In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly looks back at an emergency order by the Ontario AG, acquisitions and temporary lay offs.
ONTARIO AG ALLOWS DELIVERY, PICK-UP AT CANNABIS STORES: Ontario's Attorney General issued an emergency order on Tuesday night to allow private sector cannabis retail stores to continue business operations by offering products for delivery and curbside pick-up. The order came days after Ontario's legal cannabis retailers were removed from the province's list of "essential" businesses. Following the order, Raymond James analyst Rahul Sarugaser called it positive news for the sector and said he expects strength in Canadian cannabis stocks.
AKERNA ACQUIRES TRELLIS: Akerna (KERN) announced Wednesday it will acquire cannabis cultivation management and compliance software company Trellis for $2M in an all-stock deal. The deal is expected to close this week. The transaction is expected to contribute positive cash flow. Akerna will acquire Trellis for $2M, with 100% of the consideration paid in stock priced at the 30-day volume weighted average price and no assumption of debt. The transaction price is a 1.8x multiple of 2019 revenue of $1.1M. The company also announced Thursday it has completed an agreement with Rolling in Green, a pre-roll cannabis automation company that provides a turn-key processing solution for licensed producers. Akerna will use its strategic agreement with NetSuite to help the company manage inventory, track their financials, and maintain customer relationship management systems.
GENERAL CANNABIS TO ACQUIRE CANNASEUR: General Cannabis (CANN) announced Thursday it executed a definitive purchase agreement to acquire The Organic Seed, doing business under the name Cannasseur, located in Pueblo West, Colorado. Cannasseur, a vertically integrated company that commenced operations in 2013, operates a recreational retail dispensary, a 12,000 square foot light deprivation greenhouse and a manufacturing facility, that produces Dabtek, a product line of infused concentrates. The company anticipates that once the acquisition and integration is complete, Cannasseur should generate over approximately $4M of incremental annual revenue. The acquisition agreement provides that General Cannabis will acquire Cannasseur for $2.35M of General Cannabis common equity, priced at the time of closing, subject to a floor of 45c per share and a ceiling of 55c per share.
ORGANIGRAM TEMPORARILY LAYS OFF 45% OF STAFF: Organigram Holdings (OGI) announced Monday the temporary layoff of approximately 45% of its workforce primarily to help boost COVID-19 containment efforts representing approximately 400 employees. COVID-19, some administrative, support and other functions were deemed non-essential to the short-term needs of the business. The temporary layoffs were initiated on March 24, 2020 and the Company will continuously monitor the evolving situation. Lump-sum payments will be paid to the affected employees to help bridge the gap to available government programs. In addition, the company will absorb the employee paid portion of health, dental and short-term disability premiums for all employees during this difficult time.
CVSI RECEIVES NOTICE OF PATENT ALLOWANCE: CV Sciences (CVSI) announced Monday that it will be receiving a Notice of Allowance from the U.S. Patent and Trademark Office for the Company's patent application 15/426,617. The patent covers methods of treating smokeless tobacco addiction by administering pharmaceutical formulations containing CBD and nicotine. The Company's initial drug candidate contains nicotine and CBD to support cessation of smokeless tobacco use and addiction. Following formal issuance of the patent, expected over the coming months, CV Sciences will continue development efforts as the company seeks authorization from the U.S. Food and Drug Administration to commercialize the treatment for smokeless tobacco addiction.
Following the announcement, Cantor Fitzgerald analyst Pablo Zuanic raised the firm's price target on CV Sciences to $1.70 from 80c and keeps an Overweight rating on the shares. The patent approval generates an asset worth at least $82M and makes CV a takeover target, Zuanic said. The "depressed nature" of the shares, plus the optionality from the new patent as well as optionality from consumer CBD, makes CV Sciences an attractive takeover target, especially to pharmaceutical companies, contends Zuanic. The analyst sees "significant upside" in the stock despite the 30% run up over the last two days.
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly Cannabis Group (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), Delta 9 (VRNDF), DionyMed Brands (DYMEF), Elixinol Global (ELLXF), FluroTech (FLURF), General Cannabis (CANN), Green Thumb Industries (GTBIF), Greenlane (GNLN), GrowGeneration (GRWG), Harborside (HSDEF), Hemp Inc. (HEMP), HEXO (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), ICC International Cannabis (WLDCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen (MMNFF), MJardin Group (MJARF), Neptune Wellness Solutions (NEPT), Origin House (ORHOF), Planet 13 Holdings (PLNHF), Real Brands (RLBD), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Valens (VLNCF),Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Westleaf (WSLFF), Wildflower Brands (WLDFF) and Zynerba (ZYNE).
