Adam JacksonJune 20, 2023
Net income totaled nearly $412,000.
Grown Rogue Archives - Green Market Report
Adam JacksonJune 20, 2023
StaffMarch 28, 2023
The Daily Hit is a recap of the top financial news stories for March 28, 2023.
On the Site
Judge Narrows New York Retail Licensing Injunction to One Region
An injunction issued by a federal judge in November that has stalled retail cannabis licensing in five of New York’s regions has been narrowed now to just one – the Finger Lakes. That means marijuana retail licenses can now be awarded by the state Office of Cannabis Management in the other four regions, which include Brooklyn, Central New York, Western New York and the Mid-Hudson areas. Read more here.
Eight Cannabis Companies Sue Georgia, Allege Fraud, Corruption in Licensing
A coalition of eight companies that submitted bids for medical marijuana licenses in Georgia have filed suit against the state, alleging that the permitting process was corrupt and fraudulent and asking a judge to set aside the license awards. Read more here.
Massachusetts’ MCR Labs Accuses Control Board of Harassment
The CEO and founder of Massachusetts cannabis testing company MCR Labs is accusing the state’s Cannabis Control Board of harassing and intimidating employees, disregarding safety protocols, and compromising their facility’s testing integrity during an unannounced inspection last week. Read more here.
Canopy Growth Fined C$15 Million for Breach of Contract
Canada’s Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC) has been ordered by an arbitration tribunal to fork over C$15 million to an unnamed counterparty for breach of contract, the company disclosed this week in a regulatory filing. Read more here.
Leaf Trade, Sweed to Merge Into ‘B2B2C’ Cannabis Tech Platform
Nevada-based cannabis tech companies Leaf Trade and Sweed will merge into a new yet-to-be-named business entity, with Leaf Trade CEO James Yi at the helm. The combined company, Yi said, will result in a new “B2B2C” tech platform that is unique to-date in cannabis. Read more here.
Grown Rogue Gets Boost from Michigan Sales
Grown Rogue International Inc. (CSE: GRIN) (OTC: GRUSF), reported its fiscal first quarter 2023 results for the three months ended Jan. 31, 2023. Grown Rogue‘s revenue grew 21% to $4.5 million versus last year’s $3.7 million in the same time period. The company also reported a net income of $592,000. Read more here.
SNDL to Buy Dutch Love, Delays Earnings
SNDL Inc. (Nasdaq: SNDL) reported that it has entered into an agreement with Lightbox Enterprises Ltd. to buy four cannabis retail stores operating under the Dutch Love Cannabis banner in a deal valued at $7.8 million. the deal is expected to close by the end of May 2023. Read more here.
In Other News
Texas
Last week, the Texas House Committee on Public Health unanimously approved a bill to increase the THC limits in medical cannabis and expand who is eligible to use it. On Tuesday, goodblend — a state-licensed medical marijuana operator — opened its first dispensary location in Austin. It’s only the third medical marijuana retail location to open in the Lone Star State. Read more here.
Wu-Tang Clan
Newark, New Jersey’s Central Planning Board stomped on a lot of buzzes Monday night, denying an application by Wu-Tang Clan’s Raekwon to open a cannabis lounge a block from the Prudential Center arena after church elders protested and one board member complained that the rendering was offensive. Read more here.
Debra BorchardtMarch 28, 2023
Grown Rogue International Inc. (CSE: GRIN) (OTC: GRUSF), reported its fiscal first quarter 2023 results for the three months ended Jan. 31, 2023. Grown Rogue‘s revenue grew 21% to $4.5 million versus last year’s $3.7 million in the same time period. The company also reported a net income of $592,000.
“We continue to demonstrate our operating abilities by generating substantial free cash flow margins while operating in extremely competitive markets. Our financial results for Q1 2023 were improved from Q4 2022 due to of our continued pursuit of operating efficiencies, and a modest increase in average wholesale pricing in Oregon,” said Obie Strickler, CEO of Grown Rogue.
The company reported operating cash flow, before changes in working capital, of $1.3 million, compared to $500,000 in the 2022 first quarter, an increase of 176%. The free cash flow was $800,000, after $400,000 was spent on working capital and capital expenditures.
While the news was positive, the company still lists itself as a going concern and has historically incurred net losses. The company’s accumulated deficit was approximately $19.5 million.
“As we move forward, we are proactively ramping up our genetics programs in both Oregon and Michigan to make sure we stay on the front line of delivering industry-leading quality to our consumers. We believe that our philosophy and practice of constant iteration and improvement will engender more customer trust and deepen the relationship we have with our existing fans,” Strickler continued.
Michigan Sales Jump
Sales in Michigan grew from $3.7 million in 2022’s first quarter to $4.1 million. Sales in Oregon fell from last year’s $4.7 million to $4.4 million as expenses increased slightly.
During the year ended Oct. 31, 2021, the company leased Lars, a facility in Medford, Oregon, that is owned by the CEO, with a term through June 30, 2026. Lease charges for Lars of $46,814 (2022 – $45,450) were incurred for the fiscal first quarter. The lease liability for Lars on Jan. 31, 2023, was $575,375 (October 31, 2022 – $607,900).
“Regarding capital allocation, we continue to focus on producing free cash flow to best position ourselves to meet our balance sheet obligations while being prepared for new market opportunities, using only a modest amount on increased working capital,” Strickler said. “With our internal cash generation and the recent $2 million convertible debenture capital raise, we feel confident in our ability to take advantage of high-quality opportunities as they arise.”
CEO Spouse Deal
The company also disclosed in its quarterly filing that during the quarter, Grown Rogue incurred expenses of $23,077 (2022 – $15,000) for services provided by the spouse of the CEO.
According to the filing, on Jan. 31, accounts and accrued liabilities payable to this individual were $3,846 (October 31, 2022 – $1,154). The spouse of the CEO was granted 500,000 options during the quarter.
During the quarter 1,500,000 options were granted to the CEO; 750,000 options were granted to the CFO; and 750,000 options were granted to the SVP.
StaffMarch 1, 2023The Daily Hit is a recap of the top financial news stories for March 1, 2023.
On the Site
Cowen Will No Longer Cover the Cannabis Sector
Cowen Group was one of the first major financial institutions to cover the cannabis industry on the equity research side, but on Wednesday, TD Bank Group (TSX: TD) (NYSE: TD) announced on Wednesday that it completed its acquisition of Cowen Inc. (Nasdaq: COWN) and subsequently dropped coverage. Read more here.
Riv Capital Third Quarter Revenue Flat, CEO Leaves
RIV Capital Inc.‘s (CSE: RIV) (OTC: CNPOF) CEO Mark Sims left the company, effective immediately. The company made the announcement alongside its financial results for the quarter ending Dec. 31, 2022. Revenue for Riv Capital’s fiscal third quarter (which is essentially sales from New York medical operator Etain) was $2 million, only a slight improvement over second-quarter revenue of $1.9 million. Read more here.
Other cannabis earnings reports:
SEC Orders Adam Nugent, FWM to Pay $3 Million over Cannabis Investment Scheme
The Securities and Exchange Commission announced on Tuesday that it had settled fraud charges against Utah-based registered investment adviser Foresight Wealth Management (FWM) and its principal, Adam E. Nugent, for violations related to a private fund they managed. Read more here.
Michigan’s Cannabis Sales Avoid Collapse Over Unpaid METRC Fees
Michigan’s marijuana industry narrowly avoided a near-complete stoppage this week due to a miscommunication with its private tracking system service provider. Florida-based METRC LLC recently instituted a new monthly service fee of $40 per month, which came as a surprise to those in the industry who say they never received an invoice. Read more here.
In Other News
Steep Hill Inc.
Steep Hill Inc. (CSE: STPH) entered into a settlement and release agreement with its wholly owned subsidiary Steep Hill Inc. and several Green Analytics parties to terminate license agreements between the parties as of Feb. 28. As a result, Steep Hill has no continuing licensed operations in the states of Massachusetts, New Jersey, and Pennsylvania and will continue not engaging in any such actives in Maryland. Read more here.
Greenway Greenhouse Cannabis Corp.
Greenway Greenhouse Cannabis Corporation (CSE: GWAY) (OTC: GWAYF), a cultivator of greenhouse cannabis for the Canadian market, generated revenue of $1 million for the third quarter of fiscal year 2023, an increase of 103% compared to the same quarter in fiscal 2022. Read more here.
Adam JacksonMarch 1, 2023Revenue jumped 89% during the fiscal year.
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.
Adam JacksonJanuary 31, 2023
The deal has been a couple years in the making now.
Adam JacksonDecember 13, 2022
Grown Rogue International Inc. (CSE: GRIN) (OTC: GRUSF) posted temperate earnings results that show rising revenue and positive free cash flow. The craft cannabis company operating in Oregon and Michigan reported its unaudited results for the fourth quarter ending October 31.
Grown Rogue posted revenue of $5.07 million, a 35% rise versus $3.76 million in the fourth quarter last year. It also improved over the previous quarter’s revenue of $4.2 million. Net loss totaled $397,324 for the quarter, down from a $431,000 net income in the same time last year.
“I couldn’t be more thrilled about our record revenue and adjusted EBITDA, closing out a record year including achieving positive free cash flow for the year,” said CEO Obie Strickler. “It’s even more exciting to watch our team continue to increase market share in Oregon and Michigan by staying true to our focus towards ensuring customers experience leading craft quality and genetics at an attractive value.”
Adjusted EBITDA for the quarter came out to $1.66 million versus $1.2 million in the same quarter last year, “up 39%, despite pricing headwinds in our markets, particularly in Michigan,” the Strickler added. The gross margin was 63.4% in the quarter before fair value adjustments.
Grown Rogue held the crown for the top flower brand in Oregon for the sixth consecutive quarter, according to LeafLink’s MarketScape data. Over the year, total harvested wet weights for the state of Oregon fell 13% for indoor and 21% for outdoor, respectively. “In Oregon, we saw continued reduction in total supply as many cultivators exit or scale back their business, which should result in a pricing rebound in 2023,” Strickler said.
The company also closed on a $2 million convertible debenture financing arrangement over the period.
“It’s also great to see a shifting of investor sentiment towards strong operators and management teams reflected in our recently closed a $2 million convertible debt financing with Mindset Capital at very attractive terms to the company,” Strickler said. “We are planning to continue our disciplined approach to capital allocation as we look to accelerate expansion plans into new markets. I look forward to updating Grown Rogue shareholders on these efforts in the future.”
Adam JacksonSeptember 30, 2022Michigan sales dip as the company continues to expand cultivation in the state.
StaffJune 30, 2022
The Daily Hit is a recap of the top cannabis business stories for June 30, 2022.
ON THE SITE
Tyson 2.0 Raises $9M with Plans to Expand Celebrity Property
Cannabis advocate and former boxer Mike Tyson’s cannabis brand Tyson 2.0 announced the close of its oversubscribed $9 Million Series A round led by JW Asset Management. Additional investors in the round include K2, Ambria Capital, Tress Capital, and Patrick Carroll. The company said that the new funds will be used to acquire more celebrity intellectual property, scale marketing efforts, accelerate distribution, and further invest in the development of Tyson 2.0’s house of brands strategy. Read more here.
Akerna Shares Plunge on New Offering
Despite being in financial trouble, cannabis tech firm Akerna Corp. (Nasdaq: KERN) announced the pricing of an underwritten public offering of 29,382,861 units with common stock warrants. The units are being sold at a public offering price of $0.23 per unit and the pre-funded units are being sold at a public offering price of $0.2299 per pre-funded unit. The news sent shares tumbling almost 50% in early trading to lately sell at 14 cents per share. The offering should bring in roughly $6.7 million. Read more here.
Grown Rogue Reports Rising Revenue as Prices Fall
Grown Rogue International Inc. (CSE: GRIN) (OTC: GRUSF) reported its fiscal second-quarter 2022 results for the three months ending April 30, 2022. Grown Rogue reported revenue rose 72% to $4.7 million versus $1.37 million for the same time period last year. Sales also rose sequentially from the first quarter’s revenue of $3.73 million. Read more here.
Curaleaf Pushes Back on Tip Jar
Cannabis multi-state operator Curaleaf Holdings Inc. (OTC: CURLF) is pushing back against an employee lawsuit that sued the company for the contents of a tip jar. Former employee Morgan Heller filed a complaint in March accusing the company of not giving the employees $126,000 that had been collected in tip jars. Heller says the managers took the money instead. Read more here.
Field Trip’s Clinics Cost More Than the Revenue They Bring In
Field Trip Health Ltd. (NASDAQ: FTRP) reported fiscal fourth-quarter and full-year 2022 results for the period ending March 31, 2022, and provided a business update today. All results are reported in Canadian dollars. For the quarter, Field Trip earned patient services revenues of $1,724,102 from its twelve clinics in operation, an increase of $1,197,667 or 228%, over the fourth quarter ended March 31, 2021. Read more here.
Psychedelic Microdosing is Trendy, but Studies are Lacking
Microdosing psychedelics is quickly becoming a trendy new mental and physical wellness event that athletes, celebrities, and everyday businesspeople are doing it as a daily ritual that is sometimes even encouraged by their bosses. In fact, the very term “microdosing” is working into common usage as just another way of saying you tried something, or attended some event, or ingested some substance — but just not a lot of it. Read more here.
IN OTHER NEWS
Canopy Growth Corporation
Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) announced today that, further to its press release dated June 29, 2022, it has entered into an additional privately negotiated exchange agreement with a holder of the company’s outstanding 4.25% unsecured senior notes due 2023, to acquire approximately C$7.25 million (approximately USD$5.6 million) aggregate principal amount of the notes from the noteholders in exchange for common shares of the company and approximately C$140,000 (approximately USD$110,000) in cash for accrued and unpaid interest. Read more here.
MariMed, Inc.
MariMed, Inc. (OTCQX: MRMD), a multi-state cannabis operator, today announced that it has obtained a receipt for its final non-offering, long form prospectus dated June 29, 2022, from the Ontario Securities Commission. Concurrent with its prospectus filing, the Company also received conditional approval from the Canadian Securities Exchange to list the company’s common shares on the CSE under the symbol “MRMD”. Listing of the common shares is subject to the satisfaction of certain customary conditions, including the receipt by the CSE of all final documentation. Read more here.
Northern Lights Acquisition Corp., SHF Holding Co., LLC
Northern Lights Acquisition Corp. (Nasdaq: NLIT), a special purpose acquisition company, announced that it has amended that certain unit purchase agreement, dated February 11, 2022, by and among the company, 5AK, LLC, the company’s sponsor, SHF, LLC d/b/a Safe Harbor Financial, a Colorado limited liability company, SHF Holding Co., LLC, a Colorado limited liability company and the sole member of the target, and Partner Colorado Credit Union, a Colorado corporation and the sole member of the Seller, to extend the date by which the transactions contemplated thereby had to be consummated from June 30, 2022, until July 29, 2022, with the ability for the deadline to be extended through August 31, 2022. The extension of the outside date will provide the company with additional time to complete the business combination as it awaits regulatory approval. Read more here.
Ascend Wellness Holdings, Inc.
Ascend Wellness Holdings, Inc. (CSE: AAWH.U) (OTCQX: AAWH), a multi-state, vertically integrated cannabis operator, announced that it has closed on $28.5M of the remaining additional funding under the accordion feature of its existing term loan credit facility. As previously announced, the company drew initial funding of US$210M in August 2021 and subsequently closed on a US$36.5M expansion in May 2022. This additional raise brings the total raised under the senior credit facility to US$275M. Read more here.
Auxly Cannabis Group Inc.
Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF) announced today the voting results from its annual general meeting of shareholders held on June 30, 2022. A total of 159,835,106 common shares of the company, representing 17.85% of the issued and outstanding common shares of the company, were voted in connection with the meeting by shareholders and proxy holders. All of the matters put forward before the company’s shareholders for consideration and approval, as set out in the company’s information circular dated May 20, 2022, were approved by the requisite majority of the votes cast at the meeting. Read more here.
Canntab Therapeutics Limited
Canntab Therapeutics Limited (CSE: PILL) (OTCQB: CTABF) (FRA: TBF1) a developer in cannabinoid and terpene blends in hard pill form for therapeutic applications, provided a corporate update to its shareholders and stakeholders. Further to the announcement made by Canntab on April 14, 2022, with respect to our exploration of a variety of alternative business strategies including potential M&A opportunities, as well as identifying and negotiating partnerships to assist Canntab in expanding its product offerings in the United States and other international jurisdictions. Read more here.
Pervasip Corp.
Pervasip Corp. (OTC: PVSP), a developer of companies and technologies in high value emerging markets, and Zen Asset Management, its wholly owned subsidiary today announced that its partnership with Full Spectrum Advisors is yielding results ahead of expectations. Following announcements made in March, introducing its partnership with Full Spectrum Advisors, Pervasip reports early results that are exceeding projected yield improvements with 25% increased harvest results in the cultivation centers growing Artizen flower. Read more here.
MediPharm Labs Corp.
MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ), a pharmaceutical company specialized in precision-based cannabinoids, today announced the results of matters voted on at its annual meeting of holders of common shares held on Thursday, June 30, 2022. The voting results for each of the matters presented at the meeting are outlined below. Read more here.
Humble & Fume Inc.
Humble & Fume Inc. (CSE: HMBL) (OTCQX: HUMBF), a North American distributor for cannabis and cannabis accessories, announced the detailed voting results for the 2021 Annual General Meeting of Shareholders, held on June 29, 2022, which includes the election of Mark Hubler to the Board of Directors. Read more here.
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