The Daily Hit is a recap of the top financial news stories for Tuesday, December 3, 2024.

On the Site

With second lease on life, Eaze CEO says Florida key to success

Azzalino said Eaze’s upcoming Florida infrastructure investment will be critical to future stability.

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LeafLink projects cannabis market to reach $55 billion by 2030

If cannabis is rescheduled, it could increase industry cash flow by $2-3 billion annually.

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Canopy Growth to close Acreage deal next week

After years of delays and restructuring, some shareholders could walk away empty-handed.

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CEA Industries to buy unnamed specialty retailer

CEA Industries has seen its revenues plunge as cannabis companies pull back on spending.

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Curaleaf sues former director of operations in Colorado

Cura Co. is accusing Jamison Vosnos of sharing confidential information with Michael Quattrone of Crowded House cannabis.

Read more here.

In Other News

Nebraska

The Nebraska Attorney General’s Office filed a second “amended cross-claim” Friday on behalf of Secretary of State Bob Evnen in a lawsuit against two successful medical cannabis measures.

Read more here.

Pennsylvania

With a new legislative session just a month away, Pennsylvania state lawmakers plan to once again introduce legislation to decriminalize recreational marijuana.

Read more here.

Christina Lake Cannabis

The Company issued 56,663,636 Common Shares for gross proceeds of approximately $1,869,900 at a price of $0.033 per Common Share under the closing of the first tranche.

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Holders of Acreage Holdings’ (CSE: ACRG.A.U, ACRG.B.U) (OTCQX: ACRHF, ACRDF) fixed shares will likely get nothing when Canopy Growth (TSX: WEED) (Nasdaq: CGC) acquires the U.S. cannabis operator next month, a stark yet unsurprising reversal from the deal’s multi-billion-dollar valuation half a decade ago.

A June convertible note offering severely diluted the fixed shares, Acreage said Monday, making them worthless at Canopy’s current $3.90 share price. The company provided a sliding scale showing fixed shareholders would only start receiving value if Canopy’s stock rises above $5.

“As a result of the material impact of the Offering it is anticipated that the current holders of Fixed Shares will receive zero value upon closing of the Acquisitions,” Acreage said in a statement.

The deal’s completion would mark the end of a complex, years-long trudge first announced in 2019 when Canopy agreed to buy Acreage for about $3.4 billion, betting on U.S. legalization. Those early consolidation wagers have mostly soured since, with deal terms repeatedly revised as cannabis stocks plunged and federal legislative efforts lulled.

Acreage reported a $22.2 million third-quarter loss as revenue fell 30% to $39.6 million. As of Sept. 30, the firm carried $274.6 million in total debt. Earlier this month, Canopy posted a C$128 million loss on declining revenue of C$73.9 million.

“We remain highly optimistic about the momentum building within Canopy USA,” Canopy CEO David Klein said on an earnings call earlier this month, noting plans to leverage Acreage’s assets alongside recently acquired brands Wana and Jetty.

Klein, who plans to step down by March, said Canopy is focused on “deeper, not wider” U.S. market penetration through its Canopy USA subsidiary. The Canadian firm’s worked to shore up its finances, prepaying $100 million in debt last month.

Acreage’s floating shareholders will still get 0.045 Canopy shares per share held when the deal closes, expected in mid-December.

Acreage Holdings Inc. (CSE: ACRG.A.U, ACRG.B.U) (OTCQX: ACRHF, ACRDF) reported wider losses in the third quarter as the multi-state cannabis operator wrestles with competitive pressures ahead of its planned acquisition by Canopy USA.

The New York-based company posted a net loss of $22.2 million for the quarter ending Sept. 30, versus a loss of $7.9 million a year earlier. Revenue fell 30% to $39.6 million from $56.5 million, though it increased 2% from the previous quarter.

The results come off the heel of Acreage launching adult-use cannabis sales in Ohio, where initial recreational revenue accounted for 38% of total state-level sales in the third quarter. The company operates five dispensaries in the state under The Botanist brand in Akron, Canton, Cleveland, Wickliffe and Columbus.

“With our strengthened financial position, we have bolstered our capacity to pursue opportunities in these markets as they continue to mature,” CEO Dennis Curran said in a statement. “The Ohio market presents an incredible growth opportunity for us, based on our solid reputation as a trusted medical provider and strong operational foundation already in place.”

The company’s planned acquisition by Canopy USA, LLC remains on track to close no later than the first half of 2025, executives said. The deal would bring Acreage under the same umbrella as cannabis brands Jetty and Wana.

Canopy Growth Corp. (TSX: WEED) (Nasdaq: CGC) CEO David Klein said last week the Canopy USA team is “focused on execution at Acreage” with a strategy centered on “deeper, not wider” market penetration.

“(We want to) get better in the markets that we’re in and use the production assets that we have at Acreage to bolster the other parts of the portfolio, meaning Wana and Jetty,” Klein said during Canopy’s earnings call on November 8.

Acreage secured additional funding during the quarter through an amended credit agreement that provided approximately $8 million in net proceeds. The deal included a $65 million advance from a new lender with an original issue discount of 10%, or $6.5 million. About $48 million was used to repay existing debt.

The company carried $274.6 million in total debt as of Sept. 30, with nearly all of it classified as long-term obligations, according to financials. Total liabilities of $419.3 million exceeded assets of $293.1 million, resulting in a $126.1 million deficit. The new credit agreement carries a 13.5% annual interest rate and matures in September 2027.

Gross margin declined to 35% from 38% a year earlier, which the company attributed to increased costs for inventory inputs and industry-wide price compression. Operating expenses fell 5% to $22.6 million.

The company expects to open its relocated New Jersey dispensary in Collingswood for medical and adult-use sales in the fourth quarter, pending final regulatory approval. The new location will be the borough’s first cannabis retailer.