Editor-in-Chief

Debra BorchardtDebra BorchardtMarch 1, 2021
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6min430

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) didn’t completely sell its New York operations to privately held Ascend Wellness, but it’s pretty close. Last week, beleaguered California-based cannabis operator MedMen signed an agreement with Ascend Wellness Holdings, where Ascend would make an investment of approximately $73 million in MedMen NY Inc. or MMNY. MedMen’s shares jumped over 14% in trading on Friday to lately sell at 48 cents.

Following the investment, Ascend will hold a controlling interest in MMNY of approximately 86.7% and will have an option to buy MedMen’s remaining interest in MMNY in the future. Also in the agreement, Ascend must also make an additional investment of $10 million in exchange for additional equity in MMNY. This investment will also be used to repay MMNY’s senior secured lender if adult-use cannabis sales commence in MMNY’s dispensaries.

“We believe the proposed transaction will bring fresh capital and a new perspective to New York’s medical marijuana program and its patients,” said Abner Kurtin, Founder of Ascend Wellness. Ascend Wellness is a vertically integrated operator with assets and partners in Illinois, Michigan, Ohio, Massachusetts and New Jersey. Ascend produces and distributes Ozone branded products.

Of course, all of this is subject to approval from the New York State Department of Health and other applicable regulatory bodies. The state did not approve of MedMen’s attempt to acquire PharmaCann’s operations in New York back in the day, so nothing is ever certain. That deal was scrapped back in 2019. MMNY will also use Ascend’s services for a management agreement under which Ascend will advise on MMNY’s operations pending regulatory approval of the Investment transaction.

Agreement Terms

The details of the deal say that MMNY will assume up to approximately $73 million of MedMen’s existing secured debt, Ascend will invest $35 million in cash in MMNY, and AWH New York, LLC will issue a senior secured promissory note in favor of MMNY’s senior secured lender in the principal amount of $28 million, guaranteed by Ascend, which cash investment and note will be used to reduce the amounts owed to MMNY’s senior secured lender. 

Cowen & Co. Drops Coverage

Cowen & Co. discontinued coverage of MedMen in December of 2020. In her last report, Vivien Azer wrote, “MMEN delivered $20.7 mm in revenue from its 11operating CA stores, up ~34% QoQ and implying ~$1.9 mm per door in the quarter (implying$7.5 mm per door annualized), which we believe is roughly in line with management targets for CA store sales productivity. Meanwhile, NV sales were up triple digits sequentially(192%) due to the cycling of temporary store closures in the prior quarter. MMEN’s OakPark door in IL was the highest growing of the portfolio and we estimate this door could achieve ~$15 mm in revenue annualized.”

She added, “Despite the improvement, MMEN’s cost structure is still bloated and a heavy debt burden may force management to seek dilutive solutions.” 


Debra BorchardtDebra BorchardtMarch 1, 2021
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6min810

The cannabis community is certainly pleased to see that the state of Virginia has legalized adult-use cannabis, but it will be some time before sales can begin. Still, despite support for the legislation it looked to be a nail-biter to the end. The Virginia House and Senate lawmakers were in agreement on passing the law, but they differed on just exactly what it would look like.

The two sides have been working over the past few weeks to reach a compromise, which was beginning to look less possible. Then on Saturday, it seemed the law just managed to squeak through. Marijuana Moment reported, “The Senate voted 20-19 to approve the conference committee report on its bill as well as the identical version for the House legislation. The House voted to approve the conference report on its bill, 48-43, with two abstentions. When considering the Senate version, the House voted 47-44, with one abstention.”

The next stop for the legislation goes to Democratic Gov. Ralph Northam, who supports legalization. However, it will be some time before Virginians will actually be able to purchase adult-use cannabis in the state.

Sales Begin January 1, 2024

Another major area of contention dealt with how the state would approach cannabis possession in the time between the bill’s signing and implementation of legal sales going into effect. Under both versions, the adult-use market wouldn’t launch until January 1, 2024 to give the state time to establish a regulatory agency to oversee the program. While the Senate had wanted to make the legalization of simple possession and home cultivation take effect starting on July 1 of this year, negotiators ultimately agreed to delay it to coincide with commercialization in 2024.”

One company that was intently focused on the outcome of this legislature was Jushi Holdings (OTC: JUSHF). In the fall of 2020, Jushi, through its 100% owned Virginia-based pharmaceutical process permit holder, Dalitso LLC, started operations at its 93,000 sq. ft. cultivation, manufacturing, processing and retail facility in Manassas, and opened the first of six dispensaries operating under the company’s retail brand, BEYOND / HELLO on December 1, 2020. Dalitso is currently one of only five applicants to have received approval for a pharmaceutical processor permit issued by the Virginia Board of Pharmacy, and the designated area for Dalitso to operate is Health Service Area II, in Northern Virginia, which has a population of approximately 2.5 million people or nearly 30% of the state’s population. This area includes two of Virginia’s most densely populated counties, Fairfax and Prince William County.

“The adult-use cannabis legislation passed by the Virginia General Assembly is a critically important first step on the path toward legalization,” said Jushi CEO and Founder Jim Cacioppo. “These bills begin to accomplish fundamental justice and equity priorities as well as promote public health.  Jushi appreciates the General Assembly’s commitment to address these complex issues, especially the passion shown by Senators Adam Ebbin and Louise Lucas and Delegate Charniele Herring in answering Governor Ralph Northam’s call for legalization.
Adding flower to Virginia’s medical cannabis program is a critical advance and Jushi applauds Delegate Cliff Hayes and Senator Louise Lucas on this achievement.  We expect that around the end of the year, this new legislation will allow pharmaceutical processors to make medicines available at much lower price point and expand access to patients who could otherwise not afford sustained medical cannabis therapy.”


Debra BorchardtDebra BorchardtFebruary 26, 2021
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5min800

Cronos Group Inc. (NASDAQ: CRON) released its 2020 fourth quarter and full-year business results for the quarter ending in December. Cronos delivered net revenue increased 133% to $17.0 million in the fourth quarter versus $9.7 million for the same time period in 2019. The net loss for the quarter was a whopping $111 million versus last year’s net income of $61 million.  The stock was slipping by 2% in early trading as the fourth quarter GAAP EPS of -$0.31 missed by $0.23.

The company said that the increase year-over-year was primarily driven by continued growth in the adult-use market in Canada, sales in the Israeli medical market, and growth in our U.S. segment. The adjusted EBITDA loss of $53.1 million in the quarter increased by $1.5 million from 2019. The increase in losses year-over-year was primarily driven by an increase in general and administrative expenses and an increase in R&D spending.

“Our fourth quarter 2020 results are the summation of the hard work and perseverance the company has put into this past year despite the challenges of 2020. As we look to 2021, I’m incredibly excited about the teams we have supporting our brands and the breakthrough research and development (“R&D”), innovation and exciting marketing campaigns Cronos Group plans to execute on. We are poised to build upon the growth we experienced in 2020 as we continue to push cannabinoid innovation and differentiated product offerings under our portfolio of brands,” said Kurt Schmidt, President and CEO of Cronos Group. “My goals this year will be to focus on building a winning team by fostering a collaborative, performance-driven culture; continue to focus on creating disruptive technology and innovation; grow and develop our brands and strengthen our ability to compete through R&D, strategic global infrastructure and engaging in the legislative process in key markets.”

Full Year Results

Cronos reported net revenue grew by 83% to $37.2 million for the full year of 2020 versus $16.8 million for 2019. The company attributed the increase year-over-year to continued growth in the adult-use market in Canada and sales in the Israeli medical market. It was partially offset by non-recurring wholesale revenue in the Canadian market in Full-Year 2019 and strategic price reductions on various adult-use cannabis products in Canada in Full-Year 2020. The net loss for the year was $75 million versus last year’s net income of $1.1 million.

Gross loss of $30.0 million in Full-Year 2020 increased by $10.5 million from Full-Year 2019. The increase in losses year-over-year was primarily driven by third party purchased flower associated with adult-use products in Canada and a decline in wholesale sales in Full-Year 2020 versus Full-Year 2019. The company said it expects that gross margin will continue to fluctuate as price and mix change from quarter-to-quarter. Adjusted EBITDA loss of $98.3 million in Full-Year 2020 increased by $13.5 million from Full-Year 2019. The increase in losses year-over-year was primarily driven by an increase in gross loss, increased R&D spending, increased general and administrative expenses, and higher sales and marketing costs related to brand development.

Write Downs

Still, Cronos wrote down an inventory of $26.1 million for the full year 2020 on dried cannabis and cannabis extracts, primarily driven by cannabis product price compression in the Canadian market. The company said it may incur further inventory write-downs due to pricing pressures in the marketplace.

The company incurred an inventory write-down in the fourth quarter of $15.0 million on dried cannabis and cannabis extracts, primarily driven by cannabis product price compression in the Canadian market.

 


Debra BorchardtDebra BorchardtFebruary 26, 2021
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4min900

The Cannabis Spa at Home: How to Make Marijuana-Infused Lotions, Massage Oils, Ointments, Bath Salts, Spa Nosh, and More

by Sandra Hinchliffe

 -Topic Focus-

Now you can enjoy that legit cannabis spa experience from home thanks to Sandra Hinchcliffe and her book, “The Cannabis Spa at Home”. This notion is super appealing as many modern cannabis spas can be a bit hefty when it comes to the price tag so just buying a book and being able to customize our own spa experience.

Learning to do more things from home seems more and more relevant these days, doesn’t it? It’s also always fun to learn and explore more ways to get creative and use your marijuana.

Let’s get into just what “The Cannabis Spa” brings to the table for us so we can all destress from the past year with some awesome cannabis spa action!

About the Author

The author of “The Cannabis Spa at Home” is Sandra Hinchcliffe and she brings a diverse array of experiences to the table ranging from writing on cannabis-related topics, an artisan herbalist, an allergy chef, and more. This variety of skill sets and knowledge help her to put together books that combine these experiences to create genuinely useful content and recipes for cannabis users who value wellness.

She currently lives in Del Norte County in California and is also the owner and founder of posyandkettle.com while also working to create cannabis and food recipes to serve people with immune challenges.

Her other books include “The CBD and Hemp Handbook”, “High Tea”, “CBD Every Day”, and more.

-Reading Experience-

First off, the high-quality photos are quite appealing and really help to bring the concept of creating your own cannabis spa experience at home to life. Now that idea just sounds fancy and pampering right off the bat!

The list of recipes has a wider range of recipes than I had initially imagined ranging from lotions, salves, tinctures, balms, and more. You can really spoil yourself here if you feel so inclined!

The recipes themselves are clearly written, possess minimal fluff, and are very accessible to even those of us with zero experience as herbalists or with cannabis product creation. I am very interested in being able to expand my own cannabis-infused creation repertoire.

-Summary-

You can’t go wrong with “The Cannabis Spa at Home” by Sandra Hinchcliffe if you’re looking to create your own canna-infused heaven-on-earth in the comfort of your own abode. Sounds great, right?

The recipes are solid and easy to perform, the range of possibilities is actually fun to explore, and you will learn new and interesting ways to utilize your marijuana. Nothing wrong with spicing up your regular usage with new and interesting ways to consume your favorite flower.

Get started infusing, mixing, and creating your own cannabis spa concoctions for personal use today by acquiring your copy of “The Cannabis Spa at Home” here:

 

 


Debra BorchardtDebra BorchardtFebruary 25, 2021
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4min2220

Acreage Holdings, Inc. (OTCQX: ACRDF, ACRHF) announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million. Acreage Florida is licensed to operate medical marijuana dispensaries, a processing facility, and a cultivation facility in the state of Florida. The deal also includes the sale of property in Sanderson, Florida. The stock was dropping over 6% to lately sell at $7.39.

The transaction will be an up-front cash payment of $5 million upon execution of the definitive agreement and an additional $20 million in cash, $7 million in the buyer’s common stock, and $28 million in promissory notes upon closing the transaction. Acreage said it expects to close the deal during the second quarter of 2021.

Brad Rogers, Chief Executive Officer of RWB, said, “Our core strategy has always been to focus on a limited number of markets within which to operate at scale, and Florida has always been one of those targeted markets. Today we have our path to entry into the third-largest market by revenue in the US and are excited with what we can do with the brands we have amassed as well as the skill to execute on our vision.” The company also recently announced an acquisition in Illinois, expanding its presence in the States with limited cannabis licenses. Upon closing of the deal, RWB will have a presence through licensed operations and/or the licensing of its brands in six states.

“The sale of our Florida operations is a significant step in our previously announced operating strategy to focus on those core markets that we believe will accelerate our path to profitability and position us for significant long-term growth and cash generation,” said Peter Caldini, Chief Executive Officer of Acreage Holdings. “The cash proceeds will significantly bolster our balance sheet and position us to accelerate our cultivation expansion projects and open additional dispensaries to support our growth into key adult-use cannabis states such as Illinois and New Jersey.”

Last summer, Acreage had announced it was scaling back from its initial plan to be the cannabis company in the most states to one that was more focused on core-markets in just nine states in the Northeast, Mid-Atlantic, and Midwest. The company said it currently has active operations and licenses in 13 states and continues to pursue divestitures of its remaining non-core state operations and licenses.

In November, Acreage reported revenue of $31.7 million for the third quarter, a 42% increase compared to the same period in 2019. It also was a 17% increase compared to the second quarter this year. Partner revenue was $17 million, which was a drastic increase of 79% compared to the second quarter of 2020. Acreage Holdings reported a net loss of $35.7 million, while adjusted net loss attributable to Acreage was $14.3 million.

 

 


Debra BorchardtDebra BorchardtFebruary 25, 2021
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5min680

The Valens Company Inc. (OTCQX: VLNCF) report its fourth quarter and fiscal year financial results for the period ended November 30, 2020. Valens reported gross revenue for the fourth fiscal quarter fell to $17.9 million from $18.5 million in the third quarter of 2020. The net loss increased to $16.6 million sequentially over the third quarter’s net loss of $3 million.

Full Fiscal Year

Sales for the full fiscal year ending in November were $86 million versus the 2019 fiscal year-end sales of $58 million. The net loss for the full fiscal year of 2020 was $20.6 million versus 2019’s net loss of $6.5 million. Product sales increased 237% to $54.7 million in the fiscal year 2020 over 2019

“In fiscal year 2020, we transformed Valens from a leading extraction company into the industry’s most trusted third-party manufacturer of cannabis consumer packaged goods. Over the course of the year, we strategically employed our human and capital resources to strengthen our platform and build the infrastructure required to offer what we believe are the most innovative and cost-competitive product manufacturing capabilities in the market today,” said Tyler Robson, Chief Executive Officer, Co-Founder and Chair of The Valens Company. “Moving into 2021 with a transformed business model, a growing international presence, and over 77,000 square feet of manufacturing space, Valens is focused on three key initiatives – growing unit volumes per SKU, increasing Cannabis 2.0 and 3.0 product market share, and driving revenues in new consumer verticals. We expect to do this by expanding our provincial distribution capabilities, entering new international markets including the US, and broadening our custom manufacturing and white label partnership network.”

Valens said that it increased its market share to ~4.9% of the Cannabis 2.0 market in AlbertaBritish Columbia, and Ontario in the fourth quarter based on Headset data and not including B2B LP manufacturing, and grew cannabis-infused beverage market share in Canada to approximately 5.2% in the quarter for its product lineup with only one customer in this category to date. the company also said it cemented its position as the largest third-party vape manufacturer in Canada. Valens said in a statement that it transitioned from shipping bulk distillate in the first quarter of 2020 to shipping hundreds of thousands of finished product units per month in the fourth quarter, resulting in revenue that is expected to be recurring in nature

Looking Ahead

Valens reiterates its previously announced guidance for the first fiscal quarter with revenue projected to be between $19 million to $23 million, driven by the company’s newly launched and operational K2 Facility which is expected to give Valens the ability to increase production capabilities and unit volumes. The company said it ended the year with a current cash balance of $48.7 million, including gross proceeds of $39.7 million from the bought deal financing that closed subsequent to the quarter-end.

Jeff Fallows, President of The Valens Company, said, “Moving into fiscal year 2021, we have already executed on step one of our strategic plan for the year with the announcement of our agreement to acquire LYF and are focused on quickly integrating and realizing on the incredible opportunity we see in adding their edibles platform to our capabilities. With our recent bought deal financing, we are also well-positioned to aggressively pursue available and future growth opportunities, including potential acquisitions.”


Debra BorchardtDebra BorchardtFebruary 25, 2021
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5min750

Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) released results for the fourth quarter and year ending December 31, 2020, after the market close on Wednesday. The stock was pulling back in pre-market trading by over 6% to sell near $206 as investors were disappointed with the earnings. Innovative Industrial delivered a fourth-quarter FFO of $1.36 missed by $0.07 and the revenue of $37.09 million missed by $1.41 million despite increasing by 110%.

Seven analysts cover the stock with five giving the company a buy rating and two at a hold rating. the average price target is $207 and the stock had been selling for around $220. The 52-week high is $220, so the selling may be related to just some simple profit-taking.

Fourth Quarter

IIP reported that its total revenues increased 110% to $37.1 million in the quarter. The net income was approximately $21.0 million for the quarter, or $0.91 per diluted share, and AFFO of approximately $32.4 million, or $1.29 per diluted share. The company also paid a quarterly dividend of $1.24 per common share on January 15, 2021 to stockholders which was a 24% increase over last year’s fourth quarter and a 6% increase sequentially and equal to an annualized dividend of $4.96 per share. The company also engaged in an “at-the-market” equity offering program, that issued 1,762,500 shares of common stock during the fourth quarter totaling approximately $262.9 million in net proceeds.

Full Year

For the full year of 2020, IIP delivered total revenues of $116.9 million and net income of approximately $64.4 million and adjusted funds from operations (“AFFO”) of approximately $97.8 million, representing increases of 162%, 191%, and 180% over 2019, respectively. The company reported $3.27 of net income attributable to common stockholders per diluted share and $5.00 of adjusted funds from operations (“AFFO”) per diluted share, representing increases of 61% and 53% over 2019, respectively. IIP declared dividends of $4.47 per share, a 58% increase over 2019.

In addition, the company said it closed on over $620 million in new acquisitions and additional investments at existing properties (including commitments to fund future development/redevelopment, but excluding transaction costs), including 20 new property acquisitions, expanding IIP’s footprint to 66 properties totaling 5.4 million rentable square feet in 17 states at year-end.

Renters Are Paying

In a sign of strength within the cannabis community, it seems the rents are getting paid despite COVID challenges. IIP said it had collected 100% of contractual rent due for the fourth quarter of 2020 and 100% of contractual rent due for the months of January and February 2021. The company did note that the tenant at IIP’s Los Angeles, California property was in receivership until IIP signed a new lease with Holistic for the entire property in January 2021. Plus, Medical Investor Holdings, LLC (Vertical) made partial payments of contractual rent due that the properties that Vertical occupied represented less than one percent of IIP’s total gross assets at year-end.

Looking Ahead

The company is sitting comfortably with $126 million in cash and cash equivalents and approximately $619.3 million in short-term investments, totaling approximately $745.3 million. There is no debt, other than approximately $143.75 million of 3.75% exchangeable senior notes maturing in 2024 (the Exchangeable Senior Notes), representing a fixed cash interest obligation of approximately $5.4 million annually, or approximately $1.3 million quarterly.

As of February 24, 2021, IIP said it owned 67 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Virginia, and Washington, totaling approximately 5.8 million rentable square feet (including approximately 2.0 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years. As of February 24, 2021, IIP had invested approximately $1.1 billion in the aggregate (excluding transaction costs) and had committed an additional approximately $328.7 million to reimburse certain tenants and sellers for the completion of construction and tenant improvements at IIP’s properties.


Debra BorchardtDebra BorchardtFebruary 24, 2021
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4min1570

James Patterson, the former CEO of California cannabis delivery platform Eaze pleaded guilty to one count of conspiracy to commit bank fraud according to a report at Law360. The plan was a scheme to deceive banks into processing more than $100 million worth of credit and debit payments for marijuana purchases. The major banks and credit card companies like Visa (NASDAQ: V) and Mastercard (NYSE: MA) refuse to work with cannabis companies as the product is still federally illegal. So any transactions using these products or lying to banks about the nature of the transactions is illegal.

The timing of the guilty plea is worth noting as the bank fraud trial of businessmen Ruben Weigand and Hamid Akhavancomes is scheduled for March 1 in the Southern District of New York federal court. In March of 2020, Ruben Weigand and Hamid “Ray” Akhavan were charged with conspiracy to commit bank fraud over charges that occurred between 2016 and 2019. They were alleged to have created a bunch of fake companies to trick banks into processing credit and debit payments for marijuana products from legal sellers. The two asked the court to dismiss the indictment saying that no one was harmed in the scheme.  However, the case was allowed to move forward.

Prosecutors said Weigand and Akhavan worked with executives at an online marijuana marketplace company to facilitate the sales, although they haven’t named the business. Eaze, an online company offering delivery from dispensaries, was the subject of a lawsuit last year that alleged it worked with Akhavan to utilize shell companies to process credit card payments. That case was settled. While Eaze was not specifically named in the case by the prosecutors, only an unnamed online marijuana marketplace was mentioned, a connection has been made. Eaze was not charged in this case against the two. Patterson resigned from Eaze in 2019.

It is being suggested that the plea could be an indication that Patterson is with prosecutors and could testify against other defendants in an effort to lower his punishment.

According to Law360.com, Patterson is reported to have admitted to working with Weigand and Akhavan to disguise the purchases because he “understood that if banks were aware of the nature of the transactions they would not allow them.”

Eaze Denies Involvement

For its part, Eaze denied the allegations in the 2019 lawsuit and has said it had cooperated with federal authorities and “is not a defendant in” the case against Patterson. Eaze also quit accepting payments of this nature in mid-2019. However, legal experts say the allegations don’t end because the transactions ended. The dispensary owners are no doubt nervously watching the outcome of this case. They could also be dragged into this for committing bank fraud. If the dispensary owners knew that Visa and Mastercard would not accept payments for cannabis transactions and they still pursued a scheme that managed to make that happen, are they guilty? That is yet to be determined.


Debra BorchardtDebra BorchardtFebruary 23, 2021
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3min770

Green Thumb Industries Inc. (OTCQX: GTBIF) announced it has raised approximately $56 million by selling 10 million of its subordinate voting shares, that was declared effective by the U.S. Securities and Exchange Commission (SEC) as of February 8, 2021.  Green Thumb said it had received and accepted offers from investors to purchase 1.6 million registered subordinate voting shares at $35.50 per share for a total of approximately $56 million.  The stock closed at $35.35 on Monday.

“The strength of investor demand suggests growing confidence within the U.S. capital markets for cannabis,” said Green Thumb Founder and Chief Executive Officer Ben Kovler. “The Green Thumb team is excited by the momentum and is proactively advocating for U.S. cannabis companies to receive access to U.S. exchanges like our Canadian peers. This access is a key step to unlock greater job creation, significantly more tax revenue and a more robust effort to right some of the wrongs caused by the war on drugs.”

The company said that the sale would close on February 23, 2021, and follows the previous sale of shares pursuant to the Registration Statement that closed on February 9, 2021, for $100 million. On February 9, Green Thumb said it received and accepted an offer from a single institutional investor to purchase approximately 3.1 million registered subordinate voting shares at $32.03 per share for a total of $100 million.  The company did not disclose the name of the buyer.

According to Yahoo Finance, six analysts cover GTI. The average price target is $34.39 with all buy ratings.

GTI is a leading cannabis consumer packaged goods company and the owner of Rise Dispensaries. In November, the company reported its earnings for the third quarter of 2020. Overall, the company’s balance sheet was strong and retained a positive cash flow for the third consecutive quarter. Green Thumb’s revenue increased 31.3% quarter-over-quarter, and year-over-year 131.% to $157.1 million. The company’s gross margin for the third quarter of 2020 was 55.4%, an increase from a 53.2% gross margin the quarter prior.

The company’s adjusted operating EBITDA increased by 50% to $53.2 million, or 33.9% of revenue for the third quarter of 2020. The prior quarter ended with an adjusted EBITDA of $35.4 million, or 29.6% of revenue. As of September 30th, 2020, Green Thumb’s current assets totaled $159.1 million and included cash and cash equivalents equaling $78.1 million. The company reported a total debt outstanding of $97.1 million, $0.3 million being due within 12 months.


Debra BorchardtDebra BorchardtFebruary 22, 2021
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6min1790

Privately-held multi-state cannabis operator Parallel and special purpose acquisition corporation (SPAC) Ceres Acquisition Corp.  (OTCQX: CERAF) have entered into a definitive business combination agreement involving a transaction that, if completed, would result in Parallel becoming a public company. The investors have an over-subscribed private investment in public equity (PIPE) of $225 million. The deal is expected to close in Summer 2021.

The deal values Parallel at an implied enterprise value of $1.884 billion with expected net revenues of $447 million in 2021. The expected pro forma cash on hand of $430 million at the close, including the $225 million from the PIPE and $120 million of cash held in Ceres’ escrow account assuming no redemptions.

William “Beau” Wrigley Jr., Chairman and CEO of Parallel said, “This transaction will enable Parallel to accelerate existing investments to transform not only our company but also the cannabis industry, as we seek to disrupt the more traditional beverage alcohol and healthcare spaces. As a public company, we will have access to capital to grow our national footprint through new licenses and M&A, improve our cultivation and production capacity, expand our established retail footprint, develop and launch rare cannabinoids products with therapeutic benefits, and conduct important clinical research in partnership with the University of Pittsburgh Medical Center. We look forward to working with the Ceres team and benefiting from Scooter Braun’s expertise and extensive influencer network to reach our diverse consumers with creative omnichannel approaches that will fuel Parallel’s leadership in the cannabis industry.”

Formerly Surterra Wellness

In June of 2019,  Surterra Wellness closed on the initial $100 million Series D funding round and expanded its Board of Directors.  The company noted back then that the participants in the round included existing and new investors including former Patrón Spirits Company CEO, Ed Brown. At this time, Parallel is operating in five states that have the potential to see significant growth in cannabis sales, including FloridaPennsylvaniaMassachusettsTexas, and Nevada. It has a total of 42 brick-and-mortar dispensaries. Plus, an e-commerce infrastructure that supports the next phase of cannabis distribution, including online order-ahead, curbside pickup, and home delivery sales, which is expected to drive strong net revenue generation.

Ceres

The company said in a statement that the combined publicly listed company is expected to have Class A Subordinate Voting Stock and Class B Multiple Voting Stock. The Class B Multiple Voting Stock will have 15 votes per share and will be held by Beau Wrigley and his affiliate entities upon close. The Class A Subordinate Voting Stock will have one vote per share and will be the publicly traded class of stock upon the closing of the Transaction.

Scott “Scooter” Braun, Co-Founder of Ceres Group Holdings said, “I have carefully watched the cannabis industry and Parallel stands out as a leader in the space. With a culture of compliance and strong values, a commitment to social equity, and disciplined growth and innovation, I’m thrilled to work with Parallel. Together, Ceres and Parallel have the experience and reputation to drive growth and create value for all their stakeholders. Beau and his team stand out among the pack and bring to the table their deep experience and business acumen to run a public business of this size and I believe Parallel is primed for massive growth in the sector. I’m honored and excited for the opportunity.”

Joe Crouthers, Chairman and CEO of Ceres Acquisition Corp said, “Ceres’ deep cannabis and consumer experience, coupled with Scooter’s powerful network, makes Ceres an ideal partner for a well-positioned, well-led, high growth cannabis company like Parallel. The Ceres team has organized a set of truly unique resources that aims to open the top of the consumer awareness funnel and help fuel growth – from capital to cannabis to marketing to an extensive network in entertainment and access to consumers – we look forward to supporting Parallel’s transition to a publicly traded company.”



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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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