MedMen Archives - Green Market Report

StaffStaffApril 22, 2019
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7min5250

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) stock fell over 5% to lately trade at $2.86 as more top executives leave the company amid mounting lawsuits. On Friday it was announced that Ben Cook, Chief Operating Officer, and Lisa Sergi, General Counsel and a member of the MedMen Board of Directors both resigned.

“We appreciate the contributions of all current and former MedMen team members as we work to build the world’s leading cannabis company, and I have the utmost confidence in the management team. Their expertise, skill set, and experience set the standard of excellence for the industry,” said Adam Bierman, MedMen CEO.

The company said in a statement that the leaders of the operations group will now report directly to Bierman. The leaders of the legal team include Dan Edwards, who will continue in his role of Senior Vice President of Legal Affairs, and report directly to the CEO.

In addition to those departures, Senior Vice President of Corporate Communications Daniel Yi has also resigned. Yi has been with the company since 2016, but his resignation wasn’t mentioned in the press release. Also, during its fiscal quarter ending March 30, 2019 MedMen named Ryan Lissack Chief Technology Officer. Mr. Lissack is a seasoned technology executive with over 20 years of experience.

Lawsuits

Of course, this follows the very high profile resignation of Chief Financial Officer James Parker, not long after the company went public. Parker followed that action with a lawsuit alleging numerous misdeeds at the company including disparaging remarks by the Bierman, inappropriate spending and serious accusations of improper actions regarding the stocks purchases and mortgage applications.  Michael Kramer is the new CFO. Kramer worked previously in senior jobs for retailers such as Apple Inc., Abercrombie & Fitch and Forever 21.

MedMen is facing another lawsuit from 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). The two 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.”

In the company filing, it also describes a legal claim filed against the company relating to a financial transaction and seeking damages of approximately $3.5 million. “The claim is at a very early stage and the Company believes that it has no merit. As a result, no amount has been set up for potential damages in these financial statements.”

Stock Inquiries

Just last month MedMen acknowledged in a statement that the OTC Markets had made inquiries about promotional activity relating to promotional materials encouraging investors to buy the company’s Class B Subordinate Voting Shares. The company made a statement claiming it wasn’t aware of stock promotion activity by a company it hired for public relations. Yet in the statement, the company admits “There are statements made which encourage investors to purchase the stock of the Company.”

MedMen said at the time that it “is committed to compliance with the OTC Markets Group Policy on Stock Promotion and the OTCQX Standards and Canadian securities laws. The Company does not condone the use of sensational language to describe the Company’s business prospects or the growth potential of the Company’s industry. The Company does not condone any statements made regarding urgency to invest in the Company’s stock or any other similar statements. Going forward, the Company will affirmatively prohibit all third-party service providers from including such statements in any investor relations or promotional materials respecting the Company.”

Financials

It seems the market is whispering about the company’s financial state. Last week, MedMen announced unaudited systemwide revenue for its fiscal 2019 third quarter ended March 30, 2019. The systemwide revenue was $36.6 million (CA$48.8 million). The company is expected to post its fiscal 2019 third-quarter results in May 2019 and nothing other than revenue was mentioned in the press release which was intended to soothe investors fears.  In the fourth quarter, the gross profits only reached $16 million, while its expenses hit a whopping $77 million. At the end of 2018, MedMen noted that its current liabilities had reached $87 million.

Basically, the company has taken on a lot of debt with the anticipation of big cannabis sales. However, the sky-high expenses are eating away at what revenue is coming in. The debt is going to have to be paid back at some point, but will the revenue coming in be enough to keep up?

 

 

 

 


Debra BorchardtDebra BorchardtMarch 22, 2019
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6min4470

MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF)  has signed a binding term sheet for a senior secured convertible credit facility of up to $250 million from funds managed by cannabis investor Gotham Green Partners.  MedMen said that it thinks this is the largest investment to date by a single investor in a publicly traded cannabis company with U.S. operations.

The investment from GGP will be in the form of convertible senior secured notes issued by MM CAN USA, Inc., a subsidiary of the company, totaling up to $250 million on a private placement. MedMen will receive the investment in three tranches assuming the company achieves certain price thresholds and other conditions. The first tranche is for $100 million, with the second tranche of $150 million delivered in two chunks of $75 million. That second investment will be made available at the six-month mark of the closing date and the third six months following the second.

“This strategic partnership with Gotham Green Partners represents another key milestone for MedMen and stems from our long-standing relationship with The Cronos Group and GGP’s brand portfolio,” said Adam Bierman, CEO of MedMen. “The growth capital will be used to operationalize the balance of our footprint and we look forward to creating further alignment with GGP and their global cannabis platform.”

The company said it plans to use the money from drawdowns on the facility for the following purposes:

  • Operationalize existing retail licenses, with a focus on Florida, where the Company is licensed for 30 stores
  • Integrate assets acquired through pending transactions, including those related to PharmaCann, LLC
  • Accelerate geographic expansion through bolt-on acquisitions and investments in core markets
  • Support national roll-out of higher-margin in-house branded products
  • Continue to invest in technology and digital infrastructure, with a focus on delivery and loyalty programs
  • Consolidate the supply chain and enhance margins by ramping up cultivation and production capabilities

“We continue to be impressed with MedMen’s industry-leading retail execution and iconic branding. With MedMen’s fortified balance sheet, the Company’s future has never been brighter,” said Jason Adler, managing member of GGP. “We feel fortunate to have the opportunity to take such a significant stake in MedMen and begin to work actively with the management team and the board to help the Company achieve its goals.”

Payback

The statement outlined how MedMen will pay back the investment:

All Notes will have a maturity date of 36 months from the closing date (“Maturity Date”), with a 12-month extension feature available to the Company on certain conditions, including payment of an extension fee. Notes will bear interest from their date of issue at LIBOR + 6.0% per annum. During the first 12 months, interest may be paid-in-kind at the company’s option such that any amount of PIK interest will be added to the outstanding principal of the Notes. The Company shall have the right after the first year, to prepay the outstanding principal amount of the Notes prior to maturity, in whole or in part, upon payment of 105% of the principal amount in the second year and 103% of the principal amount thereafter.

All or a portion of the Notes will be convertible, at the option of the holder, into class B subordinate voting shares of the company at any time prior to the close of business on the last business day immediately preceding the Maturity Date. The conversion price of each tranche of Notes is as follows:

i) for Tranche I Notes, the conversion price will be equal to 115% of the lesser of  (a) US$3.10, which represents the closing price of the Subordinate Voting Shares on the Canadian Securities Exchange on the trading day immediately preceding the announcement of the Facility, and (b) the closing price of the Subordinate Voting Shares on the trading day immediately preceding the closing date; and

ii) for Tranche II and Tranche III Notes, the conversion price will be equal to the lesser of (a) 115% of the 20 trading day volume weighted average trading price of the Subordinate Voting Shares as of the trading day immediately preceding the date of issue of such tranche, and (b) US$7.00.

The company may force the conversion of up to 75% of the then outstanding Notes at the applicable conversion price(s) if the volume weighted average trading price of the Subordinate Voting Shares (translated to US dollars) is US$8.00 for any 20 consecutive trading day period. If 75% of the then outstanding Notes are converted by the company, the term of the remaining 25% of the then outstanding Notes will be extended by 12 months.


Debra BorchardtDebra BorchardtMarch 5, 2019
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4min5871

Following the market close on Monday, MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) made a statement claiming it wasn’t aware of stock promotion activity by a company it hired for public relations. Yet in the statement, the company admits “There are statements made which encourage investors to purchase the stock of the Company.”

MedMen acknowledged in the statement that the OTC Markets had made inquiries about promotional activity relating to promotional materials encouraging investors to buy the company’s Class B Subordinate Voting Shares.

“After due inquiry, the Company identified the promotional materials as an article featuring the Company that was posted on February 25, 2019, on the website marijuanastox.com by Wining Media LLC. WM is an independent third-party investor relations and consulting firm. The Company engaged WM orally in January 2019 to provide public relations and communication services for the Company.”  MedMen said that the campaign was only intended to drive awareness of the company, its business and its securities. The story is now password protected https://marijuanastox.com/the-single-best-way-to-play-a-market-soaring-to-80-billion-per-year-retail/.

The stock price increased between February 26 and February 28th, but MedMen claims that the stock price could have increased because the company announced that it would be reporting earnings on February 27. They believe this is why the activity increased.

MedMen also claims that the article published by WM “was not approved according to the Company’s internal procedures.” However, the company also stated that its officers had editorial input into the creation of the article. In addition, MedMen provided WM with supporting documents including public filings,  prior press releases, and an investor relations presentation.

MedMen says that it “is committed to compliance with the OTC Markets Group Policy on Stock Promotion and the OTCQX Standards and Canadian securities laws. The Company does not condone the use of sensational language to describe the Company’s business prospects or the growth potential of the Company’s industry. The Company does not condone any statements made regarding urgency to invest in the Company’s stock or any other similar statements. Going forward, the Company will affirmatively prohibit all third-party service providers from including such statements in any investor relations or promotional materials respecting the Company.”

A variety of public relations firms have been hired by MedMen including Edelman (New York, NY); Azione (New York, NY); Stockhouse Publishing, Ltd (Vancouver, Canada); CFN Media Group (Whitefish, Montana); and Wining Media LLC. WM was asked to remove all promotional materials regarding MedMen from the public domain and to cease all promotional efforts on behalf of MedMen.

The OTC inquiry follows a lawsuit filed by the company’s former CFO James Parker in which he alleged securities violations, which the company also denies.


Debra BorchardtDebra BorchardtMarch 1, 2019

3min3410

MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) reported its second quarter of fiscal 2019 with revenue of $29.9 million. This represents a 39.1% quarter-over-quarter increase over the first quarter of fiscal 2019 ending September 30, 2018.

California is the main driver of sales. MedMen’s eight retail locations primarily in Southern California reported a combined $23.7 million in revenue. The company said that if the revenue included pending acquisitions it would have been $49.5 million for the quarter.

Unfortunately, the company is continuing to post losses. MedMen delivered a total net loss of $64.6 million compared to a net loss of $66.5 million for the first quarter. So, the losses have been trimmed somewhat. The net loss per share in the second quarter was $0.25 versus a net loss of $0.27 for the first quarter.

Gross profits before biological asset adjustment, were $13.3 million, as compared to $0.5 million in the second fiscal quarter of last year. The gross profit margin after biological asset adjustment was 53%, compared to 45% in the previous quarter.

“Our strong second quarter results support MedMen’s commitment to drive strong retail and sales performance, while efficiently scaling the Company and executing on our growth strategy,” said Adam Bierman, MedMen chief executive officer, and co-founder. “As we emphasized last quarter, we are in a new phase of growth, one focused on continuing to operationalize our industry-leading retail footprint and increasing our profitability. We are confident in the team we’ve built to drive our success.”

The company said that “In an effort to increase transparency, provide a better understanding of MedMen’s business, and ensure sales comparability between years, it is basing accounting on the 4-5-4 calendar structure. Additionally, the Company is now breaking out performance in the MD&A by retail, cultivation and manufacturing, corporate SG&A and pre-opening expenses.”

The company has been criticized for its high expenses. MedMen noted that “Of the total $40.9 million corporate SG&A expenses, $14.4 million was corporate payroll, which included the buildout of several teams within the company including finance and accounting, digital, business intelligence and marketing. SG&A expenses also included $8.6 million in marketing and branding as compared to $4.8 million in the first quarter of 2019.”

 


Debra BorchardtDebra BorchardtFebruary 27, 2019
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4min3450

It’s time for your Daily Hit of cannabis financial news for February 27, 2019.

On The Site

Curaleaf

Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) signed a definitive deal to buy California-based Eureka Investment Partners, LLC. Eureka operates a cultivation facility in the Salinas Valley and is developing three dispensaries across the state. The deal is valued at $30.5 million, of which $10 million is to be paid in cash, $20.5 million in Curaleaf stock, with a potential added bonus to be paid if certain goals are met. The deal is expected to close in March 2019.

Choom

Canadian-based Choom Holdings Inc. (CSE: CHOO) (OTCQB: CHOOF) also announced an acquisition on Wednesday. The company said that it had entered into a deal to buy Clarity Cannabis MD Holdings. The agreement includes 30 retail locations, three of which are licensed with the Alberta Gaming, Liquor & Cannabis Commission (AGLC). Choom will issue 8,867,000 Choom Shares and pay $2.5 million to the principal in connection with the acquisition.

MedMen

MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) reported its second quarter of fiscal 2019 with revenue of $29.9 million. This represents a 39.1% quarter-over-quarter increase over the first quarter of fiscal 2019 ending September 30, 2018.

California is the main driver of sales. MedMen’s eight retail locations primarily in Southern California reported a combined $23.7 million in revenue. Unfortunately, the company is continuing to post losses. MedMen delivered a total net loss of $64.6 million compared to a net loss of $66.5 million for the first quarter. So, the losses have been trimmed somewhat. The net loss per share in the second quarter was $0.25 versus a net loss of $0.27 for the first quarter.

In Other News

Canopy Rivers reported its third quarter results for the quarter ending December 31, 2018 with net income of C$1.4 million and a total loss of C$79 million. The diluted earnings per share was C$0.01. “With more than $55 million of capital deployed during the quarter, Canopy Rivers continues to position itself as a preeminent investment firm in the cannabis industry,” said Eddie Lucarelli, Chief Financial Officer of Canopy Rivers. In addition the company reported that it has closed its previously announced bought deal financing with a syndicate of underwriters. The Bought Deal consisted of an aggregate of 13,225,000 Subordinated Voting Shares, which reflects the exercise in full of the Underwriters’ over-allotment option, at a price of $4.80 per Subordinated Voting Share for gross proceeds of approximately $63.5 million.

Westleaf Inc. (TSX-V: WL) (OTCQB:WSLFF) has been approved to begin trading on the OTCQB effective immediately. Westleaf begins trading tomorrow under the symbol “WSLFF”.


Debra BorchardtDebra BorchardtFebruary 7, 2019
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5min5200

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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4min2490

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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9min13001

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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5min3180

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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15min25720

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.



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