You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.

Friends,

This newsletter warned three weeks ago to not dive into Canadian LPs. The New Cannabis Ventures Canadian Cannabis LP Index was up 16.4% year-to-date at the time. It has pulled back 8.5% since 5/09, and it is now up 6.5% year-to-date :

The warning was most specifically for Canopy Growth and Tilray Brands. Canopy Growth has been the worst performer of the larger Canadian LPs since the warning, dropping 12.8%. It is still up in 2024 by 68.1%, which is a lot more than the overall market as well as the Canadian Cannabis LP Index. In May, the stock has dropped a stunning 42.2%.

The company reported its fiscal Q4 yesterday, and the numbers were close to expectations. The debt-load is huge, and the cash flow from operations is still negative. The only thing really going up is the share-count.

In February, Canopy Growth was the focus of this newsletter when it reported its fiscal Q3 results. This was before the stock surged, as it was down 21% year-to-date at the time. This newsletter, which suggested that Canopy Growth could go away, pointed to the unattractiveness of the money-losing operations. We did not say to buy it at the time, though we did suggest that perhaps large shareholder Constellation Brands would step in and acquire the rest of it. The stock wasn’t attractive then, and it is even less so now at this higher price.

I have shared that my model portfolio at 420 Investor has a lot of Organigram and Village Farms. They both trade below tangible book value. Canopy Growth trades at 3.3X, which makes no sense at all. The company continues to generate adjusted EBITDA losses. I have shared a target for year-end with my subscribers that is below $2.

For those that are excited by their plans to fully acquire Acreage Holdings, Jetty Extracts and Wana Brands, the NASDAQ still has not given the company the greenlight on the deal. I think that if Canopy Growth can buy the American cannabis companies and retain its NASDAQ listing, others will soon follow.

Over the past year, the NCV Global Cannabis Stock Index has gained 22.4%. Canopy Growth has gained just 1.0%. As the news that the DEA had been asked by the Department of Health & Human Services to reschedule cannabis hit in late August, Canopy Growth soared despite the company would receive no benefit from this move. This recent run started before the news hit that the DEA is actually recommending a move from Schedule 1 to Schedule 3:

The market seemed to figure out how bad Canopy Growth is, sending it to a new all-time low in March. The recent rally fell short of reaching the level hit in September. While the stock is down sharply from its recent peak, it is still overly expensive. Investors should consider selling the stock to buy other Canadian LPs or other cannabis stocks.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusives

Florida Medical Cannabis Patient Growth Falls Again

Financial Reports

Canopy Growth Q4 Revenue Slips Sequentially

M&A

Cansortium to Buy Canopy Growth Spin-Off RIV Capital

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

Canopy Growth Reports Fourth Quarter and Fiscal Year 2024 Financial Results; Q4 FY2024 Net Revenue increased 7% year-over-year, or 16% excluding divested businesses

• Storz & Bickel® delivered its best Q4 revenue quarter, with net revenue increasing 43% as compared to Q4 2023
• Canada medical cannabis net revenue increased 16% in Q4 FY2024 and 10% in FY2024 year-over-year
• Canada cannabis Cost of Goods Sold decreased by 54% in FY2024 versus FY2023
• Following recent balance sheet actions, the Company has no material debt obligation due until March 2026¹

SMITHS FALLS, ON, May 30, 2024 /PRNewswire/ – Canopy Growth Corporation (“Canopy”, “Canopy Growth” or the “Company”) (TSX: WEED) (NASDAQ: CGC), a world-leading cannabis company dedicated to unleashing the power of cannabis, today announced its financial results for the fourth quarter and fiscal year ended March 31, 2024 and the filing of an annual report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended March 31, 2024 and the unqualified report thereon of the Company’s independent registered public accounting firm. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Highlights

• Storz & Bickel^® net revenue in Q4 FY2024 increased 43% as compared to Q4 FY2023 driven by strong sales of the new Venty portable vaporizer.
• Canada cannabis net revenue in Q4 FY2024 increased 4% as compared to Q4 FY2023 led by a 16% increase in the Canada medical cannabis business.
• Total Cost of Goods Sold (“COGS”) decreased by 45% in FY2024 and Canada cannabis COGS decreased by 54% year-over-year, driven by the cost reduction actions.
• Consolidated Gross Margins increased to 27%, an improvement of 4,600 basis points year-over-year in FY2024, with Canada cannabis, International markets cannabis and Storz & Bickel all posting higher Gross Margins year-over-year.
• Operating loss from continuing operations of $229 MM in FY2024. Adjusted EBITDA loss was $59 MM in FY2024, representing an improvement of 72% year-over-year, driven primarily by revenue growth and successful cost reduction actions taken to date.
• Cash, cash equivalents, and short-term investments of $203 MM at March 31, 2024. Benefiting from balance sheet strengthening actions completed subsequent to the end of FY2024, the
• Company has no material debt due until March 2026.

“In Fiscal 2024 we fortified Canopy’s foundation for future growth. With a resolute focus on cannabis, we have momentum and are poised to seize the opportunity presented by continued regulatory developments in Germany and the United States. Entering FY2025, Canopy has growing businesses in all of the world’s most attractive cannabis markets, a leading portfolio of high-impact brands, and a rapidly developing U.S. ecosystem.”

David Klein, Chief Executive Officer

“We have made remarkable progress and delivered dramatic reductions in expenses, cash burn, and debt over the past year. These efforts have significantly enhanced our financial stability and moved us toward achieving positive Consolidated Adjusted EBTIDA. With no material debt maturing until 2026, Canopy is equipped to capitalize on growth opportunities and enhance shareholder value.”

Judy Hong, Chief Financial Officer

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.

Cansortium and RIV Capital Announce Business Combination

• Combined Company’s footprint will provide access to Florida, New York, Texas, and Pennsylvania, with significant growth potential and future regulatory catalysts in all four states
• Combined Company expected to leverage Cansortium’s robust operating expertise as well as RIV Capital’s ~US$66 million¹,² cash balance, strengthening both its operating and financial position
• Transaction has the support of ScottsMiracle-Gro, which intends to exchange its existing convertible notes in RIV Capital for a new class of non-voting Exchangeable Shares of Cansortium at closing, eliminating US$175 million³ of debt

TAMPA, Fla., May 30, 2024 (GLOBE NEWSWIRE) — Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF) (“Cansortium”), a vertically integrated, multi-state cannabis company operating under the FLUENT brand, and RIV Capital Inc. (CSE: RIV) (OTC: CNPOF) (“RIV Capital”), a vertically integrated cannabis company operating the EtainTM brand in New York, are pleased to announce that they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Cansortium will acquire all of the issued and outstanding Class A common shares (the “RIV Capital Shares”) of RIV Capital in exchange for Cansortium Shares (as defined below) (the “Transaction”).

Under the terms of the Arrangement Agreement, RIV Capital shareholders (the “RIV Capital Shareholders”) will receive 1.245 of a common share of Cansortium (the “Cansortium Shares”) in exchange for each RIV Capital Share held. Upon closing of the Transaction, shareholders of Cansortium (the “Cansortium Shareholders”) are expected to hold approximately 51.25% of the combined business of Cansortium and RIV Capital (the “Combined Company”) and the RIV Capital Shareholders and The Hawthorne Collective, Inc. (“The Hawthorne Collective”), together, are expected to hold approximately 48.75% of the Combined Company, each on a fully diluted basis.

_{¹Cash balance of RIV Capital as of March 31, 2024.
²All references to “$” in this news release are to United States dollars.
³Based on gross proceeds received in U.S. dollars upon issuance of the convertible notes. The convertible notes are denominated in Canadian dollars with a total outstanding principal amount of approximately C$219.7 million.}

Key Transaction Highlights

• Positioned in Key U.S. Markets: The Combined Company will be geographically diversified across the eastern U.S., spanning four key states (Florida, New York, Texas and Pennsylvania), positioning the Combined Company to cover approximately 25% of the U.S. population. These limited license markets in which the Combined Company is expected to hold a strong position have well-staged regulatory catalysts in the near and medium term.
• Bolstering Balance Sheet: The Combined Company is expected to be well capitalized with a pro forma cash balance of approximately US$74 million as of March 31, 2024, in a capital scarce environment, in order to enable the Combined Company to fund highly accretive growth. The Hawthorne Collective’s intended exchange of its existing convertible notes in RIV Capital for a new class of non-voting exchangeable shares of Cansortium will eliminate US$175 million of debt, which is expected to fundamentally transform the Combined Company’s balance sheet.
• Operational Efficiencies: Cost synergy opportunities are estimated to be approximately US$5-10 million annually over the next few years, which are expected to be realized from anticipated cultivation, processing and operating efficiencies, corporate integration and eliminating duplicative public company costs in the Combined Company.
• Strategic Partnerships: Strategic relationship with The Scotts Miracle-Gro Company (“ScottsMiracle-Gro”) (NYSE: SMG) through its investment in RIV Capital via its wholly-owned subsidiary, The Hawthorne Collective and through innovative growing products sold by its wholly-owned subsidiary, The Hawthorne Gardening Company (together with The Hawthorne Collective, “Hawthorne”). The Hawthorne Collective intends to exchange its existing convertible notes in RIV Capital for a new class of non-voting exchangeable shares of Cansortium at closing, further strengthening and reinforcing its relationship with the Combined Company.
  Scalable Talent-Base: Expanded talent-base through the combination of Cansortium and RIV Capital management and operating personnel. The Combined Company will seek to leverage
• Cansortium’s operating expertise and best practices across its footprint.

Upon closing of the Transaction, the Combined Company is expected to operate in four of the largest states by population in the U.S. – Florida, New York, Texas, and Pennsylvania – creating a strategic operating footprint with significant potential growth opportunities in the years ahead. Operations in these states will be comprised of 8 cultivation and processing facilities and 42 retail dispensaries.

The Combined Company will operate under the Cansortium name and the Cansortium Shares will continue to trade on the Canadian Securities Exchange (the “CSE”) under the symbol “TIUM.U” and on the OTCQB Venture Market under the symbol “CNTMF”. Upon closing of the Transaction, it is expected that the Combined Company will be headquartered in Tampa, Fla., which is the current location of Cansortium’s corporate offices, and Robert Beasley, the current Chief Executive Officer of Cansortium, will act as Chief Executive Officer of the Combined Company.

Management Commentary

“The plan to bring together these two companies with core strengths in key growth states is expected to position us to drive near-term synergies, capitalize on opportunities for long-term value creation while continuing to provide high-quality service to customers who call Florida and New York home with the FLUENTTM brand experience.” said Robert Beasley, Chief Executive Officer of Cansortium. “Upon consummation of the Transaction, we believe the Combined Company will be able to leverage balance sheet liquidity and the ability to opportunistically allocate capital to growth initiatives building upon the strength of our existing operating platform, in addition to a pathway for Cansortium to lead in New York’s emerging adult-use market. As a Combined Company, we will continue to focus on growth and profitability while relying on our core principles in cultivation, operating efficiencies and inventory optimization to deliver strong cash flows for shareholders.”

William Smith, Executive Chair of Cansortium, said, “I view joining forces with RIV Capital as a natural progression in the expansion of Cansortium. With the addition of the New York cannabis market, Cansortium is expected to hold the distinction of operating in 4 of the 5 highest population states in the U.S. following the closing of the Transaction. Additionally, the resources and market expertise that are expected to be leveraged from RIV Capital and Hawthorne will help position Cansortium to capitalize on the inevitable regulatory changes expected in the U.S. cannabis industry.”

Mike Totzke, interim Chief Executive Officer and Chief Operating Officer of RIV Capital, said, “The Combined Company will enable RIV Capital to deliver on its vision of becoming an established multi-state operator, capable of deploying capital for strategic investments beyond New York. In an environment where state-issued cannabis licenses are limited, Cansortium opens doors in important growth markets in the U.S. Additionally, Cansortium has a proven operating model that can bring efficiencies and economies of scale to RIV Capital’s cultivation and dispensary operations.”

“Through its relationship with RIV Capital, Hawthorne has used its research and development capabilities to recommend innovative growing products to support in the buildout of EtainTM and adult-use in New York, and we look forward to providing continued support to this exciting, larger platform,” said Chris Hagedorn, President of Hawthorne and director of RIV Capital. “Hawthorne and ScottsMiracle-Gro are fully supportive of the deal, and we expect that the Combined Company will unlock value drivers to the benefit of our shareholders as well as those of RIV Capital and Cansortium.”

Financial Highlights

Select financial highlights of the Transaction are currently expected to be⁴:

• 2023 pro forma revenue: US$105 million
• 2023 Cansortium Adjusted EBITDA⁵: US$27 million
• Cash and cash equivalents as of March 31, 2024: US$74 million
• Combined Company’s cash position net of debt as of March 31, 2024: US$5 million⁶
• Total steady state addressable market of the Combined Company’s footprint: US$13 billion⁷

_{⁴Unless otherwise stated, the pro forma financial information referred to in this news release, which gives effect to the Transaction as if it had closed on December 31, 2023, was prepared utilizing accounting policies that are consistent with those disclosed in the audited consolidated financial statements of Cansortium for the year ended December 31, 2023 and RIV Capital for the nine months ended December 31, 2023, and year ended March 31, 2023.
⁵Adjusted EBITDA is a non-IFRS measure. See “Non-IFRS Measures” section below.
Cash position net of debt is a non-IFRS measure. See “Non-IFRS Measures” section below. The cash position net of debt is equal to the cash balance of RIV Capital as of March 31, 2024, plus the cash balance of Cansortium as of March 31, 2024, less Cansortium’s outstanding debt of US$69 million as of March 31, 2024. Cansortium’s outstanding debt of US$69 million consists of a US$66 million senior secured term loan, a US$3.1 million convertible debenture and US$0.4 million of combined auto, equipment and insurance financing or loans and excludes employee retention tax credits related liability and the convertible note issued in conjunction with the resolution of the Smith Transaction. ⁶The cash position net of debt also assumes the closing of the Hawthorne Notes Exchange.
⁷Sum of Florida market size per BDSA June 2023 market forecasts, New York market size per MGP Consulting New York illicit Cannabis Market Absorption Analysis and Pennsylvania market size per MJBiz 2023 Factbook. Note, this amount does not ascribe value to the Texas market.}

Transaction Summary and Shareholder Approvals

The Transaction will be effected by way of a court-approved plan of arrangement pursuant to the Business Corporations Act (Ontario) (the “Arrangement”) requiring the approval of at least two-thirds of the votes cast by the RIV Capital Shareholders voting at an annual general and special meeting of shareholders to consider the Transaction, which is expected to be held in the third quarter of 2024. Certain of RIV Capital’s directors and officers and a significant shareholder holding an aggregate 20.2% of the RIV Capital Shares have entered into voting support agreements with Cansortium to, among other things, vote in favor of the Transaction.

The closing of the Transaction is subject to shareholder and court approvals, as well as the receipt of all required regulatory approvals, the closing of the Hawthorne Notes Exchange (as defined below), the completion of the Smith Transaction (as defined below), the requirement for RIV Capital to maintain a certain minimum cash balance as of a specified date prior to closing and the satisfaction of certain other closing conditions customary in transactions of this nature. For further details relating to the Hawthorne Notes Exchange and the Smith Transaction, see the “Concurrent Transactions” section below. The Arrangement Agreement includes customary provisions, including non-solicitation, “fiduciary out” and “right to match” provisions as well as a termination fee of US$3,000,000 payable by RIV Capital to Cansortium and a termination fee of US$5,000,000 payable by Cansortium to RIV Capital, in certain specified circumstances.

Assuming timely receipt of all necessary court, shareholder, regulatory and other third-party approvals, the closing of the Hawthorne Notes Exchange and the completion of the Smith Transaction and the satisfaction of all other conditions, closing of the Transaction is expected to occur in the fourth quarter of 2024.

A description of the Transaction will be set forth in the management information circular of RIV Capital (the “RIV Capital Circular”), which will be mailed to RIV Capital Shareholders and filed with the Canadian securities regulators on System for Electronic Document Analysis and Retrieval + (“SEDAR+”).

In connection with the Hawthorne Notes Exchange, which is expected to close on the business day prior to the closing date of the Transaction, Cansortium will hold an annual general and special meeting of shareholders (the “Cansortium Meeting”) where the Cansortium Shareholders will be asked to consider a special resolution authorizing an amendment to its articles of incorporation (the “Amendment Proposal”) to create a new class of non-voting exchangeable shares (the “Exchangeable Shares”). The Exchangeable Shares will not carry voting rights, rights to receive dividends or other rights upon dissolution of Cansortium, but will be convertible into Cansortium Shares on a one-for-one basis. The Amendment Proposal must be approved by at least two-thirds of the votes cast by Cansortium Shareholders voting at the Cansortium Meeting. Certain of Cansortium’s directors and officers and significant shareholders holding approximately 26.8% of the voting power of the issued and outstanding Cansortium Shares and proportionate voting shares have entered into voting support agreements with RIV Capital to, among other things, vote in favor of the Amendment Proposal.

A description of the the Amendment Proposal, the Smith Transaction, the Hawthorne Notes Exchange and the Hawthorne Exchange Agreement (as defined below) will be set forth in the management information circular of Cansortium (the “Cansortium Circular”), which will be mailed to Cansortium Shareholders and filed with the Canadian securities regulators on SEDAR+ at www.sedarplus.ca. The Cansortium Meeting is expected to be held in the third quarter of 2024 / concurrently with the meeting of shareholders of RIV Capital.

Approvals and Recommendation

The Transaction has been unanimously approved by the boards of directors of Cansortium (the “Cansortium Board”) and RIV Capital (the “RIV Capital Board”). The RIV Capital Board has unanimously determined, after receiving financial and legal advice along with the Independent Fairness Opinion (as defined below) and following the receipt and review of a unanimous recommendation of the RIV Capital Strategic Growth Committee, that the Transaction is in the best interests of RIV Capital and is fair to the RIV Capital Shareholders and the RIV Capital Board recommends that the RIV Capital Shareholders vote in favor of the Transaction.

Each of Moelis & Company LLC and INFOR Financial Inc. provided the RIV Capital Board with an opinion, dated May 29, 2024, to the effect that, as of the date of such opinion, the consideration payable pursuant to the Transaction is fair, from a financial point of view, to the RIV Capital Shareholders, in each case, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinions. Paradigm Capital Inc. provided the Cansortium Board with an oral opinion, dated May 30, 2024, to the effect that, as of the date of such opinion, the consideration being offered by Cansortium to the RIV Capital Shareholders pursuant to the Transaction, is fair, from a financial point of view, to the Cansortium Shareholders, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinion.

The Hawthorne Notes Exchange, including the Amendment Proposal has been unanimously approved by the Cansortium Board. The Cansortium Board unanimously determined, after receiving financial and legal advice, that the consideration payable pursuant to the Transaction and the exchange ratio applicable thereto is fair, from a financial point of view, to the Cansortium Shareholders, and the Cansortium Board recommends that the Cansortium Shareholders vote in favor of the Amendment Proposal.

None of the securities to be issued pursuant to the Transaction have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and any securities issuable in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities.

Concurrent Transactions

Hawthorne Notes Exchange

In connection with the Transaction, Cansortium and The Hawthorne Collective have entered into a letter agreement (the “Notes Exchange Side Letter”), pursuant to which the parties have agreed that, on the business day immediately prior to the closing date of the Transaction, The Hawthorne Collective will exchange its existing unsecured convertible notes that were issued for an aggregate principal amount of US$175,000,000, including any accrued and unpaid interest, payable by RIV Capital, for Exchangeable Shares of Cansortium (the “Hawthorne Notes Exchange”). In connection with the Notes Exchange Side Letter, Cansortium and The Hawthorne Collective have agreed to enter into a notes exchange and protection agreement (the “Hawthorne Exchange Agreement”) prior to the closing of the Transaction, pursuant to which, among other things, the parties will complete the Hawthorne Notes Exchange. The Hawthorne Collective will be granted nomination rights with respect to the Cansortium Board, and for the period during which The Hawthorne Collective holds its Exchangeable Shares until it elects to convert such Exchangeable Shares into Cansortium Shares, The Hawthorne Collective will be granted pro rata participation rights in any future equity financings of Cansortium and Cansortium will agree to certain covenants in favor of The Hawthorne Collective. In addition, the Hawthorne Exchange Agreement will contain certain provisions that prohibit The Hawthorne Collective from converting its Exchangeable Shares into Cansortium Shares where such conversion would result in The Hawthorne Collective, together with any person or company acting jointly or in concert with The Hawthorne Collective having an aggregate beneficial ownership of, or control or direction over, directly or indirectly, over 19.99% of Cansortium’s issued and outstanding voting securities of Cansortium immediately after giving effect to such conversion, unless and until Cansortium has received the necessary shareholder approval in accordance with all applicable policies of the CSE.

Smith Transaction

In connection with the Transaction, Cansortium and certain of its affiliates and William Smith, a director and the Executive Chair of Cansortium, and certain companies controlled by Mr. Smith (together with Mr. Smith, collectively, the “Smith Group”), have entered into a termination agreement (the “Smith Transaction Termination Agreement”). The Smith Transaction Termination Agreement terminates the initial agreement, as amended, among the parties named therein (the “Initial Smith Transaction Agreement”), which provided that an aggregate of 30,250,000 Cansortium Shares (on an as converted basis) held by the Smith Group would be subject to a minimum price “floor” of US$0.40 (the “Floor”) until December 31, 2025 (the “Floor Expiration Date”), which entitled the Smith Group to an aggregate of up to US$12,100,000 in the event the Smith Group elected to sell its Cansortium Shares at a price that was below the Floor (the “Floor Entitlement”). Pursuant to the Initial Smith Transaction Agreement, if on or prior to the Floor Expiration Date, the Smith Group elected to sell some or all of its Cansortium Shares that were subject to the Floor, and the proposed purchase price of such Cansortium Shares was less than US$0.40 per Cansortium Share, then Cansortium could either purchase all or any portion of the Cansortium Shares proposed to be sold by the Smith Group for US$0.40 per Cansortium Share or elect to pay in cash the difference between US$0.40 per Cansortium Share and the actual sale price per Cansortium Share received by the Smith Group in such sale. Pursuant to the terms of the Smith Transaction Termination Agreement, upon consummation of the Arrangement, the Smith Group will no longer be entitled to the Floor Entitlement (and, in the interim, so long as the Smith Transaction Termination Agreement has not been terminated, the Smith Entities have agreed not to exercise the Floor Entitlement), and in consideration thereof, on closing of the Transaction, Cansortium will, among other things, issue to the Smith Group a 15% secured subordinate convertible note in an initial aggregate principal amount of US$6,500,000 payable three years from the date of issuance (the “Smith Convertible Note”). Upon issuance, the Smith Convertible Note will be guaranteed by, and secured by a junior lien on substantially all assets of, Cansortium and its subsidiaries, and will be subordinated in right of payment to prior payment in full of the Credit Agreement (and any “eligible refinancing” of the Credit Agreement). The Smith Convertible Note will be convertible, at the discretion of the Smith Group, into Cansortium Shares at a price of US$0.21 per Cansortium Share. Assuming full conversion of the Smith Convertible Note, including the full amount of the anticipated accrued interest over the life of the Smith Convertible Note, the Smith Group would be entitled to receive 44,880,952 Cansortium Shares, representing approximately 15% of Cansortium’s outstanding Cansortium Shares on a partially diluted basis based on the current number of non-diluted Cansortium Shares outstanding. For more information on the Initial Smith Transaction Agreement, see Cansortium’s news release dated December 22, 2022 and Cansortium’s material change report dated January 3, 2023 filed under Cansortium’s profile on SEDAR+ at www.sedarplus.ca.

The transactions contemplated by the Smith Transaction Termination Agreement (the “Smith Transaction”) constitutes a “related party transaction” as such term is defined in Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions (“MI 61-101”). Cansortium has relied on the exemptions from obtaining a formal valuation and minority shareholder approval of the Cansortium Shareholders with respect to the Smith Transaction in accordance with sections 5.5(a) and 5.7(1)(a) of MI 61-101, as the fair market value of the Smith Convertible Note issuable in connection with the Smith Transaction does not exceed 25% of Cansortium’s market capitalization as determined in accordance with the provisions of MI 61-101. A special committee of independent directors of Cansortium formed for the purpose of reviewing, evaluating and considering the Smith Transaction (the “Special Committee”) has unanimously recommended that the Cansortium Board approve the Smith Transaction and, following the receipt and review of recommendations from the Special Committee, the Smith Transaction was approved by the Cansortium Board, with Mr. Smith having disclosed his interest in the Smith Transaction and abstaining from voting thereon. Cansortium did not file a material change report 21 days prior to the closing of the Smith Transaction as the details of the Smith Transaction had not been finalized at that time.

Bridge Financing and Bridge Note

In connection with the Transaction, RIV Capital US Corporation (“RIV Capital US”), a wholly-owned subsidiary of RIV Capital, has agreed to advance to Cansortium an interest-bearing bridge loan up to an aggregate principal amount of US$8,975,000 (the “Bridge Loan”). In consideration, Cansortium has agreed to issue a 10% unsecured convertible promissory note (the “Bridge Note”) to and in favour of RIV Capital US evidencing the Bridge Loan, which will mature, if not earlier converted or prepaid in accordance with its terms, May 1, 2025 (the “Maturity Date”), and is subordinated in right of payment to prior payment in full of the Credit Agreement (as defined below) (and any “eligible refinancing” of the Credit Agreement). The Bridge Note will automatically be convertible into Cansortium Shares upon the occurrence of certain events of default, and at the option of RIV Capital US on the business day immediately preceding the Maturity Date, in each case at a price of US$0.17 per Cansortium Share. In connection with signing the Arrangement Agreement, RIV Capital US will make an initial advance to Cansortium under the Bridge Loan in the amount of US$3,000,000.

Credit Agreement Amendment

In connection with entering into the Arrangement Agreement, Cansortium has obtained the consent of the Required Lenders under its senior secured term loan credit agreement dated April 29, 2021 (the “Credit Agreement”) to the Transaction and certain concurrent transactions in accordance with, and subject to the terms and conditions set forth in, an amendment to the Credit Agreement (the “Amended Credit Agreement”). Among other things, the Amended Credit Agreement provides that,

(a) upon consummation of the Arrangement, RIV Capital and its subsidiaries shall become loan parties under the Amended Credit Agreement and shall pledge their assets to secure the Amended Credit Agreement;

(b) the Consolidated Leverage Ratio (as defined in the Amended Credit Agreement), for purposes of triggering a prepayment of the loans under the Amended Credit Agreement, was amended to (i) 2.5:1.0 for fiscal quarter of the Borrower ending March 31, 2022 and each fiscal quarter thereafter prior to the fiscal quarter in which the Arrangement is consummated and (ii) 3.0:1.0 for the fiscal quarter in which the Arrangement is consummated and each fiscal quarter thereafter;

(c) the Consolidated Interest Coverage (as defined in the Amended Credit Agreement) covenant was amended to (i) 2:5:1:0 for period March 31, 2022 through the fiscal quarter immediately prior to the fiscal quarter in which the Arrangement is consummated and (ii) 1.2:1.0 for the fiscal quarter in which the Arrangement is consummated and each fiscal quarter thereafter;

(d) the Minimum Liquidity (as defined in the Amended Credit Agreement) covenant was amended to provide that (i) the quarterly Minimum Liquidity shall apply up to the fiscal quarter immediately prior to the fiscal quarter in which the Arrangement is consummated and (ii) commencing with the calendar month in which the Arrangement is consummated and each calendar month thereafter, Liquidity (as defined in the Amended Credit Agreement) shall be not less than US$10,000,000;

(e) on the Arrangement closing date, after giving effect to the Transaction and the pay-down required under the Amended Credit Agreement, pro forma Liquidity shall be not less than US$10,000,000;

(f) upon consummation of the Arrangement, Cansortium will prepay US$10,000,000 of the principal amount outstanding under the Amended Credit Agreement, together with accrued interest and the applicable Prepayment Premium (as defined in the Amended Credit Agreement) thereon (if applicable); and

(g) certain additional covenants events of default were added.

No fee was payable to the lenders in connection with the Amended Credit Agreement. A copy of the Amended Credit Agreement will be filed with the Canadian securities regulators on SEDAR+ at www.sedarplus.ca.

Financial and Legal Advisors

ATB Securities Inc. is acting as financial advisor to Cansortium and Paradigm Capital Inc. provided an independent fairness opinion to the Cansortium Board. Wildeboer Dellelce LLP and Shumaker, Loop & Kendrick, LLP are acting as Canadian and United States legal counsel, respectively, to Cansortium.

Moelis & Company LLC is acting as financial advisor to RIV Capital and provided a fairness opinion to the RIV Capital Board. INFOR Financial Inc. provided an independent fairness opinion to the RIV Capital Board (the “Independent Fairness Opinion”). Cassels Brock & Blackwell LLP and Goodwin Procter LLP are acting as Canadian and United States legal counsel, respectively, to RIV Capital.

Paul Hastings LLP and Goodmans LLP are acting as United States and Canadian legal counsel, respectively, to the Agent and the Required Lenders under the Credit Agreement.

Conference Call

Cansortium will host a conference call and live audio webcast today at 11:00 a.m. Eastern time to discuss the Transaction.

Date: Thursday, May 30, 2024
Time: 11:00 a.m. Eastern time
Toll-free dial-in number: (844) 763-8274
International dial-in number: (647) 484-8814
Conference ID: 10023540
Link: Cansortium Conference Call

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

The conference call will also be available for replay via the News & Events section of Cansortium’s investor relations website at https://investors.getFLUENT.com/.

About Cansortium

Cansortium is a vertically-integrated cannabis company with licenses and operations in Florida, Pennsylvania and Texas. The Company operates under the FLUENT brand and is dedicated to being one of the highest quality cannabis companies for the communities it serves. This is driven by Cansortium’s unrelenting commitment to operational excellence in cultivation, production, distribution and retail. The Company is headquartered in Tampa, Florida. For more information about the Company, please visit www.getFLUENT.com.

About RIV Capital

RIV Capital is an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of brands in key strategic U.S. markets. Backed by in-house expertise and cannabis domain knowledge, RIV Capital aims to grow its own brands and partner with established U.S. cannabis operators and brands to bring them to new markets and build market share. RIV Capital established the foundational building blocks of its active U.S. strategy with its previously announced acquisition of EtainTM. Through its strategic relationship with The Hawthorne Collective, a subsidiary of ScottsMiracle-Gro, RIV Capital is The Hawthorne Collective’s preferred vehicle for cannabis-related investments not under the purview of other ScottsMiracle-Gro subsidiaries.

_{⁸Cansortium’s outstanding debt excludes employee retention tax credits related liability and the convertible note issued in conjunction with the resolution of the Smith Transaction. The cash position net of debt also assumes the closing of the Hawthorne Notes Exchange.}

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.

Friends,

We have been warning for quite some time that investors have been ahead of themselves on the rescheduling of cannabis. President Biden first suggested it in October 2022, but no one had confidence then that progress would be made. On August 30th, news hit that the Department of Health & Human Services had recommended to the DEA that it move cannabis from Schedule 1 to Schedule 3, and the market soared. At the end of April, we learned that the DEA was going to reschedule cannabis, and this week it shared the actual proposal.

Again, this rescheduling has a huge potential benefit: It will eliminate the 280E taxation that American cannabis operators pay. It’s not yet a done deal, but it will be financially very helpful to companies that generally have cash flow challenges and capital market constraints.

We have been concerned during this long process that things might not go as expected or that they could take a long time. The good news is that the DEA is moving forward as had been suggested, though it took a long time. The odds of 280E going away have increased.

The MSO prices have rallied a lot since August 29th. Here are the five Tier 1 names, the largest public companies by revenue and market cap:

Since the huge rally on 4/30, they are all down a lot:

We thought the largest MSOs were running up too much and pointed this out to our readers several times. Verano Holdings is actually down 6.3% in 2024, but the rest are up, especially Trulieve. The New Cannabis Ventures Global Cannabis Stock Index, which includes MSOs but also other types of cannabis stocks, is now up 17.6% in 2024. The NCV American Cannabis Operator Index is up less! It has returned 14.3%, and it is down 28.0% since April 30th. Here is the past month in that index:

So, less risk and a more likely big reward, but the stocks are lower? Yes, but it doesn’t mean that they are a buy. At 420 Investor, I include no large MSOs in my model portfolio that aims to beat the Global Cannabis Stock Index despite the big decline since the end of April. I do include 44% MSOs now, but these are not the very largest. 3 of the 4 names are actually down in 2024, and the other is up just 7%. I also include 27% ancillary companies and 27% Canadian LPs.

Investors made a big bet, but that bet has gone bad for many. I have talked about the gambling table here and elsewhere: AdvisorShares Pure US Cannabis ETF (NYSE Arca: MSOS). That ETF is up 16.0% year-to-date, but it has dropped 27.8% since April 30th. The ETF, which is focused solely on MSOs, has very limited exposure to most of them, as it has 82.7% in just the five Tier 1 names.

MSOS has seen its share-count increase 81% in 2024 so far, and it has increased over 100% over the past year:

The fund has bought a lot of shares of the largest MSOs. My concern in the past was that things could go the other way. If MSOS was selling its shares, I was concerned that it would end up slamming the prices of the large MSOs. This is still a risk, but much less of one.

So, investors should understand that the big gains in the largest MSOs coincided with the ETF buying them. This week, there have been no share purchases at all. The ETF is fully invested. Cannabis stocks look better now, and investors can do a lot better than picking the MSOS ETF. A big bet was made very poorly.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusives

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

The Public Cannabis Company Revenue & Income Tracker, managed by New Cannabis Ventures, ranks the top revenue producing cannabis companies. This update is our first since  late April, when we previewed the upcoming Q1 reports..

Tracker Rules

This data-driven, fact-based tracker will continually update based on new financial filings so that readers can stay up to date. Companies must file with the SEC or SEDAR and be current to be considered for inclusion. When we launched this resource in May 2019, companies with quarterly revenue in excess of US$2.5 million qualified. As the industry has scaled and as more companies have gone public, we have raised the minimum several times subsequently, including a move to US$5 million in October 2019, to US$7.5 million in June 2020, to US$10 million in November 2020 and US$12.5 million in August 2021. Due to the rapid growth in the cannabis industry, we raised the minimum to US$25 million (C$33.8million) to qualify for what we now call the senior list and introduced a junior list with a minimum of US$12.5 million (C$16.9 million) in September 2021. It’s been a while since we have adjusted the rules for inclusion, but we did so again last week. Going forward, the senior list has a minimum of US$50 million (C$68.1 million), and the junior list now has a minimum of US$25 million (C$34.1 million).

A Note About Adjusted Operating Income

In May 2019, we added an additional metric, “Adjusted Operating Income”, as we detailed in our newsletter. The calculation takes the reported operating income and adjusts it for any changes in the fair value of biological assets required under IFRS accounting. We believe that this adjustment improves comparability for the companies across IFRS and GAAP accounting. We note that often operating income can include one-time items like stock compensation, inventory write-downs or public listing expenses, and we recommend that readers understand how these non-cash items can impact quarterly financials. Many companies are moving from IFRS to U.S. GAAP accounting, which will reduce our need to make adjustments. Please note that our rankings include only actual reported revenue and not pro forma revenue. We also note that companies with non-cannabis operations must provide segment-level financial reports that detail not only revenue but also operating profit to be have their operating profit included in the tracker. Currently, Aurora Cannabis (NASDAQ: ACB) (TSX: ACB), Jazz Pharma (NASDAQ: JAZZ) and Tilray (TSX: TLRY) (NASDAQ: TLRY) aren’t providing this information.

Tracker Inclusion Updates

At the time of our last update on April 27th, 34 companies qualified for inclusion on the senior list, including 28 filing in U.S. dollars and 6 in the Canadian currency. Due to the changing of the qualification levels, 16 companies that file in U.S. dollars qualify and 3 that file in Canadian dollars are qualifying for the senior lists, a total now of 19. The junior list now includes 13 companies reporting in U.S. dollars and 3 in Canadian dollars. On a combined basis, the Public Cannabis Company Revenue & Income Tracker now includes 35 companies. We removed several companies that were previously on the junior lists.

Included Companies That Reported in  May

This was a busy reporting period, as most of the companies  on the senior list have years ending in December and were required to file by mid-May.

Senior and Junior – American Dollar Reporting

Nine companies reported revenue in excess of $100 million, including eight MSOs. The four highest MSO revenues were all in excess of $200 million and showed on average slightly negative sequential growth as annual revenue increased only 3.5%. Curaleaf (OTC: CURLF) (TSX: CURA) had the highest revenue, but is annual growth was only 2%. Operating income was just $12.7 million. Trulieve (OTC: TCNNF) (CSE: TRUL) saw the strongest sequential growth at 4%. Green Thumb Industries (OTC: GTBIF) (CSE: GTII) had the strongest annual growth and the highest operating income. Verano Holdings (OTC: VRNOF) (NEO: VRNO) had the worst sequential growth, falling 7%, and it was the only one of the four to see sales shrink from a year earlier.

There are no companies that are on the senior list that are scheduled to report. Tilray Brands (NASDAQ: TLRY) (TSX: TLRY) ends its Q4 in two weeks and will report it by the end of August, perhaps earlier. Analysts expect total revenue for the company will be up 22% to $225 million due to the alcohol M&A that the company has done. They expect total adjusted EBITDA to rise 27% to $28 million. We are aware that some of the companies are late, and they are subject to removal if they don’t file soon.

Senior and Junior – Canadian Dollar Reporting

The only senior company to recently report was SNDL (NASDAQ: SNDL), which experienced a 9% sequential decline in cannabis-related revenue to C$91.9 million. This was up 7% over the past year.

Canopy Growth (NASDAQ: CGC) (TSX: WEED) has scheduled its Q4 call for the end of the month. Analysts expect that revenue fell 2% to C$72 million as adjusted EBITDA improved to -C$15 million.

Stay up to date

Visit the Public Cannabis Company Revenue Tracker to track and explore the complete list of qualifying companies. Readers can access our library of Revenue Tracker articles. For our readers who are interested in staying on top of scheduled earnings calls in the sector, we have created and continually update the Cannabis Investor Earnings Conference Call Calendar.

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.

Friends,

Cannabis stocks are rallying hard in 2024. The New Cannabis Ventures Global Cannabis Stock Index is up by 33.5% so far. Of course, a major development is playing out: rescheduling. If cannabis is moved from Schedule 1 to Schedule 3, then 280E taxation will end, which will be very good for the American cannabis companies that have been paying it.

The American cannabis companies are doing well, but they aren’t the only part of the market firing forward. The NCV American Cannabis Operator Index has gained 35.1%, only slightly higher than the Global Cannabis Stock Index.  As we discussed last week, certain Canadian LPs that are in the GCSI are doing so much better than the index and the American operators. Cannabis investors should avoid certain Canadian LPs.

While rescheduling looks like it will take place, which should be good for the MSOs due to tax reduction and improved cash flow, we remind readers that there may be some things that will not be so positive. We have a fairly large exposure to MSOs in the model portfolio at 420 Investor. but we are avoiding some of the largest ones. The five Tier 1 names are up dramatically in 2024 and over the past year, especially Trulieve:

Each of these stocks has outperformed the Global Cannabis Stock Index, up 39.2%, over the past year. A year ago, Trulieve was very out of favor. Going back to the end of 2022, it is up a lot, but it is not the leader:

Since the end of 2022, the Global Cannabis Stock Index has gained 11.5%, so these large MSOs are all up by at least twice as much. The two leaders among the five largest MSOs are both big in Florida, which is a large medical-cannabis state that is vertically-integrated. Trulieve has 136 dispensaries, while Verano operates 75. The two of them have about 1/3 of the 635 open dispensaries in the state.

Investors have been very excited by the chances of the voters in Florida approving a ballot initiative in November that would allow adult-use legalization. The Supreme Court of Florida gave the go-ahead in early April, overruling a challenge. The MSOs in the state joined Trulieve in funding support for the amendment, which will require 60% of voters approving it to pass.

In addition to Trulieve and Verano, AYR Wellness and Curaleaf are big operators in the Florida medical cannabis market, with 125 stores between the two of them. The four of these, then, have 336 dispensaries in Florida, which is 53% of all dispensaries in the state. AYR Wellness, which is up 59.2% in 2024, has gained 139.2% since the end of 2022, ahead of the five largest MSOs.

We began writing about the Florida medical market recently. The state provides an update each week with unit volumes for all of its participants. Typically, these reports are released on Friday for the week ending on Thursday. The past report, though, was late to actually hit the website. Instead of last Friday, it was published on the OMMU website on Tuesday. The report showed a new all-time low in growth of patients, which expanded just 7.3% from a year ago. When we updated the BDSA data earlier this month, we shared that Florida revenue was up only 1.8% from a year earlier in March. This was a record low too.

It’s not clear that Florida voters will approve adult-use legalization in November. If they don’t, we think the market will not be happy with a mature medical market that is slowing and competitive. If they do, it’s not yet clear that the four largest operators will win going forward. Investors should be careful in our view with the big Florida operators.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusives

Financial Reports

AYR Wellness Q1 Revenue Flat From a Year Ago

Cresco Labs Q1 Revenue Falls 5%

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

AYR Wellness Reports First Quarter 2024 Results

• Q1 Revenue up 3% Q/Q to $118.0 Million, Excluding Discontinued Operations
• Q1 GAAP Loss from Operations Improved to $2.0 Million, Excluding Discontinued Operations
• Q1 Adjusted EBITDA¹ up over 10% Y/Y to $29.1 Million, with Adjusted EBITDA Margin of 25%
• Company generated free cash flow for the quarter and expects to for FY2024

MIAMI, May 15, 2024 (GLOBE NEWSWIRE) — AYR Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF) (“AYR” or the “Company”), a leading vertically integrated U.S. multi-state cannabis operator, is reporting financial results for the first quarter ended March 31, 2024. Unless otherwise noted, all results are presented in U.S. dollars.

David Goubert, President & CEO of AYR, said, “2024 continues to be about execution for AYR, furthering the progress we made in 2023 by focusing on improving product quality and consistency, building a loyal retail customer base, rebuilding our CPG brand platform, and continuing to prioritize cost controls. I want to thank our team for their continued effort against these goals. First quarter results reflect continued progress with modest sequential revenue growth, adjusted EBITDA margins in line with long-term targets of 25% and positive free cash flow for the period.

“Meanwhile, the U.S. Department of Justice’s groundbreaking decision in April to recommend the reclassification of cannabis from Schedule I to Schedule III represents a significant moment for our industry that brings us one step closer to federal reform. This expected policy shift validates AYR’s commitment to building a sustainable business that will win in the long-term, and while we await next steps on implementation of this new policy, AYR intends to continue to improve and refine its operations to position for accelerated profitable growth.

“Our team is also acutely focused on positioning AYR for success ahead of the key state-level catalysts on the horizon in Ohio, where we anticipate converting to adult-use over the summer, and Florida and Pennsylvania, where we hope to see adult-use pass later this year. With only 15 of AYR’s 91 dispensaries operating in adult-use markets, we are poised to take advantage of the significant growth opportunity that the transition to adult-use presents across the majority of our footprint, without materially increasing our fixed cost base. With a strong asset base and tailwinds for the regulatory environment, we look forward to generating meaningful, sustainable, and profitable financial growth for years to come.”

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.

Cresco Labs Reports Continued Trend of Financial Improvement with First Quarter 2024 Financial Results

Over 10x year-over-year increase in operating cash flow

CHICAGO–(BUSINESS WIRE)– Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) (“Cresco Labs” or the “Company”), the industry leader in branded cannabis products with a portfolio of America’s most popular brands and the operator of Sunnyside dispensaries, today released its financial and operating results for the first quarter ended March 31, 2024. All financial information presented in this release is reported in accordance with U.S. GAAP and in U.S. dollars, unless otherwise indicated, and is available on the Company’s investor website, Here.

First Quarter 2024 Highlights

• First quarter revenue of $184 million, flat year-over-year, excluding the impact from strategic divestitures aimed to drive profitability.
• Gross profit of $92 million. Adjusted gross profit¹ of $95 million up 7% year-over-year; and an Adjusted gross margin¹ of 51% of revenue, a 580 bps improvement.
• SG&A of $54 million. Reduced Adjusted SG&A¹ by 24% year-over-year to $52 million, or 28% of revenue.
• First quarter income before income taxes of $16 million, net loss of $2 million.
• First quarter Adjusted EBITDA¹ of $53 million, up 82% year-over-year; and Adjusted EBITDA margin¹ of 29%, a 1,380 bps improvement.
• $36 million in operating cash flow up 1,000% year-over-year. $33 million in Free Cash Flow¹.
• Retained the No. 1 share position in Illinois, Pennsylvania and Massachusetts².

_{¹See “Non-GAAP Financial Measures” at the end of this press release for more information regarding the Company’s use of non-GAAP financial measures.}

_{²According to BDSA.}

Management Commentary

“I want to thank the Cresco team for taking our learnings from the Year-of-the-Core, making them a part of our DNA and producing such a strong start to 2024. The continued development of our teams’ capabilities and our relentless focus on efficient execution is leading to very strong performance across our retail and branded product business resulting in a 10x increase in operating cash flow year-over-year. This is just the start, with upcoming adult use catalysts in Ohio and potential catalysts in Florida and Pennsylvania we have the ability to generate significant operating leverage and additional cash flow going forward.

I also want to thank the team for continuing Cresco’s leadership on cannabis reform. The recently announced potential federal rescheduling will fundamentally change the future for cannabis and all of its stakeholders. The team is fulfilling our vision of being the most important company in cannabis and leading the development of the most responsible, respectable and robust industry possible,” said Charles Bachtell, CEO of Cresco Labs.

Balance Sheet, Liquidity and Other Financial Information

• As of March 31, 2024, current assets were $285 million, including cash, cash equivalents and restricted cash of $125 million. The Company had senior secured term loan debt, net of discount and issuance costs, of $387 million and a mortgage loan, net of discount and issuance costs of $18 million.
• Total shares on a fully converted basis to Subordinate Voting Shares were 475,235,515 as of March 31, 2024.

Conference Call and Webcast

The Company will host a conference call and webcast to discuss its financial results on Wednesday, May 15, 2024, at 8:30am Eastern Time (7:30am Central Time). The conference call may be accessed via Webcast or by dialing 1-833-470-1428 (US Toll Free) or 1-404-975-4839 (US Local), providing access code 897519. Archived access to the webcast will be available for one year on Cresco Labs’ Investor Website.

Consolidated Financial Statements

The financial information reported in this press release is based on unaudited management prepared financial statements for the quarter ended March 31, 2024. These financial statements have been prepared in accordance with U.S. GAAP. The Company expects to file its unaudited condensed interim consolidated financial statements for the quarter ended March 31, 2024, on SEDAR+ and EDGAR on or about May 15, 2024. Accordingly, such financial information may be subject to change. All financial information contained in this press release is qualified in its entirety with reference to such financial statements. While the Company does not expect there to be any material changes between the information contained in this press release and the consolidated financial statements it files on SEDAR+ and EDGAR, to the extent that the financial information contained in this press release is inconsistent with the information contained in the Company’s financial statements, the financial information contained in this press release shall be deemed to be modified or superseded by the Company’s filed financial statements. The making of a modifying or superseding statement shall not be deemed an admission, for any purposes, that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws. Further, the reader should refer to the additional disclosures in the Company’s audited financial statements for the year ended December 31, 2023, previously filed on SEDAR+ and EDGAR.

Cresco Labs references certain non-GAAP financial measures throughout this press release, which may not be comparable to similar measures presented by other issuers. Please see the “Non-GAAP Financial Measures” section below for more detailed information.

Non-GAAP Financial Measures

This release reports its financial results in accordance with U.S. GAAP and includes certain non-GAAP financial measures that do not have standardized definitions under U.S. GAAP. The non-GAAP measures include: Earnings before interest, taxes, depreciation and amortization (“EBITDA”); Adjusted EBITDA; Adjusted EBITDA margin; Adjusted gross profit; Adjusted gross profit margin; Adjusted selling, general and administrative (“Adjusted SG&A”), Adjusted SG&A margin; and Free Cash Flow are non-GAAP financial measures and do not have standardized definitions under U.S. GAAP. The Company defines these non-GAAP financial measures as follows: EBITDA as net loss (income) before interest, taxes, depreciation and amortization; Adjusted EBITDA as EBITDA less other income, net, adjustments for acquisition and non-core costs, impairment and share-based compensation; Adjusted EBITDA Margin as Adjusted EBITDA divided by revenues, net; Adjusted gross profit as gross profit less adjustments for acquisition and non-core costs; Adjusted gross profit margin as Adjusted gross profit divided by revenues, net; Adjusted SG&A as SG&A less adjustments for acquisition and non-core costs; Adjusted SG&A margin as Adjusted SG&A divided by revenues, net; and Free Cash Flow as Net cash (used in) provided by operating activities less purchases of property and equipment and proceeds from tenant improvement allowances. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with U.S. GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with U.S. GAAP and may not be comparable to similar measures presented by other issuers. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the U.S. GAAP financial measures presented herein. Accordingly, the Company has included below reconciliations of the supplemental non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

About Cresco Labs Inc.

Cresco Labs’ mission is to normalize and professionalize the cannabis industry through a CPG approach to building national brands and a customer-focused retail experience, while acting as a steward for the industry on legislative and regulatory-focused initiatives. As a leader in cultivation, production and branded product distribution, the Company is leveraging its scale and agility to grow its portfolio of brands that include Cresco, High Supply, FloraCal, Good News, Wonder Wellness Co., Mindy’s and Remedi, on a national level. The Company also operates highly productive dispensaries nationally under the Sunnyside brand that focus on building patient and consumer trust and delivering ongoing education and convenience in a wonderfully traditional retail experience. Through year-round policy, community outreach and SEED initiative efforts, Cresco Labs embraces the responsibility to support communities through authentic engagement, economic opportunity, investment, workforce development and legislative initiatives designed to create the most responsible, respectable and robust cannabis industry possible. Learn more about Cresco Labs’ journey by visiting Www.Crescolabs.Com or following the Company on Facebook, X or LinkedIn.

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We post this and all of the newsletters on our website here.

Friends,

Near the end of Q1, we shared a warning about the Canadian LP market, which had soared after the Legislative Review of the Cannabis Act. The New Cannabis Ventures Canadian Cannabis LP Index rallied the day we ran the newsletter, dropped and then rallied back in early April.  Then, it sold off a lot, and we suggested that cannabis investors should not ignore Canada. Here is teh action over the past six months:

The index has lifted substantially from its all-time low set at the end of February, and it is up 16.4% in 2024. There are six Canadian LPs in the NCV Global Cannabis Stock Index, which has rallied 29.1% so far in 2024. Those six stocks in the index are up an average of 40.4%:

All are up more than the Global Cannabis Stock Index except for Tilray Brands, which has dropped 14.2%. I continue to think that the stock could move a lot lower, as it seems to be overvalued relative to peers.  It trades at 3.9X tangible book value. My favorite LP, Organigram, has pulled back and is up less than the average. One that I like a lot, Village Farms, is not in the index, and it has rallied 72.1%. I include a large position in Organigram and a small one in Village Farms my model portfolio at 420 Investor. Both of these stocks trade below tangible book value.

The best stock in 2024 of the six LPs that are in the Global Cannabis Stock Index has been Canopy Growth. Its fiscal year ended at the end of March, and it will report its Q4 results this quarter. It still hasn’t scheduled a date. The market cap is currently over $1.3 billion and more than 3.4X tangible book value. The NASDAQ still has not ruled on the move that Canopy Growth is making to acquire American cannabis companies and maintain its NASDAQ listing. The company isn’t doing well in Canada, and it has a negative projected adjusted EBITDA for FY25.

Canopy Growth and Tilray Brands, which both have market caps above $1 billion, are very popular with investors despite their terrible performance over the past five years:

Some investors like to buy stocks that are down a lot, and both of these are down more than the Global Cannabis Stock Index, which has lost 81.8% over the past three years. We suggest that investors look at the valuations! There are much better deals in the market than Canopy Growth and Tilray Brands in our view.

The Canadian cannabis market is maturing, and we are not sure why investors would chase these two stocks. Several other Canadian LP stocks trade below tangible book value and aren’t carrying large debt loads. There had been some speculation that Canada would address the tax challenges, but it failed to do so recently.

The Canadian LPs are having a good year so far, but we suggest that investors be cautious, especially regarding Canopy Growth and Tilray Brands. The excitement about cannabis stocks this year has been mainly due to the potential rescheduling, which would have no impact on either of these companies.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:

Exclusives

Florida Medical Cannabis Patient Growth Is Slowing

Financial Reports

Ascend Wellness Beats Analyst Expectations in Q1

Cannabist Q1 Revenue Dips

Curaleaf Q1 Revenue Growth Stalls

Green Thumb Industries Grows Revenue 11% in Q1

Capital Raises

Canopy Growth Dilutes Its Stock After Big Rally

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan

Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

Trulieve Reports First Quarter 2024 Results Demonstrating Core Business Strength and Cash Generation

• First quarter performance of $298 million in revenue, up 4% sequentially, and 58% gross margin
• Strong cash flow from operations of $139 million and free cash flow of $124 million* in Q1 2024
• Definitive progress made on Smart and Safe Florida adult use initiative and federal rescheduling of cannabis to Schedule III

TALLAHASSEE, Fla., May 9, 2024 /PRNewswire/ — Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) (“Trulieve” or “the Company”), a leading and top-performing cannabis company in the U.S., today announced its results for the quarter ended March 31, 2024. Results are reported in U.S. dollars and in accordance with U.S. Generally Accepted Accounting Principles unless otherwise indicated. Numbers may not sum perfectly due to rounding.

Q1 2024 Financial and Operational Highlights*

• Revenue of $298 million increased 4% sequentially and year over year, with 96% of revenue from retail sales. Strong first quarter sales were driven by higher retail traffic and average basket size.
• Achieved GAAP gross margin of 58%, with gross profit of $174 million.
  Reported net loss of $23 million, an improvement of 31% sequentially and 64% year over year. Adjusted net loss of $10 million* excludes non-recurring charges, asset impairments, disposals and discontinued operations.
• Achieved EBITDA of $85 million*, or 29% of revenue and adjusted EBITDA of $106 million*, or 36% of revenue, up 21% sequentially and 35% year over year.
• Generated cash flow from operations of $139 million and free cash flow of $124 million*.
• Cash at quarter end was $327 million, inclusive of $50 million in tax refunds, from amended returns, related to our tax challenge of 280E received during the first quarter.
• Opened three new dispensaries in Cocoa Beach, Palm Bay, and Pinellas Park, Florida.
• Ended the quarter with 31% of retail locations outside of the state of Florida.

_{*See “Non-GAAP Financial Measures” below for additional information and a reconciliation to GAAP for all Non-GAAP metrics.}

Recent Developments

• Smart & Safe Florida initiative for adult use will be included on the ballot for the November 2024 election. If passed by voters, sales are anticipated to begin in May 2025.
• Department of Justice confirmed progress on federal rescheduling of cannabis to Schedule III, which would allow research and remove 280E tax burden.
• Opened one retail location in North Palm Beach, FL.
• Currently operate 196 retail dispensaries and over 4 million square feet of cultivation and processing capacity in the United States.

Management Commentary

“With strong performance in our core business and several meaningful catalysts on the horizon, the outlook has never been brighter,” said Kim Rivers, Trulieve CEO. “The team has done a phenomenal job carrying forward the momentum from last year, driving further improvements in production and retail. Given our financial performance and significant scale in key markets, Trulieve is best positioned for the coming wave of growth catalysts.”

Original press release

Published by NCV Newswire

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.