Body & Mind Archives - Green Market Report

Debra BorchardtFebruary 13, 2023


The author of a year-end letter to cannabis investors expects smaller cannabis companies to have an easier path than multistate operators going forward.

The letter came from the Bengal Catalyst Fund run by Bengal Capital, which outperformed the cannabis ETF MSOS by more than 2,100 basis points in 2022 and 2,500 basis points since inception – confirming its bona fide to comment on the industry.

Bengal questions the long-term performance of the large MSOs, noting, “Large MSOs often did not become large by being great cannabis growers, processors, and/or sellers, but instead good raisers of money and license applicants – which made sense for early cannabis.”

The authors said that the cost for these MSOs to package and distribute cannabis is more than $1,000 per pound, while smaller, more efficient operators can do the same for $500 a pound. The letter also points out that when faced with strategic decisions, MSOs tended to opt for the immediacy of more production and more sales versus trying to cut costs.

That strategy worked while prices stayed high in emerging market states, especially since MSOs tended to have that early market advantage. However, these markets have matured and many have expanded their licenses adding to more competition. Add falling prices to that equation, and the advantage evaporates.

Mistakes Made

“Many MSOs were not built to turn a profit when pricing becomes even mildly competitive, and the problem has only been exacerbated with their balance sheet choices,” Bengal Capital wrote.

The report highlighted the decision to use REIT financing, where companies sell real estate assets and then agree to lease the property back with rapidly rising rents. One example in the report explains that if a company borrowed $50 million from Innovative Industrial Properties (NYSE: IIPR) at 15% interest, it would need a profit of $7.5 million to pay back IIPR – and that’s before rent payments. This was easy in the salad days, but as the prices fall and the rent rises, watch out.

The report goes on to suggest that these large cultivation facilities built by MSOs don’t necessarily result in lower costs and that quality is harder to control in a large facility.

Bengal Capital also questioned how the large MSOs have spent money on acquisitions. It pointed to Curaleaf (OTC: CURLF) likely having spent $100 million on its West Coast businesses only to shut them all down. The company was essentially spending $2 for every $1 dollar that was coming in and suggesting that was just how the market dynamics were working.

At the same time, Bengal Capital points out that Grown Rogue in Oregon doesn’t seem to be facing the same problems Curaleaf cites.

“We see investors running for the door and large MSOs running into significant business issues. We see unloved, high-quality cannabis companies that are grinding away almost completely ignored,” Bengal wrote.

Small Cap Focus

The company points to the beer industry as a comparison. Craft beer accounts for only 13% of industry volume, but it makes up 26% of the revenue. The letter made it clear that these aren’t stock recommendations and calls the group its “Scrappy Operator Club.” They include:

  • Grown Rogue (OTC: GRUSF), craft cannabis in Oregon
  • Urban-Gro Inc. (Nasdaq: UGRO), cannabis facility operator
  • XS Financial (OTC: XSLF), cannabis specialty finance focused on equipment leasing
  • Body & Mind (OTC: BMMJ) cannabis operations in Arkansas, California, Nevada, and Ohio.

Bengal disclosed that it put together a special purpose vehicle investment of $3 million convertible debt in Body & Mind, with just over $1 million from a side pocket of the fund.

Bengal said that it once believed in the large MSO story. The company now believes it will see better returns by focusing on high-quality, smaller, and overlooked companies. While some MSOs will do well, Bengal thinks it will be harder to reliably predict their performance.

Debra BorchardtJune 21, 2022


Once upon a time, owning a cannabis company seemed like a sure bet. Even if you couldn’t make the business work, there was always an option to sell it. So many people have been desperate to get into the cannabis industry that they were willing to pay just about any price. In other words premium prices regardless of whether the business warranted it or not. Now as the bear market in stocks seems to have some staying power and competition in some cannabis markets is heating up, prices for these businesses is dropping.

Body & Mind

The latest price cut is Body and Mind Inc. (CSE: BAMM) (OTCQB: BMMJ) cutting the price it is paying on the Seaside dispensary purchase agreement. The company, through its wholly-owned subsidiary, DEP Nevada, Inc. agreed to buy the Reef dispensary in Seaside California on November 30, 2021, and has been operating the dispensary since December 1st, 2021. DEP has executed the first amendment to drop the cash purchase price of the transaction and to issue shares of common stock having the same value as the cash reduction. The transaction has been changed to reduce the cash purchase price from $2.5 million to $1.25 million. Instead, the company will issue $1.25 million worth of shares. The Body & Mind stock price has fallen from roughly 32 cents at the beginning of 2022 to recently selling at approximately 13 cents per share.

“The combination of our recent debt extension, pausing our Michigan cultivation and reduced cash payment for the Seaside dispensary are designed to strengthen the Body and Mind balance sheet for future development,” stated Michael Mills, CEO of Body and Mind. “We continue to focus on our cultivation, manufacturing, and retail operations as we expand our brand and wholesale business and develop new strains and innovative products.”


Last week, HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) announced that it changed its agreement with Tilray Brands, Inc. (Nasdaq | TSX: TLRY) and HT Investments MA LLC. Citing specifically “current stock market conditions”  the three companies agreed to reduce the minimum liquidity interim covenant and closing condition from $100 million (approximately C$129 million) to  $54 million (approximately C$70 million.) The press release also kept mixing currencies throughout the announcement making it confusing for readers and forcing continuous currency conversion calculations to understand what was happening. For example, the press release wrote, “reduce the Amendment Share Price (as defined in the Transaction Agreement) from $0.54 to C$0.40.” Using a currency calculator, the price cut is really dropping from 54 cents to 30 cents, but if you switch in the Canadian dollar amount it doesn’t look as bad.

“The strategic partnership with Tilray Brands significantly improves HEXO’s capital structure and provides the opportunity to accelerate our growth in global markets,” said Charlie Bowman, President & CEO of HEXO. “Challenging stock market conditions have necessitated amendments to the agreement, but this is a critical step in unlocking the shareholder value held within the Company.”

Deals Are Down

According to Viridian Capital Advisors, as of May 4, 2022 only 84 M&A (merger & acquisitions) deals have occurred year-to-date versus 120 in 2021. Overall, the combination of debt and equity capital raise deals for 2022 only adds up to $1.9 billion versus 2021’s total of $5.8 billion for the same time period. 2022 has only seen 99 capital raise deals versus 2021’s 208 deals. Considering the country was still under the cloud of Covid, the numbers for 2021 are pretty impressive.

Putting the blame on stock prices is definitely relevant, but cannabis stock prices also tumbled in 2021. The year started strong in 2021, but stocks plunged after February and never recovered. A hopeful outlook that stock prices would eventually recover may have fueled the optimism of 2021 – only it never happened. The cannabis ETF Advisor Shares Pure U.S. Cannabis  (NYSE: MSOS) is down 54% year-to-date and is down 71% from its 52-week high.


StaffDecember 24, 2019


Body and Mind Inc. (CSE: BAMM) (OTCQB: BMMJ) reported the first-quarter 2020 revenue of $1.44 million, which represented its Nevada operations only. The net loss for the quarter was $896,797 which ended October 31, 2019. The basic and diluted loss per share of $0.01.

“We continue to expand BaM’s geographic footprint developing new, fully-funded facilities comprising retail, production, and cultivation,” stated Michael Mills, President and Interim CEO of Body and Mind. “Our deep cannabis and development experience has been decisive in our success advancing production and cultivation capacity in Nevada, co-developing a new dispensary in Arkansas and developing the ShowGrow San Diego dispensary. The Company continues to execute on its growth strategy, including submitting new state license applications, upgrading and expanding existing assets, and evaluating attractive acquisition opportunities. We look forward to updating you on our continued progress throughout fiscal 2020.”

The company said that the quarter’s income from Ohio would be treated as equity pickup. Ohio is now fully operational and but is currently only 30% indirectly owned by BaM. Body & Mind said it expects it will consolidate revenue from ShowGrow Long Beach when local and state licenses to conduct medical and adult-use commercial cannabis retail operations are issued to NMG Long Beach.

The company is set to expand into Arkansas with in-state partner, Comprehensive Care Group LLC, for a dispensary and fifty plant cultivation facility. The construction of the fully-funded medical marijuana dispensary in West Memphis, Arkansas, and all pre-construction activities have been completed. Work in progress includes final HVAC, drywall.

On October 31, 2019, BaM had $6.89 million in cash and $8.29 million in working capital surplus.

Debra BorchardtDecember 21, 2017


Hot off of a strong first-quarter earnings report, Friday Night Inc. (TGIFF) said it was acquiring Nevada-based Body & Mind (BMMJ) in an all-stock transaction valued at C$115 million a 50% premium over Body & Mind’s recent closing price of $1.54. The Body & Mind shareholders will receive shares in Friday Night Inc.

The deal is expected to be immediately accretive to cash flow and the combination of the two companies will make it one of the larger cultivation and production companies in Nevada. The merger will result in roughly 130,000 square feet of projects under development.

Management Comments

“This transaction advances Friday Night into a leading position in what many believe is the best cannabis market in the world,” said Brayden Sutton, Chief Executive Officer of Friday Night Inc. “Unlike so many competitors that promise to deliver profits well in the future, we are able to deliver them now and in real time. We see a huge opportunity for further consolidation as well.”

Robert Hasman, Body & Mind President commented, “This is a meaningful win for our stakeholders but is only the beginning of consolidation here in Nevada.  The financial strength of a combined entity will enable us to continue to do more transactions at a rapid pace with the ultimate goal of driving down costs, expanding product lines, and servicing our customers.  I would like to thank our staff and shareholders and the overwhelming support from the investment community for this transaction.”

The Companies

Friday Night Inc. is a Canadian public company, which owns and controls cannabis and hemp-based assets in Las Vegas Nevada.  The company owns 91% of Alternative Medicine Association, LC (AMA), a licensed medical and adult-use cannabis cultivation and production facility that produces its own line of unique cannabis-based products and manufactures other third-party brands.  Infused MFG, also a 91% owned subsidiary, produces hemp-based, CBD products, thoughtfully crafted from high quality organic botanical ingredients.  Friday Night Inc. is focused on strengthening and expanding these operations within and outside of the state.

Body and Mind is a Nevada corporation which is publicly traded on the Canadian Securities Exchange. The Company was an early State of Nevada applicant in 2014 and was awarded one of the first state medical marijuana licenses for both cultivation and production. BAMM produces flower, oil extracts and edibles in its current facility and expects within the latter part of 2018 to be managing operations in facilities providing approximately 50,000 square feet.

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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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