MedMen Archives - Green Market Report

Kaitlin DomangueKaitlin DomangueJune 18, 2020
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MedMen co-founders, Adam Bierman and Andrew Modlin have stepped down from the company’s Board of Directors, announced yesterday. This comes after a long series of errors and Bierman eventually stepping down as CEO in February.  

MedMen has made headlines in the cannabis news for the past 8-ish months, and while some issues (like the riots and sales being impacted due to COVID), were things totally out of their control, the general consensus is that the company, especially the corporate offices, have made some serious missteps along the way. MedMen has been heavily criticized in the past for its extreme spending habits and the bottomless need for more capital. Bierman and Modlin have been personally accused of handling money disproportionately to benefit themselves. 

Here is a timeline of some of the missteps and out-of-their-control misfortunes in MedMen’s last eight months, that ultimately led to the co-founders to step down from the Board of Directors:

November 2019: MedMen reports a net loss of $82 million for the first fiscal quarter of 2020 

Per Green Market Report’s article, “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.”

November 2019: MedMen Cuts Workforce To Cut Costs

Bloomberg reported on November 15th that MedMen cut 190 jobs, including 20% of their corporate workforce. It also announced the sale of its stake in Treehouse Real Estate Investment Trust for $14 million. 

December 2019: MedMen Sells Licenses to Raise Money

According to Green Market Report, “the company has executed a non-binding term sheet for the sale of its Arizona licenses, which include three vertically-integrated licenses, and a binding term sheet for the sale of a cultivation and manufacturing license in Illinois.

MedMen said it expects to get roughly $54 million in cash proceeds through the divestiture of the non-core licenses. The completion of the sale of Arizona licenses is subject to due diligence, the execution of definitive documentation and customary regulatory approvals. The completion of the sale of the Illinois license is subject to the execution of definitive documentation and customary regulatory approvals.

The company said it will continue to explore the sale of other non-core assets and will focus on deepening its retail market share in California, Nevada, Florida, Illinois, Massachusetts, and New York.” MedMen also sold some Class B subordinate shares for $20 million.

January 2020: MedMen Confirms the Rumor They Haven’t Been Paying Vendors

Former MedMen CEO, Adam Bierman, told Green Market Report, “During that time frame [in reference to a time of growing pains for the company], we stopped payments to certain vendors as would be commonplace in the restructuring of a retailer. We turned over our accounts payable to a restructuring consulting firm (FTI Consulting) so that we could preserve and allocate the cash as we got through and out the other end of restructuring. These are brands that heavily rely upon MedMen for their business. Especially in California, we understand how important MedMen is to that ecosystem and we understand what happens, and the impact, and the ripple effect it has on these manufacturers. They’re having discussions like that with our teams about structuring payments.” The news was broken by screenshots of emails being posted online telling vendors MedMen would not be paying them. 

February 2020: MedMen CEO, Adam Bierman, Steps Down

MedMen announced on January 31st that their CEO was stepping down effective February 1st. He also gave up all of his Class A super voting shares as part of the deal. 

“I continue to believe that MedMen is positioned to thrive. It’s time for our next iteration of leadership to capitalize on the opportunity we have created. This has been an incredible journey and I will continue to be inspired by those around the globe working to make our world safer, healthier and happier through access to legal, regulated cannabis,” said Adam Bierman.

May 2020: MedMen Says COVID-19 Impacted Sales

After releasing a fairly solid third quarter earnings report, on the company’s earnings conference call, interim CEO Tom Lynch said, “Unfortunately, COVID has impacted our sales since the end of March; we’re down in April overall, but have seen a steady increase since. While we’re still not back to our normal levels, pre-COVID, particularly in California, we’re optimistic about our ability to recapture traffic as soon as stay at home orders are lifted.”

MedMen also noted that its Nevada location had suffered saying, “We saw a decrease in overall sales in this market, particularly given the impact that the pandemic has had on tourism into Las Vegas, we’re encouraged about the recent decision to open up cannabis retail again, and have already begun to see a steady ramp-up in revenue.”

June 2020: MedMen Storefronts Looted, Robbed, and Destroyed

The Green Market Report wrote, “according to social media videos, MedMen in Los Angeles had two locations broken into and robbed. The man filming the video can be heard saying, “They are cleaning MedMen out” as protestors or just plain looters leave the store with red shopping bags, filled with the things they stole.”

Hopefully, 2021 brings better tides for the cannabis giant.


Kaitlin DomangueKaitlin DomangueJune 4, 2020
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Businesses across the nation are suffering at the hands of protesters attempting to send a message about the brutal killing of George Floyd. Many protests have been peaceful, but there are many that lead to looting and damaging buildings, and cannabis dispensaries are included. Despite being considered an essential business throughout the pandemic, many cannabis retail stores found themselves in the crosshairs of these looters. 

The protestors describe these acts of violence and damage to their cities as years of pent up rage and unheard voices, stemming from what they believe is a racially biased system against black Americans. The civil unrest has incited the President to release the National Guard across various states. There have been many deaths, arrests, and injuries during this tense time in history. 

According to social media videos, MedMen in Los Angeles had two locations broken into and robbed. The man filming the video can be heard saying, “They are cleaning MedMen out” as protestors o just plain looters leave the store with red shopping bags, filled with the things they stole. 

MedMen did not want to comment on the situation. However one employee of MedMen posted on LinkedIn, “It is not hard for me to empathize with, and I am sensitive to those who view MedMen as a symbol of the inequality that led to the anger expressed last night.” He further emphasized his support for those who feel outraged by the killing of George Floyd, and he himself feels “angry that a group of police officers sat idly by while one of their own murdered George Floyd by standing on his neck for nearly 10 minutes.” MedMen reported Monday that all of their stores will be closed until further notice. They have operations across six US states. 

“Effective immediately, we are temporarily closing all stores and the corporate office to protect the safety of our employees. The safety of everyone in the MedMen family is the most important thing right now, and we are grateful to report that while our stores were damaged, our employees and security guards were unharmed.” The company said in an internal memo, first reported by Marijuana Moment

Jushi Closes Temporarily

Jushi Holdings (OTC:JUSHF) Chairman and Chief Executive Officer Jim Cacioppo said in a statement:

We fully support an individual’s right to freedom of speech and the touching peaceful demonstrations that we have seen around the country. We are heartbroken by the murder of George Floyd and the pain it is causing communities across the country that we not only work in, but live and love.

Unfortunately, certain opportunistic bad actors have at times manifested unacceptable behaviors. This past weekend, our Center City and Northern Liberties locations in Philadelphia were broken into, making it impossible for us to safely operate. In addition to these two temporary store closures, we have limited our hours at certain locations in Pennsylvania and Illinois. Please check www.beyond-hello.com for the latest details. It is our hope to begin safely servicing our customers soon from the impacted store locations and apologize for any inconvenience this may cause our patients and customers.

As committed members of the cannabis movement, we will also continue to fight for equality and work to overturn racially biased laws that ruin lives and unequally target disenfranchised communities and people of color. 

Rappers Berner and B Real both reported robberies at their stores, too. B Real Tweeted on May 30th, “Today as a country we hit a low point.  Rioting, looting  and burning down business all during a pandemic isn’t going to make the change needed. It will only set us back. Protest peacefully and remove the instigators that aren’t there in the name of George Floyd.” 

The Chicago Tribune reported that all of their dispensaries would be closed indefinitely either to prevent looting or to clean up from the damage that has already been done. Kris Krane, president and co-founder of 4Front Ventures, who owns the robbed dispensary Mission South Shore, told The Chicago Tribune, “The store’s been pretty much ransacked. Nothing was going to hold that many people back.” Krane watched 30 to 40 people break into the dispensary on security cameras. 

Most of the cannabis industry seems optimistic that they will rebuild from this, and a lot of them say they understand why this happened. “We can replace windows, we can grow more pot, we can have empathy.” said the MedMen employee. 


Kaitlin DomangueKaitlin DomangueMay 28, 2020
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It’s time for your daily hit of cannabis financial news for May 28th, 2020. 

On the Site

Canopy River Tightens Belt, Cuts Employees

Canopy Rivers Inc. (OTC: CNPOF) is laying off employees and cutting back on spending as the company focuses on positive cash flow. The venture capital firm that specializes in cannabis companies said that it is streamlining its operations to preserve its cash on hand.

The company said in a statement that it is making the following changes:

  • A material reduction in the Company’s operating cash outflows, including a reduction in headcount, directors’ compensation, marketing expenses, and general corporate expenses of a minimum of 35% from the Company’s fiscal 2020 operating cash outflows on a normalized basis;
  • A focus on generating positive cash flow from operations for fiscal 2021 (year ended March 31, 2021); and
  • A focus on maximizing returns on existing assets.

MedMen Says COVID Has Hurt Sales

On the company’s earnings conference call, interim CEO Tom Lynch said, “Unfortunately, COVID has impacted our sales since the end of March; we’re down in April overall, but have seen a steady increase since. While we’re still not back to our normal levels, pre-COVID, particularly in California, we’re optimistic about our ability to recapture traffic as soon as stay at home orders are lifted.”

MedMen also noted that its Nevada location had suffered saying, “We saw a decrease in overall sales in this market, particularly given the impact that the pandemic has had on tourism into Las Vegas, we’re encouraged about the recent decision to open up cannabis retail again, and have already begun to see a steady ramp-up in revenue.”

In Other News

Aurora Completes Acquisition of Reliva, LLC

Canadian cannabis company, Aurora, has completed the acquisition of hemp-derived CBD company, Reliva. 

“We are pleased to have closed the Reliva transaction ahead of schedule. The partnership between Aurora and Reliva is expected to create a market leading international cannabinoid platform that we believe can deliver robust revenue and profitable growth,” said Michael Singer, Executive Chairman and Interim CEO of Aurora. “I would like to officially welcome Miguel Martin and his team to Aurora, and look forward to increasing Aurora’s operating scale, international reach, and product and brand diversity while in parallel, we remain focused on delivering Adjusted EBITDA profitability in Canada for the benefit of all shareholders.”

Cresco Labs Announces First Quarter 2020 Results

Multi-state operator Cresco announced a record revenue of $66.4 million in Q1 of 2020. This is a 60% growth over 2019’s Q4. The company also revealed the largest cultivation expansion in their company’s history, adding 6x cultivation space in Illinois and 4x the cultivation space in Pennsylvania. There was a 144% increase year over year from Q1 of 2019 to Q1 of 2020. 


Debra BorchardtDebra BorchardtMay 28, 2020
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MedMen Enterprises Inc. (OTCQX: MMNFF) reported a fairly solid third-quarter 2020 but warned that COVID-19 has affected its sales.

On the company’s earnings conference call, interim CEO Tom Lynch said, “Unfortunately, COVID has impacted our sales since the end of March; we’re down in April overall, but have seen a steady increase since. While we’re still not back to our normal levels, pre-COVID, particularly in California, we’re optimistic about our ability to recapture traffic as soon as stay at home orders are lifted.”

MedMen also noted that its Nevada location had suffered saying, “We saw a decrease in overall sales in this market, particularly given the impact that the pandemic has had on tourism into Las Vegas, we’re encouraged about the recent decision to open up cannabis retail again, and have already begun to see a steady ramp-up in revenue.”

Third Quarter Results

MedMen reported that its third-quarter revenue of $45.9 million was up 41% over 2019 and up 4% sequentially. 64% of the company’s retail business is in California. CFO Zeeshan Hyder said on the call,Since the end of March, we did see a slowdown in sales into our California stores due to the shelter at home orders and reduced tourism. Accordingly, we modified certain store operations and reduced staff. However, over the past few weeks, we’ve seen a steady rebound of sales, with overall sales per week up over 20% versus the end of April.”

The net loss and comprehensive loss was $76.9 million for the quarter versus $96.4 million in the previous quarter. The net loss from continuing operations was $68.8 million versus $75.2 million in the previous quarter. Third-quarter 2020 net loss attributable to shareholders of MedMen enterprises was $39.9 million or $0.10 per basic and diluted share. Overall, adjusted EBITDA loss for the quarter was $20.7 million compared to $35.1 million in the previous quarter.

On a positive note, Hyder said, “We had a first full month in March of our retail stores being cash flow positive on an after-tax basis. While we expected to be here sooner, we now have a playbook for how to continue building off the progress being made to increase gross margins and reduce store-level expenses.”

Gross Margins Fall

The company reported that its retail gross margins for the third quarter were 47% versus 51% for the second quarter. “The decrease was related to a one-time inventory adjustment we took during the quarter. Without the adjustment, overall gross margins for the quarter was 51%, and if you look at the month of March alone, our gross margin was over 53%, reflecting the impact of our new vendor agreements.” Cowen & Co analyst Vivien Azer asked on the call, “Despite all your costs, cost savings, your OpEx is still running three times ahead of gross profit and now you’re not going to be vertically integrated, which means it seems like you’re probably getting up to margin there though you’re saving yourself some of the overhang on DNA.” Lynch said the company will become incredibly efficient in order to protect the margins.

Financial State

MedMen ended the third quarter of 2020 with $31.8 million of cash and cash equivalents. During the quarter, the company closed an equity financing transaction of $20 million of which $8 million was funded during the quarter, the remainder was funded in the second quarter. It also closed on $12.5 million of additional gross proceeds under Tranche 4 of its Gotham Green convertible notes facility.

Expansion Plans & Closings

MedMen said it temporarily closed five stores in Florida to redirect the limited product to the higher traffic locations but said it fully intends to open those backup. The company also said that it expects to open stores in San Francisco, Emeryville, Pasadena, Fenway area of Boston, Chicago, and Miami, all in the next 12 months; stores that could be at the top of the list in terms of performance in their opinion.

 


Debra BorchardtDebra BorchardtFebruary 26, 2020
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MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) delivered its financial results for the second quarter of 2020 ending December 28, 2019. Revenue across MedMen’s operations in California, Nevada, New York, Illinois, and Florida increased to $44.1 million for the quarter, up 50% year-over-year and 11% sequentially. The company stated that the revenue figures did not include the Company’s operations in Arizona, which are in the process of being divested and are classified as discontinued operations in the Company’s financials.

The net loss for the quarter was a staggering $96 million versus last year’s $64 million. The loss per share was ($0.09) versus last year’s ($0.23), so some improvement there.

“We feel positive about the progress made while remaining aware there is still substantial work to be done. The business is focused on the execution of a strategy to streamline operations, strengthen its balance sheet and bring in additional capital. The sustained power of the brand and consistent consumer loyalty is a regular reminder of our strengths and the opportunities within reach,” said Ben Rose, executive chairman of the Board and Chief Investment Officer of Wicklow Capital.

The total expenses for the quarter were $69 million, which the company managed to trim from last year’s $76 million for the same time period. The company reported an Adjusted EBITDA loss of $35.1 million for the quarter. The Adjusted EBITDA for the quarter does not include additional headcount reduction and retail optimization efforts the company executed on subsequent to the quarter-end. The company’s cultivation and manufacturing facilities contributed to $11.4 million of the total EBITDA loss.

“This is a pivotal time for the Company where we have the opportunity to re-assess the business and narrow the focus on what we do best – retail, to continue to cut costs and to execute on four-wall economics with a path to profitability,” said Ryan Lissack, Interim Chief Executive Officer. “I look forward to transitioning the company into its next chapter, which will be defined by financial discipline and strategic growth to drive long-term value creation for the Company and its stakeholders.”

Yesterday, MedMen entered into an agreement to assign its rights to acquire a licensed cultivation and manufacturing facility in Hillcrest, Illinois for  $17 million which it received as part of its merger termination agreement with PharmaCann, LLC. As part of the Hillcrest Transaction, MedMen received an initial payment of $10 million and the second payment of $7 million is due prior to the closing of the Hillcrest Transaction, expected in the coming weeks.

The company announced two new independent board members and voted to keep former CEO and Co-founder Adam Bierman on the board.

Mr. Mel Elias, an active investor, entrepreneur, and developer in Los Angeles has past and present board experience in CPG and consumer retail businesses both in the US and internationally. He was President and CEO of The Coffee Bean & Tea Leaf for 6 years until it was sold in 2013.

Mr. Cameron Smith currently operates a private angel investment and advisory fund that focuses on health food. Prior to his investment and advisory business, Mr. Smith was General Counsel of The Island ENC, Inc., President of Quantlab Financial and worked at the SEC.


Debra BorchardtDebra BorchardtJanuary 31, 2020
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MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) announced that its Co-Founder and Chief Executive Officer Adam Bierman is stepping down as CEO effective February 1, 2020. Bierman is also giving up all of his Class A super voting shares as part of the deal.

After giving up these shares, MedMen said that Bierman will have 1,893,047 Subordinate Voting Shares and 3,956,324 redeemable shares of MM CAN USA, Inc., each of which is redeemable for one Subordinate Voting Share. Bierman will own 4.8% of the company with an equal amount of voting power.

Bierman’s Co-founder Andrew Modlin has granted a proxy of all of his Super Voting Shares to the company’s Executive Chairman, Ben Rose until December 2020. Mr. Modlin has also agreed to surrender all of his Super Voting Shares to the company, which would occur upon the expiration of the proxy granted to Mr. Rose. Modlin will own 4.9% of the company with an equal amount of voting shares.

Readers may recall that when MedMen went public, the company faced a storm of criticism that the two leaders essentially gave themselves total control of the company with the bulk of the voting shares. New shareholders basically had no say in the company and had no way to voice displeasure in the running of the company as they had no way to vote.

Lissack Named Interim CEO

MedMen’s Chief Operating Officer & Chief Technology Officer, Ryan Lissack was named Interim CEO. The Board of Directors has said that it is forming a committee to identify and appoint a new CEO. Bierman has agreed to continue to serve on the Company’s board of directors, including as part of the board to be elected at the Company’s upcoming shareholder meeting.

“The Board supports both Adam’s decision to step aside for a new CEO to lead the Company, and his and Andrew’s decision to surrender their voting rights to give all shareholders a stronger voice. This evolution will provide Adam the space to contribute to the future of MedMen and extend his commitment to the industry that he has helped pioneer,” said Executive Chairman Ben Rose.

“I continue to believe that MedMen is positioned to thrive. It’s time for our next iteration of leadership to capitalize on the opportunity we have created. This has been an incredible journey and I will continue to be inspired by those around the globe working to make our world safer, healthier and happier through access to legal, regulated cannabis,” said Adam Bierman.

MedMen’s most recent stumble was its inability to pay vendors. When the news first began leaking out from companies stating that their bills were not getting paid and that the company was negotiating payment, MedMen claimed the stories were “not factual.” However, Bierman did concede to Green Market Report that in fact, the stories were true.

The company has faced criticism for his extreme spending habits and its insatiable need for more capital. That most recent rounds of funding though came at the cost of overseeing the management of the company.

Constant Crisis in C-Suite

MedMen seemed to constantly be putting out fires in the C-Suite and many of its own making. MedMen originally began as an investment company, but then it pivoted to become a retailer and described itself as the Apple store of cannabis. The stores became known for slick interiors and styling – the opposite of a “head shop.”

The company’s IPO though was awash in controversy and from day one, it seemed the company could never operate on stable ground. The hubris of awarding the majority of the voting shares to the founders was topped by the billion-dollar valuation for a company that only brought in low double-digit millions in revenue.

It seemed scandal after scandal engulfed the management. There was the employee tax issue, where employees were hit with a lower paycheck, which was blamed on a miscalculation of taxes due to the fast growth of the company. That was followed by a $20 million shareholder lawsuit.

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.”
Parker Lawsuit
That lawsuit was small potatoes compared to the explosive allegations from former CFO James Parker. 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.

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.

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)”

The company had also made a lot of noise about its impending acquisition of PharmaCann and how that deal would make it the largest multi-state operator in the country, but the deal was never closed and was recently terminated.

 


Kaitlin DomangueKaitlin DomangueJanuary 28, 2020
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Emerald Health Therapeutics (TSXV: EMH; OTCQX: EMHTF), referred to as “Emerald” for clarity, is a Canadian cannabis company offering wellness-oriented and recreational cannabis products. Emerald provided an update yesterday on their recently announced a shares for debt transaction with Emerald Health Sciences, (“Sciences”) a control person for Emerald. 

Presently, Emerald carries an aggregate debt of $2,816,963. Per a previously disclosed loan agreement between both parties, Emerald will settle $794,182 owed to Sciences, as well as $2,022,781 owed to Sciences pursuant to trades payable. Emerald Health Therapeutics will also issue 9,713,666 common shares of Emerald to Sciences at $0.29 per share in order to fulfill the debt.

Currently, Sciences holds roughly 29,687,942 of Emerald’s issued shares and upon the completion of the debt settlement, Sciences will hold approximately 23.1% of the issued and outstanding shares of Emerald, on an undiluted basis.

Due to Sciences being a control person of Emerald, the settlement is considered to be a “related party transaction”, meaning the companies had a pre-existing connection prior to the transaction.

Emerald is not the only company in a cash crunch, and relying on selling common shares to stay above water. MedMen has also been making the headlines for a similar situation. The company recently sent out emails to their vendors stating they cannot pay them, and are offering shares in their company instead.

Green Market Report talked to Adam Bierman, the CEO of MedMen, about their circumstances. Bierman tells us, “We’ve been very forthright with the public, and with our investment community at large about the fact that at the end of last year we entered into a restructuring in the business, exiting the hyper-growth stage of the business, and getting into sustainability, and with that, there’s a lot of pain. And that pain starts at the employees that were on this mission with us, building this platform with us that we had to part ways with.”


Debra BorchardtDebra BorchardtJanuary 23, 2020
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Green Market Report’s Editor-in-Chief Debra Borchardt spoke with MedMen CEO Adam Bierman regarding the word from vendors that payments have been delayed. This interview has been edited slightly. 

Editor-in-Chief Debra Borchardt:

We’ve confirmed that the emails posted online from MedMen telling vendors that payments will be late are real. We’ve also confirmed that vendors had said they haven’t been paid.

MedMen CEO Adam Bierman:

Those emails are absolutely, real emails. We’ve never denied those emails. We’ve been very forthright with the public, and with our investment community at large about the fact that at the end of last year we entered into a restructuring in the business, exiting the hyper-growth stage of the business, and getting into sustainability, and with that, there’s a lot of pain. And that pain starts at the employees that were on this mission with us, building this platform with us that we had to part ways with. A lot of them are like family that has been with us for a very long time.

That’s unfortunate. That’s hard. But it was necessary. During that timeframe, we stopped payments to certain vendors as would be commonplace in the restructuring of a retailer. We turned over our accounts payable to a restructuring consulting firm (FTI Consulting) so that we could preserve and allocate the cash as we got through and out the other end of restructuring. These are brands that heavily rely upon MedMen for their business. Especially in California, we understand how important MedMen is to that ecosystem and we understand what happens, and the impact, and the ripple effect it has on these manufacturers. They’re having discussions like that with our teams about structuring payments.

Some of these people are my very good friends that we came up in this business together for the last decade. But I also say that there have been plenty of times where, well, roles have been reversed and we’ve been asked to be partners, long term partners to some of these groups. I think that’s just part of building an industry. There will be times when you’ll be asked to help others out in the industry. And there’ll be times when it’s vice versa.  We are probably 30 days away from being out the other end of this restructuring.

Our cash position is very healthy, our balance sheet is strong. We’ve made a couple of announcements over the last month about bringing in fresh capital by way of selling some equity as well as selling some non-core assets, and the business is well-positioned going forward. So, the unfortunate reality of growth, which we’ve all seen over the last 10 years, is what we were faced with. This is all stages. And so, this was a stage that we went through, but we’ll come out the other end and.

GMR: One of the things that you got out of the PharmaCann break up was the Illinois licenses. Are you planning on holding onto those Illinois licenses or are you thinking that you’ll see if there’s a good price for them?

Bierman:  No, I think at this point in time we’ve sold the non-core assets that we believed could bring in the most near term cash and also include our near to mid-term prospects of profitability. And we’re through that. There are no additional states or assets that we currently plan to sell out. We did sell the cultivation facility, in Illinois from PharmaCann. That was one of the assets that we sold. But as far as the retail stores go, it is a market that we believe to be important to our near and mid-term health. The two stores we have open now are averaging 200 transactions per hour. That’s per store in Illinois.

GMR:             The CFO situation, you guys have been through a lot of turmoil on the CFO side, and of course, that doesn’t look good to the market. Do you feel like you’ve started to get stability in that office in the C suite?

Bierman:                   I’ll start by saying that the Zeeshan Hyder is outstanding and the company is so fortunate to have him in that seat. I guess I would say on a broader basis, we are very aggressive in how we iterate and evolve our business. And you’ve seen it, and I’ve lived it for the last 10 years. And part of that evolution is constantly wanting the best talent with the most amount to contribute to the business and within the context of whatever stage the business is in. As you’re aware, it was only a couple of years ago that people from the traditional industry wouldn’t work in cannabis. I think we were among the first organizations in cannabis to attract talent from mainstream industry. And so, where I think where you mentioned the word turnover, we look at it as an evolution. We are constantly evolving. If we can get better, we get better.

GMR:   Was hiring FTI consultants, was that part of the deal with your investors? Gotham Green? Gotham has extended a lot of credit to you guys and they’ve also kind of stepped in as part of the board, et cetera. Was that part of their idea to bring in FTI to kind of right the ship?

Bierman:                   Yeah, I don’t know where that rumor started cause I try not to pay attention, but there’s never been a point in time where our lenders haven’t quote, “stepped in.” We’ve had a facility as Gotham, we renegotiated that facility in the fall to get the company way more flexibility amidst this backdrop. We have a second lending group that we renegotiated with a few weeks ago that gave us way more flexibility and also pushed that out for a couple of extra years. So our relationship at this point with our lenders is solid.

I think when you talk about our primary investors, our relationship is on solid footing.  Our biggest equity holder, outside equity holder, is Wicklow Capital, who wrote an eight-figure check into our equity round two weeks ago. So, we have a lot of continued support from those groups. Now, I don’t know if we would’ve had that support if we hadn’t taken all the actions we’ve taken to put ourselves in a position to thrive for what’s next. But we’ve done that, and I think, as a result, we continue to have their backing.

So, we brought FTI in to help us through the restructuring when it comes to things like AP. We brought in different resources for very specific purposes. And then some of the work we did ourselves just rather than taking all the commitments off our balance sheet in regards to payroll, extra infrastructure and projects. And then the restructuring of both facilities, plus our accounts payable.

In the fall, I recognized that I probably was six months behind taking actions that, at that point in time, we decided to take. We were down at that point in time as we sit here, middle to the end of January, we’re positioned to thrive. I mean this company has never been healthier.

It’s not just that our lenders have stepped up to support us because of their long term belief in how well we’re positioned and it’s not just that Wicklow stepped up and wrote another eight-figure check because of how well we’re positioned, it’s because how much they believe in the value of the check they just wrote. And how cheap the stock currently is versus where it will be as we execute. But me, Chris, and Andrew wrote checks into the last equity round. So, the last equity round was 60 plus percent, me, Chris, Andrew and Wicklow. And these are the people that understand what’s going on within the business better than anybody in the world. So, again not taking away from the pain and the difficulty and the stress of what that restructuring was, and absolutely having the humility to be able to admit that’s something that should have taken place six months earlier. All that, notwithstanding, and get to a place in January where maybe the people on the inside of this business understand how well positioned and undervalued it is for where it’s headed.

GMR:             Well, the creditors are selfish. They ultimately want to see you succeed because that’s how they’re going to get their money back. I mean, they, it does not behoove them to send you down the drain cause then, they’re going to lose their investment. You know, they, it’s ultimately in their best interests that MedMen succeed so that they get paid back, basically.

Bierman:                   Yes, yes. 100%, which is why some of these rumors are just so silly. But MedMen has $1 billion in license value across all our licenses and MedMen has a market cap right now of $350 million dollars. So, I guess, on one hand, the lenders, if they believe in where we’re at, and they believe in the upside of the business. 100% that leads to the support that we have received from them, but nonetheless, we’re still in a position where if that belief wasn’t there, the net asset value of the business is over three times today what our market cap is. So, I think if that belief wasn’t there, we might’ve seen other actions taken from these lenders. So yes, you’re 100% right. This is the path of least resistance for everybody. I do think that there’s a credibility lift in the fact that they chose this route.


Debra BorchardtDebra BorchardtJanuary 21, 2020
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9min62253

Once touted as the first “unicorn” in cannabis IPO’s, MedMen Holdings Inc. (OTC: MMNFF) is now struggling to pay vendors. In addition to telling vendors, it wouldn’t be able to pay its bills until February or March, the company has been selling assets and also announced it was laying off employees in November. The Twittersphere was active on the subject as Jason Spatafora @WolfofWeedSt lead the charge by posting several exchanges between unidentified vendors and MedMen executives.

“That’s Shitty News”

One unnamed vendor’s email from MedMen’s Senior Director of Strategic partnerships, Ben Shultz read, “Sorry for the delay. We received our payment schedule from our consultant’s FTI and had them signed off by our CFO. I wish I had better news here, but unfortunately, we don’t have payments scheduled for you in the near term. We are working on longer cash term infusions, but it is unlikely that we will be able to pay off these invoices before Feb/March.” He goes on to write, “That’s shitty news and there’s no sugar-coating it, but I have to be the messenger of bad here. If and when we can allocate funds to pay off our AR, we will be in touch.”

One California vendor suggested vendors consult a lawyer or accountant before accepting stock instead of the money owed by MedMen. Also, not identified.

Josh Shlenker, the General Merchandising Manager wrote to another unnamed vendor, “We’ve employed a financial consultant FTI to help us devise a payment plan strategy to clear outstanding balances and get us caught up as expeditiously as possible.”

It goes on to read, “All I can realistically offer are imperfect solutions and I’ve had to have a lot of frustrating and awkward conversations. FTI is supposed to be reaching out early next week with a proposed solution for you.” It continues with, “I am working on creative arrangements with people who wish to remain in the assortment through this period and I am working to offer them more premium shelf space and trying to find fund to allocate weekly to chip away at the outstanding balances, while still planning to continue to place and receive orders on 45-60 day terms.”

Last week, CEO Adam Bierman spoke to Benzinga and acknowledged the layoffs announced in November, but that was the extent of his remarks regarding the 190 employees given the pink slip. Instead, he dwelled on the real estate choices the company was making. Yet, the company has been selling off its real estate assets (to a business that is closely connected to company executives) and then leasing the property back. Such that shareholders are really not benefiting from these assets. There was no discussion of financial difficulties.

Bierman’s point was the locations that MedMen is choosing will result in more sales. His thesis is that locations located near airports draw the tourist crowd. However, choosing a dispensary near the airport in Vegas, versus one on the strip seems like an odd choice for consumers.  (Editors note: GMR visited the Vegas MedMen dispensary during the MJ Biz conference in December and it was largely empty. NuWu ( billed as the world’s largest dispensary) was very busy with customers, as was Planet 13 and Reef Dispensaries had a line that snaked outside the door.)

No, It’s Not Bankrupt

Short-seller Grizzle.com added fuel to the fire by blasting a headline that asked, “Did MedMen Just Go Bankrupt?” It hasn’t and the general consensus is that cannabis companies can’t declare bankruptcy. According to the U.S. Courts, “All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.” Since cannabis is still federally illegal, it is suspected that the court would reject such a filing. Granted, many of these cannabis companies have complicated business structures where potential parts of the company that isn’t plant-touching could file to reorganize, but that remains to be seen or tested.

Setting up payment plans doesn’t necessarily mean a company is out of money, but with a retail business, the end of the year is typically when a company is flush with cash from holiday sales. So, not being able to pay bills at a time when there should be extra revenue coming in is cause for concern. Retailers like Wet Seal, The Limited, Eastern Outfitters and BCBG all filed for bankruptcy in February of 2017 after the holiday season. Demonstrating that this isn’t an uncommon time for retailers to call it quits.

Still, there’s the issue of total reported liabilities of $671 million as per the quarter ending in September. The revenue for the quarter was $43.9 million. This is a fairly lopsided situation. The next earnings report is on February 26, 2020.

Challenges In The C-Suite

MedMen has faced a lot of criticism since it has gone public. The company first came under fire when the May 2018 IPO disclosed the generous pay for Bierman and Co-founder Andrew Modlin, who recently purchased an $11 million home in Hollywood, despite the financial struggles of the company. The IPO also gave the founders the majority of the voting shares causing another outcry.

The company’s proposed acquisition of Pharmacann was terminated in October 2019, one bonus though is that MedMen received some Illinois licenses out of the deal. The company also took this moment to announce that Zeeshan Hyder has been appointed Chief Financial Officer at MedMen. Mr. Hyder, had been MedMen’s Chief Corporate Development Officer. Hyder succeeded 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 a half. CFO James Parker resigned in 2019 and then followed with a scathing lawsuit that laid bare a great deal of dirty laundry.

More Ugly Rumors

If the vendor payment issues weren’t enough to scare investors, others on the Spatafora twitter feed suggested that the company had sold pesticide tainted cannabis and another said that MedMen was experiencing harvesting issues and was only selling other company’s products. None of this has been substantiated and could be sour grapes from ex-employees, however, if it is true it is troubling.

The stock was lately trading at 57 cents, down from its 52-week high of $3.84. Yahoo Finance lists the company’s market cap at $120 million. The founders have agreed to salary cuts and have relinquished a large portion of their voting rights in an effort to appease its creditors.

MedMen has not responded to a request for comment.

 

 


Debra BorchardtDebra BorchardtDecember 27, 2019
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3min12870

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) announced the execution of term sheets for non-core asset sales and the company also said that it executed the definitive subscription agreements for its previously-announced equity placement. Altogether, MedMen said it expects to generate gross cash proceeds of approximately $74 million.

MedMen took steps last month to cut costs which included laying off of 190 employees or 20% of its workforce and cutting back on store openings. In addition to those moves, the company also said it was going to sell assets.

Selling Licenses

This update on that announcement noted that the company has executed a non-binding term sheet for the sale of its Arizona licenses, which include three vertically-integrated licenses, and a binding term sheet for the sale of a cultivation and manufacturing license in Illinois.

MedMen said it expects to get roughly $54 million in cash proceeds through the divestiture of the non-core licenses. The completion of the sale of Arizona licenses is subject to due diligence, the execution of definitive documentation and customary regulatory approvals. The completion of the sale of the Illinois license is subject to the execution of definitive documentation and customary regulatory approvals.

The company said it will continue to explore the sale of other non-core assets and will focus on deepening its retail market share in California, Nevada, Florida, Illinois, Massachusetts, and New York.

Voting Shares Sale Reduced

The company had originally said it was selling some of its Class B subordinate voting shares for approximately $27 million at a price per share of $0.43. However, since the sale of the licenses was moved up, the company decided to reduce the number of shares down to just $20 million. Instead, MedMen will only offer 46,962,648 Class B subordinate voting shares, at a price of $0.43 per share.

Proceeds raised from the Equity Placement are contemplated to be used to finance working capital requirements and to execute on the Company’s retail footprint expansion plans in its core geographic markets.



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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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