Verano Archives - Green Market Report

Debra BorchardtAugust 10, 2021
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Verano Holdings Corp. (CSE: VRNO) (OTCQX: VRNOF) delivered its results for the second quarter ending June 30, 2021, as revenues increased 39% sequentially and 164% from the second quarter of 2020 to $198 million. It was a big miss versus the Yahoo Finance average analyst estimate for revenue of $241 million. Verano noted that the financial information was reported on a pro forma consolidated basis accounting for the AltMed acquisition as if completed on January 1, 2021, and all currency is in U.S. dollars.

Verano reported that its net income, including the impact of biological assets, was $6.8 million. Excluding the impact of biological assets, net income was $32 million in the second quarter of 2021, compared to $8 million in the first quarter of 2021. The earnings per share reported by Verano were $0.05 for basic and $0.02 for diluted. This was a big miss versus the average estimate for earnings of $0.32.

“This was a very strong quarter, particularly in topline revenue growth, which reflects our proven ability to execute in both the retail and wholesale verticals,” said George Archos, Verano CEO and Founder. “We executed exceptionally well on our expansion plans in the second quarter, adding 16 dispensaries to our footprint between new doors opened and acquisitions closed, providing an additional runway for growth in core markets such as Arizona, New Jersey, Pennsylvania, Illinois, and Florida. Building on this momentum, we anticipate exiting the year with an annual revenue run rate approaching $1.1 billion.”

Expenses climbed as Verano reported SG&A expenses were $53 million, or 27% of revenue, compared to $29 million, or 20% of revenue, in the first quarter of 2021. However, no worries as the company is sitting on a pile of cash. As of June 30, 2021, the company’s current assets on a pro forma consolidated basis were $572 million, including cash and cash equivalents of $150 million. Verano said it had working capital of $285 million and total debt, not including lease liabilities and net of issuance costs, of $131 million. Total liabilities are $708 million, which were only $216 million at the end of 2020.

After The Quarter

Verano continued to build its empire after the quarter closed. In July, Verano completed the acquisitions of Agri-Kind and Agronomed Biologics in Pennsylvania, allowing for vertical benefit realization in the state by adding an active 62,000 square foot, indoor cultivation and production facility, and a permit to build out a second cultivation facility and six additional dispensaries—two of which it has already opened. Also in July, Verano maximized its retail footprint in Ohio with five dispensaries upon closing its acquisition of Mad River Remedies, LLC, a high-volume storefront in Dayton. Before July ended,  Verano strategically expanded its presence into Northern Nevada with the announcement of its planned acquisition of Sierra Well, which will add approximately 10,000 square feet of active cultivation and production capacity, and two top-performing dispensaries in Reno and Carson City.

Verano currently has 83 operating dispensaries and said it expects to hit 90 by the end of 2021.


Debra BorchardtJuly 26, 2021
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 Verano Holdings Corp. (CSE: VRNO) (OTCQX:  VRNOF) is buying WSCC, Inc., also known as Sierra  Well, adding two operational dispensaries and an active cultivation and production facility in Nevada along with two real estate properties in Carson City and Reno. The acquisition is a cash and stock deal valued at $29 million with $5.6 million in cash up front and the rest in stock. It is expected to close once approvals are received for the two medical cannabis cultivation licenses; two adult-use cultivation licenses; two medical cannabis dispensary licenses; two adult-use dispensary licenses; one medical production license; one adult-use product manufacturing license; and one adult-use distribution license. 

“We’ve been operating successfully in Nevada since 2017 and have maintained focus on growing our presence in this highly attractive state. Following completion of this accretive transaction,  Nevada will become a core market for us. We are pleased to strategically expand our distribution in Nevada while partnering with a like-minded ownership group that has built a profitable business through sound operational management,” said George Archos, Verano Founder, and  CEO. “We look forward to expanding Verano’s retail presence into Northern Nevada and bringing  our house of premium brands to more patients and consumers in a region that’s rife with natural  beauty and draws significant tourism from around the country.” 

Sierra Well was going to be bought by iAnthus in 2019 for $27.6 million. At that time Sierra Well had unaudited annual revenue of approximately $16 million with an EBITDA (non-IFRS) margin above 20% and positive net income. One year later, iAnthus said it had terminated the agreement as it was beginning to unravel.

The move is expected to strengthen the company’s distribution capability in Northern Nevada with the addition of an approximately 10,000 sq. ft. Reno cultivation and production facility, which will complement the active expansion at the Verano-affiliated cultivation facility in North Las Vegas. The company said that both dispensaries are located along busy retail corridors and just minutes from their respective city centers. 

In addition, Verano said in a statement that it will broaden its Nevada supply chain while increasing the dispensary count between Verano and its affiliates to four active storefronts, with a fifth planned location to open in Las Vegas later this summer. 


Debra BorchardtJune 7, 2021
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Cannabis Law Reports reported that Sol Global (OTC: SOLCF) lost the first round in its lawsuit with investor MMCap. Sol Global had filed a case in the state of New York regarding the repayment of a $50 million loan. At the heart of the lawsuit is a big chunk of Verano shares, which MMCap and the 1235 Fund say belong to them as an option for the repayment of the loan, while Sol Global claims the shares belong to them alone and that all the 1235 Fund gets is a cash repayment.

Judge Jennifer Schecter wrote that of all interested parties only one, Verano Blocker 2, specifically agreed to New York as a place of jurisdiction. She also described the group as “sophisticated parties” suggesting all the parties understood what had been agreed to for jurisdiction. MMCap and the 1235 Fund filed their case in Ontario, which Judge Schechter said was consistent in the other clauses in the agreements signed by the parties.

“In the end, defendants never consented to personal jurisdiction in New York or waived the objection; thus, this action is dismissed. Moreover, jurisdictional discovery is unwarranted because the complaint does not make a sufficient start at suggesting there could even possibly be a basis for New York jurisdiction,” wrote the Judge in her two-page decision.

Sol Global did not respond to a request for comment.

Sol Global & The 1235 Fund History

The conflict between the two parties arose after Sol Global began claiming that MMCap and 1235 Fund had no rights to the Verano shares as repayment for a loan. Sol Global was in a cash crunch back in July 2019. The one thing of potential value it owned was a large investment in the privately-held cannabis company Verano. MMCap bought the debenture through what was called the 1235 Fund giving Sol $50 million with the risk that Sol could possibly go under and not repay the $50 million or the Verano shares could end up being worth much less than the $50 million it had spent. At the time, it was a risky deal as it was difficult to determine the outcome. Cannabis stocks were suffering through a tremendous bear market and valuations had plunged across the board.

At one time, Harvest Health & Recreation (HRVSF) had said it was going to acquire Verano in a deal valued at $850 million, but then the deal unraveled. Both parties agreed to terminate it and walk away. This is where the disagreement begins between Sol and MMCap. Sol claims that once the Harvest deal was over, that MMCap had no options to receive the stock as payment, and that MMCap could only get a cash payment.

MMCap says that isn’t true and even includes in its lawsuit the language from the debenture document that seems to support its claim to having an equity option. The debenture language according to MMCap says that if the Harvest deal didn’t happen, MMCap would receive 1,730,794 shares of Verano. MMCap says that the termination of the Harvest deal actually had the opposite effect to what Sol claims. Instead of getting paid in cash, the debenture language says that the termination of the deal meant MMCap would have to accept the Verano shares as payment. At that time, Sol would have been able to walk away from the $50 million debenture by only having to turn over the shares which looked to be worth far less than they are today. MMCap also says in its lawsuit that Sol wasn’t paying its interest payments on time and could only pay what it owed in tranches.

According to a court document filed in Canada, MMCap wants its repayment in the form of those Verano shares. It is insisting that it has the option to request payment in shares, which could be worth as much as $500 million. MMCap was supposedly trying to resolve the matter between the parties, but during those discussions, Sol Global filed this lawsuit in New York saying that MMCap did not have the option to choose Verano shares as a form of repayment and that it would instead pay the debenture amount in cash. Now that Sol Global has lost this initial round, it looks like the case conflict will remain in Canada.


Debra BorchardtMay 18, 2021
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Verano Holdings Corp.  (OTCQX: VRNOF) announced its financial results for the first quarter ended March 31, 2021. Verano noted that its revenue was reported on a pro forma basis as if the AltMed acquisition were completed on January 1, 2021. With that in mind, the first quarter of 2021 revenues increased 117% from the first quarter of 2020 to $143 million. Unfortunately, this missed the Yahoo Finance average analyst estimate for revenues of $160 million.

Net income in the quarter, including the impact of biological assets, was $126 million versus $72 million in the first quarter of 2020. Excluding the impact of biological assets, net income was $8 million in the first quarter of 2021. The earnings per share were net income per share – basic were $ 0.48 and net income per share – diluted was $ 0.27, easily beating the average estimate for $0.12 per share.

“Our strong first-quarter performance was foundational in nature and sets the tone for what we expect to be a transformational year. We anticipate considerable quarter-over-quarter growth in 2021 as we begin to realize the impact of accretive acquisitions we’ve made over the last few months, in addition to broad expansion of cultivation capacity and organic retail growth,” said George Archos, Verano CEO and Founder. “We’ve expanded our retail footprint and production capacity in core markets where we’ve identified substantial near- and long-term upside.”

Verano’s first quarter 2021 EBITDA on an unadjusted basis was $60 million or 42% of revenues, and Adjusted EBITDA was $75 million or 52% of revenues. As of March 31, 2021, the company’s current assets on a pro forma consolidated basis were $549 million, including cash and cash equivalents of $112 million.

Verano’s Expansion Efforts

Verano has completed the acquisitions of Territory, Emerald, and Local Joint, all in Arizona, giving it the third-largest retail footprint in the state with six active storefronts plus two cultivation facilities. In first quarter 2021, the company brought four new dispensaries online in as many states. In April, Verano opened its second of three planned Zen Leaf dispensaries in New Jersey, where the expansion of its 120,000 sq. ft. cultivation facility is underway in anticipation of the onset of adult use sales in the state.

In addition to that, the company completed acquisitions of TerraVida and The Healing Center, adding six dispensaries in Pennsylvania – three in the Philadelphia metroplex and three in the Pittsburgh metroplex – and also acquired a permit for the development of three additional dispensaries in the state. Verano also announced it has entered into agreements for the acquisitions of Agri-Kind and Agronomed Biologics in Pennsylvania, which are expected to add an active and completely built-out, state-of-the-art 62,000 sq. ft. indoor grow facility, in addition to further developing the Company’s vertically integrated footprint with a permit for six new dispensaries and a second cultivation and production facility.

Money For Growth

Last week, Verano filed for an offering to raise C$1.2 billion during a 25 month period. Verano said at the time that it expects to file a supplement to qualify the issuance of Class A subordinate voting shares upon the exercise of special warrants previously issued on a private placement basis which raised gross proceeds of approximately C$100 million.

“The filing of a base shelf prospectus supports our growth strategy by providing us with the flexibility to access capital as future opportunities arise,” said Archos. “We’ve been assertive in the M&A arena, demonstrating strong capital stewardship through several accretive transactions. Collectively, these acquisitions have expanded our footprint considerably, adding depth in Illinois and Pennsylvania while unlocking high-growth markets in both Florida and Arizona. We anticipate that we will continue to deliver added shareholder value through strategic capital allocation in the months and years ahead.”

 


Debra BorchardtMay 11, 2021
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Verano Holdings Corp. (OTCQX: VRNOF) amended its credit agreement for its senior secured term loan of $130 million. The Restated Credit Agreement which has a maturity date of May 30, 2023, now provides for additional, non-dilutive funding of $100 million, with an annual interest rate of 9.75% for the incremental amount.

“This upsized credit facility was strategically planned to provide additional coverage of recently announced M&A activity, to enhance our overall financial position, and create flexibility for us to pursue opportunities that could drive further growth and margin expansion,” said George Archos, Verano Co-Founder, and CEO. “We very much appreciate the support of Chicago Atlantic, and the improved terms of the new facility. Being able to secure one of industry’s leading rates signals the growth in acceptance of the cannabis industry as it continues to evolve and mature.”

In making the announcement, John Mazarakis, Partner of Chicago Atlantic, noted, “We are excited to see Verano execute on its growth plan and we are looking forward to expanding our partnership. The terms of the upsized loan reflect Verano’s impressive operating performance, which resulted in this credit facility carrying one of the lowest cost of capital to-date in the industry. Verano is a clear leader in the cannabis space, and the company’s consistent focus on profitable growth is what attracted us to this opportunity.”

The company said it will release financial results for the first quarter of 2021, before the market opens on Tuesday, May 18, 2021.

New Stores

Last week, Verano opened Zen Leaf West Loop, the first Zen Leaf to open within the City of Chicago. The new flagship dispensary is located in an iconic Chicago neighborhood renowned for its dynamic dining and hospitality destinations. The area, which has experienced tremendous commercial and residential growth over the last several years, is home to some of Chicago’s best restaurants and boutique hotels.

“We’re excited to open the doors on Zen Leaf’s first dispensary in Chicago, and to be able to create jobs and generate retail activity in the West Loop,” said George Archos, Co-Founder, and CEO of Verano. “Illinois’ cannabis market continues to experience significant growth as the economy reopens. We’re hopeful that Zen Leaf West Loop will be a retail destination that helps drive foot traffic to assist the neighborhood’s hospitality industry bouncing back after a very challenging year.”

Last month, the company opened its newest MÜV Dispensary located in St. Augustine, Florida.  It’s the 32nd dispensary in the state and the company is now positioned as having the fourth largest retail footprint in Florida.


Debra BorchardtFebruary 16, 2021
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Verano Holdings Corp. (CSE: VRNO) is set to begin trading on February 17 after closing the reverse takeover of Majesta Minerals Inc. and the merger with Alternative Medical Enterprises LLC, Plants of Ruskin GPS, LLC, RVC 360, LLC, and affiliated companies better known as AltMed and sometimes referred to as AME. The company noted that the Subordinate Voting Shares would begin trading on the CSE, but that the Proportionate Voting Shares will not be listed for trading. 

“Our public listing will provide us access to capital to execute our long-term strategy of expanding into limited-license, high-growth markets and scaling our wholesale and retail operations into new and existing markets,” said CEO George Archos. Archos holds 19.62% of the issued and outstanding SV Shares of Verano. While the subscription price is $10, it is expected that the stock will trade above that level. 

Verano is in 12 U.S. States, with active operations in nine, which includes 23 active retail locations and approximately 440,000 square feet across its six cultivation facilities. Verano produces a full suite of premium, artisanal cannabis products sold under its trusted portfolio of consumer brands: Encore, Avexia, and Verano. Verano designs, builds, and operates inimitable Zen Leaf branded dispensary environments that deliver a superior cannabis shopping experience in both medical and adult-use markets. 

The merger with Alt-Med brings the company the MÜV brand of medical cannabis-infused products which were launched in Arizona in 2016. Alt Med has  29 active retail locations, the AME Parties have 220,000 square feet of cultivation facilities in Florida, and 33,542 square feet in Arizona, which is expected to increase by an additional 110,000 square feet to meet increased demand. 

“The combination with AltMed joins two complementary companies focused on providing superior customer experiences. We have both been disciplined operators since inception, and together we anticipate continuing to generate strong profitability and an EBITDA margin that would rank us near the top of our peer group,” said Mr. Archos. “Our public listing will provide us with access to capital to execute our growth plan, including the organic growth of our retail presence and product portfolio in addition to the pursuit of strategic acquisitions, with the goal of being a top three operator in the states in which we operate.”

Earnings

For the nine months ending in September 2020, Verano reported revenue of $154 million and AME reported $87 million. The net income for the same period was $118 million for Verano and $88 million for AME. On a pro forma consolidated basis, the nine months of revenue would be $241 million and the net income would be $172 million. 

Winners & Losers

In 2019, Harvest Health & Recreation (OTC: HRVSF) intended to acquire Verano for roughly $850 million. The two companies agreed to terminate the deal without incurring any breakup fees. Part of the problem with the all-stock deal was that Harvest Health’s stock plunged from C$8.79 at the time of the announcement to roughly C$1.62. The stock was lately selling at C$4.61. “This decision was not taken lightly,” said George Archos, Verano Holdings CEO. “While both organizations worked very hard to consummate this transaction, significant delays in closing started with the Hart-Scott-Rodino antitrust review process. Those were followed by state and local regulatory complexities in multiple states.” Harvest has a current market cap of $1.8 billion while Verano’s market cap is expected to be $2.8 billion. 

SOL Global Investments Corp.  (OTCPK: SOLCF) stands to benefit greatly from its investment in Verano. Once the stock begins trading, SOL Global expects to hold 25.2 million subordinate voting shares and was pleased to note that Verano has “effectively scaled up its operations in several key cannabis markets in the U.S., including Illinois, New Jersey and Nevada (either directly or via affiliates/subsidiaries), and is well positioned to continue to generate impressive quarter over quarter growth.”

Sol Global said in a statement that the transaction will have a significant positive impact on its net asset value and the company will update the market in a timely manner as information is available. Sol Global also had to set the record straight with one of its lenders regarding the Verano stake. On February 7, 2021, the company initiated litigation in the State of New York against its lender, 1235 Fund LP, an affiliate of MMCAP who wants Verano stock instead of being paid in cash. 

Back in 2019, the company announced that it had completed a $50,000,000 private placement financing by way of the issue and sale of a senior secured non-convertible debenture. If the deal between Verano and Harvest Health had occurred, the lender would have been repaid in shares of either Verano or Harvest, which would have enabled the lender to cover its short position in Harvest and provided the lender with a reasonable premium of return beyond the stipulated 6%. 

“The Harvest Transaction did not close and thus the Debenture is repayable only in cash. Nevertheless, on February 5, 2021, the lender has wrongfully sent a formal notice purportedly electing to receive, instead of cash, Verano shares currently owned by the Company whose value is more than 200% of the principal value of the Debenture. The Company advised the lender that it will repay the Debenture in cash pursuant to its terms. To address any uncertainty resulting from the lender’s positions, the Company commenced litigation against the lender and another seeking declaratory relief that, among other things, the lender has no right to be repaid in Verano shares. As a result of the lender’s positions, SOL Global has decided that it will no longer do business with it nor participate in any transaction in which the lender is involved.”


Debra BorchardtNovember 12, 2020
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Verano Holdings, LLC is buying and merging with Alternative Medical Enterprises, LLC, Plants of Ruskin, LLC,  called AltMed to create the largest privately-owned cannabis company. The value of the transaction was not disclosed.

Verano is a multi-state operator located in 12 states, with 17 active retail locations and approximately 440,000 square feet across its cultivation facilities, The company is known for its portfolio of consumer brands: Encore, Avexia, and Verano. Verano designs, builds and operates inimitable Zen Leaf branded dispensaries.

AltMed is known for its MÜV brand of medical cannabis-infused products launched in Arizona in 2016. MÜV Dispensaries by AltMed Florida was formed a year later through the partnership of AltMed Enterprises and Plants of Ruskin, a multi-generational Florida agricultural leader. The company has 27 locations (one in Arizona muv-az.com, 26 in Florida muvfl.com, and more added each month).

“The combination of Verano and AltMed is a game-changer in the U.S. cannabis industry. It is expected to create one of the largest private cannabis companies with truly no redundancies in geography or operations. AltMed is an ideal partner to accelerate our shared vision to be one of the most innovative and profitable cannabis operators in the country. Our cultures are seamlessly aligned and we have a strong commitment to providing a superior, customer-focused cannabis experience across our existing markets. AltMed not only has a substantial market presence in Florida and Arizona, a state which recently approved recreational use, but also delivers a portfolio of high-quality, pharmaceutical-grade medical cannabis products,” said George Archos, Founder and CEO of Verano Holdings. “Together, we believe we have a very strong management team whose experience spans cannabis, pharma, real estate and hospitality, and we are very excited to welcome and work collectively with AltMed’s Michael Smullen, Bill Petron and John Tipton.”

The combined company will be led by the founder and CEO of Verano, George Archos, a veteran in the logistics and operations spaces who entered the cannabis industry in 2014. AltMed’s key personnel will maintain a strong presence on the management team and Board of Directors, including Michael Smullen, Alternative Medical Enterprises, LLC’s Chairman, CEO & Co-Founder, and John Tipton, a registered CPA with more than 30 years of leadership experience in both the agricultural and land development industries. In addition, Bill Petron of AltMed Arizona will bring his vast experience to the newly formed company.

Mr. Archos continued, “This combination will create significant opportunity to expand our business into limited-license markets and scale both our wholesale and retail operations. We have created a thoughtful model for long-term success and a solid platform to deliver what we expect to be industry-leading EBITDA margin on a pro forma basis. In addition, our combined strong balance sheet should provide us with financial flexibility to expand operations and go deeper in states in which we operate.”

Harvest Went Bust

Earlier this year Verano looked like it was going to be acquired by Harvest Health (OTC:HRVSF) in an all-stock deal valued at approximately $850 million based on a share price of C$8.79 ($6.70). The companies stated at the time of termination that prolonged obstacles in meeting requirements for state and local regulatory authorities needed to transfer ownership and operational licenses, adverse capital market conditions, a challenging environment for asset sales, all contributed significantly to the decision not to move forward with the pending acquisition. Harvest Health shares are now trading at C$2.41 ($1.84).

Profitable and Formidable

Verano says it has been profitable since it was founded.  AltMed was founded in 2014 and said it has been profitable in recent years. AltMed has 220,000 square feet of cultivation facilities in Florida, and 30,000 square feet in Arizona, which is rapidly expanding by an additional 50,000 square feet to meet increased demand.

The combination will accelerate Verano’s expansion into Florida and Arizona, currently among the largest and fastest-growing cannabis markets in the United States. Following the consummation of the transaction, the combined group of companies will operate under the Verano name and will have the ability to operate in 14 states, with eight cultivation facilities and 44 active retail locations. Approximately 32 additional retail locations are planned.

“We share Verano’s enthusiasm for this transformative business combination. We have a mutual commitment to delivering a high-quality product through a superior customer experience to distinguish us in the marketplace,” said Michael Smullen, Chairman, CEO and Co-founder of AltMed’s Alternative Medical Enterprises, LLC. “We are both disciplined stewards of capital, run our businesses efficiently and are focused on delivering profitable growth. It was important for us to find the right strategic partner and Verano was the ideal choice.”

“Through our combination with Verano, we will have economies of scale to further expand our operations, bring adult-use programs online and scale cultivation and manufacturing capacity to meet market demand,” said John Tipton, CEO of AltMed Florida. “Both Verano and AltMed are uncompromisingly dedicated to superb cultivation and manufacturing processes, new product development and retail design and engagement. In combining with a multi-state operator, we have a larger platform to meet the growing needs of our customers and deliver long-term profitable growth for our stakeholders.”

Synergies

The company said in a statement that the combination was expected to result in substantial benefits to AltMed and Verano, including the following reasons for the transaction.

  • Establishes Verano as one of the three largest MSOs in the United States based on 2021 internal projections compared to current FactSet 2021 consensus estimates for revenue and EBITDA.
  • Creates a scale market leader well-positioned for growth and accelerates expansion in the limited license, high-growth markets – specifically Florida and Arizona.
  • Increases Verano’s reputation as a manufacturer of high-quality products on a large scale by adding similar capabilities in new states.
  • Increases the combined company’s financial profile with industry-leading margins and profitability.

Debra BorchardtMarch 26, 2020
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 Harvest Health & Recreation Inc. (CSE: HARV, OTCQX:HRVSF) and Verano Holdings, LLC  have announced the mutual termination of the Business Combination Agreement dated April 22, 2019. At the time this was announced, Harvest Health had agreed to buy  Verano in an all-stock deal valued at approximately $850 million based on a share price of C$8.79. The stock was lately trading at C$1.62 or $1.13.

“Given the persistent challenges in consummating this deal and current market conditions both companies felt it was prudent to move forward separately at this time,” said Steve White, Harvest CEO. “We have tremendous respect for the entire team and operations at Verano Holdings. We wish them well and look forward to possibly working together in the future.”

The companies stated that prolonged obstacles in meeting requirements for state and local regulatory authorities needed to transfer ownership and operational licenses, adverse capital market conditions, a challenging environment for asset sales, all contributed significantly to the decision not to move forward with the pending acquisition. No breakup fees or other considerations are owned by either party as a result of the termination of the BCA.

Mr. White continued, “We remain focused on the continued development of assets in our core markets including ArizonaFloridaMaryland, and Pennsylvania. Recent capital raising efforts have afforded the company sufficient resources to continue to invest in strategic projects while moving toward profitability.”

“This decision was not taken lightly,” said George Archos, Verano Holdings CEO. “While both organizations worked very hard to consummate this transaction, significant delays in closing started with the Hart-Scott-Rodino antitrust review process. Those were followed by state and local regulatory complexities in multiple states. Now with the COVID-19 pandemic often being dealt with in the very agencies that must approve the transaction, it has become clear that this combination would not be completed within the established timeframe. We look forward to continuing to grow our operations as one of the largest privately held multi-state operators in the U.S.”

Harvest’s Numerous Flings

Harvest Health had started 2020 with breakup news from Falcon International. In January Harvest filed suit against Falcon International, Inc. asking to terminate the planned merger agreement and return the money Harvest paid to Falcon under the Merger Agreement. That lawsuit alleged that Falcon’s principals stalled due to the falling share price of Harvest. Harvest went on to suggest that Falcon International engaged in illegal activities.

Falcon has said that Harvest owes the company $50 million in a breakup fee. In addition to that Falcon said, “Amounts previously funded by Harvest to Falcon are convertible into Falcon equity at Harvest’s or Falcon’s option and, accordingly, are unlikely to be paid.”

Just a few weeks ago Harvest announced that it would acquire Interurban Capital Group for approximately $85.8 million payable by the issuance of 309,452 multiple voting shares, assumption of approximately $19.1 million of debt convertible into 205,594 multiple voting shares and payment of an additional $9.3 million upon exercise of a call option agreement to acquire controlling interests in five Washington cannabis dispensaries or alternatively $12.4 million to acquire substantially all of the assets of these dispensaries. ICG’s assets include direct and indirect licenses and rights to acquire entities with licenses in CaliforniaIowa, and Washington. In addition, ICG is a service provider to these entities.

Verano

Verano is a private company that is known to have licenses and operations in 11 states and territories, including seven cultivation licenses, 37 retail licenses and the potential to reach 150+ million Americans. The company is vertically integrated with cash-flow positive operations.

 


Debra BorchardtApril 9, 2019
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Harvest Health & Recreation, Inc. (CSE: HARVOTCQX: HRVSF) is acquiring CannaPharmacy, Inc. in a deal with undisclosed value. CannaPharmacy owns or operates cannabis licenses in Pennsylvania, Delaware, New Jersey, and Maryland.

Harvest recently announced the private placement of $500 million in convertible debentures to continue to finance acquisitions and corporate growth. Harvest said that it expects that the transaction will be accretive to Harvest’s 2020 revenue and EBITDA.

“We’re seeing significant M&A activity across our industry, but the most important factors are the price one pays for an acquisition, strength of the assets relative to the market size and synergies between the companies,” said Steve White, CEO of Harvest. “Harvest was already fully funded to build out our entire footprint, inclusive of the significant assets that come with the Verano acquisition. Our recent $500 million financing, secured in $100 million tranches for new accretive acquisitions like CannaPharmacy, continues to solidify Harvest’s position as the leading company in the cannabis industry in reach, brands, infrastructure, assets, and footprint.”

Expanding Its Footprint

The CannaPharmacy acquisition will bring operations in four major northeastern states. The licenses and assets of CannaPharmacy will add to Harvest’s extensive national footprint across 17 states and Puerto Rico. Upon closing of this transaction and the closing of the previously announced acquisition of Verano Holdings,  Harvest will hold licenses that allow it to operate up to 213 facilities, including 130 retail dispensaries.

“All of our efforts back up our three core objectives; to expand and deepen our retail and wholesale footprint, build national brands and continue our path to profitable growth, and this CannaPharmacy deal is no different,” said Jason Vedadi, Executive Chairman of Harvest. “Harvest has led the cannabis market in the Western United States for years, and this acquisition will similarly widen and extend our U.S. foothold to the East Coast. When you add that to our existing dominant position in the Pennsylvania and Maryland markets, acquisition of CBx and its suite of brands, as well as our pending acquisitions of Falcon and Verano, with its holdings throughout the eastern seaboard and brands and infrastructure to leverage, we are looking at Harvest becoming a household name throughout the region in a matter of months.”

The company statement outlined the acquisition as follows:

New Jersey

  • One of six operational (and 12 awarded) fully vertical licenses, permitting cultivation, retail sales and manufacturing.
  • Woodbridge, NJ flagship store open and operational on a major highway since 2013, one of six in the state, 20 miles from NYC. According to the most recent NJ Dept. of Health annual report in April 2018, this dispensary has served more patients and completed more cannabis transactions since inception than any other dispensary.
  • A satellite store is approved and under construction in Union, NJ, 17 miles from NYC, on one of the most heavily trafficked highway corridors in the state at the intersection of the Garden State Parkway, NJ Turnpike, Route 22, and Route 78.
  • Approval pending for a third dispensary in densely populated Monmouth County, NJ (the “Jersey Shore”), which presently does not have a single dispensary.
  • 43.4% year-over-year revenue growth from 2017 to 2018.
  • New Jersey has 42,000 medical patients and growing 60 percent annually.

Pennsylvania

  • One 46,800 square foot cultivation and processing facility in the fifth most populous state in the country, with a statutory cap of 25 grower-processors;
  • Facility is a former Pepsi bottling plant employing local Pennsylvanians.
  • Harvest currently has seven state licenses allowing up to 21 retail stores throughout the state.
  • Pennsylvania currently has 116,000 medical patients as of February 2019 and growing at 10 percent month over month.

Maryland

  •  Rights to one dispensary in Prince George’s County.

Delaware

  • One of three fully vertical licenses, permitting cultivation, manufacturing, and three retail dispensaries.
  • Newark, DE flagship open and operational on a major highway leading into the heart of downtown, one of four stores statewide, in the county that hosts 60 percent of the state’s population.
  • Two additional dispensaries expected to open in 2019-2020.
  • Delaware currently has 7,104 medical patients, a 53 percent increase from 2017, and is experiencing rapid growth in a state with one of the most liberal lists of qualifying conditions in the country.

Harvest recently won every license it applied for in Pennsylvania, giving the company the ability to open up to 21, the largest retail network in the state. Harvest received the highest scores on all but one of its regional applications (where it placed 2nd overall) based on its responses to the criteria developed by the Pennsylvania Department of Health.


Debra BorchardtMarch 11, 2019
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8min19930

Harvest Health & Recreation, Inc. (CSE: HARVOTCQX: HRVSF) has entered into an agreement to buy  VeranoHoldings, LLC in an all-stock deal valued at approximately USD $850 million based on a share price of C$8.79. Harvest Health stock jumped over 15% on the news to lately trade at C$9.56. The deal is expected to close in the first half of 2019 and comes with a $20 million termination fee.

If this deal is completed, the combined company will be one of the largest multi-state operators (MSO’s) in the U.S., as measured by licenses held and facilities permitted. Harvest will hold licenses that will allow it to operate up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries. Harvest Health was founded in 2011 and currently owns licenses for more than 140 facilities in the U.S. It is often ranked as the third largest cultivator.

“The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company,” said Jason Vedadi, Executive Chairman of Harvest.  “We are confident that this is an opportunity to continue to leverage each of our company’s strengths and drive continued shareholder value, while at the same time achieving the scale we know will give us a leadership position in one of the largest cannabis markets in the world.”

The newly combined company plans to continue hubs of operation in both Arizona and Illinois and merge key leadership talent.  Both companies have recently attracted management expertise across consumer-packaged-goods, beverage, spirits, logistics, branding, horticulture, and extraction technologies from some of the largest most influential companies in the world, all supporting the companies’ explosive growth.

“This is a natural match between like-minded entrepreneurs who have built our companies from the initial facilities into two of the largest MSOs in the U.S, with an unwavering focus on operational excellence, superior quality products and service, and delivering value to customers and shareholders,” said George Archos, Verano Co-founder, and CEO. “Our growth and unique positioning in key markets allowed us to evaluate some of the largest players in the space, but we only had one unanimous choice for a major transaction and that was Harvest.”

According to the company statement, Harvest’s planned acquisition of Verano will include:

·      Licenses and operations in 11 states and territories, including seven cultivation licenses, 37 retail licenses and potential to reach 150+ million Americans;

·      Vertically integrated, cash-flow positive operations;

·      Proven executive team with retail, manufacturing, branding, logistics and operational experience and 300 employees.  Hiring for approximately 300 new positions in 2019 with a focus on hiring minorities, women and veterans;

·      Game changing ethanol extraction technology at pharmaceutical grade levels providing new market opportunities for cannabis biotech, food, and beverage verticals;

·      Portfolio of premium proprietary brands with 150 + product SKUs sold in 150 + retail locations;

·      Total cultivation expansion capacity of 900,000 sq. ft in Illinois, Nevada & Maryland;

·      Ownership of an interest in nine Zen Leaf™ dispensaries with average annual revenues 2.5x higher than retail cannabis industry averages;

“Verano has been creating a brighter way for cannabis production, products and health and wellness by assembling a stellar team of experts drawn from the cannabis industry and the top echelons of Fortune 500 corporations,” noted Sam Dorf, Verano Co-founder and Chief Growth Officer.  “We are excited to join forces with Harvest to leverage each of our strengths to share the benefits of cannabis in innovative new ways with an ever-increasing customer base.  Verano and Harvest independently have always focused on business fundamentals to drive year over year growth in both revenue and EBITDA.  Together, we expect to accelerate that momentum and raise the bar even higher for the industry.”


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