Category: Cannabis

It’s been less than two years since Oklahoma legalized medical cannabis, but already the number of card-carrying medical cannabis patients has exceeded those in many states that have had programs much longer. That is due, in part, to the fact that Oklahoma has one of the most liberal medical cannabis laws in the country. Recognizing this, there are now efforts underway by some state lawmakers to reign in the burgeoning industry through legislation, while, at the same time, efforts are underway to expand legalization to adult-use cannabis. In this review, we take a look at the history of Oklahoma’s cannabis program, the existing marketplace and potential for future growth.

History

Passed by a vote of 57% to 43% in June 2018 via a ballot initiative (SQ 788), the Oklahoma Medical Marijuana and Patient Protection Act legalized the licensed use, sale and growth of marijuana for medicinal purposes. Unlike other states that created limits on what conditions qualified for use, Oklahoma’s law allows doctors to prescribe cannabis for any condition.

In addition, the amount and forms of cannabis that licensed patients can possess in Oklahoma is also considerably more liberal than most other states. The law allows patients with a license to legally possess up to three ounces on their person; up to six mature marijuana plants; six seedling plants; one ounce of concentrated marijuana; up to 72 ounces of edible marijuana; and up to 8 ounces in their residence. Possession of up to 1.5 ounces by those who can state a medical condition, but who do not have a state-issued license, are considered to have committed a misdemeanor offense and can be fined up to $400.

Existing Market

It is estimated that about 5 percent of Oklahoma’s nearly 4 million residents has a medical marijuana license, a rate of participation that far exceeds the experience in other states due to the ease of obtaining a medical card and the large number of dispensaries, as detailed below. Oklahoma’s Medical Marijuana Authority has approved an average of 3,500 patient applications since the program began accepting them in August 2018. As of Jan. 20, the Authority reported having approved the following licenses:

Oklahoma is No. 2 in the nation with 15.6 cannabis dispensaries per 100,000  residents, second only to Oregon, according to Verilife. There are few barriers to entry. Nearly anyone with $2,500 for a license can open a dispensary and every form of cannabis can be sold: from raw flower to topical creams, oils and gels to vaporization and patches.

Retail sales reached more than $345 million last year, and state tax revenue was $55 million, according to the Oklahoma Tax Commission. The state assesses a seven percent excise tax on medical marijuana, in addition to state and local sales taxes.

While many of the players who entered the Oklahoma cannabis market are small private companies with dispensary names ranging from “Doobies Dispensary” to simply “Dragon,” there are some public companies either already doing business there, or planning to enter the market. Among them are:

GrowGeneration (NASDAQ; GRWG), a chain of specialty retail hydroponic and organic garden centers has three, soon to be four, locations in Oklahoma. In the quarter ending September 30th, the company generated sales of $3.4 million in Oklahoma, representing 15% of its revenue for the quarter and accounting for 40% of its overall growth from a year ago, when it had no revenue from the state.

Curaleaf Holdings, Inc. (CSE: CURA) (OTC: CURLF), will, through the planned acquisition of GR Companies, (dba Grassroots Cannabis) get a foothold in the Oklahoma market. GR Companies Oklahoma has 12 locations in the state, with some of them operating under the “Herbology” banner. That deal is expected to close this spring.

Acreage Holdings (CSE: ACRG) (OTC: ACRGF) is another public company looking for a presence in Oklahoma. It has described plans to open one retail location in Tulsa, for which it has a license. The company stated in SEC filings it also has been approved for one grower license and one processor license in Pocasset, Oklahoma.

Earlier this month, Dixie Brands (CSE: DIXI) (OTC: DXBRF) announced that it will enter the market with an unnamed manufacturer.

In June, SLANG Worldwide (CSE: SLNG) (OTC: SLGWF) announced plans to enter the market by licensing its branded products to Elite Cultivation, including O.penVAPE, Pressies, District Edibles, Bakked, and Magic Buzz. Elite Cultivation is run by Richard Freeman of drag racing firm Elite Motorsports.

Redbird Bioscience, a cultivation and processing facility in Stilwell, Oklahoma is ramping up for cultivation, processing, distribution and warehousing there. In an interview with New Cannabis Ventures in January, Redbird’s Chairman and CEO Bill Thurman said Oklahoma’s referendum model has “allowed for a market with broad distribution opportunities.”

Future Growth

The Oklahoma medical cannabis market began with a bang. Whether that will continue is contingent upon a number of factors. First, there are efforts underway to legalize adult-use cannabis via a proposed ballot which would, of course, build on an already robust market. At the same time, those who support medical cannabis fear it would cut into their market share.

In addition, some lawmakers are looking to reign in the existing law with so-called “trailer bills.” For example, SB 1257 would prohibit medical marijuana from being advertised on billboards, while HB 2779 would prohibit future medical marijuana dispensaries from being located within 1,000 feet of a church or other places of worship.

Overall, the Oklahoma cannabis market is still young and the landscape is changing rapidly. Competition from, and consolidation by, some of the larger players, along with additional changes in the law likely will impact future growth, but for now it continues to be full steam ahead in Oklahoma.

Exclusive article by Alan Brochstein, CFA

Earlier this month, Hightimes Holding Corp., parent of High Times, revealed that it has abandoned its efforts to list on the NASDAQ, a goal it had been pursuing for since mid-2017. The company launched an offering two years ago at $11 per share through the Reg A+ process, and it reported that it would extend its Reg A+ capital raise until 4.545 million shares had been sold or until March 31st. It disclosed in an SEC filing that it recently sold 363,636 shares at $5.50 in a private placement to Ontario-based Rayray Investments (Raymond Leach, an original investor in MedReleaf), a 50% discount to where it has been selling shares.

In a shareholder letter released yesterday, Executive Chairman Adam Levin suggested that the company will continue to raise capital through the Reg A+ offering while it awaits a listing on the OTCQX rather than the NASDAQ. He admitted that the path to public trading had fallen short of the company’s expectations:

Our largest misgiving is that High Times had hoped to be public by now. But given the market’s volatility in the cannabis sector, we also believe this may have been a blessing in disguise for our company and shareholders alike. We are now more focused and realigned.

We spent this past year building our new corporate strategy, which we are excited to share. Ultimately, we believe we have found the best way to leverage our global brand and content engine to power the next steps in High Times’s evolution.

Indeed, the company has shifted its strategy to become more plant-touching. It had highly praised its new CEO, media veteran Kraig Fox, when he joined as CEO in early April, but Fox left the company on December 26th. Earlier this month, it named Stormy Simon, former President of Overstock.com, as CEO, “as the company prepares to develop its physical and virtual distribution businesses.” Traditionally, the company has focused on events and media. Simon had served on the Board of Directors of Hightimes Holding Corp. for the past two years. Simon will earn a base salary of $300K per year, though it will be reduced to $215K until the company raises an additional $10 million, with the difference accrued. Her target bonus in 2020 is $225K. She was also granted the right to buy 200 shares at $11.00 and 300K shares as a grant.

On January 16th, the company announced the addition of Paul Henderson, formerly CEO of Grupo Flor, as President. Henderson will also serve as interim CFO, as CFO David Newberg had resigned on January 7th. The company also announced binding letters of intent with holders of dispensary licenses in Las Vegas and Los Angeles that will allow the company to be a cannabis retailer. Henderson’s compensation includes a salary of $300K, an annual targeted bonus of $300K, a grant of 300K shares and an option to acquire 200K shares at $11.00.

While the shift in business strategy towards being a direct cannabis company certainly precludes the company from listing on the NASDAQ, the company wasn’t eligible in any event. Its corporate presentation reveals that the company has raised only $15 million, far short of its goal two years ago to raise $50 million.

We have written extensively about the weak financials of the company in the past, and there has been no improvement. As of mid-2019, the last time it published its financials publicly, six-month revenue was just $10.7 million, with its event business declining while its publishing business expanded following the acquisitions of Dope and Culture magazines. The operating loss in the first half of the year more than doubled to $11.3 million as it used $6.1 million to fund its operations. Capital raising, at $5.5 million, fell short of its use of cash to run its operations during the first half of 2019. The company saw its shareholders equity decrease from -$39.1 million at the end of 2018 to -$44.3 million at mid-year. Its cash balance was just $12K, and its current liabilities were almost 3X its current assets, painting a clear sign of liquidity issues ahead absent more aggressive efforts to raise capital.

As of December 31, the company had 24.85 million shares outstanding and 33.67 million potentially dilutive securities (before incorporating the recent equity sale and the grants to Simon and Henderson). At $11.00, where the company has been selling its stock, the market-cap on a fully-diluted basis, exceeds $650 million, a valuation that doesn’t seem defensible, especially in light of on-going capital raises ahead that will be necessary to fund the new growth initiatives of retail stores and delivery services.

EcoGen Laboratories Announces Closing of $40 Million Financing

GRAND JUNCTION, Colo., Jan. 28, 2020 /PRNewswire/ — EcoGen Laboratories (EcoGen), the leading vertically-integrated manufacturer and supplier of hemp-derived specialty ingredients, proprietary formulations, and private-label finished products in the United States, announced today the closing of a $40 million private placement.

We are very encouraged by the strong support we’ve received from the institutional marketplace. This investment is an important step forward that will allow us to further grow and expand our business.

Since inception in 2016, EcoGen has expanded rapidly, resulting in growth that exceeded $80 million in revenue for 2019. Poised to capitalize on a rapidly changing market, EcoGen has developed a growth strategy to support this recent raise which includes further developing facilities, focusing on research and development to increase product offerings, and expanding marketing and sales divisions to widen its global footprint.

“With engineering as a passion and also my background, the prospect of new innovation is what led me to this industry,” says Joseph Nunez, Co-Founder of EcoGen. “When we first started, we were on a mission to create a state-of-the-art process to produce exceptionally pure CBD that set the standard for the industry. We’re proud to say that goal was quickly achieved and this capital raise will allow us to expand that success into other verticals of the business.”

New technologies, advanced seeds and genetics, in addition to expanding private label finished goods, are also on the horizon for 2020.

To learn more about EcoGen Laboratories, visit https://ecogenlabs.com/.

About EcoGen Laboratories

EcoGen Laboratories (EcoGen) is the leading vertically-integrated manufacturer and supplier of hemp-derived specialty ingredients in North America. Using proprietary equipment, processes, and formulations, EcoGen has developed a broad range of the highest quality ingredients and customized formulations for a broad range of industries. Founded in 2016, EcoGen is the first seed-to-sale CBD manufacturer, known for manufacturing the purest CBD raw materials and finished products. The company is also a leader in international distribution with CBD isolate, water-soluble CBD (Nano), and THC-free CBD distillate. As the leader in hemp genetics, EcoGen promotes sustainable agriculture, using its proprietary processing and extraction technology to ensure the highest quality products at the lowest price making cannabinoids more accessible to the world.

Original press release

The science-focused, multi-state cannabis company partners with leading cannabis wholesale technology platform

MINNEAPOLIS, Jan. 28, 2020 /PRNewswire/ — Vireo Health International, Inc. (“Vireo” or the “Company”) (CNSX: VREO,OTCQX: VREOF), a leading physician-led, science-focused multi-state cannabis company, today announced the expansion of the Company’s partnership with Leaf Trade to provide a wholesale order and fulfillment management platform in four states where Vireo operates. Leaf Trade is an omni-channel sales platform that allows Vireo’s wholesale business to come online quickly and easily in new markets as the Company expands its operations nationally.

Vireo uses Leaf Trade to manage wholesale ordering and fulfillment in Pennsylvania, Maryland, Ohio and New York, and other states in which the Company is licensed to sell medical cannabis products to third-party dispensaries. The Leaf Trade platform provides a convenient way for dispensaries to review and purchase items from Vireo’s ever-growing line of products and brands.

Leaf Trade is a technology platform for cultivators and dispensaries who want to optimize their wholesale ordering and fulfillment process. It provides a single, standardized system to ensure operational consistency. This helps cultivators deliver for their customers, eliminate costly fulfillment errors, and stay compliant with State-based regulations.

As we continue to expand our wholesale operations, Leaf Trade’s innovative platform will enhance our sales capabilities and enable us to better serve the hundreds of dispensary customers we work with nationwide.

Leaf Trade has been an important partner for almost two years and we are excited to expand our partnership into new markets.

Vireo uses Leaf Trade to present their products in a one-to-one online storefront which allows dispensary operators to purchase from their mobile, tablet, or desktop computer. Lab testing results are available on each product listing, making it easy for dispensaries to understand exactly what they’re ordering and help protect patient safety.

By using Leaf Trade, Vireo no longer needs to accept orders from multiple entry points such as emails, calls, texts, website inquiries, etc. The omni-channel platform helps save time and effort for Vireo’s sales team and fulfillment departments. Leaf Trade also provides advanced sales data reporting, which enables a single, reliable source of sales figures to help develop accurate forecasts.

We are thrilled to work with a leading multi-state operator like Vireo Health. The expansion of our partnership from one state to four, and growing, is clear evidence that the Leaf Trade platform can help fuel growth for cannabis wholesalers. We look forward to continuing to grow our relationship with Vireo and helping them expand nationwide.

About Vireo Health International, Inc.

Vireo Health International, Inc.’s mission is to build the cannabis company of the future by bringing the best of medicine, engineering and science to the cannabis industry. Vireo’s physician-led team of over 400 employees provides best-in-class cannabis products and customer experience. Vireo cultivates cannabis in environmentally friendly greenhouses, manufactures pharmaceutical-grade cannabis extracts, and sells its products at both company-owned and third-party dispensaries. The Company currently is licensed in eleven markets including Arizona, Maryland, Massachusetts, Minnesota, New Mexico, New York, Nevada, Ohio, Pennsylvania, Puerto Rico, and Rhode Island. For more information about the Company, please visit www.vireohealth.com.

About Leaf Trade

Leaf Trade is the leading B2B wholesale ordering platform operating in 16 (and counting) highly-regulated cannabis markets. Leaf Trade helps licensed sellers of wholesale cannabis create an online storefront where verified dispensaries have access to all of the brands they are allowed to purchase in their respective markets. Dispensaries enjoy easily placing orders right from their mobile phones, and the sellers have all the built-in supply chain management tools that help their sales, fulfillment, and accounting teams work together to successfully process and deliver orders smoothly, all while dramatically reducing the amount of time it takes to do so. Leaf Trade specializes in custom product features and partner integrations such as seed-to-sale and accounting tools to streamline operations. To learn more about Leaf Trade, visit leaf.trade or follow us on LinkedIn, @leaftrade on Instagram, @leaf_trade on Twitter.

Original Press Release

Innovative Industrial Properties Acquires Property in Ohio and Enters Into Long-Term Lease with Cresco Labs

SAN DIEGO, January 27, 2020–(BUSINESS WIRE)–Innovative Industrial Properties, Inc. (IIP), the first and only real estate company on the New York Stock Exchange (NYSE: IIPR) focused on the regulated U.S. cannabis industry, announced today that it closed on the acquisition of a property in Ohio, which comprises approximately 50,000 square feet of industrial space in the aggregate.

The purchase price for the property was approximately $10.6 million in total (excluding transaction costs). Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease agreement for the property with a wholly owned subsidiary of Cresco Labs Inc. (Cresco), which intends to continue to operate the property as a regulated cannabis cultivation and processing facility. Cresco is expected to complete additional tenant improvements for the property, for which IIP has agreed to provide reimbursement of up to approximately $1.9 million. Assuming full reimbursement for the tenant improvements, IIP’s total investment in the property will be approximately $12.5 million.

This sale-leaseback transaction mark IIP’s third acquisition and lease with Cresco, with prior IIP acquisitions and leases for two of Cresco’s licensed cannabis cultivation and processing facilities in Illinois.

As the pioneering real estate investment trust (REIT) for the medical-use cannabis industry, IIP partners with experienced medical-use cannabis operators and serves as a source of capital by acquiring and leasing back their real estate assets, in addition to offering other creative real estate-based capital solutions.

We are excited to expand our real estate partnership with Cresco and its strong management team. Cresco continues to execute well on its business plan and has created a truly nationwide reach in its operations, benefiting patients and consumers across the United States, while creating jobs and contributing meaningfully to the local communities where they operate.

We are thrilled to partner with them again in Ohio, a state that we believe represents a tremendous market opportunity, where Cresco can bring its high quality, trusted products to patients in need.

Founded in 2013, Cresco is one of the largest vertically-integrated cannabis companies in the United States, with licensed operations in eleven states. With its pending acquisitions, Cresco has 18 licensed cannabis production facilities, 31 retail cannabis licenses and 21 operational cannabis dispensaries. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco’s national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers.

Teaming again with IIP as our long-term real estate partner enables us to further bolster our balance sheet, and redeploy that additional liquidity into higher yielding opportunities. We are thrilled with the footprint we have established, and look forward to deepening even further our presence in those states, with IIP as one of our trusted capital providers.

Ohio’s licensed medical cannabis program is in its early stages, with first sales occurring at the beginning of this year. In less than one year of sales, however, there were nearly 80,000 patients and over 8,000 caregivers registered under the program as of the end of December.

As of January 27, 2020, IIP owned 48 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, North Dakota, Ohio, Pennsylvania and Virginia, totaling approximately 3.1 million rentable square feet (including approximately 850,000 rentable square feet under development/redevelopment), which were 98.9% leased (based on square footage) with a weighted-average remaining lease term of approximately 15.6 years. As of January 27, 2020, IIP had invested approximately $529.3 million in the aggregate (excluding transaction costs) and had committed an additional approximately $128.3 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties. IIP’s average current yield on invested capital is approximately 13.3% for these 48 properties, calculated as (a) the sum of the current base rents, supplemental rent (with respect to the lease with a tenant at one of IIP’s New York properties) and property management fees (after the expiration of applicable base rent abatement or deferral periods), divided by (b) IIP’s aggregate investment in these properties (excluding transaction costs and including aggregate potential development/redevelopment funding and tenant reimbursements of approximately $128.3 million). These statistics do not include up to approximately $16.4 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Illinois properties, approximately $35.7 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Massachusetts properties, or the additional $4.0 million which may be requested by a tenant at one of IIP’s Pennsylvania properties, as the tenants at those properties may not elect to have IIP disburse those funds to them and pay IIP the corresponding base rent on those funds. These statistics also treat IIP’s Los Angeles, California property as not leased, due to the tenant’s default in its obligation to pay rent at that location in January 2020.

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties, Inc. has elected to be taxed as a real estate investment trust, commencing with the year ended December 31, 2017. Additional information is available at www.innovativeindustrialproperties.com.

About Cresco Labs

Cresco Labs is one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco is built to become the most important company in the cannabis industry by combining the most strategic geographic footprint with one of the leading distribution platforms in North America. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco’s national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco has launched the industry’s first national comprehensive Social Equity and Educational Development (SEED) initiative designed to ensure that all members of society have the skills, knowledge and opportunity to work in and own businesses in the cannabis industry. Learn more about Cresco Labs at www.crescolabs.com.

Original press release

TORONTO, ONTARIO / ACCESSWIRE / January 27, 2020 / MPX International Corporation (“MPX International”, “MPXI” or the “Company”) (CSE:MPXI; OTC PINK:MPXOF) announced that its wholly-owned subsidiary, MPX Australia Pty. Ltd. (“MPX Australia”), has been awarded a Medicinal Cannabis Licence from the Australian Office of Drug Control (“ODC”).

The licence authorizes MPX Australia to undertake certain activities at the company’s 70,000 sq. ft. site under construction in Launceston in Tasmania including:

• The cultivation of cannabis plants for producing cannabis or cannabis resin for medical purposes.
• The production of cannabis or cannabis resin for medical purposes.
• Activities related to the cultivation or production of cannabis including, but not limited to, obtaining cannabis plants, packaging, transport, storage, testing, possession and control of all resulting cannabis products as well as the supply of all cannabis plants, cannabis or cannabis resin.

This regulatory approval is a significant milestone for our operations in Australia and is a testament to our dedication to operating in real-time and our ability to execute on our strategy.

Australia provides an important gateway for MPXI into both the Oceania and Asia-Pacific markets, and we are thrilled to receive this licence, signalling another step forward in our business there.

“MPX Australia provides the company with a strong foothold in a new and burgeoning market,” said Tibor Vertes, Executive Director of MPX Australia. “The number of medical cannabis patients is growing steadily in Australia and with MPX Australia’s focus on producing high quality products for the domestic market, we are positioning the company in a first-mover position, creating increased brand awareness amongst Australians and possibly building a future export gateway to the Asia-Pacific region.”

Upon receipt of the Medicinal Cannabis Licence, MPX Australia has achieved Milestone #1, being the granting of a medicinal cannabis license (cultivation and production) in Australia in accordance with the Narcotic Drugs Act 1967 (Cth).

In addition, further to the Company’s press release dated July 23, 2019, MPXI will issue 2,689,189 common shares ($1,250,000) at a price of $0.46 per share.

About MPX International Corporation

MPX International Corporation is focused on developing and operating assets across the global cannabis industry with an emphasis on cultivating, manufacturing and marketing products which include cannabinoids as their primary active ingredient.

Original press release

Innovative Industrial Properties Prices Public Offering of 2,967,799 Shares of Common Stock

SAN DIEGO, January 24, 2020–(BUSINESS WIRE)–Innovative Industrial Properties, Inc. (the “Company”) (NYSE: IIPR) announced today the pricing of an underwritten public offering of 2,967,799 shares of its common stock at $73.25 per share for gross proceeds of approximately $217.4 million. The offering is expected to close on or about January 28, 2020, subject to customary closing conditions. The Company has also granted the underwriters a 30-day option to purchase up to an additional 445,170 shares of its common stock. All of the shares are being sold by the Company.

The Company intends to use the net proceeds from this offering to invest in specialized industrial real estate assets that support the regulated cannabis cultivation and processing industry that are consistent with its investment strategy, and for general corporate purposes.

BTIG, LLC is acting as sole book-running manager for the offering; Compass Point Research & Trading, LLC and Ladenburg Thalmann & Co. Inc., a subsidiary of Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS), are acting as co-lead managers for the offering; and Roth Capital Partners is acting as a co-manager for the offering.

The offering of the Company’s common stock will be made only by means of a prospectus supplement and the accompanying prospectus. Copies of the preliminary prospectus supplement, final prospectus supplement (when available) and the accompanying prospectus may be obtained by contacting BTIG, LLC at 65 East 55th Street, New York, NY 10022, or by email at equitycapitalmarkets@btig.com; Compass Point Research & Trading, LLC at 1055 Thomas Jefferson Street, N.W., Suite 303, Washington, DC 20007, or by email at syndicate@compasspointllc.com; Ladenburg Thalmann & Co. Inc., 277 Park Avenue, 26th Floor, New York, NY 10172, or by email at prospectus@ladenburg.com; or Roth Capital Partners, LLC, 888 San Clemente, Suite 400, Newport Beach, CA 92660, or by email at rothecm@roth.com.

A registration statement relating to these securities has been declared effective by the Securities and Exchange Commission. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the offered securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is an internally-managed real estate investment trust (REIT) focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties, Inc. has elected to be taxed as a REIT, commencing with the year ended December 31, 2017.

Original press release

Cresco Labs Announces Signing of Senior Secured Credit Agreement

Initial Drawdown of up to US$100 million expected end of January; Agreement Includes Mutual Option to Increase to up to US$200 million

CHICAGO-January 23-(BUSINESS WIRE)–Cresco Labs (CSE:CL) (OTCQX:CRLBF) (“Cresco” or the “Company”), one of the largest vertically integrated multistate cannabis operators in the United States, announced today that it has entered into a non-brokered credit agreement (the “Credit Agreement”) for a senior secured term loan (the “Senior Loan”) in an initial aggregate principal amount of up to US$100 million, with a mutual option to increase the size of the facility to a maximum of US$200 million. The Company expects to complete an initial drawdown of up to US$100 million on or about January 30, 2020, subject to the satisfaction of customary funding conditions.

The proceeds from the Senior Loan will be used to fund the expansion of operations in Illinois, closing and integration costs associated with pending acquisitions, and other strategic growth initiatives in key markets.

This agreement reflects the strength and growth potential of the national platform Cresco has built as well as our ongoing commitment to execute a superior capital agenda for the benefit of shareholders. Through this deal, we have diversified the Company’s funding sources, improved our cost of capital in a non-dilutive manner and given ourselves flexibility in a dynamic capital environment.

Charlie Bachtell, CEO and Co-founder of Cresco Labs

As we enter 2020 and our business continues to increase its positive free cash flow, Cresco is well-positioned to continue growing its foothold in the most strategic cannabis markets in the U.S., while building the most important company in the industry.

Terms

Commitments under the Senior Loan are provided by a broad syndicate of lenders, including U.S. based institutional investors, demonstrating confidence in Cresco’s strategic position and reflecting the strong growth outlook for the US cannabis industry. Members of the Company’s management and board of directors will also be participating as investors in the Senior Loan. Each commitment under the Senior Loan may be for an 18-month or 24-month term, at the lender’s option. Loans made on the initial closing date will bear interest at a rate of approximately 12.7% per annum for 18-month loans and approximately 13.2% for 24-month loans, payable quarterly in arrears. The terms of the Senior Loan were negotiated at arm’s length with the agent and lead investor and include customary restrictive covenants.

About Cresco Labs

Cresco Labs is one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco is built to become the most important company in the cannabis industry by combining the most strategic geographic footprint with one of the leading distribution platforms in North America. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco’s national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco has launched the industry’s first national comprehensive Social Equity and Educational Development (SEED) initiative designed to ensure that all members of society have the skills, knowledge and opportunity to work in and own businesses in the cannabis industry. Learn more about Cresco Labs at www.crescolabs.com.

Original Press Release

• 2019 Leafly Readers Choice Awards ranks top cannabis products in Canada, as chosen by consumers
• Company receives four awards and five acknowledgments, including Top Pre-Roll (Edison El Dorado), Top THC Oil (Edison Sativa) and Top CBD Oil (Edison CBD)
• Over 30,000 votes cast across Canadian cannabis industry and licensed producers

MONCTON, New Brunswick, January 23, 2020–(BUSINESS WIRE)–Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), the parent company of Organigram Inc. (the “Company” or “Organigram”), a leading licensed producer of cannabis, is pleased to announce products from its premium adult recreational Edison Cannabis Co. brand have been awarded top honours in the consumer-driven Leafly Readers Choice Awards.

The Company’s Edison Cannabis Co. products took first-place position in four key product categories: Top THC-Dominant Flower, Top Pre-Roll, Top THC Oil and Top CBD Oil.

These products, chosen the finest in Canada by those who know cannabis best, are validation for all the hard work, thought and dedication applied to the development of the Edison Cannabis Co. brand and the quality of its products.

We’re incredibly proud of our teams and thank those who support our work. A special thanks to the team at Leafly for this celebration of cannabis in Canada.

The competition is organized by Leafly, the world’s largest cannabis information resource. The Leafly Readers’ Choice Awards recognizes best-in-class products, producers, places and personalities in Canada’s legal cannabis industry. Three Edison products were chosen in the Top THC-Dominant Flower category, out of a possible 10 finalists.

The Company’s Edison Cannabis Co. awards and acknowledgments include:

– Top THC-Dominant Flower – La Strada
– Top Pre-Roll – El Dorado Pre-Roll
– Top THC Oil – Edison Sativa
– Top CBD Oil – Edison CBD
– Top Licensed Producer, #2 spot – The Edison Cannabis Co.
– Top Balanced Oil, #3 spot – Edison 5:5
– Top Pre-Roll, #4 spot – Edison La Strada
– Top THC-Dominant Flower, #7 spot – Rio Bravo
– Top THC-Dominant Flower, #8 spot – Lola Montes

Over 30,000 votes were cast in the inaugural competition and stands as the country’s sole 100-per-cent reader-polled cannabis awards initiative.

“The overwhelming volume of response is a sign that consumers are embracing cannabis legalization,” Engel said. “We are thrilled for the acknowledgement of our peers in these results as well, and that our products have been ranked among the best of the best in Canada.”

“Leafly readers know cannabis and we’re thrilled to give them a platform to recognize Canada’s best buds. Congratulations to Edison for winning in multiple categories including favourite THC-dominant flower and pre-roll as well as favourite CBD and THC oils,” says Jo Vos, Managing Director, Leafly Canada.

The flagship brand from Organigram Holdings Inc., the Edison Cannabis Co. is a premium adult recreational cannabis brand, available in all 10 Canadian provinces. Edison Cannabis Co. products were introduced to consumers on the first day of recreational legalization, October 17, 2018, and is one of Canada’s original, licensed recreational cannabis brands. Built on pillars of innovation, sophistication, creativity and quality, the brand is nationally regarded as best-in-class; in addition to its recently announced Leafly Readers Choice Awards, Edison was named Brand of the Year first runner-up at the Lift & Co. 2019 Canadian Cannabis Awards in November 2019.

For a full breakdown of the Leafly Readers Choice Awards and acknowledgements, visit: https://www.leafly.com/news/canada/readers-choice-awards-canada-2019.

About Organigram Holdings Inc.

Organigram Holdings Inc. is a NASDAQ Global Select and TSX listed company whose wholly owned subsidiary, Organigram Inc., is a licensed producer of cannabis and cannabis-derived products in Canada.

Organigram is focused on producing high-quality, indoor-grown cannabis for patients and adult recreational consumers in Canada, as well as developing international business partnerships to extend the Company’s global footprint. Organigram has also developed a portfolio of legal adult use recreational cannabis brands including The Edison Cannabis Company, Ankr Organics and Trailblazer. Organigram’s primary facility is located in Moncton, New Brunswick and the Company is regulated by the Cannabis Act and the Cannabis Regulations (Canada).

Original press release

Exclusive Interview with KushCo CEO Nick Kovacevich

Ancillary company KushCo Holdings (OTCQX: KSHB) is expanding its core business and focusing on new business divisions to drive its strong revenue projections for 2020. Co-Founder, CEO and Chairman Nick Kovacevich, who last spoke with New Cannabis Ventures in December 2018, checked in to talk about his company’s growing platform, funding and KushCo’s long-term vision. The audio of the entire conversation is available at the end of this written summary.

Finding talent is a major focus in the cannabis industry, and KushCo has worked to find the right people to drive its growth. The company’s management team is a blend of people with entrepreneurial experience and people with decades of corporate experience, according to Kovacevich.

The Opportunity in the Vaping Crisis

Vape has been a significant segment of KushCo’s business, and the company did experience short-term effects from the vaping crisis. According to Kovacevich, the stock sold off due to uncertainty around how sales would be affected as consumer demand declined. Now, the health issues related to vaping have been tied to vitamin e acetate, an additive largely found in black market products.

Already, Kovacevich is seeing retailers regaining confidence and ordering more products as consumers become comfortable again. In the long-term, he sees the vaping crisis having a positive effect on the industry. More consumers will likely migrate from the illicit market to legal outlets. Meanwhile, operators in the space are going to turn toward premium products, like those that KushCo provides, to boost consumer confidence in their products, according to Kovacevich.

KushCo also has a brand protection and anti-counterfeiting offering on its platform through an exclusive distribution agreement with De La Rue. De La Rue’s anti-counterfeiting sticker serves to authenticate products throughout the cannabis supply chain, helping to combat illicit operators and counterfeit products.

KushCo in the Hemp and CBD Ecosystem

KushCo is building a holistic approach to the CBD supply chain. Over the past decade, the company has built a network of cultivators, processors, and brands. Leveraging that network, KushCo’s hemp trading division can facilitate transactions within that network. The company is helping growers sell hemp biomass to processors, assisting processors sell their crude, distillate, and oil, enabling formulators to connect with brands and connecting brands with distribution channels. KushCo has designed a transparent model that spans seed to sale, according to Kovacevich. The hemp trading division is already gaining significant traction–the company is projecting $25 million in sales in its first year of operation.

The company’s recently launched retail services division is helping CBD brands enter mainstream outlets. In partnership with sales and marketing agency C.A. Fortune, KushCo is facilitating CBD brand entry into mainstream grocery channels. C.A. Fortune has access to 500,000 retail doors, according to Kovacevich. Sales and marketing agencies are a common strategy in traditional CPG, and KushCo is applying that strategy in the CBD space. KushCo has also launched an internal retail services team to target other channels such as beauty, pet, and convenience.

Downstream, this model will continue to drive growth for KushCo. Its brand partners will need more formulated products, and KushCo will be there to connect brands with formulators and those formulators with processors and farmers.

With so many opportunities in the CBD space, KushCo has also launched a new line of CBD packaging with approximately 500 SKUs.

More Growth

Hemp trading and retail services are big initiatives for KushCo in FY 2020, but the company is also eyeing equipment financing. The company will be able to help finance various types of equipment (such as extraction or drying equipment)  through a capital partner so that operators will be able to allocate cash to initiatives like sales and marketing rather than a fixed cost, according to Kovacevich.

KushCo is also targeting growth in markets like Michigan and Illinois (recent entrants into the recreational space) and Canada, which is rolling out Cannabis 2.0 products. The company is keeping an eye on new states expected to allow adult-use.

In the past, KushCo has entered new product and service categories (such as vape and energy) via acquisition. Now, the company is expecting to focus more on organic growth and partnerships with large companies like C.A. Fortune. It may vet EBITDA-accretive deals where the seller takes primarily stock, but the company has reached a large enough scale that it can likely enter new categories on its own rather than via acquisition, according to Kovacevich.

Compliance also plays a key role in the company’s approach to potential acquisitions. Many companies that could be interested in being acquired aren’t operating at the level of compliance KushCo requires.

Monroe Capital Credit Facility

Over the summer, KushCo secured a $35 million credit facility with a $15 million accordion from Monroe Capital. The scalable credit facility is tied to the company’s receivables and inventory, according to Kovacevich. The funding will help the company as it continues to scale up its operations.

2020 Revenue Projections

KushCo has doubled its business each year over the past several years, and it is projecting similar growth for FY2020. In Q4 of 2019, the company did $45 million in sales through its core business–an annual run-rate would take that number to close to $200 million. The company is planning to grow its core business to about $200 million in sales and add an additional $30 to $50 million in revenue from new businesses, such as hemp trading, retail services, and CBD packaging. In total, KushCo is expecting to go from $150 million to $230 to $250 million in FY 2020.

Achieving true valuations in the current market is difficult, but Kovacevich anticipates that will change following the expected market shakeout.

Long-Term Vision

Going forward, KushCo is keeping in mind risk management. As capital markets continue to be a challenge, many companies may struggle to sustain their business. If KushCo sells its branded products to a company that can no longer pay, it will experience a detrimental effect on its cash flow. The company is carefully considering who to do business with and extend credit to, according to Kovacevich.

With this in mind, the company is aiming to align with long-term winners in the space, companies that drive consolidation in the space. Over the next few years, those large companies will likely spend more and more with KushCo to meet their needs, according to Kovacevich. Ultimately, the company is looking for ways to touch as many transactions in the space as possible: brokering raw biomass and crude oil deals, packaging, branding, retail services, and more. KushCo will continue to focus on effective cross-selling to help its customers achieve effective market penetration.

While it can be difficult to predict what the industry and its companies will look like in even just a few short years, Kovacevich is keeping in mind the opportunity that the eventual federal legality of THC represents. Federal illegality prevents KushCo from doing so now, but, when it can, it will have the chance to do with the THC supply-chain what it is doing in the CBD ecosystem.