Lp,s are doomed!
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Matt Gaetz before the House Judiciary Committee on why the Biden Administration after 2 years has not de-scheduled #cannabis from the Schedule 1 list. Below, Gaetz cites a study that shows medical MJ states have a 24.8% lower mean annual opioid overdose mortality rate. $MSOS
Approximately 83k people experienced opioid-involved drug overdose deaths in the United States for the 12-month period ending in December 2022. And medical marijuana is legal in 39 states currently.
That means that literally speaking, Schedule 1 classification of cannabis is killing several thousand people every year.
Selling under prod cost is a bitch!
Tantalus Labs sells remaining cannabis in ‘fire sale’
Published on July 27, 2023 by David Wylie
Tantalus Labs has received court approval to sell more than 1.5 million grams of bulk cannabis, including dried flower, milled weed, and shake.
The financially destitute Maple Ridge, B.C., cannabis producer won a BC Supreme Court decision against the Canada Revenue Agency (CRA) earlier this month to sell its remaining cannabis under what’s described as a “fire sale basis.”
Tantalus brought the court action in response to the CRA’s plan to attend the facility on July 11 to ensure the destruction of its remaining cannabis excise stamps and product after the federal agency refused to renew the company’s excise licence.
The company estimated it could have generated about $2 million in revenue from its inventory over the month of July if the sale had been conducted in an orderly fashion; whereas a rushed sale would earn less than $300,000.
• RELATED: An industry martyr and the hill where he died
Justice Shelley Fitzpatrick says in her reasons for judgment that the CRA refused to renew the excise licence as a result of its unhappiness with amounts owed.
“I am satisfied that, despite the very abbreviated sales process that has been undertaken, the process has been conducted in a reasonable manner and the proposed sale itself is reasonable,” she says.
“It is, as Tantalus and the proposal trustee have described, on a ‘fire sale basis,’ but unfortunately those are the circumstances that are before us. That circumstances arise somewhat inexplicably from the position of CRA, and CRA’s threat to enter Tantalus’ premises and destroy the inventory and/or its value.”
Selling for as little as 25 cents a gram
In an affidavit, Sutton argues the sale is in the best interest of Tantalus and its creditors, including the CRA.
“Based on my 11 years of experience working the cannabis industry, I believe, given a reasonable disposition time, the fair market value of the bulk cannabis inventory is $0.25 – $0.75 per gram (approximately $300,000-$900,000),” he says in the court document.
Tantalus is selling:
611,046 grams of bulk whole flower cannabis;
405,415 grams of bulk milled cannabis; and
360,940 grams of bulk cannabis shake.
According to court documents posted online by Ernst and Young, Atlantic Cultivation had the winning bid—the dollar amount was not disclosed. Cultivars include LA Kush Cake, Coastal Sage, and Banjo.
Tantalus struggled to pay taxes since early 2021
Tantalus’ CFO says in a court document that the company started struggling to pay the excise tax in February 2021, blaming COVID-19. The company managed to pay an outstanding amount of $120,000 through a payment plan. Then in 2022, Tantalus reported to the CRA it had been struggling due to logistical issues caused by major flooding in BC.
As of May, Tantalus owed the CRA more than $4.3 million.
At that point, the CRA was threatening to garnish bank accounts and income, as well as seize assets.
In July, the CRA sent Tantalus a letter saying the company didn’t meet the requirement to have its licence renewed: “You have not demonstrated that your business has sufficient financial resources to conduct business in a responsible manner.”
Tantalus has 75,000 square feet of licensed space in its greenhouse facility.
They just need to cut their Starbucks habit and maybe pick up a side-job as an Uber driver. That way they could maybe ends meet. Lol.
Was Tilray profitable last year or not? According to its own SEC filing yesterday, the answer is no.
Tilray lost C$1.9 billion.
"We began operating in 2014 and have yet to generate a profit"
Sorry to burst your bubble.
MASTERCARD: NO DEBIT FOR CANNABIS
Bonno JULY 27, 2023
BUSINESS
CANNABIS 101
CANNABIS LEGALIZATION
CANNABIS NEWS
FEATURED
LATEST LEGALIZATION NEWS
LAW
MARIJUANA LEGALIZATION
MARIJUANA NEWS
POLITICS
POLITICS
THC NEWS
Mastercard is telling U.S. cannabis shops: no debit for cannabis purchases. U.S. consumers use cash for a vast majority of legal cannabis sales. Debit and credit purchases are rare but not out of the ordinary.
But because cannabis remains illegal at the federal level, Mastercard has started cracking down.
“As we were made aware of this matter, we quickly investigated it. In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity,” Mastercard said in a statement on Wednesday.
“The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems,” the statement continued.
The ban does not extend to Canadian consumers, where cannabis is legal at the federal level. Canadian customers can continue to use Mastercard debit and credit for cannabis purchases.
MASTERCARD: NO DEBIT FOR CANNABIS
Mastercard: No Debit for Cannabis
Mastercard doesn’t want customers using their debit cards for cannabis because of the federal ban. But, more likely, this has more to do with the federal prohibition regarding banking and providing financial services to the cannabis industry.
The U.S. SAFE Banking Act seeks to correct this financial prohibition.
Section 280E of the Internal Revenue Code says legal cannabis businesses cannot deduct operating expenses from their gross income. SAFE Banking would reverse that.
SAFE Banking has failed three times in U.S. Congress.
The Democrat-controlled US Senate is opening to pass another version of the bill this year. Republican Senator John Cornyn said this was “wishful thinking.”
In the meantime, don’t expect Mastercard to reverse its “no debt for cannabis” decision until U.S. politicians pass SAFE Banking.
MASTERCARD: NO DEBIT FOR CANNABIS? THAT’S OKAY. CASH IS KING
Mastercard: No Debit for Cannabis
Mastercard sent cease-and-desist letters to cannabis companies informing them of their “no debt for cannabis” policy.
While this leaves many consumers out to dry, as mentioned, most U.S. legal cannabis sales are made with cash. If anything, the rest of the economy should mimic the U.S. cannabis industry.
While access to banking services is essential for any advanced market economy – consider the benefits of using cash. And then the downsides of a cashless society where governments and banks can track you and your purchases with a digital currency.
Mastercard’s no debit for cannabis policy may end up being a good thing.
CASH PROS
When you pay with cash, you use the money you already have. That means no debt or overdraft fees.
Cash transactions are more tangible and can help you budget. When you use cash, you can physically see how much money you’re spending and how much you have left.
Cash transactions are private and don’t leave a digital trail. This also reduces the risk of identity theft and online fraud.
No transaction fees with cash
Cash is universally accepted. Especially the American dollar. Even in remote parts of the world, a gold coin will get you access to food and shelter.
Cash transactions are instant. No need to worry about approvals, declined transactions, or the “blockchain.”
Cash doesn’t require technology or electricity. Cash saves the day if your electronic payment system is on the fritz.
It’s impossible to overspend cash since you’re limited to what’s physically in your wallet.
Cash is convenient.
Cash is private. Already mentioned, but worth repeating.
CONS OF A CASHLESS SOCIETY
It’s no secret that Joe Biden is pushing the U.S. government to develop a “digital dollar” or a central bank digital currency.
While cash-flooded dispensaries may welcome SAFE banking and an end to Mastercard’s ‘no debit for cannabis’ policy – be aware of sheep in wolf’s clothing.
Consider the negatives of a cashless society.
Electronic payments leave a digital trail for online grifters and government busybodies. Banks and governments could monitor, record, and profile your spending habits.
Increased vulnerability to cybercrime. The government can’t even deal with crime in real life, let alone cyber-criminals stealing digital wallets.
Relying on technology requires dependable infrastructure and a stable internet connection. In the case of power outages or natural disasters, a cashless society could leave people without any means of payment.
Transaction fees and hidden costs would become more normal than they are now.
Loss of financial anonymity. People can also steal financial data or use it to blackmail or coerce.
Imposes costs that large corporations can cover while negatively affecting small businesses
Gives governments new tools and weapons to use. For a real-life example, during the Canadian Freedom Convoy protest, the government ordered banks to freeze the accounts of peaceful protesters. These restrictions would have prevented the protestors from feeding themselves if not for cash.
Cashless transactions benefit large financial institutions at the expense of everyone else. A cashless society gives banks and governments more economic control and influence. Ultimately limiting consumer choice and creating a two-class system of “haves” and “have-nots.”
While Mastercard’s ‘no debit for cannabis’ policy is annoying, looking for the silver lining is always beneficial.
And while it would be nice if the U.S. government treated the cannabis industry like any other. Simultaneously, it would be nice if more companies borrowed from cannabis and trusted cash.
FOOTNOTE(S)
https://www.bloomberg.com/news/articles/2023-07-26/how-to-buy-pot-not-with-a-mastercard-ma-debit-card-company-says
https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/
How many Canadian cannabis businesses will go bankrupt with the federal government as the largest (or one of the biggest) unpaid creditors before Finance Minister @cafreeland does something about it?
So almost all of Tilray's business segments and channels were worse in FY 2023 compared to 2022.
The only channels that improved did so due to M&A.
But M&A in the cannabis industry is costly and almost always backfires. 🤔
So almost all of Tilray's business segments and channels were worse in FY 2023 compared to 2022.
The only channels that improved did so due to M&A.
But M&A in the cannabis industry is costly and almost always backfires. 🤔
I understand these facts make a lot of people uncomforuble, so let's dig deeper.
Gross sales for the year:
Canadian medical—🔻18% to $25 million
Canadian rec— UP 2.3% to $214.3 million
Wholesale cannabis— 🔻79% to $1.4 million
International cannabis— 🔻19% to $43.6 million
Most of Tilray's business segments worsened in 2023 versus 2022. Switching to USD now.
Cannabis— 🔻7.1% to $220.3 million
Distribution—🔻0.3% to 258.7 million
Alcohol— UP 33% to $95.1 million
Wellness—🔻11% to $52.8 million
Are alcohol sales only up because of M&A last year?
But Tilray only lost C$158 million in Q4, versus a C$605 million loss in the same quarter last year, so the stock is soaring.
Interesting.
REALITY CHECK: Canadian cannabis producer Tilray Brands just reported a C$1.9 billion annual net loss, which is substantially worse than the C$575,000 loss one year earlier.
Don't shoot the messenger.
#cannabisindustry
She might be the last one to go down… lol
They only lost 120,000,000$ on last Q.
Simon deserves a raise in salary and a bonus.
Excellence has a price… and cannabis naive C.E.O. Are being paid with your money… Lol
AURORA CEO GETS $6.7 MILLION pay raise for running the company to the ground.
JULY 25, 2023
Aurora Cannabis Inc.’s CEO is getting a 38 percent raise to $6.7 million amid cost-cutting and share slumps.
Aurora Cannabis is trading 99% below all-time highs, making it one of the worst-performing companies on the TSX. The company’s shares lost 52 percent of their value in fiscal 2023. But this guy gets a 38 percent raise.
With a market cap of $240 million, what would possibly justify the Aurora CEO getting $6.7 million,
Aurora’s CEO, Miguel Martin, joined the company in September 2020. Over the past three fiscal years, he’s made $16.1 million in compensation while the company has lost $2.6 billion.
In an email to The Globe, Aurora said, “Corporate performance metrics were either met or exceeded, which is reflected in the annual short-term incentive pay component of total compensation.”
Whether that’s true or not – investors are spooked.
Consider Aurora’s biggest miscalculation to date: that large, “sea-of-green” grow facilities were the wave of the future.
On the eve of legalization, they had a $2-billion market cap. So they bought up everything they could: nutrient companies, greenhouses, and smaller cannabis companies like CanniMed and MedReleaf.
Aurora even built a 75,000-square-metre greenhouse they (incorrectly) believed would supply a third of all Canadian cannabis.
But it turns out Canada’s cannabis consumers prefer mom-and-pop craft cannabis. Aurora Cannabis has never been profitable.
They recently closed a production facility in Denmark, sold one in Medicine Hat, and they’re shifting their focus to medical cannabis.
While the Aurora CEO gets $6.7 million, the company reports losses. Aurora expects positive free cash flow by the end of fiscal 2024.
AURORA CEO GETS $6.7 MILLION – HOW?
Aurora CEO Gets $6.7 Million
How do Aurora and its CEO justify a $6.7 million compensation amid cost-cutting and share slumps? Probably the same way they justified their visions of legalization – by appealing to fantasy.
Licensed producers like Aurora overestimated demand, oversupplied products, and in the process, destroyed profit margins.
Thrown in the fact that Canadians weren’t eager to abandon their “illicit” supply of cannabis farmers and vendors, you’ve got the perfect storm: Multi-billion-dollar write-downs and cumulative operating losses.
Between 2020 and 2022, Aurora Cannabis reported losses of nearly $1 billion.
Aurora has raised equity capital numerous times, diluting shareholder wealth. Company-wide layoffs are the norm as the cannabis producer scales down its operations.
Hence, the shift to higher-margin medical cannabis. Still, the company loses money.
IS NOW THE TIME TO BUY AURORA SHARES?
Aurora CEO Gets $6.7 Million
Putting aside the fact that the Aurora CEO is getting $6.7 million amid cost-cutting and falling stock – is now the time to buy Aurora stock?
They say it’s darkest before dawn.
Aurora expects to be profitable by the end of fiscal 2024. They’ve certainly been aggressive in their reorganization. In fiscal 2023, Aurora Cannabis reported a sales increase of 27%.
According to the company, the Aurora CEO’s $6.7 million deal is linked to Aurora’s share price and corporate performance metrics.
So is the point where the company turns itself around? Aurora has promised to achieve positive free cash flow before. What’s unique about this time?
Analysts expect the loss per share to narrow in 2024. What’s motivating them is the potential of European cannabis markets.
Aurora Cannabis is well-established in Europe, with a presence in Germany and France.
Still, Aurora Cannabis Inc.’s fundamentals are weak. They are a high-risk investment. There are other cannabis companies (especially south of the border) that are much better buys.
That said, some analysts expect to see the Aurora stock gain by 40% in the next twelve months. Which may or may not justify Aurora CEO’s $6.7 million compensation package.
FOOTNOTE(S)
https://www.theglobeandmail.com/business/article-aurora-cannabis-ceo-compensation/
https://www.prnewswire.com/news-releases/aurora-cannabis-announces-sale-of-aurora-sun-facility-to-bevo-expected-to-provide-incremental-revenue-and-cash-flow-301883527.html
https://www.fool.ca/2023/06/30/is-it-worth-investing-in-aurora-cannabis-stock-right-now/
Buying fresh bunk from Crappy Growth… lol
Opening a @TweedInc Houndstooth 510 cartridge I bought for $11 that was packaged on April 20 2020, or 1183 days ago pic.twitter.com/ofpabhsChD
— pancakenap (@pancakenap420) July 24, 2023
“And once this is legal those companies with the ability to supply the Walmarts, Costco and Amazons of the world will be the last ones standing. Tilray is that company.”
Why would they do that?
To lose their shirts?
Remember that bunk is a hard sell.
Not so obvious if you are green but…
MAGA & Tilray are item specifics.
Read: RED
When facts don’t matter.
Dude is living in a non-reality show.
Legalization is the ruination of good weed. Excellent for the consumers looking for cheap bunk, of that there is plenty. Good cannabis grown in small batches by people who know what they are doing is where it,s at.
The problem is VFF's competitors are mass producing garbage and driving the price down for everyone, and their overhyped competitors (most of them) can afford to pay @cafreeland's cannabis gouge while smaller businesses cannot.
If consumers are that undiscerning, retailers are that bad at marketing and the government is that bad at regulating, the industry doesn't need to exist.
This is a really good point. The Aurora CEO comp is only for 9 months of work.
In 2020, Canopy awarded its CEO C$45 million in total comp for under 3 months of work, but a lot of that was options/incentive for taking the job. Since then, Canopy has lost approx $4.02 billion.
Re-doomed!
Aurora paid its CEO $6.7 million last year, nearly a 40 per cent raise, while its shares lost nearly half their value.
And that was for only 9 months of work, because their fiscal year end changed.
I’ve seen a lot. But this one is something else.
Comparing worker pay to CEO pay in Canada's cannabis industry.
This is the median annual pay for workers:
Tilray—$48,888
Canopy—$64,532
Cronos —$83,614
Doomed!
These people have fired thousands of Canadians via Zoom and burned through billions of dollars in capital.
And for what?
These CEO don,t know what they are doing… lol
🇨🇦's top-paid cannabis CEOs in 2022 (and how much money their LPs lost)
Simon (Tilray)—$25.7 million (lost $336 million)
Gorenstein (Cronos)—$21.8 million (lost $168 million)
Klein (Canopy)—$8.5 million (lost $3.3 Billion)
Martin (Aurora)—$6.7 million (lost $87 million)
in CAD
Distressed?
Photo by brunok1/stock.adobe.com
Bankruptcy can be a helpful tool for distressed businesses.
The process allows a business to stop collection actions, discharge certain debts, cancel unfavorable contracts and provide breathing room to restructure the business.
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If your plant-touching cannabis operation is struggling or failing, however, the bankruptcy court will not provide protection to businesses that work with high-THC cannabis, or marijuana.
Enter the state court receivership.
Photo of Paula Durham of J.S. Held
Paula Durham (Photo courtesy of J.S. Held)
Photo of Scott Evans of J.S. Held
Scott Evans (Photo courtesy of J.S. Held)
Receivership is an equitable remedy that is often employed as a bankruptcy alternative.
A receivership can address business insolvency or be a temporary remedy during legal proceedings between disputing business partners, with control of the enterprise hanging in the balance.
In either scenario, the court-appointed receiver takes control of the business and must assess the posture of the business to determine the best path forward.
The receiver’s options run the gamut from operating the company as-is, restructuring operations to maximize profit, or closing shop and liquidating the business as a whole or in pieces.
The receiver has a fiduciary responsibility to determine the option that best satisfies creditors – similar to duties required of a trustee in a bankruptcy.
What is receivership?
Distressed cannabis companies often are prime candidates for receivership.
Cannabis is a burgeoning industry with huge growth and profit potential.
However, worlds have collided in the “green rush,” where business-minded individuals – often with little knowledge of marijuana – have partnered with individuals well-versed in cannabis culture, cultivation and consumption but with little experience operating a business.
Add complex state laws and regulatory drama, fraud potential due to the all-cash nature of the business, and you’ve created the perfect recipe for insolvency, litigation or both.
In these often-chaotic conditions, it is easy for a cannabis company to become unprofitable.
A receiver can add significant value by stabilizing the business while litigation proceeds or while developing a restructuring plan.
In either case, the goal of receivership is to maximize the value of a business for the benefit of its stakeholders.
If you are considering restructuring options for your cannabis operation, receivership can be an excellent choice.
However, a cannabis receivership is not for the faint of heart.
There are two significant areas that distinguish marijuana receiverships from receiverships involving non-cannabis businesses: the complex regulatory environment and banking.
The importance of having a receiver well-versed in the cannabis industry cannot be overstated.
Making a mistake in these areas can cause more harm than good.
Complex regulatory environment
Cannabis operations are subject to a complicated regulatory framework; receivers unfamiliar with the industry will be behind the curve on Day One.
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Although receivership is an excellent restructuring option for cannabis operators in distress, regulations about daily business operations (including receivers) vary by market, with some states having cannabis-specific receivership regulations.
For example, the Colorado Marijuana Enforcement Division (MED) requires court appointees including receivers to register with the state licensing authority as temporary appointees of the court within seven days.
Similarly, Washington state allows receivers or trustees to operate licensed cannabis businesses, but the receiver must be qualified by the Washington State Liquor and Cannabis Board.
Arizona laws do not address cannabis receiverships; nevertheless, the state requires anyone volunteering or working at a dispensary or recreational cannabis store to be registered with the Arizona Department of Health Services as either a dispensary agent or a facility agent.
Therefore, a receiver appointed to oversee an Arizona-licensed cannabis business must obtain the applicable registration in order to take control of the entity.
Hurdles exist nationwide
States that have legalized or decriminalized marijuana often have instituted complex rules surrounding the cultivation, manufacture, wholesale and retail sale of cannabis.
Some states, such as California, do not allow the sale of cannabis business licenses. Other markets, including Colorado, allow for the transfer of commercial cannabis licenses.
It is particularly important to understand options available to liquidate a licensee’s assets.
Upon appointment over a cannabis entity, a receiver becomes responsible for adhering to local regulations.
Accordingly, the receiver must ensure that regulatory shortcomings are identified and corrected to ensure compliance – so, it is critical to engage an experienced receiver.
Banking under receivership
One of a receiver’s most important duties is to identify and secure the assets of the entity in receivership, including cash.
This normally involves the receiver opening a bank account in the name of the business entity and moving cash assets into the controlled account.
Of course, this task is not so easy for plant-touching marijuana operations.
While the federal Financial Crimes Enforcement Network (FinCEN) issued guidance in 2014 that cleared the way for financial institutions to service cannabis businesses, the guidance requires financial institutions to design and implement a thorough customer due diligence review – burdens that come at a cost.
Naturally, compliance costs incurred by banks to service cannabis operators are passed on to the customer, and fees of $2,500 per month per account are not uncommon.
Distressed cannabis operations may not have the cash flow to afford banking services – at least not at the outset of a receivership.
Further compounding the banking problem, some banks that are open to cannabis are not open to receiverships, limiting banking options even more.
A receiver, therefore, must be prepared to quickly secure all cash assets of the receivership entity and ensure appropriate internal controls are in place to control cash.
Paula Durham is a director in J.S. Held’s corporate finance business unit. She is a certified fraud examiner and certified commercial cannabis expert. Reach her at PDurham@jsheld.com.
Scott E. Evans, CPA, CFF, ABV, is a managing director in J.S. Held’s corporate finance business unit. Reach him at SEvans@jsheld.com.
Home / Finance
Herbl collapse signals wider fallout in California marijuana industry
author Chris Roberts, Reporter
July 6, 2023
California-based marijuana distribution giant Herbl is going to the courts in a bid to recover some of the roughly $10 million it claims retailers owe the company, which fell into receivership in June.
At the same time, according to court and investor documents, at least one of Herbl’s former brand partners – Sunset Connect – is suing to recover a six-figure debt the San Francisco maker of pre-rolls claims that Herbl owes and refuses to pay, records show.
The unprecedented struggle over what’s left of the once-prominent distribution company is a wave in a broader ripple effect that observers fear could sink more California cannabis businesses amid a cash squeeze plaguing the state’s marijuana industry.
In terms of what’s left of Santa Ana-based Herbl, retailers, brands, investors and creditors as well as state and federal tax collectors appear to be in a race to be the first to collect money from a rapidly vanishing pot.
Herbl’s unprecedented collapse is also a test case for the U.S. marijuana industry as a whole.
Federal prohibition means cannabis companies can’t use typical avenues for businesses in such financial straits, including bankruptcy proceedings that would allow for debt to be restructured and certain assets protected.
In Herbl’s case, “it is understood from the terms of the receivership that investors and claimants will be prioritized over the brands seeking payment,” said Alexis Lazzeri, a Los Angeles-based attorney at Manzuri Law.
In addition to Pasadena-based East West Bank, Herbl’s main lender, Herbl’s investors include New York City-based Roystone Capital Management.
Roystone did not respond to a request for comment.
It’s unclear how much Herbl may owe its erstwhile brand partners, but observers said those cannabis companies may be least likely to recover money owed.
Herbl has yet to make a public statement about its collapse.
Nor did it directly inform its partners.
‘Destined to happen’
The Herbl situation is also amplifying the voices of critics who argue that California’s mandatory distribution model as well as current state tax structure are unworkable.
That’s particularly true in a bear market in which creditors are seeking either unrealistically quick returns on their investments or calling back their capital from cash-poor businesses.
“I think this was destined to happen, the way the California market is set up,” said Griffen Thorne, a Los Angeles-based attorney and corporate law specialist at Harris Bricken, an international firm with a specialized cannabis practice.
“I don’t think it’s an Herbl thing. It’s just a symptom of the way the industry was set up and the way the market is going right now.” Designed to fail, like the Canadian market.
“There’s going to be a lot of fighting over unsecured debt,” he added.
“There’s a lot of people out there vying for money, and it’s going to be hard for those folks to get paid.
“This is going to be the first of many failures and flameouts we’re going to see as a result of the creditor crunch.
“It’s just not going to be clean, and, unfortunately, this is where we’re at with the industry.
Anatomy of a struggle
Court records in Los Angeles and Orange counties show Herbl is suing at least 10 retailers and delivery services for unpaid debts.
Past-due amounts range from $22,000, owed by Southern California-based General Verde Organics, to more than $123,000 owed by Urban Buds, a Los Angeles-area delivery service, according to court records.
Urban Bud did not respond to requests for comment. General Verde could not be reached for comment.
Herbl’s collection efforts began earlier this spring, before the company’s struggles became publicly known, though attorneys for Herbl filed several complaints seeking past-due bills in June, court records show.
How much Herbl, in turn, owes the brands whose products it distributed is not known.
Also unknown is Herbl’s potential overdue tax liability to the state and the IRS.
Herbl fell into receivership in early June after the company’s main lender, East West Bank, called in a key loan, as MJBizDaily first reported.
The bank’s aggressive collection efforts set off a chain reaction that broke the already weakened company.
According to an undated investor update from Herbl founder and CEO Mike Beaudry obtained by MJBizDaily, East West canceled Herbl’s line of credit in March.
Herbl was already “in desperate need of new capital” after an attempted raise the previous August resulting in no new investors “despite (the company’s) willingness to extend extremely favorable terms,” Beaudry told investors in the update.
At the same time that East West canceled Herbl’s line of credit, the bank demanded the company start repaying a $5 million loan “in increments of $250k per week or face immediate foreclosure proceedings,” Beaudry wrote.
‘Uniquely vicious’
That “bloodthirst” was “uniquely vicious, but not surprising given that the distribution model essentially makes distributors act as banks to the cannabis industry, fronting money for retailers,” Manzuri Law’s Lazzeri said.
“It might also be an indication of a loss in trust in the state of the cannabis industry and a lack of incentive to continue to hold it up,” she added.
Herbl made the bank payments, but the resulting cash crunch – coupled with spiraling overdue accounts-receivable from retailers that ballooned to “nearly $10 (million), of which $7M+ is significantly in arrears” – “forced us to begin missing payments with our brand partners,” Beaudry wrote.
“That, in turn, caused our brand partners to begin exiting our platform.”
The resulting downward spiral came to a head in June. Brands publicly announced they were leaving Herbl before Herbl employees posted farewells on social media.
“We are working with East West Bank on next steps, which we anticipate will involve a process of liquidating HERBL’s assets,” Beaudry noted in the investor update.
David Hafner, a spokesperson for California’s Department of Cannabis Control, told us that regulators are ‘informed that Herbl is in receivership and is communicating with the licensee and receiver to address issues related to the licenses.”
“As with any licensed business in California, cannabis licensees who have unpaid invoices can avail themselves of any applicable legal processes to recover funds,” Hafner continued.
“We encourage our licensees to seek out the appropriate, legal solutions to resolve their matters.”
Herbl also does business in Nevada, where its operations are so far unaffected, Beaudry wrote in the investor update.
Brands left out
One of those brands, Sunset Connect, did just that.
In a June 20 lawsuit filed in San Francisco Superior Court, Sunset Connect is seeking compensation for more than $130,000 worth of pre-rolls that Herbl sold to retailers.
That product was sold and Herbl collected payment, but then Herbl informed the brand that “they would not be paying,” the lawsuit alleges.
Ali Jamalian, Sunset Connect’s founder and owner, told MJBizDaily via text that Herbl “did a great job as a full-service distributor.”
However, the subsequent “lack of transparency and willingness to make so many brands a casualty of said lack of transparency is not excusable,” he added.
“I for one never even received any communications announcing their receivership or inability to pay, not sure if other brands did but I doubt it.”
Home / Finance
Herbl collapse signals wider fallout in California marijuana industry
author Chris Roberts, Reporter
July 6, 2023
California-based marijuana distribution giant Herbl is going to the courts in a bid to recover some of the roughly $10 million it claims retailers owe the company, which fell into receivership in June.
At the same time, according to court and investor documents, at least one of Herbl’s former brand partners – Sunset Connect – is suing to recover a six-figure debt the San Francisco maker of pre-rolls claims that Herbl owes and refuses to pay, records show.
The unprecedented struggle over what’s left of the once-prominent distribution company is a wave in a broader ripple effect that observers fear could sink more California cannabis businesses amid a cash squeeze plaguing the state’s marijuana industry.
In terms of what’s left of Santa Ana-based Herbl, retailers, brands, investors and creditors as well as state and federal tax collectors appear to be in a race to be the first to collect money from a rapidly vanishing pot.
Herbl’s unprecedented collapse is also a test case for the U.S. marijuana industry as a whole.
Federal prohibition means cannabis companies can’t use typical avenues for businesses in such financial straits, including bankruptcy proceedings that would allow for debt to be restructured and certain assets protected.
In Herbl’s case, “it is understood from the terms of the receivership that investors and claimants will be prioritized over the brands seeking payment,” said Alexis Lazzeri, a Los Angeles-based attorney at Manzuri Law.
In addition to Pasadena-based East West Bank, Herbl’s main lender, Herbl’s investors include New York City-based Roystone Capital Management.
Roystone did not respond to a request for comment.
It’s unclear how much Herbl may owe its erstwhile brand partners, but observers said those cannabis companies may be least likely to recover money owed.
Herbl has yet to make a public statement about its collapse.
Nor did it directly inform its partners.
‘Destined to happen’
The Herbl situation is also amplifying the voices of critics who argue that California’s mandatory distribution model as well as current state tax structure are unworkable.
That’s particularly true in a bear market in which creditors are seeking either unrealistically quick returns on their investments or calling back their capital from cash-poor businesses.
“I think this was destined to happen, the way the California market is set up,” said Griffen Thorne, a Los Angeles-based attorney and corporate law specialist at Harris Bricken, an international firm with a specialized cannabis practice.
“I don’t think it’s an Herbl thing. It’s just a symptom of the way the industry was set up and the way the market is going right now.” Designed to fail, like the Canadian market.
“There’s going to be a lot of fighting over unsecured debt,” he added.
“There’s a lot of people out there vying for money, and it’s going to be hard for those folks to get paid.
“This is going to be the first of many failures and flameouts we’re going to see as a result of the creditor crunch.
“It’s just not going to be clean, and, unfortunately, this is where we’re at with the industry.
Anatomy of a struggle
Court records in Los Angeles and Orange counties show Herbl is suing at least 10 retailers and delivery services for unpaid debts.
Past-due amounts range from $22,000, owed by Southern California-based General Verde Organics, to more than $123,000 owed by Urban Buds, a Los Angeles-area delivery service, according to court records.
Urban Bud did not respond to requests for comment. General Verde could not be reached for comment.
Herbl’s collection efforts began earlier this spring, before the company’s struggles became publicly known, though attorneys for Herbl filed several complaints seeking past-due bills in June, court records show.
How much Herbl, in turn, owes the brands whose products it distributed is not known.
Also unknown is Herbl’s potential overdue tax liability to the state and the IRS.
Herbl fell into receivership in early June after the company’s main lender, East West Bank, called in a key loan, as MJBizDaily first reported.
The bank’s aggressive collection efforts set off a chain reaction that broke the already weakened company.
According to an undated investor update from Herbl founder and CEO Mike Beaudry obtained by MJBizDaily, East West canceled Herbl’s line of credit in March.
Herbl was already “in desperate need of new capital” after an attempted raise the previous August resulting in no new investors “despite (the company’s) willingness to extend extremely favorable terms,” Beaudry told investors in the update.
At the same time that East West canceled Herbl’s line of credit, the bank demanded the company start repaying a $5 million loan “in increments of $250k per week or face immediate foreclosure proceedings,” Beaudry wrote.
‘Uniquely vicious’
That “bloodthirst” was “uniquely vicious, but not surprising given that the distribution model essentially makes distributors act as banks to the cannabis industry, fronting money for retailers,” Manzuri Law’s Lazzeri said.
“It might also be an indication of a loss in trust in the state of the cannabis industry and a lack of incentive to continue to hold it up,” she added.
Herbl made the bank payments, but the resulting cash crunch – coupled with spiraling overdue accounts-receivable from retailers that ballooned to “nearly $10 (million), of which $7M+ is significantly in arrears” – “forced us to begin missing payments with our brand partners,” Beaudry wrote.
“That, in turn, caused our brand partners to begin exiting our platform.”
The resulting downward spiral came to a head in June. Brands publicly announced they were leaving Herbl before Herbl employees posted farewells on social media.
“We are working with East West Bank on next steps, which we anticipate will involve a process of liquidating HERBL’s assets,” Beaudry noted in the investor update.
David Hafner, a spokesperson for California’s Department of Cannabis Control, told us that regulators are ‘informed that Herbl is in receivership and is communicating with the licensee and receiver to address issues related to the licenses.”
“As with any licensed business in California, cannabis licensees who have unpaid invoices can avail themselves of any applicable legal processes to recover funds,” Hafner continued.
“We encourage our licensees to seek out the appropriate, legal solutions to resolve their matters.”
Herbl also does business in Nevada, where its operations are so far unaffected, Beaudry wrote in the investor update.
Brands left out
One of those brands, Sunset Connect, did just that.
In a June 20 lawsuit filed in San Francisco Superior Court, Sunset Connect is seeking compensation for more than $130,000 worth of pre-rolls that Herbl sold to retailers.
That product was sold and Herbl collected payment, but then Herbl informed the brand that “they would not be paying,” the lawsuit alleges.
Ali Jamalian, Sunset Connect’s founder and owner, told MJBizDaily via text that Herbl “did a great job as a full-service distributor.”
However, the subsequent “lack of transparency and willingness to make so many brands a casualty of said lack of transparency is not excusable,” he added.
“I for one never even received any communications announcing their receivership or inability to pay, not sure if other brands did but I doubt it.”
S&B is a dud. Lol.
Home / All U.S.
Philip Morris buying Israeli cannabis firm for up to $650M, report says
Matt Lamers, International Editor
July 19, 2023
Multinational tobacco giant Philip Morris International is buying the Israeli cannabis tech firm Syqe Medical in a deal worth up to $650 million, according to the Israeli business newspaper Calcalist.
Syqe’s chief product is a metered-dose pharmaceutical-grade inhaler that allows patients to measure an exact dose of medical cannabis.
If completed, the deal would mark one of the biggest investments in the cannabis space by a tobacco producer in recent years.
In 2018, Altria Group, one of the largest tobacco companies in North America, pumped 2.4 billion Canadian dollars ($1.8 billion) into Ontario-based cannabis producer Cronos Group, though the doomed Canadian company is now looking for a buyer.
The following year, British tobacco giant Imperial Brands invested CA$123 million in Toronto-based cannabis producer Auxly Cannabis Group.
Philip Morris’ reported $650 million agreement to purchase Syqe would make the Israeli company one of the most valuable cannabis firms in the world.
Both Syqe Medical and Philip Morris declined to comment.
According to Calcalist, the pending deal consists of milestones.
Philip Morris is investing $120 million upfront in Syqe.
If the Israeli company obtains approval from the U.S. Food and Drug Administration for its inhaler following clinical trials, Philip Morris would purchase the Syqe shares it doesn’t already own, bringing the total price to $650 million, according to the Calcalist report.
Owen Bennett, a cannabis and tobacco equity analyst for New York-based investment bank Jefferies Group, wrote on Tuesday that the $650 million valuation would make Syqe the seventh most valuable cannabis company in the world.
Bennett said the move could help Philip Morris tap the vaped medical cannabis market, which he pegged at $22 billion in the next 10 to 15 years.
“There is a significant opportunity in cannabis, spanning wellness and healthcare,” Bennett noted.
Philip Morris isn’t entirely new to the medical cannabis tech space.
The company earlier invested $20 million in Syqe Medical when it was a startup.
Philip Morris’ move to buy Syqe Medical comes two years after the New York-based cigarette maker told Bloomberg News it was analyzing the marijuana industry for market opportunities.
“We are doing all this work and will determine one day what avenues to pursue,” then-CEO Andre Calantzopoulos said at the time.
“But our priority is what we’re doing with our smoke-free products, and that’s where I would stay on cannabis,” he said.
Calantzopoulos is now executive chairman.
The Calcalist report said Syqe holds approximately 120 patents.
The inhaler is currently available in Israel and Australia.
It was approved in Canada in 2021 as only the fourth medical device for a cannabinoid vaporizer, but it doesn’t appear to have made it to market.
The inhaler is reported to have taken eight years and $83 million to develop.
Home / All U.S.
Philip Morris buying Israeli cannabis firm for up to $650M, report says
Matt Lamers, International Editor
July 19, 2023
Multinational tobacco giant Philip Morris International is buying the Israeli cannabis tech firm Syqe Medical in a deal worth up to $650 million, according to the Israeli business newspaper Calcalist.
Syqe’s chief product is a metered-dose pharmaceutical-grade inhaler that allows patients to measure an exact dose of medical cannabis.
If completed, the deal would mark one of the biggest investments in the cannabis space by a tobacco producer in recent years.
In 2018, Altria Group, one of the largest tobacco companies in North America, pumped 2.4 billion Canadian dollars ($1.8 billion) into Ontario-based cannabis producer Cronos Group, though the doomed Canadian company is now looking for a buyer.
The following year, British tobacco giant Imperial Brands invested CA$123 million in Toronto-based cannabis producer Auxly Cannabis Group.
Philip Morris’ reported $650 million agreement to purchase Syqe would make the Israeli company one of the most valuable cannabis firms in the world.
Both Syqe Medical and Philip Morris declined to comment.
According to Calcalist, the pending deal consists of milestones.
Philip Morris is investing $120 million upfront in Syqe.
If the Israeli company obtains approval from the U.S. Food and Drug Administration for its inhaler following clinical trials, Philip Morris would purchase the Syqe shares it doesn’t already own, bringing the total price to $650 million, according to the Calcalist report.
Owen Bennett, a cannabis and tobacco equity analyst for New York-based investment bank Jefferies Group, wrote on Tuesday that the $650 million valuation would make Syqe the seventh most valuable cannabis company in the world.
Bennett said the move could help Philip Morris tap the vaped medical cannabis market, which he pegged at $22 billion in the next 10 to 15 years.
“There is a significant opportunity in cannabis, spanning wellness and healthcare,” Bennett noted.
Philip Morris isn’t entirely new to the medical cannabis tech space.
The company earlier invested $20 million in Syqe Medical when it was a startup.
Philip Morris’ move to buy Syqe Medical comes two years after the New York-based cigarette maker told Bloomberg News it was analyzing the marijuana industry for market opportunities.
“We are doing all this work and will determine one day what avenues to pursue,” then-CEO Andre Calantzopoulos said at the time.
“But our priority is what we’re doing with our smoke-free products, and that’s where I would stay on cannabis,” he said.
Calantzopoulos is now executive chairman.
The Calcalist report said Syqe holds approximately 120 patents.
The inhaler is currently available in Israel and Australia.
It was approved in Canada in 2021 as only the fourth medical device for a cannabinoid vaporizer, but it doesn’t appear to have made it to market.
The inhaler is reported to have taken eight years and $83 million to develop.
RE-DOOMED
CANNABIS CARNAGE
CALEB JULY 18, 2023
Cannabis carnage continues as shares of Canopy Growth fell 40% the other morning on the Toronto Stock Exchange. This came after the company announced it was issuing new shares to reduce its debt load.
Meanwhile, Organigram posted a net loss of $213.5 million for its third quarter. The CEO, Beena Goldenberg, blamed “THC inflation.” That is, companies that exaggerate their THC levels to boost higher sales.
Organigram’s total net revenue for the quarter declined by 14%, after a 17% decline from the previous quarter.
Yet, the CEO thinks the solution is to complain to Health Canada about “THC inflation.” She thinks flower products showing 28% and 32% THC are impossible.
“This is not something that even the most advanced cultivation techniques could make happen,” Goldenberg said in a press release.
As we’ve been saying for years – Canadian cannabis legalization was a lesson in crony capitalism.
The original homesteaders – “B.C. Bud” – were labelled “organized crime” and ignored during the legalization process. “Stakeholders” and public health busybodies wrote the rules.
Canadian consumers may love the novelty and convenience of legal weed, but underneath the surface, it’s cannabis carnage.
CANNABIS CARNAGE – CANOPY
Cannabis Carnage
Just one day before a vital debt maturity date, Canopy announced they were diluting their shares. The cannabis carnage began by gutting the WEED-T stock by 40 percent.
The idea is to shave $ 437 million in debt from the company’s balance sheet. But some analysts have suggested that Canopy cannot claw its way out of debt. That the company’s true stock value is zero.
Canopy’s last earnings report showed a $1.4 billion debt hole and less than $ 800 million in cash. A far cry from the hyped-up nonsense in 2018 and 2019, when legal cannabis first hit the market.
The fact is: Canopy has never been profitable. Like the other large-scale licensed producers, they’ve never been cash-flow positive. Canopy’s latest fiscal year ended in March with a net loss of $ 3.3 billion.
To stem the cannabis carnage, Canopy is paying $ 225 million in convertible senior notes. With lenders holding nearly $ 200 million in debt agreeing to a swap deal.
Canopy will pay the debt holders $ 101 million in cash, 90.4 million common shares, and $40.4 million in new convertible debt that lenders can convert to common spares at 55 cents a share.
Analysts say Canopy may need to issue 73 million new shares at this price. Currently, the company has 558 million outstanding shares. The value of these shares has been steadily declining since early 2021.
In other words – Canopy is addressing its debt issues by significantly diluting existing investors. The stock is down over 99 percent compared to all-high times in the months leading up to legalization.
Cannabis carnage, indeed.
CANNABIS CARNAGE – ORGANIGRAM
Cannabis Carnage
The cannabis carnage at Organigram is different from Canopy’s problems.
Both stem from the fact that these highly-leveraged, capital-intensive, politically-connected cannabis companies aren’t as popular as your small-time “illicit” grower or mom-and-pop micro licence holder.
But where Canopy is trying to do the right thing by clawing out of a financial sinkhole, Organigram runs to the authorities.
They’re complaining they’ve been “disproportionately negatively impacted by THC-inflation.” Their evidence for THC inflation is
a) Lack of standard testing for cannabis potency via Health Canada
b) The number of cannabis flower products labelled 30%+ THC has increased ten-fold in one year
It’s almost like new players are entering the field and learning how to grow quality cannabis. But according to the lacklustre minds on the board at Organigram, these high THC levels are “not something that even the most advanced cultivation techniques could make happen.”
In response to competition, Organigram’s CEO said they had to cut pricing “so we could address the value equation to consumers.”
The cannabis carnage at Organigram is a result of dealing with market competition. Something these large producers aren’t accustomed to. First, as one of Harper’s medical producers, then as one of Justin’s front-in-line recreational producers, Organigram has enjoyed a sizeable market share.
Alongside pot giants like Canopy, Tilray, or Aurora, Organigram enjoyed the benefits of being one of the few market players.
But now, there are hundreds of licensed cannabis growers in Canada. And consumer preference suggests small-scale (potent) craft strains are superior to the sea-of-green value bud these large producers specialize in.
But the issue must be with consumers.
“We’ve been sending in comments to Health Canada, we’ve been talking to the (provincial cannabis wholesale) boards, and we’ve been talking to other labs and really looking at finding solutions to address this issue,” said the Organigram CEO.
WHAT’S NEXT FOR CANNABIS IN CANADA?
From excessive taxes, zero tolerance on marketing, and government monopoly distributors, to other regulations driving up the costs of doing business – cannabis carnage in Canada stems from a botched legalization scheme.
Even Organigram’s concern over “THC inflation” isn’t entirely out to lunch. Canadian cannabis regulations allow for a 15% discrepancy in either direction. So a flower product labelled 30% THC may only be 15%.
And when it comes to Organigram’s legal battle with Health Canada concerning potent extracts, we 100% side with the cannabis producer.
But it’s hard to feel sympathy for these Leviathan cannabis producers.
Producers who were more concerned with selling equity than quality weed. Producers who didn’t step up to fund medical cannabis lawsuits. Cannabis producers who didn’t challenge the narrative that B.C. Bud (their market competition) wasn’t a bunch of violent, criminal gangsters.
The chickens are coming home to roost. Are these large producers ready to reap what they sowed? The cannabis carnage was foreseeable. And it’s far from over.
DOOMED
FOOTNOTE(S)
https://laws-lois.justice.gc.ca/eng/regulations/SOR-2018-144/FullText.html
https://www.businesswire.com/news/home/20230713792265/en/Organigram-Reports-Third-Quarter-Fiscal-2023-Results
https://www.thecanadianpressnews.ca/business/shares-in-cannabis-company-canopy-growth-plunge-after-debt-reduction-plan-announced/article_221e177f-0a4e-5cdc-8c8e-7d9bb7e3b5fd.html
https://mjbizdaily.com/cannabis-operator-organigram-posts-ca213-5-million-loss/
https://www.theglobeandmail.com/business/article-canopy-stock-falls-36-per-cent-after-cannabis-company-dilutes-shares/
Vaping Propelyne Glycol is great for your health.
Vaping and buying Crappy Growth shares is all the mood.
Headz will stick to flowers and oil.
90,000,000 shares to scarf up…
Home / Cultivation
Marijuana grower Canopy eyes share consolidation after Nasdaq warning
By MJBizDaily Staff
July 17, 2023
Canadian cannabis producer Canopy Growth plans to seek approval to consolidate its shares after the Smiths Falls-based company was notified by the Nasdaq that it does not meet the stock exchange’s listing standards.
Maintaining a minimum bid price of at least $1 per share is one of the Nasdaq’s listing requirements.
However, the closing bid price of Canopy’s shares has been below $1 per share for 30 consecutive business days.
Under the Nasdaq rules, Canopy has 180 calendar days from the issuance of the letter on July 11 to regain compliance.
The shares will continue to be traded on the exchange in the meantime.
In Canada, Canopy lists on the Toronto Stock Exchange. The Nasdaq warning doesn’t affect that listing.
In a news release, Canopy said it is evaluating all “available options” to resolve the deficiency and regain compliance.
To that end, Canopy plans to seek permission from shareholders to consolidate its shares at the company’s next annual meeting, which is set for Sept. 25.
The proposal will consist of a consolidation range between one post-consolidation common share for every five to 15 outstanding pre-consolidation common shares.
Under the proposal, Canopy Growth’s board would have permission to execute the share consolidation until Sept. 25.
A number of other Canadian cannabis producers received similar warnings in the past year.
Early last year, Quebec-based Hexo Corp. and Calgary-headquartered Sundial Growers also received notices from the Nasdaq that they were not compliant with the exchange’s continued listing standards.
Those warnings prompted share consolidations for both businesses.
Separately, on July 13, 2023, Canopy entered into negotiated redemption agreements with holders of its 4.25% convertible senior notes, which had been due July 15.
Under the agreements, Canopy redeemed approximately 193 million Canadian dollars ($160 million) of the aggregate principal amount for cash newly issued common shares, and newly issued unsecured convertible debentures.
That will consist of:
CA$101 million in cash.
The issuance of 90,430,920 shares.
The issuance of approximately CA$40.4 million of debentures.
Home / Canada
Cannabis operator Organigram posts CA$213.5M loss, frets over THC inflation
author profile pictureBy Solomon Israel
July 16, 2023
Hype & b.s.
New Brunswick-based cannabis grower and manufacturer Organigram Holdings posted a net loss of 213.5 million Canadian dollars ($162.1 million) for its third quarter, driven by a CA$191.2 million impairment loss.
The impairment charges for the quarter ended May 31 included CA$37.9 million in intangible assets and goodwill as well as CA$153.3 million in property, plant and equipment.
“A meaningful contributing factor to the conditions that led to the quantum of the impairment charge related to the impact to flower sales and margins due to THC inflation,” Organigram noted in a news release.
Organigram CEO Beena Goldenberg acknowledged on a Friday earnings call that THC inflation – the dishonest practice of labeling cannabis products with exaggerated THC levels – is not a new phenomenon.
But, she added, it “was more widespread in the last year.”
Goldenberg said nearly 50% of cannabis flower sales in the third quarter consisted of flower labeled as containing 26% THC or more.
“And the number of SKUs (stock-keeping units) that have THC labeled values above 26% has doubled in the last 10 months,” she said.
“Another stat that we look at is the number of SKUs labeled above 30% grew tenfold versus last year.”
Goldenberg said Organigram has been particularly impacted by THC inflation in the bulk 28-gram cannabis flower category.
“We see that there are some licensed producers who were averaging sales of flower in the 21% (to) 22% range … and now are showing 28% to 32%,” she said.
“This is not something that even the most advanced cultivation techniques could make happen,” Goldenberg continued.
“There is something – and I think it’s the increasing behavior – that’s really starting to impact the results.”
Goldenberg said Organigram had to cut flower pricing “so we could address the value equation to consumers.”
She said the Moncton-headquartered company is working to increase cannabis potency “in a proper way, with proper (THC) testing.”
“And at the same time, we have been talking to key stakeholders,” Goldenberg went on.
“We’ve been sending in comments to Health Canada, we’ve been talking to the (provincial cannabis wholesale) boards, and we’ve been talking to other labs and really looking at finding solutions to address this issue. ”
Organigram, which claimed a third-place position in Canadian recreational cannabis for May, said its adult-use net revenue grew by 7% from the second quarter to the third.
Total net revenue for the quarter was CA$32.8 million, a decline of 14% from the same quarter last year and a sequential decline of 17% from Organigram’s second quarter.
Goldenberg attributed the weaker quarterly financial results to:
Poor quality.
High prices.
“Lower-than-expected growth in the flower category.”
Delayed international cannabis shipments.
The company’s inability to sell its Edison Jolts cannabis lozenge product in light of a disputed decision by regulator Health Canada.
She said a judicial review of Health Canada’s decision regarding Jolts will take place “in late July.”
Organigram recently consolidated its shares to maintain its U.S. equity listing on the Nasdaq exchange.
The company’s shares lost value in early trading on Friday morning in the wake of the quarterly report.
Organigram reported cash of CA$75 million as of May 31 and said it has “sufficient liquidity available for the near to medium term.”
They will need every pennies…
You guys had never had it so good…
Time to splurge big time!
Canadian marijuana entrepreneurs shift focus to ‘micro’ licenses
Matt Lamers, International
July 17, 2023
Cannabis entrepreneurs are increasingly turning to smaller micro-cultivation facilities to manage costs and produce higher-quality marijuana at a time when the industry is facing a glut of “standard” product and falling prices.
That shift ultimately could help shrink some of the Canadian cannabis industry’s current supply glut, given that micro-class licensees operate smaller cultivation facilities.
At the end of 2022, Canada’s total indoor growing area was 28% lower than the all-time high reached in 2020.
Canada’s federal government last year handed out only 58 standard cultivation licenses, the lowest annual total since recreational cannabis was legalized in late 2018.
Unlike standard-class licenses – which face no size limits – micro-class permits allow cultivation only within a surface area of up to 200 square meters (2,150 square feet).
In 2022, the 130 new micro licensees outpaced standard ones for the second year in a row, and experts don’t expect that trend to reverse.
In 2021, there were 106 standard-class licenses compared with 134 micros.
That’s a reversal from the first three years of regulated cannabis production, when Canada handed out 396 standard licenses and 46 micros.
Experts say entrepreneurs are drawn to micro licenses because:
Micro-class licenses generally have lower startup costs compared to standards.
Micros can scale up to a standard-class license through a Health Canada-issued amendment.
The industry is already swimming in overproduction of low-quality cannabis that generally comes from “standard” production sites.
Mitchell Osak, president of Toronto-based Quanta Consulting, said consumer demand for craft, or high-quality, cannabis is also a factor.
“Micro licenses became more popular, reflecting a transition in consumer demand to craft-type of products,” he said.
Another factor that might have contributed to increased interest in micro-class licenses is a rule change by Health Canada shortly after the launch of the country's recreational market in October 2018.
In mid-2019, seven months after legalization, Health Canada said all new applicants would have to have their facility fully built out when submitting an application.
Previous to that, applicants were able to get approval for a building site before it was completed.
That effectively increased up-front costs for any large facility seeking a standard-class license.
More interest in craft
Consumers appear to be weighing price sensitivity with a desire for the highest-quality products they can afford at a particular price point.
Osak said that is leading consumers to micro-cultivators.
“It’s difficult to grow craft, high-THC, premium products in a large grow that has a standard license; these products can be grown and processed easier and at target batch quality in a smaller facility, which is supported by a micro license.”
Generally, smaller production schemes have a reputation for producing better-quality cannabis.
Typically, standard licenses were secured for larger grows, Osak said.
“Many of the existing standard licenses were used to address growing the value, or low-cost, segment," he said. "At the same time, some of the market shifted to premium, high-potency, craft-quality products.
“That makes sense financially. Their higher cost required more production to get a return on investment.
“Finally, like the wine industry, some consumers seek out and prefer authentic; but legal, craft products can only be found in a micro-licensed facility.”
Businesses with standard-class licenses are also seeking out production deals with micro-class license holders, such as Canopy Growth and Indiva.
“Some operators have figured out that getting a micro license, focusing on cultivation and using a large LP for distribution/retail activation or genetics is a more efficient and low-cost way of getting their weed to the market,” Osak said.
“It’s now very common for large LPs to outsource their craft production to micro licenses. Everyone wins.”
Too much cannabis
The shift to businesses with a much smaller growing area also in part stems from the fact that Canada faces a massive glut of low-quality cannabis.
Nationwide inventory of dried cannabis, both packaged and unpackaged, jumped to an all-time high of at least 1.47 billion grams (3.2 million pounds) as of December 2022, according to the latest data from Health Canada.
The federal regulator tracks overall unsold stockpiles of licensed producers, wholesalers and retailers.
The inventory, predominantly held by licensed producers, is approximately four times the amount of dried flower and pre-rolls sold at retail in Canada that year, according to Seattle-based cannabis data firm Headset.
At the end of 2022, Canada’s indoor growing area where cultivation activities occurred stood at 1,595,724 square meters (17.2 million square feet), per Health Canada's most recent data.
That's 28% lower than the all-time high of 2,217,216 square meters reached in 2020.
Canopy Growth collected $65 million from Canadian taxpayers, courtesy the federal government, to "rehire and retain" workers during covid-19.
As the city that never sleeps – it is known you can get whatever you want in NYC and unlicensed marijuana shops are there to help
New York is home to the Naked Cowboy, is the city with the most billionaires, and a reputation to get what you want when you want. Now it is famous for the huge number of unlicensed marijuana shops – even one close to City Hall.
Cannabis isn’t fresh to New York. Long before recreational (or adult-use) cannabis was legalized in 2021, there was a thriving underground cannabis market that supplied the Empire State. Decades of criminalization did not stop the spread of cannabis across the state, with New Yorkers developing a robust illicit market known for famed strains like Sour Diesel. The Marihuana Regulation & Tax Act effectively legalized adult-use cannabis on March 31st of 2021. While the Act specified a regulatory and licensing scheme to build a legal adult-use cannabis market, not everything has gone so smoothly.
The rollout of NY’s adult-use licensing program was initially delayed by former Gov. Cuomo, who did not select any members of the Cannabis Control Board (CCB) during his tenure. While now Gov. Hochul quickly established the CCB, thus kicking off the adult-use program, the unlicensed market was already starting to bloom. While some unlicensed operators continued selling upon legalization, many new operators saw this as a golden opportunity. Recently, New York has opened a few licensed storefronts, but their single-digit numbers pail in comparison to the estimated 1,400+ unlicensed shops. Some products seen in the current unregulated market resemble pre-legalization cannabis (such as pre-rolls or simple bags of cannabis flower), but many do not.
One only has to walk a couple Manhattan blocks to find a shockingly wide variety of cannabis products. Unlicensed operators have evolved, with many unlicensed products imitating licensed products (and non-cannabis products), through appropriating well-known brand iconography and/or simply using the recognizable California cannabis warning. What may be even more surprising however, is the fact that some unlicensed sellers are now selling “legal” cannabis. While their sale (and interstate trafficking) is not legal, the cannabis once was. Through diverting legal cannabis products to the illicit market at some point along the supply chain, these licensed operators make a side profit (free from their often-significant taxes). But does it even matter if people buy and sell unlicensed cannabis?
Every state, even those with robust licensed adult-use cannabis markets, have some sort of unlicensed cannabis market. While this was an inevitability in NY, the degree of unlicensed growth seen in New York is nearly unmatched. New Yorkers will smoke metric tons of cannabis, legal or not, every year. The underlying concern is the competition (or lack thereof) between unlicensed and licensed stores. Even upon the establishment of enough cannabis dispensaries to supply the state, unlicensed cannabis operators will be able to sell cannabis products for significantly cheaper. This is due to the much higher overhead cost of licensed operators and effective tax rates as high as 40-80% (which is in part due to excise taxes and the federal 280E problem). The inability for licensed operators to compete will not only result in widespread untested cannabis, but will directly hurt many of those most disenfranchised by the War on Drugs, such as the Conditional Adult-Use Retail Dispensary Licensees. But then how does the NYC, NY or the nation solve this?
NYC Pushes Unlicensed Cannabis Enforcement to Landlords
Terran Cooper
July 13,07,2023
In April 2023, New York City Councilmember Lynn C. Schulman introduced a bill to the City Council which would prohibit landlords from leasing to a commercial tenant engaged in the unlicensed sale of cannabis. After being approved by the Committee on Public Safety, the bill was sent to, and also approved by, the full Council on Thursday, June 22nd. It will now be sent to the desk of Mayor Eric Adams, who has 30 days to either sign the bill and enact it into law, or veto it.
If enacted, the bill would send city inspectors to suspected unlicensed cannabis stores, which currently number in the thousands. If the inspector finds that illegal cannabis is being sold on premises, the landlord would face a fine between $5,000 and $10,000. A second inspection would later take place, and if the landlord can provide proof that eviction proceedings have begun since the first inspection, the fines may be avoided. Along with the state agencies currently authorized to inspect for relevant violations, the bill would allow the mayor to designate any state agency to inspect for such. While the levying of fines against landlords could significantly reduce unlicensed cannabis stores, a certain provision of the bill may allow for a loophole to be exploited by these unlicensed stores, as further discussed below.
Actions against the illicit businesses themselves have already begun in earnest, as Governor Kathy Hochul granted the Office of Cannabis Management (OCM) with enforcement powers newly backed by the state’s FY 2024 Budget. The timing of the bill’s approval coincides with the Governor’s report that nearly $11 million worth of illicit cannabis products have been seized throughout the state so far. The additional step of fining landlords who knowingly rent to unlicensed operators has long been proposed as a deterrent against the illicit market.
The Existing Markets
New York effectively has two cannabis industries: the legal one, born of the Marihuana Regulation and Taxation Act (MRTA) in March 2021, and bound by the OCM’s rigid regulatory framework, and the illegal one, which is vastly larger, older, and unfettered by the restrictions placed on legitimate licensees, including the payment of taxes, and public safety prohibitions on operating in sensitive locations or selling to minors.
Long before the first state-licensed dispensaries opened their doors, it was clear that the two industries could not truly coexist. The unlicensed marketplace (AKA the legacy market, the gray/black market) has opportunistically exploded since the MRTA legalized cannabis throughout the state, and has continued to proliferate at light speed when compared to the legal market, the rollout for which has crawled sluggishly forward under the weight of bureaucracy. Even one of the states with the longest running legal adult-use (recreational) cannabis program, California, sees up to $8 billion in illegal sales every year, generating significantly more revenue than the legal market.
In response, politicians at every level of state government have proposed some sort of landlord accountability. The idea is that if landlords are discouraged from entering leases with these businesses or punished for having done so, operators will be unable to secure the necessary space or, in the event that they already signed a lease, will face eviction. In either event, these illicit operators will be forced to consider going entirely underground, closing their doors or, perhaps, will consider entering the legal marketplace and obtaining a dispensary license.
For many legacy operators, the latter may not be realistic. New York was the first state in the nation to prioritize justice-involved license applicants through its Conditional Adult-Use Retail Dispensary (CAURD) program. But nearly two and a half years after MRTA passed, and with thousands of adult-use cannabis applications submitted, there are only a handful of legally compliant dispensaries open for business in New York.
Landlords who lease space to unlicensed operators cannot plead ignorance to avoid fines. It was initially believed that a landlord could not lease directly to a CAURD license holder, but rather would enter into a lease with the Dormitory Authority of the State New York (DASNY), which would then sublease the space to the license holder. The difficulty in locating and securing compliant premises has led to the OCM approving locations for non-DASNY controlled premises. Both DASNY leases and these stand-alone leases, which Falcon Rappaport & Berkman has extensive experience with, are explicit in their structure and purpose. For these unlicensed stores, landlords across the city enter into non-DASNY leases with tenants who conspicuously advertise THC products for sale. Under the proposed bill, these landlords would be at high risk of enforcement action, particularly after a city agency warning letter which could disallow any landlords’ claims of ignorance. Falcon Rappaport & Berkman can assist Landlords in drafting leases with more robust use restrictions to discourage unlicensed cannabis sales and ease eviction actions in the event such illegal use has occurred.
Unforeseen Consequences
Fining commercial landlords and/or encouraging them to evict illicit cannabis tenants is a predictable step in the implementation of New York’s legal cannabis market. Without it, legitimate license holders will continue to be at a disadvantage in the industry, and neither consumers nor the general public will reap the benefits of a well-regulated marketplace.
However, the way in which we fine these commercial landlords, or enact other enforcement action, must be carefully examined. A provision of the proposed bill, section C.1., specifies that written notice following an inspection (and presumably any future fines) are only for a property that is used to sell illicit cannabis products and “is not occupied for any other licensed or lawful purpose.” While the bill may still result in fines against landlords of unlicensed cannabis stores, this provision means that if the premises is used for another lawful purpose, these fines against the landlords may not apply. The existing unlicensed market consists of not only stand-alone cannabis stores, but of bodegas and convenience stores selling cannabis products, the landlords of which will likely avoid penalties under this proposed bill.
The complexity and adaptability of the unregulated market should not be underestimated. If enacted, this bill will hinder some significant competitors to adult-use dispensary licensees, but will be far from addressing the entire unregulated market in NY. Frequent reassessment of enforcement action and well-crafted policies will be necessary to ensure a flourishing New York adult-use cannabis industry.