MedMen Archives - Green Market Report

Debra BorchardtDebra BorchardtNovember 26, 2019
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3min4820

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) reported first fiscal quarter revenue of $44 million, up 105% year-over-year and 5% sequentially. The company also reported an eye-popping net loss of $82 million. MedMen delivered an Adjusted EBITDA loss of $22.2 million for the quarter.

Approximately $7.4 million of rent expense was not included in Adjusted EBITDA for the quarter due to the application of IFRS 16 Leases. Adjusted EBITDA loss under the previous methodology would have been $29.6 million compared to a $39.4 million loss in the previous quarter.

“We entered Fiscal 2020 on a mission to build a more nimble and financially flexible MedMen,” said Adam Bierman, MedMen co-founder and chief executive officer. “As we right-size our organization and implement an intensified focus on free cash flow generation, our business will become more efficient, in turn allowing us to better serve our stakeholders. Through the successful execution of these goals, we expect MedMen will be EBITDA positive by the end of calendar year 2020.”

“Since 2016, MedMen has aggressively executed on a plan to become the most recognizable brand in cannabis. The company’s focus on profitability will provide greater flexibility to navigate near term market fluctuations, as they continue to capitalize on the sector’s overall opportunity. We have supported the business since 2016 and are supportive of the vision going forward,” said Ben Rose, executive chairman of the Board and chief investment officer of Wicklow Capital.

Gross margins across retail operations were 52% compared to 50% in the prior quarter. The increase in gross margins reflects increased leverage with suppliers and favorable vendor terms.

Corporate SG&A totaled $30.6 million, a 21% decrease from fiscal second quarter 2019, representing $31.6 million in annualized savings since the initial cost-cutting efforts began.

More Money From Gotham Green

As part of the amendment to the company’s $250 million senior secured credit facility, Gotham Green Partners has an obligation to fund the $10 million tranche by November 29, 2019.


Debra BorchardtDebra BorchardtNovember 18, 2019
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5min6280

MedMen Enterprises Inc. (MMEN.CN) (MMNFF) claimed to be the unicorn of marijuana companies when the California-based business went public in May of 2018. Now just 18 months later, it has a market cap of $170 million, according to Yahoo Finance, and is being forced to dramatically curtail its plans.

On Friday, the company said it was taking several steps to achieve profitability including laying off of 190 employees or 20% of its workforce, cutting back on store openings and selling assets.

Cowen & Co senior analyst Vivien Azer wrote, “While MMEN has established leading brand equity in California, it has come at a significant cost. The announced changes are clearly necessary if MMEN aims to remain a going concern, in particular in a capital constrained environment. That said, the magnitude of the change, for an organization that has experienced an unusually high amount of turnover in senior leadership, will present challenges from an execution standpoint. Maintain Underperform.”

Layoffs

“We have a clear plan to increase our market share, while at the same time enhancing our margins and reducing our corporate overhead,” said Adam Bierman, MedMen co-founder, and chief executive officer. “We must unlock our operating leverage and bring the company to positive EBITDA. Given market conditions, capital allocation is more critical than ever. As such, we announced a layoff of over 190 MedMen employees.”

Market watchers may recall that when the company went public, Bierman and his partner Andrew Modlin were criticized for the amount of money they were paying themselves. In subsequent quarters, analysts pointed to the company’s extremely high expenses, but Bierman would explain it away as the cost of building a new company.

Bierman added, “This layoff includes many hard-working, mission-based people whose presence will be sorely missed. While it is never easy to let employees go from the MedMen Family, we believe this decision is in the best interest of our company as we position ourselves for growth in the years ahead.” No doubt those laid off employees will be thinking about the mansion Modlin just acquired for $11 million in July.

The company also said it was consolidating its offices, which would foster team building as well as saving money. The remaining employees will have a share-based reward program based on the company meeting certain targets. MedMen also noted that it will trim too many layers of overlapping jobs.

In addition to the employee layoffs, which the company said would save $10 million, MedMen is also selling its interest in Treehouse REIT for net proceeds of $14 million. So far, its gotten $7 million and has agreements to sell the remainder. Treehouse was buying the MedMen properties and then MedMen was leasing them back, an option that has increased within the industry as cannabis companies monetize their properties as financing has gotten more expensive.

MedMen had been on an aggressive expansion plan as it spent millions on dispensaries and licenses in a quest to be one of the largest multi-state operators. Now the company is saying it will cut back on store openings in 2020 and only open a dispensary that will make over $10 million in the first 12 months. It will delay further spending in New York in Arizona.

Selling Assets

The company has hired Canaccord Genuity to “explore strategic alternatives for certain operations and licenses in states that are currently deemed not critical to the Company’s retail footprint.” It has also sold other investments in various brands and has netted $8 million so far.

Cutting Expenses

Not only is the company laying off employees, but it is also cutting back on its marketing and technology budgets in order to save $20 million. In other words, don’t expect any more Spike Jonze videos. MedMen said it thinks it can save $2 million by renegotiating insurance policies and outsourcing human resources.

The stock was lately trading at 98 cents, down from its 52-week high of $4.19. Cowen & Co. has a target price of 85 cents.

 


StaffStaffOctober 29, 2019
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3min11950

On Tuesday, Cowen & Co. senior analyst Vivien Azer issued new comments on MedMen MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) following the company’s earnings announcement after the close of trading on Monday. Azer has an Underperform rating on the company and an 85 cent price target.

She pointed out that the company delivered a bigger than expected adjusted EBITDA loss, and then backed away from previous guidance on the company’s cost-cutting goals.

She wrote, “In FY4Q19, MMEN continued on its cost-cutting pathway, having reduced corporate SG&A spend by 14.6% or $5.6 mm relative to the company’s December spend (FY2Q19). Importantly, however, the company reiterated its cost-cutting target relative to the guidance offered in May 2019 (where they called for a 20% reduction from 2Q to 2Q). This, unfortunately, ignores the company’s most recent guidance from August, where the company: 1) expanded the cost-cutting target to a 30% SG&A reduction, and 2) targeted achieving this bigger reduction by the September quarter (one quarter earlier).”

Azer also highlighted the changes to Gotham Green’s investment saying, “In our view, this change reflects a capital preservation stance from MMEN’s lenders, as they are offering near-term bridge financing, while also acknowledging that medium-term financing will be dependent on improved financial metrics, but clearly not at the rate they had originally envisioned.”

Azer has adjusted her estimate for the company and now believes that in FY 2020, MedMen will generate $244.4 million in sales, growing to $424.7 mm in sales in FY2021. She is inline with the company’s projections to “achieve break-even adjusted EBITDA around calendar 4Q20 (FY 2Q21), where we have the company losing $4.5 mm in EBITDA, but being EBITDA positive in the following quarter.”

Looking Ahead

“On the retail front, we saw another deceleration in quarter over quarter growth, which was up 13% (vs. +16% in 3Q19); meanwhile wholesale revenues were up 49% QoQ in FY 4Q19,” Azer wrote in her note “While we commend the company’s commitment to transitioning its revenues away from retail (which currently accounts for 93% of sales), MMEN is behind on this initiative, relative to its peers under our coverage (where other operators, like GTI, generate as much as 42% of revenues from non-retail sales).”


Debra BorchardtDebra BorchardtOctober 29, 2019
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5min22260

Following its earnings announcement on Monday after the close, MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) said that it was making certain amendments to its $250 million senior secured convertible credit facility arranged by Gotham Green Partners including changes to the company’s board. MedMen said it has agreed to form a committee to select new independent directors to be appointed or elected to the board, which directors would form a majority of the board. MedMen said it will propose director candidates to this committee for consideration and approval.

Changes To The Terms

MedMen said that the aggregate amount that remains available to be borrowed has not changed, but “In order to minimize dilution given the current capital market environment, both parties have agreed to amend the size of both Tranche 3 and Tranche 4, as well as the timing of Tranche 3. Tranche 3 now consists of $10 million in available credit and Tranche 4 consists of $115 million in available credit. The parties anticipate that Tranche 3 will be funded within 30 days instead of the originally proposed date in December 2019.”

The larger Tranch 4 will require the consent of both MedMen and Gotham Green under the Facility. Some of the reporting and financial covenants under the Facility have also been modified to provide MedMen with additional balance sheet flexibility. Changes in the covenants included a reduction in required minimum cash balances, removal of restrictions on equity issuances and an additional ability to spin-out or borrow against certain non-core assets, in addition to sales and indebtedness that were permitted prior to the amendment.

MedMen’s Deals With Gotham Green

March

In March of this year, MedMen signed a binding term sheet for a senior secured convertible credit facility of up to $250 million from funds managed by cannabis investor Gotham Green Partners.  MedMen said at the time that it thought this was the largest investment to date by a single investor in a publicly-traded cannabis company with U.S. operations. At that time, the stock was trading over C$4  on the CSE and $3 plus change on the OTC.

July

Then in July, MedMen went back to Gotham Green with participation from Wicklow Capital, agreed to an additional $30 million in an equity commitment to MedMen, bringing the total financing commitment to $280 million. To date, Gotham Green Partners had funded $100 million of the total commitment.

The terms were amended to reflect the drop in the company’s share price.  “Pursuant to Tranche 1 of the Facility will be changed from $3.29 to $2.55, which represents a 12% premium over the Company’s 20 trading day VWAP as of July 8, 2019.” In addition, Gotham Green Partners and Wicklow Capital have committed to a $30 million non-brokered financing of Subordinate Voting Shares at a price equal to $2.37 per share. The Equity Placement is conditional upon the satisfaction of customary conditions, including but not limited to the receipt of all necessary approvals. MedMen shares in July were trading at approximately $2.53.

August

One month later, the deal was amended again. In August, MedMen said that the conversion price was lowered to $2.55 for the first Tranche. The second Tranche conversion price was dropped to $2.17. The second Tranche was expected to be for $75 million and that has dropped to $50 million. “The gross proceeds from the Equity Placement together with the remaining financing commitment under the Facility total US$155 million.”

So, in August it was no longer a $250 million investment, but now it is back to being characterized as a $250 million investment.


Debra BorchardtDebra BorchardtOctober 28, 2019
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5min17461

MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) fourth-quarter revenue of $42 million, up 104% year over year, but the net losses were an eye-popping $82.9 million.

The company’s full-year revenue was $130 million, up 227% year over year. The full-year net loss was $277.0 million, with net loss attributable to shareholders of MedMen Enterprises $79.1 million or loss of $0.75 per basic and diluted share. The company spent $42 million in executive compensation for the year. This compares to a net loss of $113.9 million, with net loss attributed to shareholders of MedMen Enterprises $68.3 million or loss of $1.69 per basic and diluted share, for fiscal 2018.

“Fiscal 2019 was a transformative year for MedMen, with over two million completed retail transactions to date and revenues increasing 227% year-over-year,” said Adam Bierman, MedMen co-founder and chief executive officer. “Our success was due, largely in part, to our loyal customer base. Throughout the year, we served over one million customers from all 50 states and more than 100 countries. In California, the largest cannabis market in the world, MedMen surpassed a record $110 million in annualized run-rate retail revenue.”

Mr. Bierman continued, “While industry tailwinds propelled us forward over the past twelve months, changing macroeconomic conditions have led us to refocus our strategy, to reevaluate our assets and to determine where it makes most sense to allocate capital going forward. As we progress into the next fiscal year, our go-forward strategy will therefore focus on three key objectives: optimizing our current retail assets, unlocking the further potential of our factories, and leveraging our omnichannel strategy. As we bring all of our factories online and up to full capacity, and simultaneously optimize our current retail assets across our core geographic markets, we continue on our path toward profitability.”

Gross margins fell to 50% in the fourth quarter compared to 53% in the prior quarter. The company attributed the decline in gross margins “to new store openings, which initially have lower gross margins.” The company reported an Adjusted EBITDA loss of $39.4 million for the fourth quarter, representing a 7% improvement from the previous quarter.

The company wrote in its filing that it could be considered at risk of ongoing concern citing, “The amount of new revenue to be generated from ongoing and planned operationalization of existing licenses to provide sufficient cash flow to fund operations and other committed expenditures.”

Production Costs Flat, Prices Fall

Costs of Production Per Gram were essentially flat $0.70 to $3.30 (2019) versus $0.72 to $3.05 (2018). Prices fell though, Selling Price Per Active Gram $3.26 to $5.61 (2019) versus $5.28 to $6.54 (2018).

California

MedMen seems to have refocused itself on the California market versus a nationwide expansion. The California retail revenue totaled $27.5 million for the quarter. MedMen increased its total California retail license count to 17. Of these 17 retail licenses, 13 are operational as MedMen stores. The company was also recently awarded a commercial retail license in Pasadena, California. MedMen said it expects to have a total of 30 operating retail locations in California by the end of the calendar year 2020.

MedMen added a flagship retail location in Long Beach situated strategically between its Santa Ana and LAX stores. The company also opened a second San Diego retail location in Sorrento Valley. During the quarter, MedMen was also awarded one of six retail licenses available in the City of Pasadena. MedMen continued to expand its Northern California retail footprint announcing plans to open a retail store in the city of Vallejo upon completion of a pending acquisition of a retail and distribution license.

The City Council of West Hollywood passed an ordinance to extend MedMen’s temporary recreational retail license until January 1, 2021, unless otherwise determined. MedMen continues to work with West Hollywood City Council and various community groups on a long-term resolution.

 


Video StaffVideo StaffOctober 11, 2019

3min7740

This is your marijuana money minute for the week ending October 11 from the New West Media in San Francisco. Wow, what a crazy week to see things blow up and more carnage in the cannabis industry. 

Where to start?

MedMen announced it decided to terminate the deal with PharmaCann that had been valued at $684 million. MedMen said it wants to focus more on its California market and go deeper into its strengths. As a consolation prize, Medmen gets PharmaCann’s Illinois licenses as part of the termination fee. Of course, MedMen has been touting its proforma numbers with Pharmacann and so now those have to be dialed back.

Speaking of dialing back, HEXO Corp said that its previously projected revenues were a bit lofty. The company said it had to reduce its revenue estimates to a range of $46-$48 million for the year, significantly lower than the $400 million it said it would do in 2020. That stock got spanked hard.

The Green Organic Dutchman said that it was considering new financing to complete the construction of two of its facilities. The only problem with that is that on previous investment decks, TGOD claimed that their projects were fully funded. The company also says it has $50 million in cash. How much money d they possibly need if they are only weeks away from completion. The stock lost 40% of its value in 2 days. 

More divorce news.

Aleafia said it was no longer going to buy cannabis from Aphria saying Aphria failed to meet its supply obligations. Aphria seemed to toss it off and said they would still achieve net positive income for this past quarter. To make things more awkward, Aphria owns a lot of Aleafia stock.

And then finally, two Russian nationals were arrested for campaign finance violations this week and it turns out that they had applied for marijuana licenses in Nevada. They didn’t get them because they were late by 2 months.


StaffStaffOctober 8, 2019
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7min3740

It’s time for your Daily Hit of cannabis financial news for October 8, 2019.

On The Site

MedMen

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) and PharmaCann, LLC made a big deal back in December of 2018 that MedMen would buy PharmaCann in an all-stock transaction. That deal, once valued at $684 million, is now off. MedMen is now saying that it will focus on leveraging its retail brand, its leadership position in California and its digital platform to grow the business will create greater shareholder value than the completion of the transaction.

The company also took this moment to announce that Zeeshan Hyder has been appointed Chief Financial Officer at MedMen. Mr. Hyder, currently MedMen’s Chief Corporate Development Officer, has been an integral part of the leadership team at MedMen since 2017, overseeing corporate development, investor relations and other financial growth initiatives. To date, Mr. Hyder has led over $300M in M&A deals executed, partnered with the CEO to take the company public and raised $500M in capital for direct investment into the business.

Hyder succeeds Michael Kramer, who apparently was terminated as of October 7, 2019. Kramer was only just hired in December of 2018 and he followed the previous CFO James Parker who only lasted a year and half and is currently suing Medmen for breach of contract.

Aleafia Health

Aleafia Health Inc. (TSX: ALEF)(OTC: ALEAF) has terminated its deal to buy cannabis from Aphria Inc. (TSX: APHA)(NYSE: APHA) saying Aphria failed to meet its supply obligations. The deal that was agreed to on September 11, 2018 said that Aphria would provide up to 175,000 kg equivalents of cannabis products over an initial five-year term, commencing May 1, 2019. Aleafia said the termination should not affect the company. A few weeks ago, Aleafia told the market on Tuesday that it will achieve positive net income for the quarter ending September 30, 2019. The company also stated that it had $51 million in cash on hand.

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

In Other News

Target Group Inc (OTCQB: CBDY) announced that its wholly-owned subsidiary, Canary RX Inc (“Canary”), has been granted licenses to cultivate, process and sell cannabis pursuant to the Cannabis Act (Bill C-45). Strategically located just outside of Toronto, ON, Canary RX will begin cultivating cannabis in its 44,000 square foot facility, producing 3600 kilograms annually.

The Supreme Cannabis Company, Inc.  (TSX: FIRE) (OTCQX: SPRWF) announced that Blissco Cannabis Corp., Supreme Cannabis’ premium wellness brand and a multi-licensed processor and distributor, has received licensing approval from Health Canada for the sale of cannabis oils from its facility in Langley, British Columbia.

 

 


Debra BorchardtDebra BorchardtOctober 8, 2019
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4min7610

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) and PharmaCann, LLC made a big deal back in December of 2018 that MedMen would buy PharmaCann in an all-stock transaction. That deal, once valued at $684 million, is now off. MedMen is now saying that it will focus on leveraging its retail brand, its leadership position in California and its digital platform to grow the business will create greater shareholder value than the completion of the transaction.

The company said in a statement, “In connection with the termination, PharmaCann has agreed to transfer certain cannabis licenses and related assets in Illinois and Virginia to MedMen for no additional consideration from MedMen, other than the forgiveness of certain debt.” Basically, to cover the termination fee PharmaCann is giving up four assets:

  • Operational cultivation and production facility in Hillcrest, Illinois
  • Retail location in Evanston, Illinois
  • Retail license for Greater Chicago, Illinois
  • License for vertically integrated facility in Virginia

“The cannabis sector has evolved tremendously since we first announced the PharmaCann transaction and based on the current macro-environment and future opportunities that exist for our business, we believe it is now in the best interest of our shareholders to deepen, rather than widen, our Company’s reach,” said Adam Bierman, MedMen co-founder and chief executive officer. “Looking at the PharmaCann portfolio today, Illinois has emerged as the most attractive opportunity for our longer-term, strategic growth plan. The addition of those assets, without dilution, is a win for MedMen and our shareholders.”

Four Weeks Ago It Was A ‘Transformative’ Deal

Just a few weeks ago Bierman was crowing about the PharmaCann acquisition and suggesting it was still moving forward. On September 10, he said, “Our transformative acquisition of PharmaCann will mold us into an even bigger and bolder company for our consumers. This acquisition doubles the number of states where MedMen has licenses, extending our geographic footprint and creating tremendous opportunity for our company and our shareholders. We are excited to be one step closer to closing the acquisition.”

On March 15, 2019, pursuant to the HSR Act, MedMen and PharmaCann each received a request for additional information from the U.S. Department of Justice Antitrust Division. On August 9, 2019, both MedMen and PharmaCann declared substantial compliance with this Second Request. On September 9, 2019, the waiting period under the HSR Act, which extended automatically for 30 days following both companies declaring substantial compliance with the Second Request, expired. That was when MedMen declared it had  green light to complete the deal.

New CFO For MedMen

The company also took this moment to announce that Zeeshan Hyder has been appointed Chief Financial Officer at MedMen. Mr. Hyder, currently MedMen’s Chief Corporate Development Officer, has been an integral part of the leadership team at MedMen since 2017, overseeing corporate development, investor relations and other financial growth initiatives. To date, Mr. Hyder has led over $300M in M&A deals executed, partnered with the CEO to take the company public and raised $500M in capital for direct investment into the business.

Hyder succeeds Michael Kramer, who apparently was terminated as of October 7, 2019. Kramer was only just hired in December of 2018 and he followed the previous CFO James Parker who only lasted a year and half and is currently suing Medmen for breach of contract.

MedMen stock was lately trading at $1.72, down from its 52-week high of $7.57.


William SumnerWilliam SumnerSeptember 10, 2019
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4min3310

It’s time for your Daily Hit of cannabis financial news for September 10, 2019.

On the Site

Canndescent

Private premium cannabis company Canndescent announced that it closes on a $27.5 million in Series C Preferred Funding. Leading the investment round, Green Acre Capital, a cannabis-specific venture fund from Canada, was joined by Carnegie Arch Capital, Senterra, LLC., Altitude Investment Management, JW Asset Management and a multinational beer company from Asia. The money will be used for the company’s expansion into vapes and ingestibles as well as supporting efforts in Massachusetts, Nevada, Canada and beyond.

Dissect the Economics of Cannabis Branding at the Green Market Summit

On September 11th, 2019, investors, entrepreneurs, and branding experts will gather to dissect the economics of cannabis business brands at The Green Market Summit in Los Angeles, California. Following a sold-out event in Chicago, The Green Market Summit will bring its business acumen to the world of cannabis branding and provide exclusive industry information on topics such as the celebrity effect on cannabis, how to manage brand perception for public companies, and the world of luxury cannabis.

In Other News

MedMen

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) announced that the waiting period stipulated by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended has expired in relation to the company’s proposes acquisition of PharmaCann LLC. The waiting period was one of several conditions needs to close the acquisition, and the deal is expected to close by the end of 2019. “Today marks a monumental day for the cannabis industry,” said Adam Bierman, MedMen co-founder and CEO. “We hope this will pave the way for other companies in what has become a highly acquisitive and dynamic industry.”

Sunniva

Sunniva Inc. (CSE: SNN) announced that it has entered into an agreement to sell its subsidiary Natural Health Services, Ltd.  (NHS) to The Clinic Network Canada, Inc. (TCNC) for C$9 million. Half of the purchase price will be paid in cash, while the other half will be paid through the issuance of 4.5 million shares of TCNC. The closing of the sale could not have come at a better time for Sunniva, as yesterday,  NHS was named in a class action lawsuit in connection with a previously reported privacy breach of the Electronic Medical Record system used by NHS.


Debra BorchardtDebra BorchardtAugust 13, 2019
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5min5220

Beleaguered California cannabis company MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) announced unaudited revenue figures for the fiscal fourth quarter of 2019, ending on June 29, 2019. The company did not release any information as to net income or losses and considering each quarter the net losses have been extremely high, the lack of this information could be a red flag.

Systemwide revenue across MedMen’s operations in California, Nevada, New York, Arizona, and Illinois, excluding pending acquisitions, rose 15% sequentially to US$42.0 million. The company reported that gross margins were 50%, compared to 51% in the previous quarter. Pro forma systemwide revenue, which includes pending acquisitions that have not yet closed, totaled US$61.3 million. The company defined the pro forma as 37 retail stores that were operational at the end of the quarter and includes the recently announced pending acquisitions of operational retailers in Long Beach, California, and Vallejo, California.

“Q4 2019 was another quarter of solid execution for MedMen and a very strong end to our fiscal year,” said Adam Bierman, MedMen co-founder and chief executive officer. “Throughout 2019, we broadened our geographic footprint through strategic acquisitions, which leverage our existing corporate infrastructure as we enter new markets. Following the closing of pending acquisitions, we will be licensed for up to 92 retail locations across 12 states, and there is tremendous opportunity ahead to turn the balance of our retail licenses into revenue-generating storefronts.”

Conversion Price Dropped

In March, MedMen announced a $250 million senior secured credit facility arranged by Gotham Green Partners. At that time the conversion price for the shares was $3.10. Since the stock has dropped as a result of numerous negative headline, the conversion price was lowered to $2.55 for the first Tranche. The second Tranche conversion price has dropped to $2.17.

The second Tranche was expected to be for $75 million and that has dropped to $50 million. “The gross proceeds from the Equity Placement together with the remaining financing commitment under the Facility total US$155 million.” So, it is no longer $250 million. MedMen stock was lately trading at $2.10.

PharmaCann Update

Last December, MedMen said that is was going to buy PharmaCann, one of the largest vertically-integrated multistate cannabis operators in the U.S. The FTC questioned that acquisition as part of its anti-trust oversight. MedMen said both it and PharmCann have provided all the requested information and still hope the deal will close by the end of 2019. “PharmaCann equityholders are expected to receive approximately 168.4 million subordinate voting shares in the combined company, based on MedMen’s fully-diluted shares outstanding as of June 29, 2019.” So far New York State has not approved of the MedMen acquisition of PharmaCann.

Expense Reduction

MedMen has been criticized in the past for its extremely high expenses. The lawsuit filed by the company’s former Chief Financial Officer James Parker detailed numerous unusual corporate expenses that disturbed shareholders. Now the company says that it expects to significantly surpass the targeted 20% reduction in its corporate SG&A expenses from its quarter ending December 2018, which totaled $164 million on an annualized basis. MedMen said it is now on track to reduce its run-rate corporate SG&A expenses by 30% by the end of the September 2019 quarter, or to approximately $115 million on an annualized basis going forward. Key drivers of this continued decrease in corporate SG&A expenses include i) general corporate cost savings, ii) strategic headcount reductions across various departments and iii) elimination of non-core functions and overhead in various departments.

 

 



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