share of those who have “bought-in” to cannabis consumption skyrocketing while fewer and fewer report not being open to consuming cannabis,” the report said.

BDS Analytics data showed that this past Spring, 51% of Americans in adult-use states claim to have consumed cannabis in the past six months, up 15% from Spring 2020. At the same time, the share who claim to be rejecters (non-consumers who are not open to consuming in the future) fell from 31% in Spring 2020 to just 23% in Spring 2022.

Overall consumer participation is lower in medical markets, yet BDS Analytics data suggest that consumer participation is growing at a similar rate.

The share of those who report past six-month consumption ballooned from just 26% to 41% between Spring 2020 and Spring 2022 – as the share of rejecters fell from 34% to 28% over that same period.

These realities have left many companies considering what they can learn from the alcohol industry — or how they can partner — as it continues to languish within its own prohibition.

“When we look deeper into the data, we see a cannabis consumer base that is knowledgeable, open to trying new product formats, and willing to experiment with incorporating cannabis consumption into more occasions throughout their lives,” the report said.

Stacking up to Big Alc

While consumer usage rates are starting to near beverage alcohol levels, experts generally agree that significant cannibalization of alcohol by cannabis would likely only occur over the course of at least another generation.

“While the trend toward alcohol’s displacement by cannabis is a durable one, especially among young adults, it is likely going to be a generational one, rather than one manifested in the next few years,” BDS Analytics Andy Seeger said. “Furthermore, it is expected that growing social acceptance will both increase substitutability and strengthen public preferences for cannabis over alcohol, though not completely dissuade cannabis consumers from drinking.”

Together, U.S. legal and illicit sales have been estimated to be $97 billion in 2021 – edging out against $87 million in spirit sales. Demand for cannabis in the U.S. now exceeds what the nation annually spends on spirits – and roughly matching what it spends on beer – according to a report by New Frontier Data.

Two-thirds of cannabis consumers surveyed by New Frontier said that they drink alcohol at least once per month, but 61% say that given a choice, they prefer cannabis.

Additionally, one-third of respondents said that they would like to quit drinking alcohol altogether, “though it is likely that the significant difference in social acceptability between alcohol and cannabis makes it more difficult to stop drinking entirely,” New Frontier wrote.

In another study, Colorado households – compared to all other states that did not legalize recreational cannabis – showed a 13% average monthly decrease in purchases of all alcoholic products combined and a 6% decrease in wine, according to a July 2021 report published in the Journal of Cannabis Research.

However, complicating the idea that cannabis will hurt alcohol sales, researchers’ findings showed that Washington saw an increase in spirits purchased while Oregon showed a significant decrease in monthly spirits purchased when compared to all other states without legalized recreational cannabis.

The conclusion was that the results “suggest that alcohol and cannabis are not clearly substituted nor complements to one another.”

“Future studies should examine additional states as more time passes and more post-legalization data becomes available, use cannabis purchase data and consider additional methods for control selection in quasi-experimental studies,” it said.

Shifting the culture (through regulatory action)

While the nature of cannabis consumption typically resides within the home, finding margins outside of those living spaces has been an ongoing challenge that has frustrated entrepreneurs in the space.

Those who consume are consuming more often as consumers are pairing cannabis with alcohol and a variety of activities, BDS Analytics said in its report – though the lack of a three-tier system and on-premise regulation prevents cannabis companies from creating social hubs with experiences tied to their product.

“There is very, very little on-premise spending right now, which does add the margin,” Seeger said. “And that’s one of the things that the market, in general, is fighting right now – is a way to find margin. Those kinds of occasions would do that. That’s certainly what we see in beverage alcohol.”

According to BDS Analytics, the share of consumers in adult-use markets who report pairing cannabis with spirits or liquor rose from 12% in Spring 2018 to 22% in Spring 2022, while the share who report cannabis with cocktails doubled to a total of 20% in Spring 2022.

Pairing Up

Additionally, BDS Analytics found that consumers are increasingly pairing cannabis with activities not typically associated with cannabis.

The share of consumers in adult-use markets claiming that they pair cannabis with fine dining rose from 14% in Spring 2020 to 25% in Spring 2022, while the share of those who report using cannabis while exercising rose from 18% in Spring 2020 to 26% in Spring 2022.

“While these increases may not seem shocking to savvy industry insiders, they demonstrate that the use occasions for cannabis are incredibly varied,” the report said. “They also show opportunity for brands that can produce product with form factors and targeted formulations that speak to these varied need states and use occasions.”

Innovations in rapid-onset technology help push cannabis-infused, non-alcoholic beverage products to create a standard beverage serving of Delta-9 THC, such as Keith Villa’s non-alcoholic, cannabis-infused, Belgian-style ale — Ceria Brewing Co. — which sold out in Colorado dispensaries four hours after it’s release; or corona importer Constellation Brands multi-billion dollar investments in Canopy Growth.

Alcohol Meets Cannabis

More recently, distributing partnerships between cannabis companies and the alcohol industry are sprouting.

Fresh Hemp Foods, a part of Tilray’s Wellness (NASDAQ: TLRY) division, signed a distribution agreement on Wednesday with Southern Glazer’s Wine & Spirits — one of the nation’s largest distributors of wine and spirits.

The pact will provide Tilray Wellness with direct access to the alcohol distributor’s network, “reaching consumers everywhere from local bars and restaurants to independent and national grocery chains and convenience stores.”

“This agreement helps Tilray uniquely position itself to enter the multi-billion-dollar adult beverage category with a non-alcoholic, CBD beverage alternative, for consumers who want to relax and unwind,” said Tilray Wellness and Fresh Hemp Foods president Jared Simon.

The agreement allows Tilray to develop a U.S. CBD beverage portfolio within retail channels, “which will transition the category out of the fringe and into the mainstream,” the company said.

“Cannatourism” and the brewery model

Currently, marketing cannabis products toward specific experiential outcomes are limited without a legal framework.

Despite that, the industry has found creative ways to circumvent some of these limitations — even finding parallels with the brewery model.

Operators can establish deeper relationships with customers as people travel to and within states where cannabis is legal to visit the farms where the product is grown, similar to visiting wineries — also known as “cannatourism”.

“It’s a really big opportunity for states that have legalized cannabis to capitalize on that, not just for their own residents but also for tourists that might travel particularly for that,” said Christina Sava, an attorney at Troutman Pepper.

Other services help people find “Bud and Breakfast” spots — onsite consumption lounges in adult-use states such as a 420-friendly bed and breakfast type hotel.

“We kind of take it for granted that you can consume alcohol in entertainment venues and at bars and at restaurants,” Sava said, “but there really aren’t that many sanctioned spaces outside the home to try cannabis and share cannabis with your friends. I think this is an area that is ripe for evolution and will continue to grow.”


Adam JacksonAugust 10, 2022
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Zynerba Pharmaceuticals, Inc. (Nasdaq: ZYNE) posted positive results as the company continues to further its research and development goals — with signs of a FDA approval looming in the distance. The cannabis biotech company reported financial results for the second quarter ending June 30, 2021,

Research and development expenses were $5.4 million for the second quarter of 2022, the company said, including stock-based compensation of $0.5 million. General and administrative expenses were $3.7 million in the second quarter this year, including stock-based compensation expense of $0.6 million. As an emerging biotech company, Zynerba does not have revenue at this time as it develops drugs.

The company said that it has continued to focus resources toward developing treatment for two orphan neuropsychiatric disorders, Fragile X syndrome and 22q Deletion Syndrome.

“During the second quarter, we were pleased to announce positive top-line results from our Phase 2 trial of Zygel in patients with 22q,” said CEO Armando Anido. “In addition to further progressing 22q, we are focused on completing the Phase 3 RECONNECT trial for children and adolescents with Fragile X syndrome, with top-line results expected in the second half of 2023.”

With a cash runway extending past expected availability of top-line results from our RECONNECT trial, we remain well-positioned on achieving our goal of bringing the first pharmaceutical product indicated for the treatment of behavioral symptoms of Fragile X syndrome to market.”

This echoes Zynerba’s belief that the results from RECONNECT, if positive, will be sufficient to support the submission of a New Drug Application (NDA) for Zygel in patients with Fragile X syndrome.

The company also said it plans to meet with the U.S. Food and Drug Administration (FDA) to discuss the data and the regulatory path forward for its open label Phase 2 INSPIRE trial of Zygel in children and adolescents with 22q Deletion Syndrome — also called DiGeorge syndrome, a chromosomal disorder with no known cure that results in poor development of several body systems.

The company said it plans to move forward in 22q as an orphan indication and has previously received orphan drug designation from the FDA for cannabidiol, the active ingredient in Zygel, for the treatment of 22q.

While data from the company’s ASD clinical development program to date are compelling, given the difficult financing market, the company has deferred the start of the Phase 3 development program in ASD as it has prioritized its resources on FXS and 22q in the near term.

Net loss for the second quarter of 2022 was $9.9 million, with basic and diluted loss per share of $0.24 cents. Cash and cash equivalents were $62.5 million, versus $67.8 million as of December 31, 2021.

In May, the company entered into a Controlled Equity Offering Sales Agreement — with Cantor Fitzgerald & Co., Canaccord Genuity, LLC, H.C. Wainwright & Co. LLC and Ladenburg Thalmann & Co. Inc. as sales agents — in which the company may sell, from time to time, up to $75 million of its common stock.

Zynerba then sold and issued 488,892 shares of its common stock in the second quarter under the agreement in the open market — resulting in gross proceeds of $0.9 million and net proceeds of $0.8 million, after deducting commissions and offering expenses.

After that, from July 1, 2022 through August 8, 2022, the company sold and issued 1,469,714 shares of its common stock under the agreement in the open market resulting in gross proceeds of $1.8 million, and net proceeds of $1.6 after deducting commissions and offering expenses.

Zynerba also struck an equity purchase deal last month for up to $20 million with Chicago-based firm Lincoln Park Capital Fund (LPC).

Lincoln Park Capital is expected to provide financial flexibility and is aligned with Zynerba’s long-term strategy for value creation, the company said.

Zynerba said it plans to use any net proceeds from the sale of its common stock to LPC for working capital and general corporate purposes, including research and development expenses and capital expenditures.

Management believes that the Company’s cash and cash equivalents are sufficient to fund operations and capital requirements through the end of 2023 or into early 2024, after the expected availability of top-line results from its confirmatory pivotal Phase 3 RECONNECT trial of Zygel in patients with FXS.


Adam JacksonAugust 10, 2022
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Cannabis REIT NewLake Capital Partners, Inc. (OCTQX: NLCP) posted positive results on Wednesday as it continues to inject capital into the cannabis real estate landscape. The real estate trust released results for the second quarter ending June 30, 2022.

NewLake met expectations as it delivered total revenues of approximately $10.5 million during the period, a 59% gain from $6.7 million for the same quarter last year — eking out past Yahoo Finance Average analyst estimate for revenues of $10.2 million.

“We continue to be pleased with our AFFO growth, which has allowed us to increase our dividend for the fifth consecutive quarter,” newly-minted CEO Anthony Coniglio said. “While our pipeline is as robust as we have seen in our company history, we remain disciplined in our underwriting approach and focus on quality over quantity.”

NewLake posted net income of $3.8 million for the quarter at $0.18 per diluted share, versus $2.7 million in the previous year’s second quarter. The company also posted an AFFO of $8.7 million, or $0.41 cents a share, versus $4.8 million in the same quarter last year.

The company said that net income and FFO were impacted by one-time severance costs of $1.6 million in connection with certain executive separation agreements. Such agreements were contemplated as part of the succession plan at the time of the company merger in March last year, it said.

NewLake posted a FFO of $6.5 million or $0.31 per basic and $0.30 per diluted share. The company said it had cash and cash equivalents of $49.6 million. Around $12.2 million was committed to funding tenant improvements.

The company also paid a quarterly dividend of $0.35 per common share on July 15 to stockholders — versus two cents per common share in the prior quarter — equal to an annualized dividend of $1.40 per share.

Rental income for the second quarter increased by $2.9 million from the prior year to total $9.6 million. The increase in rental revenue was due to the acquisition of several properties — around 23 — over the past two years, in addition to $20,000 from raising rent.

In April, NewLake said it signed a $34 million aggregate three-part commitment for a cultivation property in Missouri consisting of $7.3 million to purchase a 40,000 square foot cultivation facility, a commitment to fund additional $5.2 million to finish construction, $16.5 million to expand the facility by purchasing an adjacent parcel of land and fund construction and an interest-only four-year $5 million loan that can be drawn over the next year.

Once fully built, the combined property will be a state-of-the-art 105,000 square foot cultivation facility.

NewLake also entered into a revolving credit facility in May with a $30.0 million initial commitment, which was expanded to $90.0 million in July, maturing in May, 2027 with a fixed interest rate of 5.65% for the first three years and a floating rate thereafter.

“Subsequent to the quarter, we successfully increased our credit facility from $30 million to $90 million, which will allow us to continue investing in high quality assets,” said Coniglio. “We believe our ability to consistently evaluate high quality transactions with the best operators in the space and have access to capital from banking partners that believe in our ability to execute is a testament to our team, model and disciplined approach.”

Last month, NewLake said it had acquired two properties from a leading publicly-traded U.S. multi-state cannabis operator (MSO) for $28 million and amended its existing lease with another leading publicly-traded U.S. MSO to fund an already completed expansion.

The two properties NewLake acquired include an approximately 38,000 square-foot operational cultivation facility in Pennsylvania for $14.5 million and an approximately 56,500 square-foot operational cultivation facility in Nevada, a new market for NewLake, for $13.6 million.

NewLake’s stock was trading at $17.48 in pre-trading Thursday morning, a slight uptick from $16.75 in the previous day.


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