Adam JacksonApril 24, 2023
All C4 Lab employees will join the SC Labs team.
Arizona Archives - Green Market Report
Adam JacksonApril 24, 2023Adam JacksonMarch 30, 2023
New markets help drive sales upward.
Adam JacksonMarch 22, 2023
Company is focusing on Ohio for growth.
Adam JacksonMarch 9, 2023
The new business strategies will look to stave off cash burn in the coming quarters.
Adam JacksonAugust 22, 2022
The Greenrose Holding Company Inc. (OTC: GNRS, GNRSW) posted increasing losses for the consecutive quarter as its cultivators navigate demand headwinds. The multi-state cannabis SPAC (special purpose acquisition company) reported its second-quarter financials ending June 30, 2022.
While Greenrose reported approximately $9.2 million in rising revenue during the period, the company’s second-quarter net losses totaled $10.3 million, down 132% sequentially; versus a net income of $3.3 million in the same period last year. The earnings were a loss of $0.63 cent per share versus a loss of $0.92 cents in the first quarter.
The company attributed the loss to production interruptions at True Harvest and demand headwinds in the Connecticut market, as well as increased interest expense of $6.9 million, purchase accounting fair value inventory step-up of $2.2 million and intangible amortization expense of $4.0 million.
Theraplant said its second quarter revenues decreased year-over year as a result of “sustained demand headwinds in Connecticut’s medical market, as well as increased competition and impacts from the state’s illicit market.”
The company attributed True Harvest’s second quarter-revenue to production disruptions “stemming from construction on our additional grow rooms.”
“While we continued to incur higher costs associated with ramping our expanded cultivation capacity at both True Harvest and Theraplant, we believe this work improves our positioning for improving our operations in Arizona and preparing for Connecticut’s forthcoming recreational market, respectively,” CEO Mickey Harley said. “As we progress into the second half of 2022, we remain focused on leveraging our existing production efficiencies to deepen and expand our presence in our existing state markets.”
In Connecticut, Greenrose said that the company and its partners tried to apply for four retail licenses and two hybrid retail licenses as part of the state’s equity joint venture (EJV) program, but were denied Connecticut’s Social Equity Council.
“We are working to address deficiencies in the applications,” the company said.
Greenrose posted second-quarter adjusted EBITDA of $3.1 million versus $4.6 million in the prior year quarter. The company said the slump was “primarily driven by the aforementioned lower level of gross profit generated during the quarter, higher corporate general and administrative expenses, and costs related to ramping the Company’s production capacity at Theraplant and True Harvest.”
The company recorded cash and cash equivalents combined with restricted cash at $2.7 million versus to $9.1 million in the period ending December 31, 2021. It said the decrease was driven by acquisition-related expenses and debt obligations.
Greenrose suspended its previously stated full year 2022 guidance “Due to regulatory delays surrounding the expected timing of Connecticut’s recreational cannabis market…The Company expects to re-evaluate and provide further updates on its 2022 outlook as regulatory visibility improves.”
Adam JacksonAugust 11, 2022
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 Minnesota, New 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.”
Debra BorchardtOctober 12, 2020
The hydroponic store chain GrowGeneration Corp. (NASDAQ: GRWG) is making a big bet on the Arizona market. The company announced that it was buying Hydroponics Depot, Phoenix’s largest indoor and outdoor garden center. The company did not disclose how much was paid for the company and whether the deal was stock or cash or a combination.
The acquisition of Hydroponics Depot brings GrowGen’s portfolio of hydroponic garden centers to 29 stores across 11 states. “We’re excited to add Hydroponics Depot to our growing portfolio, with year-to-date sales in excess of $5 million and year-over-year growth at 50 percent,” said Tony Sullivan, GrowGen’s COO. “Importantly, it represents our 11th state and our first retail operation in Arizona, a key market in GrowGen’s growth plan. We see tremendous potential from both a medical and recreational standpoint.”
GrowGen pointed out that its entry into the Arizona market comes as voters consider Prop 207, which would legalize limited possession, cultivation, and use of marijuana for adults ages 21 years or older. If approved, it is estimated that Arizona’s cannabis market could grow from over a $700 million market in 2020 into a $2 billion market, including both recreational and medical marijuana. Retail sales of medical marijuana products in the state rose nearly 20% from January to May, according to the Arizona state estimates.
Hindenburg Research Fallout
The company has been relatively quiet since August’s report from well-known short-seller Hindenburg Research that questioned the company’s management team in a report. The company has chosen several cannabis companies over the years to write damning reports typically after the company has shorted shares with the goals of making existing shareholders sell. Then Hindenburg buys back the stock to cover its short at the lower price and thus making a profit.
The report doesn’t find fault with the company’s financial statements and indeed calls the company’s latest quarter “impressive” and called the business model”interesting.” It takes issue with the price of the shares being overvalued and felt that there should be a correction in the price of the company stock. However, it saved most of its criticism for the company’s executive team, which it accuses of having unsavory ties to past criminal behavior involving stock fraud.
GrowGeneration said it planned to take action against Hindenburg. Schall Legal firm had planned to investigate claims against GrowGeneration, but following a letter from GrowGeneration has had a change of heart and announced at the end of August it was no longer pursuing that investigation.
The stock fell from a year’s high of $22.88 following the report, but was beginning to recover and was lately trading at $18.86 as the stock moved higher in early trading on the news of the Arizona acquisition.
Debra BorchardtSeptember 15, 2020
Arizona-based Fibonacci Brands is buying the cannabis company Darwin Brands from Harvest Health and Recreation (OTC:HRVSF) for an undisclosed amount. Darwin is part of the Arizona Natural Selections company and its products include Caramel Hard Candies, Seriously Good Gummies and award-winning vapes.
In February 2020, Harvest acquired AZ Natural Selections in a deal valued at approximately $30 million, the issuance of a $6.6 million promissory note and it assumed $3.8 million in debt at closing and paid off another $2.9 million at closing. The acquisition provided Harvest with two operational cultivation facilities: a 55,000 sq. ft. indoor cultivation and production facility in Phoenix and a 322-acre site of which 25 acres are zoned for cannabis with 70,000 square feet of greenhouse in Willcox.
“We are thrilled with the opportunity to execute the vision of Darwin: to reintroduce humanity to cannabis, with integrity, so everyone can ‘Enjoy with Confidence,’” says Fibonacci Brands founder James George. “We thank everyone who has supported Darwin over the years, and we are excited to evolve our products to make Darwin even more accessible to the cannabis community.”
Darwin has won Best Vape at the Errl Cup and Best CBD Edible at the 710 Cup. Its brand icon, named Darwin is a lifelike lion dressed in a vintage suit. The company said that production and distribution will soon recommence in Arizona. Should voters enact adult-use consumption through Proposition 207 in November, the company said that Darwin is primed, given its proud roots in the state, brand appeal, quality products, and its “Origin Series,” which ensures new consumers avoid an overwhelming first-time cannabis experience. Deriving its name from a mathematical principle that underlies the structure and beauty of nature, Fibonacci Brands’ vision is to craft an international house of brands that delivers the myriad benefits of cannabis.
“We have a big vision: to provide every consumer that comes into contact with cannabis their best possible experience through products they trust and brands they love, no matter the occasion,” says George. “Our desire to fulfill cannabis consumers’ needs fires our purpose.” The company’s team says it includes veterans of the cannabis and marketing industries who have launched products in global markets, built global brands but does not name these veterans.
Harvest Health Arizona Dominance
Harvest Health is based in Arizona and is one of its largest operators. As of June, the company had 14 retail locations in the state, plus an indoor and outdoor growing facility along with a processing lab. The company’s website currently lists 15 retail locations. When Harvest Health acquired AZ Natural Selections, it was seen as a move to buy up its competition. Harvest and Curaleaf now control one-sixth of the state’s 131 dispensaries and nine MSOs have captured approximately 30% of the market share in the state.
Harvest has been on a dizzying pace for acquisitions and divestments. Earlier this year, the company made fast work of its acquisition of $85 million acquisition of Interurban Capital Group, which it then sold to another party within two months. However, Harvest Health is tied up in a lawsuit with the original owner of ICG.
William SumnerDecember 12, 2018
Earlier this week, the cannabis technology platform LeafLink released its 2018 Wholesale Cannabis Pricing Guide and the company learned that Alaska and Maryland are the two most expensive states to buy legal cannabis, followed by Nevada and California.
Examining the wholesale landscape of some of the most mature cannabis markets in the United States, the guide looks at the average wholesale price of cannabis in eight states: Alaska, Arizona, California, Colorado, Maryland, Nevada, Oregon, and Washington. The product types covered by the report include concentrates, cartridges, edibles, flower, and pre-rolls.
Although the report does not dive into the specifics of why one state is more expensive than another, the authors speculate that the Alaska and Maryland’s high prices are due to the states having a low number of cannabis cultivators. In the two states where cannabis is cheapest, Washington and Oregon, there is currently a glut of cannabis cultivators; leading to low prices and oversupply.
“As the standard wholesale marketplace for the industry’s leading brands, we are able to provide crucial market information to cannabis retailers and brands, which will help inform their plans for 2019,” said LeafLink Co-Founder and CEO Ryan G. Smith in a statement. “As more states like Massachusetts, Connecticut, Pennsylvania, and Michigan continue to establish wholesale operations, we will be able to provide a larger scope of market activity to further empower the LeafLink community, as well as the industry at large.”
Nationwide, the average price for a pound of cannabis flower is $2,124 per pound, while a gram of pre-rolls costs around $5.66 per gram. The average price for cannabis concentrates costs approximately $26.07 per gram and cartridges are priced at around $39.55 per gram. Edible cannabis products, on average, cost around $0.20 per milligram.
When taken on a state-by-state level, cannabis prices start to vary. With regards to cannabis consumer preferences, the report found that consumers prefer products in the lowest 25% price range. The exception to this was pre-rolls. On average, consumers preferred pre-roll products in the 25%-49.99% price range.
The report also examined the relationship between pricing and discounted sales. On average, approximately 16% of the products sold through LeafLink’s platform have a discounted price. Across all eight states examined, discounted products generated 3% more sales than regularly priced products.
The discount effect is magnified when combined with larger sales campaigns. During the last year, LeafLink ran two sales promotions, one in the month leading up to 4/20 (dubbed 3/20) and one in July called 7/10; which is a considered an industry-wide “holiday” for concentrates.
When combined with those larger sales campaigns, discounted products generated 37% more sales on 3/20 and 38% more sales on 7/10. This seems to suggest that cannabis retailers stand to significantly boost their sales numbers by combining sales promotions with discounted cannabis products.
Debra BorchardtOctober 3, 2018
MedMen Enterprises Inc. (MMNFF) signed an agreement to purchase Scottsdale-based cannabis company Monarch from WhiteStar Solutions. Monarch is a licensed medical cannabis license holder with dispensary, cultivation and processing operation. In addition, MedMen will acquire WhiteStar’s exclusive co-manufacturing and licensing agreements with Kiva, Mirth Provisions and HUXTON for the state of Arizona.
MedMen will pay WhiteStar approximately 80% in stock and 20% in cash in an undisclosed amount. The stock consideration will be satisfied by way of issuance of shares of MedMen Enterprises, Inc.
“Our strategy has been to establish our brand in the primary markets of California, Nevada and New York,” said Adam Bierman, MedMen chief executive, and co-founder. “We have a leading presence in those primary markets and we are now ready to expand our reach. Arizona, with its robust medical marijuana program and connectivity to California and Nevada where our brand is already strong, makes this a great fit.”
Monarch was founded in 2013 and according to the company statement is among the top medical marijuana dispensaries in the country and is the first cannabis dispensary to break ground in Scottsdale with impressive product offerings in its portfolio and a run rate revenue of over $10 million. Monarch is licensed to operate a 20,000-square-foot cultivation and manufacturing facility in Mesa, Arizona. As a wholesaler in the Arizona market, Monarch distributes branded products to over 60 dispensaries in the state.
Seven Point Acquisition
In addition to the Arizona acquisition, MedMen is also purchasing Chicago-based dispensary Seven Point for an undisclosed amount of cash at closing, deferred cash, and shares of MedMen Enterprises, Inc.
“This acquisition brings the MedMen brand to yet another major stage,” said Bierman. “MedMen has established a presence in the primary markets of California, Nevada and New York. Our strategy has been to put our brand in high visibility commercial districts in popular locations like Beverly Hills, Manhattan, Las Vegas, and Oak Park, just outside Chicago, fits the mold perfectly.”
Originally, MedMen had been expected to remain in the key markets of California, Nevada and New York. However, it recently made a move towards Florida and this week’s acquisitions signal an additional effort to move beyond those heavy tourist locations. Seven Point is located in a high foot traffic shopping district among popular restaurants, cafes and major retailers like Whole Foods, Gap and Pier 1.
“Seven Point is proud of its strong commitment to the local medical patient community and the loyal following we have built over the years,” said Brad Zerman, chief executive of Seven Point. “MedMen will continue that tradition while bringing its industry-leading retail operations and
commitment to quality and service.”
Loan Facility Is Closed
Also this week, MedMen closed a C$93,822,023 (US$73,275,000) senior secured term loan facility with funds managed by Hankey Capital and with an affiliate of Stable Road Capital as the largest loan participant.
The principal amount under the Facility will accrue interest at a rate of 7.5% per year, paid monthly, with a maturity date of 24 months following the date of closing on October 1st, 2018. The Facility will be used for acquisitions, capital expenditures, and general corporate purposes.
“This industry is more investable than ever, and this loan is reflective of that progress. Hankey Capital and Stable Road Capital’s knowledge of this sector and their creativity allowed us to structure one of the first true senior secured loans in cannabis,” said Bierman. “Our
operations in the primary markets of California, Nevada and New York are robust, and now we are turning our attention to the most promising and strategic markets across the country and the industry.”
The loan follows a recent bought deal that raised C$86 million (US$67 million). MedMen may repay the loan at any time and from time to time, in whole or in part, with a prepayment penalty of 1.0 percent of the outstanding principal amount repaid if repaid before December 31, 2019.
MedMen said it is also planning the structured sale to a special purpose real estate entity focused on the cannabis sector of real estate assets it currently owns in key markets.
“MedMen has an unmatched track record of execution in this fast-growing industry,” said Stable Road Chief Investment Officer Brian Kabot. “We are proud to facilitate MedMen’s growth with capital that can enhance value for all stakeholders and we look forward to a long-term partnership.”
Stock Performance
MedMen stock was lately trading at $3.95 on the OTC Markets. It has dropped from its 52-week high of $5.45 but remains above its year low of $2.61. It is trading at C$5.17 on the Canadian Securities Exchange, above the year low of C$2.61 and near the year high of C$5.45.
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