Business Archives - Green Market Report

StaffAugust 11, 2022
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9min3650

The Daily Hit is a recap of cannabis business news for August 11, 2022.

ON THE SITE

Cannabis Consumption on Track to Beat Alcohol

As talks revolving around the federal legalization of cannabis splinter in Congress, the question of whether cannabis 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. Read more here.

Akerna Misses on Revenue, Bookings Down

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. Read more here.

Aleafia Watches Revenues Rise in Canada, Looks Across the Pond

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. Read more here.

Goodness Growth Beats on Revenue, Sees Sales in Emerging States

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. Read more here.

Why Psychedelic Cannabis is a Thing Now

The idea of a cannabis product creating a sort of psychedelic experience is not a new one. There was a prevailing, fictional description back in the early part of the last century—encouraged by the 1936 film “Reefer Madness”—where people feared that was what all cannabis did. It freaked you out. Caused you to do unspeakable things. Run amok. Destroy property. Read more here.

IN OTHER NEWS

Leafly Holdings, Inc.

Leafly Holdings, Inc. (NASDAQ: LFLY), an online cannabis discovery marketplace and resource for cannabis consumers, today announced financial results for its second quarter ended June 30, 2022. “Revenue in the quarter was $12.1 million, up 13.8% over Q2 last year, and up 5.5% over Q1 as we continue to build on the investments we’ve made in the first half of this year.” Read more here.

Clever Leaves Holdings Inc.

Clever Leaves Holdings Inc. (Nasdaq: CLVR, CLVRW), a multinational operator and licensed producer of pharmaceutical-grade cannabinoids, is reporting financial and operating results for the second quarter ended June 30, 2022. All financial information is provided in US dollars unless otherwise indicated. Read more here.

Forian Inc.

Forian Inc. (Nasdaq: FORA), a provider of technology, analytics and data science driven solutions for the healthcare and cannabis industries, today announced results for the quarter ended June 30, 2022. Read more here.

Schwazze

Schwazze, (OTCQX: SHWZ) (NEO: SHWZ), today announced financial results for the second quarter ended June 30, 2022. Revenues of $44.3 million increased 44% compared to $30.7 million in second quarter ended June 30, 2021. Read more here.

CEA Industries Inc.

CEA Industries Inc. (NASDAQ: CEAD, CEADW) a company in controlled environment agriculture (CEA) systems engineering and technologies, is reporting results for the three months ended June 30, 2022. Read more here.

Agra Ventures Ltd.

Agra Ventures Ltd. (CSE: AGRA) (Frankfurt: PU31) (OTCPK: AGFAF), a growth-oriented and diversified company focused on the international cannabis industry, announced that its Board of Directors has approved the Company’s issuance of 240,420 common shares at a deemed price of approximately $0.12 per Share as payment of the portion of the quarterly amount of interest due in Shares on a loan entered into in December of 2020. Read more here.

Ayr Wellness Inc.

Ayr Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF), a vertically integrated U.S. multi-state cannabis operator, announced that the Massachusetts Cannabis Control Commission (CCC) has granted a final license for adult-use cannabis at its Sira Naturals dispensary in Somerville. The company also received approval to open the first phase of its cultivation expansion in Milford, Massachusetts. The CCC voted to approve both measures during its meeting on August 11, 2022. Read more here.

Cookies

Cookies today announced its in Florida’s medical cannabis market with the opening of Cookies Miami, the brand’s 52nd dispensary, in a location convenient to the airport and downtown. The new 3,100 square-foot location will host a unique menu featuring Cookies’ highly sought-after genetics and custom Cookies SF local reserve merchandise. Read more here.

Christina Lake Cannabis Corp.

Christina Lake Cannabis Corp. (CSE: CLC) recapped its second quarter financial results for the six-month period ended May 31, 2022. All amounts are expressed in Canadian dollars unless otherwise noted. Read more here.

Allied Corp.

Allied Corp. (OTCQB: ALID), as a part of the previously announced export approval of 7100kgs of Colombia-grown cannabis, Allied has today shipped 1728kgs to Switzerland. This will be followed by 1500kgs weekly until the 7100kg threshold is met. Read more here.

Pyxus International, Inc.

Pyxus International, Inc. (OTC Pink: PYYX), a global value-added agricultural company, today announced results for its fiscal quarter ended June 30, 2022. Read more here.

Reunion Neuroscience Inc.

Reunion Neuroscience Inc., (formerly, Field Trip Health Ltd.) (TSX: FTRP, Nasdaq: FTRP) and Field Trip Health & Wellness Ltd. announced the closing of the plan of arrangement spinout transaction, including the corporate reorganization effected thereby, effective August 11, 2022. Pursuant to the arrangement, holders of common shares of the company exchanged their company shares for one new common share of the company and received 0.85983356 of a Field Trip H&W common share. Read more here.


Adam JacksonAugust 11, 2022

7min2690

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.”


Debra BorchardtAugust 11, 2022
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Glass House Brands Inc. (OTCQX: GLASF and GHBWF) reported financial results for its second quarter ending June 30, 2022, with sales falling by 12% to $16.5 million from $18.7 million for the same time period in 2021. On a positive note, sales increased 18% sequentially from $14.0 million in the first quarter. the loss from operations was $17 million, which increased sequentially from the first quarter’s loss of $13 million.

“We continued to make solid progress against our strategic growth priorities during the second quarter, “stated Kyle Kazan, Chairman and CEO of Glass House Brands, “The initial harvest
from our SoCal farm was completed in late May followed by the first sales of cannabis grown at the facility in June, both well ahead of schedule and significantly faster than the previous ramp up of our Casitas and Padaro farms. Over the past few years, our Casitas and Padaro farms have established a strong reputation for consistently growing high quality cannabis at a low cost. So, I can’t emphasize enough how thrilled we are that the SoCal farm is already producing cannabis with a higher and more consistent quality than the Casitas and Padaro farms. In addition, it has shown particular promise at growing high quality genetics at extremely close to indoor quality. Volume has ramped quickly and in July we produced 22,000 pounds of biomass across all three facilities, compared to a total of 25,000 pounds in the entire second quarter.”

Guidance Is Rich

Glass House is forecasting that in the third quarter it expects to achieve revenues of between $27 million and $30 million which is a 64% to 82% increase vs. the second quarter this year. “This assumes the wholesale pricing we are currently experiencing in Q3 remains constant through the balance of the quarter. Our Q4 revenue target is $50M and assumes Q4 wholesale pricing remains consistent with Q3 and includes revenue from our NHC acquisition as well as a partial quarter for our new Farmacy stores.” The company is also forecasting that it will triple its revenues to $200 million by 2023. The company is also forecasting it will be free cash flow positive by the first quarter of next year.

“Our aggressive retail expansion also remains firmly on track and we are on pace to have at least 11 dispensaries by year-end 2022, up from three just over a year ago when we started our
life as a public company. We closed our acquisition of the remaining 50% equity stake in The Pottery Dispensary in July and expect to open three new Farmacy locations in the fourth quarter. In May, we announced the acquisition of three Natural Healing Center (“NHC”) dispensaries and we are moving forward on closing these acquisitions. In addition, we are very happy to announce that we have agreed to acquire Natural Healing Center’s flagship Grover Beach store for $15.9 million, with $8.1m of the purchase price in assumed debt, $7.7 million in stock and $0.1 million in cash net of working capital. The Grover Beach store is the crown jewel of NHC’s dispensaries and netted US$16m in revenues in 2021. It is one of only four total dispensaries in Grover Beach and is the No. 1 taxpayer in the city, given its high sales volume and strong cash flow generation. The deal multiple based on the annualized EBITDA of the Grover Beach store in the first half of 2022 is 4.8x.”

Looking Ahead

Glass House said it has a long-term target of reducing cultivation costs to $100 per pound. The company said, “The management team is now ready to provide projections for the average cost of production across all 3 farms of $150 per pound for Q3 and $125 per pound for Q4 of this year. Please note that the SoCal farm is completing its ramp up through Q3. The projected improvement to $125 per pound in Q4 represents a 25% reduction from Q4 last year.”


Adam JacksonAugust 11, 2022
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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.”


Debra BorchardtAugust 11, 2022
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Leafly Holdings, Inc.  (NASDAQ: LFLY) announced financial results for its second quarter ending June 30, 2022. with revenue rising 13.8% to $12.1 million over last year’s $10.5 million for the same time period. Leafly attributed the increase to growth in retailer and brand revenues. The company reported a net income of $14.8 million, which included $24.4 million of gains on derivative liabilities, compared to a net loss of $1.3 million for the same quarter last year.

“Revenue in the quarter was $12.1 million, up 13.8% over Q2 last year, and up 5.5% over Q1 as we continue to build on the investments we’ve made in the first half of this year. We released several new enhancements that drive consumer engagement and differentiation. In addition, we’re also bringing more tools, greater flexibility, and reduced friction to retailers and brands, creating a seamless experience between consumers and our supply partners,” said Yoko Miyashita, CEO of Leafly. “Our investments to date have positioned us for long-term growth as the industry continues to evolve at a rapid pace, leaving significant opportunity in our path. Despite the uncertainties of the current macro-economic environment, we remain committed to maximizing efficiencies and prioritizing projects that will result in the highest returns.”

During the quarter, all licensed dispensaries in New Jersey subscribed to the Leafly platform and published their menus, giving residents a single platform to shop the menus of every legal dispensary in the state. In many cases, residents can place an online order for in-store pickup. New Jersey began legal adult-use sales in April.

“We made progress in the quarter on our long-term objectives. Concurrently, we have encountered challenges in our less mature markets and seen signs that customers are more cautious with their ad budgets,” said Suresh Krishnaswamy, CFO of Leafly. “We remain focused on our execution and managing our expenses carefully.”

Statistics

Year over year, ending retail accounts grew, and ARPA (average revenue per account) declined, as a result of Leafly’s strategy to lower entry point subscription fees in order to rapidly expand in lower penetrated markets. Monthly average users or MAUs increased quarter over quarter, highlighting the strength of news and learn content, technical improvements to SEO and the Company’s expertise in the cannabis category. In Q2 2021, MAUs reflected an increase in user traffic primarily as a result of the pandemic.

Looking Ahead

Leafly noted that during the second quarter, it began to see some macro-economic impacts on the business, with signals from retailers and multi-state operators that their advertising budgets are under scrutiny. The company said, “In light of the current macroeconomic environment, we are taking a more conservative view of the second half of the year and are taking steps to manage the business accordingly. We are implementing plans to reduce operating expenses and have implemented a hiring freeze.”

For the full year of 2022, Leafly said it expects revenue to be in the range of $48.0 million to $51.0 million, representing 15% growth over 2021 at the midpoint. “We expect Adjusted EBITDA loss to be in the range of $28.5 million – $26.0 million.”


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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3min3280

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 cannabis 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 their 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 distribution agreement 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, but there really aren’t that many sanctioned spaces outside the home to try cannabis and share cannabis with your friends,” Sava added. “I think this is an area that is ripe for evolution and will continue to grow.”


Dave HodesAugust 11, 2022
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The idea of a cannabis product creating a sort of psychedelic experience is not a new one. There was a prevailing, fictional description back in the early part of the last century—encouraged by the 1936 film “Reefer Madness”—where people feared that was what all cannabis did. It freaked you out. Caused you to do unspeakable things. Run amok. Destroy property.

While the reality of how cannabis affects humans is now backed by real science, there are real studies today linking cannabis use to psychotic episodes which sound like a classic bad trip on a psychedelic, including feelings of deep paranoia and visual hallucinations.

It almost seems like cannabis developers want to tap into a more mind-bending experience for their consumers.

Psychedelics + THC

A cannabis company, CaaMTech, Inc, is even looking to develop a psychedelics-plus-cannabis line of products. According to a press release announcing the patent on the product, CaaMTech has shown that cannabinoids work synergistically with psychedelic tryptamines to produce their effects.

Researchers are warning that stronger strains of cannabis available at dispensaries now can create more head-buzzing psychedelic-like experiences that may be overwhelming for consumers. And there are new trendy cannabinoid concentrate products such as sugars and diamonds on the market that are some of the strongest “designer” cannabis products ever made. A sugar product can have 60-90 percent pure THC.

THC-O

Now comes THC-O, or THC-O acetate, an unregulated hemp derivative synthesized from Delta 8 THC extractions, that is finding its way into CBD shops that also sell quasi-legal Delta 8 THC products. Researchers are saying that THC-O is three times more potent than Delta 8 THC, offering a trippy experience that is every bit as powerful as the experience offered by a magic mushroom.

THC-O is reportedly chemically almost identical to Delta 9 THC, which is the intoxicating compound of the cannabis plant. And its effects are very similar to Delta 9. But because it binds more tightly to the body’s cannabinoid receptors than the other THC forms, THC-O is more intoxicating than both Delta 8 and Delta 9 THC. 

Many users describe THC-O as producing an almost psychedelic high, with borderline hallucinogenic effects. 

The effects of THC-O are always delayed. It’s a so-called “prodrug,” which means that the THC-O you swallow or inhale isn’t pre-activated by heat like most THC (the process called decarboxylation). Instead, the effects of THC-O aren’t felt until it’s been fully processed through the body—just like THC edibles—which could lead to accidental higher dosing and thus, more psychedelic-like effects.

For now, merchants are enjoying a surge in sales of THC O products, available in many CBD stores selling Delta 8 THC products, but also online. 

For example, some cannabis businesses calling themselves dispensaries in the Chicago area are now selling THC-O in pre-rolled joints, vape cartridges, edibles, and other forms.

Sales copy on one online store reported that, once THC-O kicks in after about an hour, “the effects are long-lasting, intensely immersive, and cerebral. Users have shared that it stimulates pleasant spiritual-type sensations.”

There has been little actual lab research on THC-O, and there are other concerns cropping up as its popularity grows. ACS Laboratory, a DEA-licensed laboratory that can test for a 22 different cannabinoids, has created a test for THC-O to help determine the level of chemicals in the product, especially the effects of acetic anhydride—a highly corrosive chemical which can burn skin and cause possible lung and eye damage—which is used to synthesize THC-O from THC Delta 8 (and Delta 9) extracts.

As the popularity of THC-O grows, lawmakers are taking notice. For example, South Dakota legislators just passed a bill regulating THC-O (HB 1292). But for the most part, THC-O is riding under the law enforcement radar.

Science is working to catch up on what THC-O really is, and what it really does. But for now, it looks like you can legally trip your way through the shadows of your mind with a cannabis-based product you get at your local CBD store. Enjoy? Or.. beware.


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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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