MedMen Archives - Green Market Report

Debra BorchardtDebra BorchardtFebruary 7, 2019
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MedMen Enterprises Inc. (MMNFF) said that it has completed the sale of three properties to Treehouse Real Estate Investment Trust with a net proceed of approximately $18.4 million. The properties will then be leased back to MedMen.

“These proceeds will be deployed into more accretive growth opportunities as we operationalize our national footprint,” said Adam Bierman, MedMen’s chief executive officer, and co-founder. According to an October filing, MedMen said it expected to sell additional properties to Treehouse.

The  list of properties included in this sale are as follows:

  • One retail storefront located on Lincoln Blvd in Venice, California;
  • One retail storefront located on Robertson Blvd, the closest dispensary to Beverly Hills, California;
  • One 45,000 sq. foot cultivation and production factory located in Sparks, Nevada.

Treehouse REIT

In January, MedMen announced that Treehouse has completed its first round of capital raise at $133 million and intended to partially use the funds to purchase properties from the company. Treehouse is a collaboration between MedMen and Stable Road Capital, a Venice, California based investment firm with successful track records in real estate and cannabis. Treehouse is governed by an independent board and has a management contract with MedMen to oversee day-to-day operations until Treehouse goes public, at which point management will be
internalized.

The Treehouse REIT is described as being externally managed, but it seems the two companies share several employees. The Treehouse Chief Executive Office is listed as Chris Ganan who is also the Chief Strategy Officer and a General Partner at MedMen. Treehouse’s Treasurer is Lisa Trager, who is MedMen’s general counsel. The Treehouse Chief Operating Officer is Zeeshan Hyder, who is MedMen’s Chief Corporate Development Officer. Brian Kabot the CIO of Stable Road Capital is listed as a Treehouse Director

It is expected that Treehouse’s initial sale-leaseback transactions will occur with MedMen. The company said it intends to use the proceeds from the prospective transactions to assist in funding the buildout of its national footprint. Subsequent to the initial transactions, Treehouse will have a three-year right of the first offer on
additional MedMen-owned facilities and development projects. With the launch of Treehouse, MedMen has the opportunity to significantly reduce future capital expenditures related to its retail and cultivation licenses.

Monetizing Real Estate

It isn’t uncommon for retail companies to monetize real estate assets. For example, Macy’s (M) has been selling off its real estate assets as retail sales shifted to more online transactions. Sear’s is another iconic department store that is also selling off its real estate assets in order to pay off debt.

In the cannabis industry, many companies are unable to obtain mortgages or finding willing landlords and must buy buildings outright. These buildings then become a source of capital for the company to draw upon. Typically, the buildings are sold to the highest bidder of outside parties.


StaffStaffFebruary 4, 2019
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It’s time for your Daily Hit of cannabis financial news for February 4, 2019.

On The Site

Namaste Tech

Namaste Technologies Inc.  (NXTTF)  has fired CEO Sean Dollinger and could be reviewing selling the company. The Canadian-based cannabis company said that following an investigation by a Special Committee of the Board of Directors, the Board terminated Dollinger for cause and removed him from his position as Director, effective immediately. The company has appointed Meni Morim as its interim CEO and also appointed Darren Gill as Chief Strategy Officer.

MedMen

MedMen Enterprises Inc. (MMNFF) is facing a new lawsuit from the company’s former Chief Financial Officer James Parker. Parker filed his case on January 29 in the Superior Court of California in the County of Los Angeles claiming wrongful termination for an undetermined amount of damages.

MedMen spokesman Daniel Yi said that the company was unable to respond to the filing because it had not been officially served, but would do so once that happened. “These are baseless claims and we’ll defend ourselves vigorously in court,” said Yi.

LB Equity

LB Equity has raised $50 million for a portfolio titled LB Equity Emerging Growth Fund, which will be concentrating its investments in cannabis companies that are involved in beauty, health, and wellness. The company’s first investment is with the platform Standard Dose, which is dedicated to selling hemp-based CBD products as well as educating consumers on these new products. The company did not announce how much of an investment it made into Standard Dose.

In Other News

Canopy Rivers

Canopy Rivers Inc. (TSXV:RIV) entered into an agreement with CIBC Capital Markets and Eight Capital to purchase, together with a syndicate of underwriters, 11,500,000 subordinated voting shares of the Company on a “bought deal” basis at a price of $4.80 per Subordinated Voting Share for gross proceeds of approximately $55.0 million.

Canopy Rivers completed a subsequent $9.4 million equity investment in its portfolio company Canapar Corp., the Canadian parent corporation of Canapar SrL, an Italy-based organic hemp production and processing platform. The investment aligns with the company’s global-focused growth strategy and is expected to provide the company with the opportunity to capitalize on the rapidly expanding European cannabidiol market.

GrowGeneration

GrowGeneration Corp. (OTCQX: GRWG) has purchased certain assets of BWGS, LLC. The transaction includes purchasing all the inventory of BWGS, as well as all their branded products.

Supreme Cannabis

Navdeep Dhaliwal, CEO and Director, The Supreme Cannabis Company, Inc. (FIRE), joined Michael Kousaie, Vice-President, Strategy and Product Innovation, Toronto Stock Exchange and TSX Venture Exchange, to open the market. The Supreme Cannabis Company, Inc. graduated and began trading on Toronto Stock Exchange on February 4, 2019.


Debra BorchardtDebra BorchardtFebruary 4, 2019
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9min9271

MedMen Enterprises Inc. (MMNFF) is facing a new lawsuit from the company’s former Chief Financial Officer James Parker. Parker filed his case on January 29 in the Superior Court of California in the County of Los Angeles claiming wrongful termination for an undetermined amount of damages.

MedMen spokesman Daniel Yi said that the company was unable to respond to the filing because it had not been officially served, but would do so once that happened. “These are baseless claims and we’ll defend ourselves vigorously in court,” said Yi.

Parker resigned from the company in November less than a year after the company began trading on the Canadian Securities Exchange following a reverse take over. It’s highly unusual for a company to experience a change at this level so quickly after becoming a publicly traded company. At the time, Jim Miller, who was the Vice President of accounting was appointed as the interim CFO and then in December MedMen named Michael Kramer as its official CFO. Kramer worked previously in senior jobs for retailers such as Apple Inc., Abercrombie & Fitch and Forever 21.

The Allegations

The allegations are harsh. Parker says that he to “Choose between complying with his fiduciary duty to the company and its shareholders or turning a blind eye and a deaf ear to improper and unlawful behavior, he had been constructively and wrongfully terminated without cause and in violation of public policy.” Parker claims MedMen went behind his back to begin searching for a new CFO and diminished his authority within the company.

He also complained that the company instructed him to make payments that he questioned.

“Plaintiff was ordered to spend several millions of company dollars on such items as 24-hour armed Executive Protection (security) for the CEO, President, and their families, high-tech safe rooms and security systems for their new houses, personal drivers, private jets (often with friends and family along for the ride), luxury hotels, special order pearl white Escalades for the CEO (and another car for his family), a custom $160,000 Tesla SUV demanded by the President, tens of thousands of dollars apiece on multiple extravagant custom conference room tables, and placing CEO Bierman’s personal therapist and marriage counselor on staff fulltime as a “performance improvement expert” at a pay rate in excess of $300,000 a year.”

Parker alleges that Bierman and President Andrew Modlin engaged in inappropriate name-calling.

“Mr. Parker was forced to tolerate being ridiculed by CEO Bierman and President Modlin for the way Plaintiff dressed (not hip enough to satisfy the Founders’ millennial culture); being called “fat and sloppy”; being called a “pussy-bitch;” having his office diminished in size; assigned to a shared a parking space with his executive assistant while less senior VP’s and Administrative Assistants had their own exclusive spots; subjected to hearing CEO Bierman’s racially inappropriate reference to Los Angeles City Councilman Herb Wesson as a “midget negro” and the CEO’s characterizations of cannabis social equity programs as “reparations”; CEO Bierman’s references to a representative of the Drug Policy Alliance as a “fat, black lesbian;” CEO Bierman’s and President Modlin referring to women in conflict with them as “cunts” and those with different ideas or perspectives as being “retarded;”

Parker also made serious securities violation claims saying:

  • “Ordering Plaintiff to wire hundreds of thousands of public dollars to a “consultant” in Canada to “buy up our stock when it is under attack”
  • “Ordering Plaintiff to pay prohibited success fees to unlicensed broker-dealers for various fundraising efforts, under the semblance of “consulting agreements”
  • “The CEO and President not being fully transparent about non-arm’s length deals with numerous related parties (including Pharmacann and Captor Capital)”
  • “The CEO and President failing to publicly disclose all Named Executive Officers and other Material Officer compensation packages (in violation of Canadian National Instrument Form 51-102 F6 which requires that the compensation of the CEO, CFO and next three highest-paid executives be publicly disclosed)”

Parker also claims that Bierman and Modlin have continued to treat the company as if it were still a private company and not one owned publicly by shareholders.

“Plaintiff having to deal with all of the resulting cultural fallout at the company; relegated to using his personal American Express card to fund company purchases ranging from $150,000-$250,000 a week because CEO Bierman and President Modlin, and Defendant could not obtain credit cards with high enough limits since MM Enterprises was in the cannabis industry”

MedMen Claims Performance Issues

Within the case, Parker included emails from Andrew Modlin suggesting the company was unhappy with Parker’s performance leading to his ouster.

Modlin wrote, “You have engaged in other serious neglect in the performance of your duties and you have willfully and repeatedly failed and refused to perform your duties. We will be providing you with a more detailed description of your performance deficiencies shortly as well as a plan for curing those deficiencies.”

In another email stated in the case, Modlin wrote, “We are taking the time to thoughtfully memorialize the myriad well-documented deficiencies in your performance so that both you and MedMen can understand what is expected of you in your very well compensated position. Given the amount of your base salary, the annual bonus available to you, and the value of the equity grants given to you, MedMen has every right to expect you to perform your job duties
admirably. ”

Damages

Parker was being paid $750,000 a year and if he was terminated without cause he would receive $2.2 million. In addition to other lump sum payments and unvested stock options. However, the filing states that damages would be determined in court.

Other Lawsuits

MedMen is facing another lawsuit. Brent Cox and Omar Mangalji founders of The Inception Companies founders (through an affiliated entity – MMMG-MC, Inc. – that holds a significant stake in MedMen’s management company MMMG, LLC) filed a complaint against Adam Bierman; Andrew Modlin and various MedMen Enterprises (OTC: MMNFF) entities for alleged breaches of fiduciary duty. A Los Angeles Superior Court though denied a request from the plaintiffs for a temporary restraining order and a preliminary injunction and giving the company a slight early victory.

However, similar to Parkers claims that Bierman and Modlin are self-dealing when it comes to the company, Cox and Mangali also stated, “MedMen veneer is a complex web of interconnected subsidiary entities, virtually all of which are directly managed, directed, controlled, and owned by BIERMAN and MODLIN, and all of which always pursue the best interests of BIERMAN and MODLIN, rather than the best interests of any stakeholder or entity. It is that perverse interconnectedness and rampant, brazen self -dealing that renders the actions of BIERMAN and MODLIN, and of the Entity Defendants, unlawful.”

 


Debra BorchardtDebra BorchardtJanuary 17, 2019
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5min2440

MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) released unaudited financial results for its fiscal 2019 second quarter ending December 29, 2018. Across the company’s operations in California, Nevada, New York, and Arizona, systemwide revenue increased 40% sequentially to $29.9 million. The company said that if it included pending acquisitions that revenue number would be $49.5 million. Official results will be posted in February.

The growth is mostly due to the company’s stores in Southern California. MedMen has eight retail locations there that reported a combined $23.7 million in revenue, which represents a 27% quarter-over-quarter increase. Cowen & Co.’s most recent estimate projects California will be a US$11 billion market by the end of 2030.

“California is the prize of the cannabis industry and the performance of our stores, quarter-over-quarter, is a reflection of our continued execution in our home state,” said Adam Bierman, MedMen chief executive officer, and co-founder.

West Hollywood Store

Unfortunately, MedMen did not receive a permanent license for its West Hollywood location. This information was divulged in a recent lawsuit filed against MedMen that alleged the company was being mismanaged. This early release of revenue results may be an attempt to fight back against those allegations. In other words, if revenue has jumped 40% quarter-over-quarter how can the company be mismanaged?

The city council of West Hollywood debated their own wisdom of awarding licenses to businesses that had no open stores and no assurance they could open stores quickly.

Mayor Pro Tem  John D’Amicosaid in a public meeting, “We haven’t asked the eight new licensees whether they can open a business in three months in the city, whether or not they’re in the position to do that – that was supposed to be explained. We also don’t know what the other four medical cannabis licenses mean if the state has conflated cannabis and adult use licenses, and that was supposed to be brought to our attention when I suggested we table this. So we’re having a discussion without any of the actual information we need. Except that four really great businesses in our community potentially will be asked to stop serving their constituents, their customers, if they don’t get some way to continue to provide service.”

That sounds like the city leaders are having second thoughts.

Other MedMen Retail Locations

The retail revenue numbers including those pending acquisitions are based on 31 retail stores that were operational at the end of the quarter. The company said that includes the MedMen Paradise location near McCarran International Airport in Las Vegas, which opened in October, and the MedMen Scottsdale location in Arizona, which opened in December through the closing of the Monarch acquisition. The operational retail locations, including pending acquisitions, represent 40% of the 77 total stores that the company is licensed for across 12 states.

In addition to growing revenue at its existing locations,MedMen has 16 new locations slated to open during the calendar year 2019, including 12 locations in Florida, where the Company is licensed for up to 30 locations. The Company is set to open four retail stores in Florida in the next 90 days, which include locations in Miami Beach, Orlando, West Palm Beach, and Key West.

 


Debra BorchardtDebra BorchardtJanuary 16, 2019
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New York State Governor Andrew Cuomo announced his plan to legalize adult use cannabis in 100 days. The governor did not provide a lot of details but suggested it would continue to be a restrictive program.

Of course, New Jersey also said it would legalize adult use cannabis but then found it has taken much longer to make adjustments to the rules and regulations of a conservative medical cannabis program. Cuomo did note that consumers would need to be over the age of 21 and he was very supportive of towns cities having the ability to opt out of allowing cannabis businesses.

In December the Governor said, “The fact is we have had two criminal justice systems: one for the wealthy and the well-off, and one for everyone else. He also said that law enforcement “for too long targeted the African-American and minority communities.”

On May 15, 2018, New York City Comptroller Scott Stringer published a report estimating the potential size of the state’s legal cannabis market and how much tax revenue it would generate for both the city and the state. According to the report, the New York State cannabis market could see up to $3.1 billion in annual sales, with up to $1.1 billion being generated in New York City alone. In terms of tax revenue, legal cannabis could generate up to $436 million for New York state and $336 for New York City. Some lawmakers have even suggested this money could be used to fix the troubled subway system.

A new report from ArcView and BDS Analytics is estimating the New York cannabis market could reach $1.6 billion by the year 2022, a big jump from the expected $263 million in sales for 2018. This would be the fourth biggest market in the U.S. The biggest market is California, followed by Colorado and Florida respectively.

“Let’s legalize the adult use of recreational marijuana once and for all,” he added.

During the midterm elections, the New York State government shifted to Democratic control and it was expected that the new lawmakers would fully legalize cannabis. The efforts by Cuomo as expected to be approved in Albany. The tax revenue and jobs from fully legal cannabis would be a big boost to some of the needy areas in the state.

Just this week, Canopy Growth (NYSE: CGC) said it was going to spend $150 million to build its first production facility in the U.S. after getting a license to grow hemp by New York.

Canopy Growth Corp. will spend as much as $150 million to build its first production facility in the U.S. after the Canadian cannabis company was granted a hemp license by New York state. “I applaud the political leadership at the federal and state level that has allowed today’s announcement to become reality,” Canopy Chief Executive Officer Bruce Linton said in a statement.

The company said it was reviewing locations in the Southern Tier region of New York State and said it would announce the winner within 100 days.

Cuomo is under pressure to create jobs in depressed areas in upstate New York and cannabis jobs fit the bill. A study, published by Joblift, shows that cannabis growth in California is “steadily declining,” while New York State is experiencing strong growth. New York is now third in terms of gross domestic product and is experiencing a “surge in medical marijuana job postings,” with the study saying it could hold “the most potential for overall growth in the sector.” New York experienced two times more job postings (155 vs. 67) in the first half of 2018, compared to the prior year.

Next comes the question investors want to know. Who is poised to capitalize on the New York market? Cannabiz Media is a company that tracks license holders in states around the country.

Figure 1Provided by CannaBiz Media

 

 

Company Symbol
MedMen Enterprises CSE: MMEN
Vireo Health Private Company
Columbia Care Q1 2019 Est Public Date
Etain Health Private Co.
Acreage Holdings CSE: ACRG.U
Fiorello Pharmaceuticals Private Company
iAnthus CSE: IAN
Curaleaf CSE: CURA

 

MedMen Enterprises

According to their data, it looks like MedMen Enterprises Inc. (CSE: MMEN) (OTC: MMNFF) is poised to be the big winner as a result of its acquisition of PharmaCann, which had the highest number of permits awarded in the state. MedMen acquired PharmaCann for $682 million in an all stock deal back in October. It not only doubled the reach for MedMen, but expanded its presence in New York.

MedMen had acquired New York’s struggling Bloomfield Industries at the beginning of 2018. The company had been unable to pay vendors and was looking for new investors. Bloomfield was one of the original five licensees in New York.

“MedMen is proud of its record of providing high quality products and shopping experience to medical marijuana patients in the state of New York and customers around the U.S. We believe that as New York moves to become the 11th state in the union to legalize adult use, the wealth of experience and knowledge MedMen brings having operated in other highly regulated and complex markets is an asset to the state,” said spokesman Daniel Yi. “We also believe that in order for an adult use cannabis market to flourish and thrive in New York, there needs to be a clear path for participation in ownership and jobs for new entrants to the industry. There also needs to be access to resources and capital for such new operators in communities disproportionally impacted by the war on drugs, and more specifically the prohibition of marijuana. MedMen stands ready to work with the state and to be a proactive partner with others in the community to build a sustainable and inclusive cannabis program.”

Vireo Health

Vireo Health is next on the list. Vireo  is  a physician-led multi-state medical cannabis company, that says “It is committed to safely alleviating pain by providing patients with best-in-class cannabis products and compassionate care.” Unfortunately for investors, this company is still private. Although it did raise $17 million back in August and the company said that it was planning on going public at some point.

Vireo is still making headlines as formers executives were set to go to trial at some point this year for smuggling cannabis oil from Minnesota to New York. The company was trying to move inventory to meet a New York deadline and the move was exposed due to a whistleblower. Dr. Laura Bultman and Ronald Owens, the company’s former chief medical officer and chief security officer.  face felony charges of smuggling $500,000 worth of cannabis oil into New York. They face up to two years in jail and a $3,000 fine for violating Minnesota state medical marijuana laws.

Columbia Care

Next in line for number of permits is Columbia Care, which is expected to go public in the first quarter of 2019 following a merger with Canaccord Genuity Growth (CGGC), a special purpose vehicle.  In October it was announced that the two companies would combine. The companies agreed that CGGC would be valued at C$60.7 million and that Columbia Care would be valued at US$1.35 billion. The deal is expected to close in the first quarter of 2019.

Columbia was selected to be one of five licensees in Virginia and became the first U.S. company licensed in the European Union. It was recently awarded one of the six new licenses in New Jersey.

Etain Health

Etain Health is one of the original five licensees in New York and it too remains a private company. It is female-owned only recently began to expand beyond the state lines as it looks to California as another market for its products.

Acreage Holdings

Acreage Holdings, Inc. (CSE: ACRG.U) (OTC: ACRZF) also stands to benefit due to its ownership of New York Canna, now known as Terradiol New York. New York Canna was originally formed  in 2015. The initial shareholders of New York Canna, Inc. were intended to be New Amsterdam Distributors (NAD) and EPMMNY. However, NAD and EPMMNY were unable to reach an agreement as to EPMMNY’s contributions to the operating entity and the terms of investment. NAD says it was the sole shareholder of New York Canna when it began talking to Acreage among others.

EPMMNY doesn’t agree with this assessment and recently filed a lawsuit asking for $400 million. EPMMNY says in its lawsuit that it was “frozen out” in 2016 and its stake reduced initially to 12.5% as NYCANNA merged with defendant NY Medicinal Research & Caring, which included NYCI Holdings, Impire Holdings and Acreage Holdings as investors.

Fiorello Pharmaceuticals

Firorello Pharmaceuticals also known as FP Wellness is a New York State only licensee. It is privately owned. The company lists its partners as The Clinic, Plant Consulting Group and LIU Pharmacy on its website. A report in the Daily Gazette said that Fiorello is building a medical marijuana production facility in Glenville and plans to open other dispensaries in Monroe, Nassau and New York counties.

iAnthus

Valley Agriceuticals was supposed to be sold to iAnthus Capital Holdings Inc. (CSE: IAN) (OTC: ITHUF) in 2017  for $17.3 million, but that deal was never closed. iAnthus then acquired New York’s Citiva Medical for $18 million at the beginning of 2018. According to the original press release, Citiva NY’s license included a cultivation and processing facility and four dispensary locations to be located in Brooklyn, Staten Island, Dutchess County and Chemung County. Citiva’s proposed 2,000 square-foot flagship Brooklyn dispensary was slated to open in Q4 2018, and would be one of only two dispensaries located in New York City’s most populous borough, with 2.6 million residents.

The statement said that Citiva’s Staten Island dispensary, would be the only Registered Organization serving Staten Island’s 500,000 residents and it was also slated to open in Q4 2018. The Dutchess County and Chemung County dispensaries are planned for the second quarter of 2019.

Curaleaf

Finally, Palliatech, which changed its name to Curaleaf Holdings Inc. (CSE: CURA) (OTC: CURLF) is based in Boston MA. It has locations in seven New York counties. Its website says more counties are coming. Near Manhattan there is a dispensary in Forest Hills in Queens. In the company’s last earnings announcement, it said that it estimates it will post revenue of $400 million in 2019 including revenue generated by the non-profits, and free cash flow of $100 million. Curaleaf expects to complete two acquisitions in the fourth quarter of 2018 in Maryland and Massachusetts. At the end of 2018, Curaleaf also expects to have at least 40 operational stores.


Debra BorchardtDebra BorchardtJanuary 9, 2019
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On Tuesday,  Brent Cox and Omar Mangalji founders of The Inception Companies founders (through an affiliated entity – MMMG-MC, Inc. – that holds a significant stake in MedMen’s management company MMMG, LLC) filed a complaint against Adam Bierman; Andrew Modlin and various MedMen Enterprises (OTC: MMNFF) entities for alleged breaches of fiduciary duty.

Cox is a former board member of MedMen, serving in that role from March 2016 to March 2018 and Founder of The Inception Companies. The Inception Companies is a private opportunistic investment firm based in Los Angeles and London with operating and investing experience across numerous industries, including regulated cannabis. Inception and its affiliates have deployed capital in leading consumer retail brands, agricultural & industrial operations, technology platforms, and real estate assets representing over $2 billion in aggregate enterprise value.

On Wednesday, a Los Angeles Superior Court denied a request from the plaintiffs for a temporary restraining order and a preliminary injunction. According to MedMen, the gentlemen say they are being unfairly prevented from cashing out of their interest in MMMG, which currently holds approximately 179 million shares that are redeemable and exchangeable on a one-for-one basis for Class B Subordinate Voting Shares of MedMen Enterprises Inc. The shares are locked up, thus prevented from trading in the open markets, until November 25, 2019.

The lawsuit claimed, “The MedMen veneer is a complex web of interconnected subsidiary entities, virtually all of which are directly managed, directed, controlled, and owned by BIERMAN and MODLIN, and all of which always pursue the best interests of BIERMAN and MODLIN, rather than the best interests of any stakeholder or entity. It is that perverse interconnectedness and rampant, brazen self -dealing that renders the actions of BIERMAN and
MODLIN, and of the Entity Defendants, unlawful.”
The general gist of the lawsuit was that Cox and Mangalji received shares that were not able to be traded until the lockup period ended on November 29, 2018. The lawsuit claimed, ” On November 21, 2018, BIERMAN announced that limited partners in Fund I and Fund II would have 100% of their shares issued to them in “mid-January” 2019, with the share totals awarded to them calculated at the then-current market value. At that time, a portion of their MEDMEN CORP. shares would be free trading, while the remainder of their shares would remain locked up until

the thirteenth month thereafter, after which once per month on a twelve-month basis their “remaining shares become free-trading based on a monthly drip,” in equal installments.”
Cox stated, “We have a long history with MedMen – as one of the largest and original shareholders of the company. Sadly, we are backed into a corner here and compelled to take action on behalf of all stakeholders of the company.”
MedMen said Last November, an independent committee made up of representatives from the three entities; MMMG, MedMen Opportunity Fund I and MedMen Opportunity Fund II collectively decided to extend lockups on virtually all of their MedMen shares until November 25, 2019 when the shares will become freely tradeable in increments over a 12-month period.
The gentlemen are seeking damages “in an amount to be proven at trial but believed to be in excess of US$18,000,000 as to MC and US$1,800,000 as to Mr. Cox.
MedMen’s Response
Daniel Yi, MedMen’s senior vice president of corporate communications said, “These are frivolous claims, and it appears the judge agrees. Today, a Los Angeles Superior Court denied the plaintiffs’ request for a temporary restraining order and preliminary injunction. Despite the agreement reached by an independent committee to safeguard the best interests of our shareholders, including MMMG and the funds, the plaintiffs; Omar Mangalji and Brent Cox, now seek special treatment. The committee decided to lock up more than 90 percent of the shares owned by the three entities at least until November 25, 2019. The interests of all of the stakeholders impacted were included in the process and the feedback was overwhelmingly positive. Mr. Mangalji and Mr. Cox have already received cash distributions representing a complete return of their capital plus a substantial gain. It’s unfortunate that Mr. Mangalji and Mr. Cox have chosen this path. This is a meritless claim by a minority investor. This is clearly and egregiously an attempt to devalue the shares of the enterprise for their own personal gain at the expense of all other stakeholders. MedMen remains focused on building one of the leading cannabis companies in the world and we feel confident we will prevail on that mission and against this meritless complaint.”
West Hollywood Store
One piece of information in the lawsuit claimed that on or about “December 18, 2018, the City of West Hollywood announced, in pertinent part, that MedMen’s flagship West Hollywood location, which presently operates under a
temporary Adult Use (Recreational) Sales License that expires in March 2019, would not receive a permanent Adult Use (Recreational) Sales License. Thus, the flagship West Hollywood MedMen location will most likely cease
all recreational sales in March 2019 unless the City of West Hollywood amends its licensing decision.”

Debra BorchardtDebra BorchardtDecember 11, 2018
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5min3241

MPX Bioceutical

MPX Bioceutical Corporation  (CSE: MPX; OTC: MPXEF) announced that GreenMart NLV, LLC, a subsidiary of MPX, has been awarded four conditional retail marijuana store licenses in the state of Nevada.

GreenMart is a fully-operational cultivation, production, and kitchen facility that produces MPX-branded wholesale products for both the adult-use and medical markets in Nevada. The new dispensaries will operate under the “Health for Life” brand, which is the company’s flagship retail brand. Nevada recorded more than half a billion dollars in cannabis sales during the first year that adult use was legal, according to the Nevada Department of Taxation, exceeding many expectations.

MedMen Enterprises

MedMen (MMEN.CN) (MMNFF) announced that it has closed its previously announced acquisition of a dispensary license in Emeryville, California from B12, LLC.

MedMen paid a combination of cash at closing and shares of MedMen in an undisclosed amount. The transaction closed within 90 days of signing. With the closing of the acquisition, MedMen will have one of only two adult-use cannabis dispensary licenses issued in the City of Emeryville, just outside San Francisco. MedMen currently operates eight dispensaries in Southern California. The Emeryville dispensary will be located in the commercial heart of the East Bay and is expected to open in 2019.

In the last month, MedMen acquired additional licenses in Arizona.  Through the acquisition of PharmaCann, MedMen will own an additional twenty-five licenses across 12 states (permitting operation of an additional 18 retail facilities and 7 cultivation/manufacturing facilities).

Liberty Health Sciences Inc.

Liberty Health (CSE: LHS) (OTCQX: LHSIF)  opened its first South Florida dispensary in the heart of Miami. The new dispensary provides customers in Miami-Dade County, the most populous county in Florida, access to premium quality medical marijuana products and educational services.

Located at 6827 Bird Road, Miami, FL., the dispensary is on one of the oldest and busiest state roads in Miami, with traffic exceeding 70,000 vehicles per day. The company said that it is a primary artery that feeds the main suburbs in Miami such as Coral GablesWest MiamiSouth Miami, Westchester, and Kendall. In addition to the Miami location, Liberty plans to open 3 more dispensaries this month with more to come in 2019, all subject to the receipt of the Florida Department of Health approvals.

Liberty remains committed to ensuring that its premium quality medical marijuana products and educational services are accessible to the more than 2.7 million people who call South Florida home,” said George Scorsis, CEO of Liberty Health Sciences. “When people come to our dispensaries, they know they will find the highest quality medicinal cannabis. They also trust that they are going to have access to the best brands in any category, including PAX and Mary’s Medicinals products.


Debra BorchardtDebra BorchardtNovember 29, 2018
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5min6000

MedMen Enterprises (MMEN) (MMNFF) reported that its fiscal year 2019 first-quarter revenue grew 1,094% to $21.5 million over last year’s $1.8 million for the same time period. Still, the company reported a net loss of $66.5 million, or a loss of $1.42 per share, a dramatic increase over last year’s loss of $5.7 million for the same time period. This was a slight improvement over the net loss of $78.7 million for the fourth quarter last year.

“Our first quarter performance underlines the successful execution of our growth strategy and ongoing commitment to provide mainstream cannabis consumers a wide breadth of products for their lifestyle and wellness needs,” said Adam Bierman, MedMen chief executive, and co-founder. “Our four-pillars strategy – built around a quality team, superior assets, strong balance sheet and the ability to efficiently and effectively raise and deploy capital – has set us up to successfully achieve our vision. We are now entering a new phase focused on fully operationalizing our vast footprint.”

Revenue Breakdown

The company said that the systemwide revenue was drawn from operations in California, Nevada and New York. The statement read that the year-over-year increase was driven primarily by the opening of seven additional retail stores and strong results from the California market. The Company operated 14 locations at the end of the first quarter. Southern California accounted for 86% of first quarter systemwide revenue and 8 out of the 14 open retail stores at quarter end.

The company noted that the quarter was impacted by a state-wide supply chain challenge in California during the month of July. That was when new regulations went into effect and many of the original products on the shelf no longer met those requirements. They were sold at deep discounts and then destroyed if it didn’t meet new regulations.

MedMen said its gross profit for the first quarter were $11.7 million versus $5.9 million in the previous quarter. This represents a 98% growth rate. Gross profit margin in the first quarter was 54% compared to 29% in the previous quarter.

Expenses

Expenses in the first fiscal quarter were $72 million and SG&A  included $4.8 million in marketing and branding, $16.3 million for salaries and benefits. Furthermore, SG&A expenses for the first quarter also included $1.4 million acquisition-related costs and $24.9 million of cash and non-cash stock-based compensation and employee incentive plans expense and $4.7 million for the state, local and federal tax-related expenses.

MedMen had $63.4 million in cash and cash equivalents at the end of the quarter. While MedMen has been able to sell more shares to raise additional capital, the expenses continue to outpace the revenue. The last capital raise was cut almost in half as the price of the shares dropped before the deal could be completed. The CFO James Parker also recently resigned and the company appointed Jim Miller as interim chief financial officer.

Since Quarter End

Since the first quarter ended, MedMen got its foot into the Illinois market through the pending acquisition of a licensed medical dispensary in Oak Park. It acquired a northern California licensed dispensary in the City of Emeryville outside San Francisco on October 10.

The company intends to acquire PharmaCann in an all-stock transaction valued at $682 million. The transaction will double the number of states where MedMen has licenses to 12, which accounts for over 50%of the total estimated 2030 U.S. addressable market of $75 billion as stated by the Cowen Group. Combined, MedMen and PharmaCann would be licensed for 67 retail stores and 14 factories, including pending acquisitions by MedMen.

MedMen agreed to acquire control of Kannaboost Technology Inc. and CSI Solutions LLC, collectively referred to as “Level Up,” in a cash and stock transaction valued at $33 million. Level Up holds licenses for two vertically-integrated operations in Arizona, including retail locations in Scottsdale and Tempe and 25,000 square feet of cultivation and production capacity in Tempe and Phoenix.

 


Debra BorchardtDebra BorchardtNovember 19, 2018
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5min13792

MedMen Enterprises (MMNFF) stock was halted for trading following the company’s amended capital raise terms. The company began trading back in May to great fanfare as the first U.S. cannabis unicorn. While some industry insiders groused about the billion dollar valuation, subsequent generous valuations seemed to signal that MedMen was just the first of many in the billion dollar club.

Still, MedMen went on to raise another C$86.3 million in September in a bought deal with units priced at C$6.87. This was followed up by an additional sale on November 9, 2018, of C$120 million of subordinated voting share units priced at C$6.80.  MedMen announced that it had entered into a letter of engagement with Canaccord Genuity Corp. Under the agreement, Canaccord has agreed to purchase, on behalf of a group of underwriters, 17,648,000 units of the company on a bought deal basis.

Price Drop Forces Change

Then the bottom fell out and the stock plunged to as low as C$5.39. Last Friday, MedMen decided to amend the terms of the deal to issue to the underwriters 13,640,000 units at a price per unit of $5.50 for gross proceeds of $75,020,000.  Each unit will be comprised of one Class B Subordinate voting share of MedMen and one Class B share purchase warrant. The exercise price for each warrant was amended to $6.87 per warrant and the warrants are exercisable for a term expiring on September 27, 2021.

The stock trading was halted as the IIROC (Investment Industry Regulatory  Organization of Canada) worked through the changes. Late on Monday, MedMen said that it had been issued a receipt by the applicable Canadian securities regulatory authorities for its preliminary prospectus dated November 16, 2018 in connection with its offering of 13,640,000 units, at a price per unit of $5.50 , for gross proceeds of $75,020,000 , to be issued and sold on a bought deal basis to a syndicate of underwriters, led by Canaccord Genuity Corp., and including Eight Capital and Cormark Securities Inc.

“We pride ourselves on our investability and we create more goodwill every day we wake up, execute on our business plan and generate outsized returns for investors,” said Adam Bierman, chief executive, and co-founder.  “The bought deal we entered into with Cannacord on November 9 came as a result of the relationship we have built with our shareholders and the investment community.  Shortly after the announcement, the global market experienced a significant sell-off and as we ended last week the investors that bought that deal would have been underwater. That did not sit right with us and accordingly, we initiated a discussion with Cannacord about repricing the deal, to ensure our investors would be buying the deal based on an offering ripe for the returns we constantly seek to create.  Cannacord was a willing and excited partner in fleshing out our options and per the press release Nov 16th the deal has been revised.”

In addition to the change in the deal, MedMen announced that its Chief Financial Officer James Parker resigned and that the company’s Vice President of Accounting Jim Miller had been appointed interim CFO. Miller joined MedMen in January 2018. Prior to joining MedMen, Miller held several senior finance and accounting positions at leading entertainment firms such as the Walt Disney Company and Viacom.

 

 


William SumnerWilliam SumnerNovember 9, 2018
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3min4220

MedMen Enterprises Inc. (CSE: MMEN) is looking to raise some extra cash. On November 19, 2018, MedMen announced that it has entered into a letter of engagement with Canaccord Genuity Corp. Under the agreement, Canaccord has agreed to purchase, on behalf of a group of underwriters, 17,648,000 units of the company on a bought deal basis. At a price of $6.80, the gross proceeds of the offering amount to $120,006,400.

Although the company reported roughly $40 million in annual revenue, its operating costs have been staggeringly high. In the fourth quarter alone, MedMen’s operating expenses were $72.6 million. For the year, the company’s net loss and comprehensive net loss were around $112 million.

Executives at the company attribute the high operating costs to significant investments in the company’s long-term strategy by building up personnel and company infrastructure. In the fourth quarter, MedMen incurred a series of high one-time expenses; including the company’s RTO ($2.7 million), acquisition-related costs ($3.5 million), and $30.8 million in non-cash stock compensation and employee incentive plan expense. Despite these costs, the company’s balance sheets still look favorable, with cash and cash equivalents of $79.2 million and total debt at $56 million.

In addition to the initial offering, MedMen has agreed to grant the underwriters an over-allotment option to purchase another 2,647,200 units at the issuing price. Underwriters may exercise the option to acquire units, Class B Shares of the company, and/or warrants.

A unit constitutes one Class B Subordinate Voting Share and one-half of one Class B share purchase warrant. Each purchase share unit entitles the holder to purchase one Class B share at a price of $10 for up to three years following the closing of the offering.

The option is exercisable up to thirty days following the closing of the offering. If exercised, the option will generate an additional $18,000,960; raising the proceeds of the offering to $138,007,360. The offering is expected to close on or around November 30, 2018.



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