Skymint has announced the impending shutdown of its Harvest Park facility near Lansing, Michigan. This 56,000-square-foot cultivation plant is set to halt its operations, coinciding with the termination of approximately 180 employees by March 1st, 2024.
The decision to close the Harvest Park facility comes amid several industry-wide challenges that Skymint, like other players in the Michigan cannabis sector, has been grappling with. The company cites an oversupply in the market, falling prices, and escalating costs as key factors influencing this move. In a statement, Skymint expressed its view that this step is necessary to stay competitive and ensure the long-term success of its brands.
Despite the closure, Skymint maintains its presence in the state with 22 retail locations. However, the company has experienced a notable financial downturn, attributed to dropping marijuana prices and alleged internal mismanagement.
In a significant industry move, Tropics LP, a Canadian entity now known as Skymint Acquisition Co., acquired Skymint out of bankruptcy. The deal, valued at $109.4 million and finalized in October, was conducted through a stalking horse bid. Tropics LP, associated with SunStream Bancorp Inc. and SNDL Inc., took over Skymint's cultivation assets and the leases of 22 dispensaries. These dispensaries, as of September, were reported to generate about $68 million in annualized sales.
The upcoming layoffs at Harvest Park, slated to begin on February 12th, 2024, raise questions about the influence of Tropics LP, Skymint's new owner, in this decision. The acquisition process is expected to be fully completed in the early part of the following year.
Skymint's path to closure and layoffs can be traced back to financial and legal difficulties. The company faced a $127 million lawsuit from Tropics over breached agreements, stemming from a $70 million loan given in September 2021 for the acquisition of 3Fifteen Cannabis. Skymint's failure to meet its financial obligations led to additional loans and exacerbated its financial woes.
Court documents revealed a stark decline in Skymint's financial health, with falling daily sales and a monthly cash burn rate of $3 million. By 2022, revenues had dropped significantly to $110 million, far below the projected $263 million. The lawsuit also highlighted issues with unpaid taxes and fees.
Moreover, Skymint's decision to surrender the lease of the Summit Sports and Ice Complex to developers Innovative Industrial Properties Inc., a cannabis-focused property developer, further illustrated its fiscal struggles. IIP, which also owns the Harvest Park property, has not commented on the facility's future amidst Skymint's ongoing challenges.
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