FFNTF in CA
FFNTF is a LONG
FFNTF announced it had commenced operations at one of the world's most extensive, most efficient cannabis manufacturing facilities. The Company had expected the Facility to be operational in September 2021. While we are excited about the opening, the delay coupled with a slow down in industry sales suggests that a revenue miss for 2021 is likely, but the Company is set up in 2022 to be one of the best positioned small-cap names in the space. That said, the press release did say, "we are anticipating a strong finish to the year," so maybe my concerns are unfounded.
This announcement, along with its expansion in MA, makes the Company an attractive M&A dance partner. On October 6, 2021, the Company's announcement has signed definitive agreements to acquire the cultivator New England Cannabis Corporation based in Holliston, Massachusetts. Upon closing, the transaction is expected to be significantly accretive to the Company's EBITDA expectations for 2022 and will immediately scale 4Front's presence as a dominant wholesaler and producer in MA. 4Front has entered into agreements to acquire 100% interest of NECC for total consideration of US$55 million. The purchase price will be funded through the issuance to the seller of 25 million subordinate voting shares of the Company and US$25 million of cash. The cash portion will be funded through proceeds raised from a US$15 million convertible notes offering, led by Navy Capital, a vendor take-back note, and balance sheet cash.
The Company's 170,000 sq. ft. facility will manufacture in-house and partner brands, including infused pre-rolls, gummies, hard candies, fruit chews, caramels, mints, soft gel capsules, etc. vapes, tinctures, and other manufactured infused products. 4Front Commerce Facility Highlights:
- 170,000 sq. ft. Manufacturing Facility, located outside of the City of Los Angeles
- 80,000 sq. ft. of distribution and warehousing space
- 25,450 sq. ft. of finished goods storage
- 3,931 sq. ft. of dry flower storage
- Currently producing nine of 4Front's 20 brands and 164 different SKUs
- Advanced machine and automation technologies and expert commissioning
- Produces a minimum of 10 times more products per shift than the Company's largest managed facilities in Washington
- The distribution partnership with Nabis is a fully-licensed cannabis wholesale platform with the largest portfolio of cannabis brands globally, supplying 100% of California's dispensaries and delivery services.
- Cost-effective wholesale solutions void of overhead capital infrastructure costs
From the PR - "I want to thank the City of Commerce for granting us approval to commence operations at what we believe to be one of the largest, most efficient processing facilities in the world," said 4Front CEO Leo Gontmakher. "The manufacturing scale of our Facility is first of its kind, and the response we've seen during our pre-commercial sales has been tremendous. With our suite of brands, custom-built automated machinery, low-cost signature production, and manufacturing capabilities, we're confident our Commerce Facility will enable us to emerge as one of the top high-quality cannabis producers and price leaders in one of the largest and most competitive marketplaces in the world. Today's announcement is another significant milestone in 4Front's journey and cements our position as one of the most efficient cannabis operators capable of producing finished goods at scale. This Facility, along with our previously announced acquisition of NECC, completes the infrastructure needed to fuel our growth expectations as we look forward to 2022.
ACB/VLNCF
Aurora Cannabis announced a manufacturing agreement with The Valens Company to manufacture a seasonal offering. They will launch a product called Drift Turbo, a cannabis cane mint, and a two-piece hard peppermint candy containing 10mg of THC. "We know that Canadian cannabis consumers are looking for novelty and variety, and seasonal offerings are a key approach to strategically expanding our portfolio of adult-use products," said Miguel Martin, CEO, Aurora Cannabis. "Valens' exceptional manufacturing capabilities complement our product line up this upcoming holiday season. Our strategic relationship is designed to unlock efficiencies as we seek to bring innovation to market with speed and differentiation that connects with consumers." We continue to believe that Valens has top-of-the-line manufacturing capabilities and technologies to support the growing 2.0 market in Canada. However, despite the growing sales of the 2.0 industry, it is challenging to generate profits given the current tax structure Health Canada has in place. This is why we removed Valens from our Canada long list. As far as Aurora Cannabis goes, it is surprising that they are still a public company. Their stock has fallen 94% in the past three years.
AFC Gamma
AFCG announced today that it priced an offering of $100 million aggregate principal amount of 5.750% Senior Notes due 2027 according to Rule 144A. The Notes mature on May 1, 2027, and the Offering is expected to close on November 3, 2021, subject to customary closing conditions. AFC Gamma intends to use the net proceeds from the Offering to fund loans related to unfunded commitments to its existing borrowers, to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with its investment strategy for working capital and other general corporate purposes. The Notes have not been and are not expected to be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.
