Editor-in-Chief

Debra BorchardtDebra BorchardtJune 29, 2020
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5min1770

It’s been a rough road for some of the OG’s of the cannabis industry. Today, Aurora Cannabis (NYSE:ACB) said its Co-Founder Terry Booth had retired from his role as Director of the Company, effective June 26, 2020. Mr. Booth was the Chief Executive Officer of Aurora from December 2014 through February 2020 and served on Aurora’s Board of Directors since December 2014.

“On behalf of our Board of Directors and management team, I would like to thank Terry for his leadership over the years and for his tenure as a director,” said Michael Singer, Executive Chairman and Interim CEO of Aurora. “As one of the original cannabis visionaries, Terry leaves an enviable legacy in the form of Aurora Cannabis. He helped set the table for the company to lead in Canada and globally, and we continue to execute our plan to do so profitably.”

According to Wikipedia, Aurora was founded in 2006 by Terry Booth, Steve Dobler, Dale Lesack, and Chris Mayerson. Booth and Dobler collectively invested over $5 million of their own capital. The founding group secured a 160+ acre parcel of land in Mountain View County, Alberta, where they established Aurora’s first facility. The company received its license to grow cannabis in 2014, making it the first cannabis producer to obtain a federal license in that province. The company went public in Canada in 2017 and then in 2018 began trading at the New York Stock Exchange.

Founders Forced Out

Founders often do quite well when their companies go public. Their large stake of shares suddenly becomes very valuable and at a certain point, the founder can sell those shares and capitalize on all the sweat equity and sacrifice it took to get the company to that point. Of course, the flip side to that coin is that the board of directors can now vote you out from your role at the company. That has been the case this year as boards have tossed founders and co-founders out as an expression of performance displeasure.

Here’s a shortlist of the leaders who got their walking papers this year.

  • Kevin Murphy, Co-founder of Acreage Holdings Inc. in June.
  • Hadley Ford, Co-founder of iAnthus in April.
  • Peter Horvath, Co-founder at Green Growth Brands in March
  • Joe Caltabiano, Co-founder, and president of Chicago-based Cresco Labs in March.
  • Jose Hidalgo Co-founder of Cansortium, a medical marijuana dispensary operator in Miami in February.
  • Andy Williams, Co-founder of Denver-based Medicine Man Technologies in February.
  • Adam Bierman Co-founder of  MedMen Enterprises in January.

In 2019, the trend seemed to be kicked off when Bruce Linton was asked to leave Canopy Growth. He had built it into one of the biggest cannabis companies in the industry, but his partnership with Constellation Brands (NYSE:STZ) proved to be his undoing as that corporate entity took over.

Most of the founders were asked to leave after the companies found themselves boxed into strategic corners. Not enough revenue coming in to satisfy all the money invested, much of it achieved through expensive debt deals. Boards always take out the CEO as a sign of acting in the best interests of the shareholders.

Still, the cannabis community is a small one and many of these founders were synonymous with their companies. When conferences do return, the companies will be familiar but the face won’t be.

 

 

 


Debra BorchardtDebra BorchardtJune 26, 2020
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4min3161

Following the company’s heavily discounted deal with Canopy Growth and the departure of co-founder and CEO Kevin Murphy, Acreage Holdings, Inc. (OTCQX: ACRGF) reported first-quarter 2020 reported revenue of $24.2 million, an increase of 88% increase compared to the same period in 2019, and a 15% sequential increase. The earnings were unaudited.

The revenue that was reported paled in comparison to the company’s charges, which were almost double what Acreage had told investors they could expect.  Acreage reported a one-time, non-cash pre-tax charge of $196.0 million, or $164.7 million after taxes. The company had originally told the market it could expect to see a charge between $80-$100 million. Acreage blamed the discrepancy on current fair market value in certain states and the write-down
for its services agreement in Maine, which was not initially contemplated.

The net losses were equally eye-popping at $172 million. These results explain the departure of Murphy and his replacement by Bill Van Faasen.

“With the COVID-19 pandemic affecting millions across the U.S., the cannabis industry was faced with yet another significant challenge. Our dispensary and processing and cultivation associates quickly adapted to these changing dynamics ensuring our patients and customers in need were still served with dignity and respect, while maintaining a safe environment for everyone. Additionally, I am pleased with the reacceleration of our reported and pro forma revenue as our wholesale business continues to ramp and our dispensaries continue to mature,” said Bill Van Faasen, interim Chief Executive Officer of Acreage.

The company continues to report pro forma numbers, however, many past deals in which Acreage included those pro forma numbers have been terminated or sold. At this point, the company that once claimed to be the largest cannabis business in the country only has (assuming completion of pending acquisitions), 15 operational dispensaries. Acreage has or will have management or consulting services agreements, (including pending acquisitions), with entities operating 12 dispensaries.

Murphy’s Voting Shares

Not unlike the structure that was originally established at MedMen (OTC:MMNFF), Murphy, he exercises a significant majority of the voting power in respect
of the Acreage Shares. According to the company’s May MD&A, “The Subordinate Voting Shares are entitled to one vote per share, the Proportionate Voting Shares are entitled to 40 votes per share, and the Multiple Voting Shares are entitled to 3,000 votes per share. As a result, Mr. Murphy has the ability to control the outcome of all matters submitted to the Company’s shareholders for approval, including the election and removal of directors and any arrangement or sale of all or substantially all of the assets of the Company.”

“As a shareholder, even a controlling shareholder, Mr. Murphy will be entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of the Company’s shareholders generally. Because Mr. Murphy holds most of his economic interest in the Company’s business through High Street, rather than through the Company, he may have conflicting interests with holders of the Acreage Shares.”

The company is hosting a call to discuss the earnings on Friday morning. The stock closed higher by 23% on Thursday to end the day at $2.88.


Debra BorchardtDebra BorchardtJune 26, 2020
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4min1510

Liberty Health Sciences Inc. (OTCQX: LHSIF) reported net sales of $50 million for the fiscal year 2020 ending February 29, 2020, versus $10 million for 2019. The company also delivered net income for the fiscal year 2020 of $22.2 million, which included the gain on the sale of a property of $14.2 million. The earnings per share reported were $0.06. This was an improvement over the net loss of $22 million for the fiscal year 2019. All figures are in Canadian dollars.

The company attributed the increase in revenue to the introduction of 200 new products the opening of new dispensaries, expanded delivery infrastructure, as well as an upsurge in same-store sales volume and an increase in the registered patient base for Medical Marijuana Use in Florida. The company also said that its expenses dropped from $25.5 million in 2019 to $25.1 million in 2020.

“End of year fiscal 2020 proved to be the highest net revenue increase in the Company’s history and reflects our customer loyalty and strength of our brand,” said Victor Mancebo, Chief Executive Officer of Liberty. “Liberty’s continued growth directly ties to the strategic initiatives we have set in place, which has been increasing our Florida production, retail base, and delivery footprint along with expanding our product portfolio and brand partnerships. We continue to work on innovative strategies that complement our expansion plans while at the same time provide our patients a more accessible medicine platform.”

Dispensary Expansion

Liberty currently operates 25 dispensaries throughout Florida and has lease agreements in place for 10 additional locations and is negotiating for another ten locations. The company said it has implemented health and safety measures for employees, patients and facilities following guidance from public health officials worldwide in response to the COVID-19 pandemic to ensure adequate in-store product supply and customer convenience due to increased demand.

The latest location opened this month in Stuart Florida with a 5,000 square foot dispensary featuring a spacious display and retail area, two private consultation rooms, and one large waiting. Locally inspired wall-art will be featured throughout the store on a rotating basis.

“We are excited to open our doors to new friends and patients in our first dispensary to be situated in Martin County ,” said Mancebo. “We are thrilled to expand our dispensary footprint along Florida’s Treasure Coast during these trying times and have remained committed to ensure our patients safe and reliable access to our premium products. We continue to take steps to keep our employees and our patients safe as the state continues to reopen.”

As of February 29, 2020, Liberty had $24,957,245 of cash and cash equivalents compared to $13,291,426 in cash and cash equivalents at February 28, 2019.

Looking Ahead

The cultivation production capacity of the company is currently approximately 19,500 kilograms annually (dry weight), and the Company made further investments in fiscal 2020 to increase its plant yield, targeting an increase of production of approximately 25% by first quarter of 2021. Retrofit activities associated with processing continued through the fourth quarter of fiscal 2020, adding additional drying rooms.

 

 


Debra BorchardtDebra BorchardtJune 25, 2020
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4min1310

Aleafia Health Inc. (OTC: ALEAF) and its subsidiary Emblem Cannabis Corporation and Aphria Inc. (NASDAQ:APHA)have said that the parties entered into a settlement agreement on June 25, 2020, to resolve their outstanding dispute in respect of the termination of the parties’ wholesale cannabis supply agreement.

Under the terms of the Settlement Agreement Emblem will get C$29.1 million which will consist of a C$15.5 million cash payment, the issuance of common shares of Aphria with an aggregate market value of C$10 million that will be freely tradeable and transferable in Canada and waiver of claimed receivables. The parties have also agreed to a mutual release of all existing and potential claims relating to the Supply Agreement, and to the dismissal of the arbitration proceedings that had previously been commenced.

“The settlement agreement is fair and satisfactory to both parties and allows Aleafia Health to move forward with a significantly strengthened balance sheet. With a substantial injection of value into our business, we can focus on our continued growth,” said Aleafia Health CEO Geoff Benic.

This settlement ends any and all potential claims and litigation against and between Aphria, Emblem, and Aleafia Health relating to the Supply Agreement.

A Busted Deal

The original problem stemmed from a deal that was agreed to on September 11, 2018, which said that Aphria would provide up to 175,000 kg equivalents of cannabis products over an initial five-year term, commencing May 1, 2019. Aleafia terminated its deal to buy cannabis from Aphria saying the company failed to meet its supply obligations.

“Following Aphria’s failure to meet its supply obligations under the Supply Agreement, Emblem has exercised its contractual right to terminate the Supply Agreement in accordance with its terms. The termination of the Supply Agreement by Emblem was made without prejudice to its rights accrued to the date of termination (including its rights to be refunded the unused balance of its deposit) and its rights to seek damages as a result of Aphria’s default and termination thereunder.”

At the time, Aphria released a statement saying, “We are disappointed that Aleafia has chosen to terminate its Agreement with Aphria Inc. The Company had every intention of fulfilling its obligations under the Agreement. As a large shareholder of Aleafia, Aphria made good faith efforts to ensure the continuation of the Agreement understanding it was in the best interest of all parties involved. However, the termination of this legacy Agreement frees up significant supply allowing the Company to service its brands that are in high-demand across the country.”


Debra BorchardtDebra BorchardtJune 25, 2020
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9min9750

Canopy Growth Corporation (NYSE: CGC) and Acreage Holdings, Inc. (OTCQX: ACRGF) stunned markets when the two companies agreed to an unusual deal in 2019. The agreement was that when cannabis was legalized in the U.S., Canopy would buy Acreage. It was called the “triggering event” and was originally valued at $3.4 billion. The price has dropped considerably.

A lot has changed since then and now the deal has changed accordingly.  Acreage shareholders will now get an initial up-front payment of $37.5 million in connection with the modification of Canopy Growth’s rights, including the extension of the term, and give Acreage shareholders the ability to participate in upside potential upon the Triggering Event.

In addition to that CEO Kevin Murphy is resigning from the company.

Deal Changes

These are the major changes to the deal as outlined by the companies:

  • Canopy Growth will pay Acreage shareholders and certain convertible security holders an aggregate of $37.5 million (approximately $0.30 per Existing Share on an as-converted basis), with the final amount to be received by each holder determined based on the number of Existing Shares into which all of the eligible securities are convertible at the close of business on the record date for the distribution.
  • Acreage shareholders’ new Fixed Shares, each of which represents 70% of an Existing Share, will be entitled to receive 0.3048 of a Canopy Growth Share, representing a premium of approximately 120% to the June 24, 2020 closing price of the Existing Shares on the Canadian Securities Exchange.
  • Acreage shareholders will be entitled to participate in the long-term value created by Acreage, and in the U.S. cannabis industry generally, as a result of the Floating Shares which Canopy Growth may acquire in the future upon the occurrence or waiver of the Triggering Event at a price based upon the 30-day volume-weighted average trading price of the Floating Shares on the CSE relative to the trading price of the Canopy Growth Shares on the NYSE at that time, subject to a minimum of $6.41 per Floating Share.
  • There will be a creation of two new classes of shares in the capital of Acreage with each existing Acreage subordinate voting share (an “Existing Share”) being converted into 0.7 of a Fixed Share and 0.3 of a Floating Share (with proportionate adjustments for the existing proportionate voting shares and existing multiple voting shares)

CEO Murphy Out

Mr. Murphy has resigned as CEO but will continue to act as Chairman of the board of directors of Acreage and contribute to the strategic direction of the company. He is listed as owning 10% of the company’s stock. Director Bill Van Faasen, former Chairman, CEO, and President of The Blue Cross Blue Shield of Massachusetts will serve as Acreage’s Interim Chief Executive Officer until a permanent replacement has been identified.

“On behalf of the entire Acreage Board, I sincerely thank Kevin for his passion and commitment to building a leading cannabis enterprise across the United States,” said Douglas Maine, Chair of the Acreage Special Committee. “Kevin is a visionary entrepreneur and positioned Acreage for success in the U.S. cannabis industry. As we move forward with a renewed commitment by Canopy Growth and build upon the vision for the U.S., we are optimistic about the long-term growth prospects for our shareholders.”

“I am excited about this New Agreement and the creation of a pre-eminent and truly global cannabis company upon the occurrence of the Triggering Event. I believe the eventual federal permissibility of cannabis in the United States is inevitable and this New Agreement continues to allow our shareholders to become a part of a leading cannabis company following such changes. Moreover, as the largest shareholder of Acreage, I believe this New Arrangement allows all Acreage shareholders to participate in potential upside to their investments through the fixed exchange component of Canopy Growth stock and importantly the new Floating Shares” said Kevin Murphy, Chair of the Acreage Board.

Canopy Loans Acreage $100 Million

In connection with the New Agreement, Canopy Growth has agreed to loan a wholly-owned subsidiary of Acreage (“Acreage Hempco”), up to $100 million pursuant to a secured debenture.  Canopy Growth will loan Acreage Hempco an initial $50 million on and subject to completion of the New Arrangement.  The remaining $50 million will be subject to the satisfaction of certain conditions by Acreage Hempco. The Debenture will bear interest at a rate of 6.1% per annum.

The United States is going to be a core market for Canopy Growth and this New Agreement solidifies our path forward with Acreage,” said David Klein, Chief Executive Officer of Canopy Growth. “I am excited to bring our relationship with Acreage back to center stage in our U.S. strategy and look forward to a time when the laws in the United States permit us to finalize this transaction as we march toward bringing our exciting beverage products to the US.”

Acreage Tumbled Quickly

Eyes were raised recently when Acreage announced that it agreed to a short term loan with an interest rate of 60%. Those terms rattled shareholders. That type of loan is akin to a payday loan and means the company must have really needed the money badly if it was willing to take those terms. The loan is secured by the company’s cannabis operations in Illinois, New Jersey, and Florida, as well as it’s U.S. intellectual property. If it can pay back the loan, In the event of default, the company is further obligated to pay to Lender an additional fee of $6 million.

Acreage was already selling assets and laying off employees after the company overextended itself in trying to become the largest cannabis company in the country. Acreage said it expects to record a pre-tax, non-cash charge of $80 to $100 million in the quarter ending March 31, 2020.

Canopy Growth’s Troubles

While Acreage has been struggling to right its ship, Canopy isn’t in much better shape. The company announced declining revenues and massive losses for the fourth quarter ending March 31, 2020. The net revenue in the quarter dropped by 13% sequentially to $107 million as the company blamed lower Canadian recreational revenue. Canopy Growth also delivered a staggering net loss of $1.3 billion in the quarter which was attributed to impairment and restructuring charges.


Debra BorchardtDebra BorchardtJune 24, 2020
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7min1840

Aurora Cannabis Inc. (NYSE:ACB) announced several difficult moves from the company including the layoffs of numerous employees and the closing of several facilities. The Canadian cannabis company laid off 25% of Aurora’s SG&A staff, most of those to take place immediately and a roughly 30% reduction in production staff over the next two quarters. The cuts went to the highest levels including a restructuring of the executive leadership team and the recently announced retirement of President Steve Dobler. 

Aurora said it has initiated a plan to close operations at five facilities over the next two quarters in order to focus production and manufacturing at the Company’s larger scale and highly efficient sites. The company will take a charge of $60 during the fourth quarter in order to make these changes. Certainly, it was awful news for the workers at the company who are losing their jobs during a pandemic, but it seemed to cheer the analysts covering the company as ratings were changed. 

Stifel Upgrade

Stifel analysts upgraded Aurora Cannabis to hold from sell following the news and said that the company has “weathered the storm.” The stock price target was also raised from C$6.20 to C$17.50 ($12.89). “We believe ongoing cash needs, potential equity dilution, and risk around debt covenants remain as impediments to a more constructive approach with the shares enjoying a still robust valuation (C$2.5 billion enterprise value),” the analysts wrote. “But with the reiteration of the F1Q21 positive EBITDA target, market share gains by Aurora, and stronger Canadian market trends, we believe the fundamental outlook and potential for capitalizing on the global cannabis category’s development are back in focus.”

With regards to the closures of the facilities, analyst Andrew Carter wrote, “We believe the ongoing costs from these facilities are well ahead of the sales associated with them, and the facilities targeted for closure are not producing second generation products. Aurora suggested these actions will be accretive to
the gross margin overall. We believe these savings will provide fuel for remaining competitive against continued price compression in the Canadian dried flower market. Aurora outlined C$200 million in total expected charges: C$60 million in asset impairment charges and $140 million in inventory, primarily trim, 60% from capitalized costs. The latter illustrates the significant burden and associated risk from inventory, and the facility closures will aid the company’s goal of working capital as a benefit, though we remain cautious given the demands of the evolving category.”

Increased Sales Estimate

The analyst also increased his estimates for sales and EBITDA bringing the F1Q21 EBITDA estimate in-line with company guidance. “We are increasing our F4Q20 revenue estimate to C$75 million (from C$67 million) with a stronger performance in the Canadian Consumer segment. Aurora has gained market share
(outlined below) positioning the company well against a Canadian market that has performed above our expectations with April sales flat from the surge in March. We now estimate flat F4Q20 Canadian adult-use sales with robust consumption tempered by wholesale/retail inventory reductions and dried flower pricing compression. We estimate C$487 million in FY22 sales, +70% from our FY20 estimate driven by growth of the Canadian Consumer business. Our outlook considers Aurora keeping pace with the growth of the Canadian adult-use market with narrow but steadily improving EBITDA, an outlook we believe affords room for error in an increasingly competitive/fragmented Canadian market.”

Other Analyst Changes

Cantor Fitzgerald reiterated its overweight rating on the stock late Tuesday. Canaccord Genuity dropped its price target from C$24 to C$21 (roughly $17 to $15.) Analyst Bobby Burleson wrote, “On the back of Tuesday’s corporate updates, although we believe the rightsizing of Aurora’s operations is a crucial step in the company’s path to profitability, with >C$1.2B of announced write-offs so far in the first six months of 2020 (or ~25% of the book value of ACB’s net assets), a high degree of uncertainty still clouds this name. As a result, we have lowered our pricing assumptions for dried bud and added a 100bp premium to our adult-use valuation for execution risk. As a result, we are lowering our PT to C$21.00 (from C$24.00).”

According to CNN Business, 15 analysts offering 12-month price forecasts for Aurora Cannabis Inc have a median target of $10.33, with a high estimate of $19.31 and a low estimate of $7.10. The median estimate represents a -24.00% decrease from the last price of $13.59. The current consensus among 17 polled investment analysts is to hold stock in Aurora Cannabis Inc. This rating has held steady since June when it was unchanged from a hold rating.


Debra BorchardtDebra BorchardtJune 23, 2020
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6min2960

Harvest Health & Recreation Inc. (OTCQX: HRVSF) said that it has completed the initial closing of certain retail properties in California to Hightimes Holding Corp. as previously announced on April 28, 2020, and June 12, 2020. The deal was recently amended from the original 13 operational and pending properties to ten. Those terms have now been reduced to a deal now valued at $67.5 million. The terms are now $1.5 million in cash and a $4.5 million one-year promissory note with 10% interest and $61.5 million in Series A Preferred stock issued by Hightimes Holding Corp.

$4.5 million was due at the initial closing according to the SEC filing. The second closing, though is subject to various closing conditions and contingencies including third party and regulatory approvals. Harvest and its affiliates said they plan to sell additional equity and assets with respect to two planned dispensaries in California for a total consideration of $6 million in Series A Preferred Stock issued by Hightimes.

One of those third parties, Alexis Bronson says he hasn’t heard from High Times Chairman Adam Levine since the deal was originally announced. The property that he has gotten his license for is on Geary Street in San Francisco next to a Chanel boutique. The rent for the high-end location is an eye-popping $2.1 million a year. Bronson said that another cannabis MSO (multi-state operator) expressed interest in the location until seeing the rent and then backed out saying it was too rich.

High Times is well aware of the challenge it faces in trying to convince Bronson to come on board. In the purchase agreement, High Times acknowledged that “Harvest Health is currently engaged in litigation in the State of Washington with Kunkel which may affect the ability of Seller to obtain the Third-Party Approvals.” Ryan Kunkel is Bronson’s former business partner. He sold his half of the property without Bronson’s approval to Harvest Health, who in turn sold it to High Times. Several of the other Have A Heart dispensary properties have third parties in addition to Kunkel and there is no indication from these parties as to whether they are on board with High Times or not.

Original Terms

In the original purchase agreement, High Times was supposed to pay at the closing (a) USD$12,500,000 in cash inclusive of the Contract Deposits and (b) 675,000 shares of Hightimes’ 16% Series A voting convertible preferred stock. The Series A Preferred Stock has a value of $100.00 per share or $67.5 million. Other shareholders might not know that the Series A Preferred Stock has a priority on liquidation or a change of control of Hightimes over any
other series of preferred stock created by Hightimes or its Common Stock. Beginning in September 2020, the Preferred Series A was to begin the 16% payments. High Times paid $1 million in the initial deposit and owed $4 million 45 days from the effective date.

Publisher Woes

High Times has not reported any financial information on the company since June 2019. Due to the pandemic, all in-person events have been canceled. This was the main revenue producer for the company. The publisher also hasn’t printed a Dope or Culture magazine in months and this also accounted for a respectable source of advertising income. The flagship publication High Times is up-to-date online with its stories, but the last print edition looks to be April 2020. The company laid off writers and said that the loss of walk-in traffic to dispensaries caused it to suspend printed editions for now. Print magazines in general have struggled as the costs outweigh the consumers buying magazines.

The company has also experienced a revolving door of executives in the C-Suite with former Green Growth Brands CEO Peter Horvath becoming the latest to take on the role. His retail experience is seen as a strong point as the company pivots from publishing to retail.

Harvest Health Keeps Four

Harvest will retain four operating dispensaries located in Grover BeachNapaPalm Springs, and Venice and select licenses for potential retail locations in California following completion of this planned divestment.

 


Debra BorchardtDebra BorchardtJune 23, 2020
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5min2860

Organigram Holdings Inc.  (NASDAQ: OGI) issued a very brief announcement stating that the company was facing a lawsuit and that it was changing its newly launched Trailer Park Buds brand. Organigram said it wouldn’t comment on the case, which was started in the Court of Queen’s Bench in Alberta. It is a class action case that seeks damages from many cannabis companies including Organigram.

Pesticides In Cannabis

It wasn’t clear from the statement if this is a new case, but Organigram has already been battling one long-running case that stemmed from 2016. That complaint was filed against Organigram in 2017 after two recalls were issued over the cannabis products in 2016. Myclobutanil was the unapproved substance found in Organigram’s medical cannabis, and in 2017 the company acknowledged that some medical cannabis patients reported adverse effects from their product. The lead plaintiff, Dawn Rae Downton, said that unauthorized use of pesticides made her and other consumers sick.

Organigram lost its organic certification, but then subsequently got it back. Organigram has fought the case. Recently, Justice Peter Bryson on behalf of the appeals court wrote,  “There is no evidence that there is a workable methodology to determine that the proposed adverse health effects claims have a common cause.” The Nova Scotia Court of Appeals also dropped Downton’s claims for unjust enrichment. The order read, “Proposed common issues for those claims should not be certified.  The claim for unjust enrichment is improperly pleaded and should be struck.” The case looks like it is headed to trial.

Organigram has stated in its filings that there is no litigation that would have an adverse effect on the company.

Trailer Park Buds Rebrand

Organigram had planned to have a key brand in its portfolio called Trailer Park Buds, named after a Showcase Tv series called Trailer Park Boys. The group of friends is always trying to run get rich quick schemes that mostly revolve around selling cannabis. It seemed like a no-brainer, except that Canadian laws forbid celebrity endorsements.

Subsection 17(1) of the Act specifically states that cannabis products can’t be promoted “by means of the depiction of a person, character or animal, whether real or fictional,” nor “by presenting it or any of its brand elements in a manner that associates it or the brand element with, or evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring.”

The product finally arrived on the shelves in April 2020 and it looked like the problems with the regulators had been solved. Now, Organigram says, “After reviewing perception around our Trailer Park Buds brand with Health Canada, the Corporation is making some changes to its newly launched brand and logo. In the immediate term, Organigram will move to a modified version of the logo. Longer-term, the Corporation is exploring options for a permanent logo and brand name combination for its large-format value brand. The Corporation will continue to have this large format value offering in the market throughout.”

At-the-Market Program Completion

On a positive note, Organigram did remind investors that earlier this month it completed its at-the-market equity program previously announced on April 22, 2020, issuing an aggregate of 21,080,229 common shares for gross proceeds of approximately CAD$49 million.


Debra BorchardtDebra BorchardtJune 22, 2020
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4min6510

Jushi Holdings Inc. (OTCQX: JUSHF) is planning on buying Vireo Health’s (OTC:VREOF) Pennsylvania Medical Solutions, LLC as the company looks to strengthen its position in the state’s market. Jushi will pay Vireo $16.3 million in cash, a $3.8 million seller note, and assume a $17 million facility associated with a long-term lease obligation. The $37 million deal is expected to close by the end of August 20.

“This acquisition allows Jushi to expand its presence in one of the most attractive medical cannabis markets in the country,” said Jim Cacioppo, Chairman and Chief Executive Officer of Jushi. “Upon completion, Jushi will be able to provide high-quality, indoor flower and concentrates to our Pennsylvania patients who continue to experience constrained supply and high prices.  Furthermore, we will be well-positioned to support an increase in demand and maintain the ability to further scale up the facility if required.”

The acquisition operates a 90,000 sq. ft. facility with approximately 45,000 sq. ft. of high-quality, indoor cultivation when construction is complete. The property can also accommodate an additional 25,000 sq. ft. of indoor cultivation bringing the total to 70,000 sq. ft.

Pennsylvania has quickly shown its power in the cannabis industry with total sales of $524 million and 80 operational dispensaries. So far $215 million has been purchased by dispensaries from grower-processors and $309 million made by patients and caregivers at licensed dispensaries. Jushi says is has reaffirmed its revenue guidance for 2021 in the range of $200 and $250 million.

“This transaction secures Vireo’s capital position for the foreseeable future and will enable us to comfortably execute our fiscal year 2020 operating strategy and begin generating positive cash flow in the first half of next year without requiring any additional capital infusions,” said Founder & Chief Executive Officer, Kyle Kingsley, M.D.  Vireo said the money received from the sale will help it to increase scale in its core markets of New YorkMinnesotaMarylandArizona, and New Mexico. Vireo said that these projects are expected to significantly improve its near-term revenue and profitability outlook.

In addition to buying Pennsylvania Medical Solution, Jushi will have an option to buy  Pennsylvania Dispensary Solutions, a Pennsylvania medical marijuana dispensary permittee in the Commonwealth’s Northeast region.  PADS currently operates two medical marijuana dispensaries in Scranton and Bethlehem, with the right to operate one additional dispensary in the region. The option expires 18 months from the closing of the Agreement.

Financing

In order to help come up with the cash portion of the acquisition, Jushi announced it had received binding subscriptions totaling approximately $15.25 million for the issuance of 10% senior secured notes and warrants to acquire the subordinate voting share of which $12.35 million has been received. The company also said it received non-binding indications of interest for up to an additional $10 million of financing.  Jushi said it plans to use $15 million of the proceeds to fund the cash portion of the acquisition.

Jushi Chairman & CEO Jim Cacioppo subscribed for $1.5 million of the Notes with other insiders subscribing for $3.35 million of the Notes.


Debra BorchardtDebra BorchardtJune 19, 2020
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3min2470

A new report from Canaccord Genuity analyst Bobby Burleson suggests that budget constraints as a result of COVID-19 impacts could generate faster support for cannabis legalization. Prior to the pandemic, several states were gearing up for ballot initiatives in the 2020 election. Social distancing seemed to cause many to table those efforts. Now only a few states look to be in play in November.

Burleson noted that prior to the pandemic, he had identified 16 states with cannabis initiatives planned for the election. A combination of medical and recreational programs were teeing up for voters. Fast forward to June and limited moves are expected except for New Jersey, Arizona, and New Mexico where legislation looks to continue making progress. South Dakota could pass medical and Louisiana’s governor signed a law expanding its medical program.

COVID Proves Expensive

“COVID-19 is driving a severe budget crisis for states across the country and an analysis by the Center on Budget & Policy Priorities projects an aggregate state budget shortfall of 10% for the current fiscal year (ends June 30) and for the shortfall to grow to 25% for fiscal 2021,” Burleson wrote. Tax revenues for states are forecast to drop by 12%in 38 states. he expects these budget shortfalls will motivate states to pass some form of legalization to generate tax revenues.

He cited Massachusetts as a prime example. It’s the only state in the northeast that has an established and growing recreational program. Demand has been strong and New Yorkers have accounted for as much as 50% of the sales. All of that tax money could be going into New York’s state coffers, but instead, it’s staying in Massachusetts. Michigan is seeing similar results. Demand in the state is also coming from residents in Ohio, Indiana, and Missouri who are driving there to make purchases.

Essential

Getting the designation as an essential service and being allowed to remain open during the pandemic further underscores the support for legalization. Despite social distancing, curbside service, and hastily arranged delivery options, dispensaries said that sales remained strong further supporting the demand from state residents.



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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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