Cannabis Industry Daily News

Cresco Labs plans to acquire four medical cannabis dispensaries in Ohio

Cresco Labs, a vertically integrated multistate marijuana company, said it agreed to purchase four Ohio medical marijuana dispensaries, currently operated by Verdant Creations, as the Illinois-based company increased its investment in what’s shaping up to be a lucrative market.

Cresco will pay $375,000 in cash for each store as well as $500,000 of the company’s subordinate voting shares.

The acquisition, which must be approved by the Ohio Board of Pharmacy, will give Cresco Labs a total of five dispensaries in the state, the maximum allowed by law.

The four dispensaries are located in Chillicothe, Cincinnati, Marion and Newark. They will join Cresco’s existing Ohio store, CY+ in Wintersville, which in 2018 became the first dispensary to receive approval to open in the state.

“We expect to drive increased revenue growth and operating leverage in this limited-license state,” Cresco’s CEO and founder, Charlie Bachtell, said in a news release.

Bachtell also pointed out that Ohio has 100,000-plus registered patients and experienced more than 30% growth in average weekly sales from February to April.

“With our experience in Illinois and Pennsylvania, we think Ohio is on its way to joining these states as one of the strongest-performing regulated cannabis programs in the country,” he added.

Ohio has experienced strong sales this year despite the coronavirus pandemic.

Through the end of April, roughly $50 million of medical marijuana was sold in Ohio, nearly matching the $58 million dispensaries in the state sold for the entirety of 2019.

Webinar to look at product preferences among marijuana consumers

Product preferences among cannabis consumers across the country will be the focus of a free webinar that Marijuana Business Daily is presenting Tuesday, May 26.

MJBizDaily‘s data editor, Eli McVey will speak, with Nancy Whiteman, CEO of Boulder, Colorado-based edibles company Wana Brands, and Liz Conners, data analyst for Seattle-based Headset.

The three will discuss data and insights regarding shifts in what consumers are looking for in products, ranging from THC levels to the choice between edibles and vaping.

The webinar also will offer insights on how product sales have shifted since March.

Sales volumes amid the COVID-19 pandemic have varied from state to state.

The webinar will begin at 1 p.m. ET/10 a.m. PT.

Register now for access.

Signs point to possible illicit cannabis activity in L.A. blast, report says

The Los Angeles Fire Department has launched a review of all smoke and vape shops in the city to ensure they’re storing explosive materials correctly after a recent explosion at Smoke Tokes that injured a dozen firefighters.

According to the Los Angeles Times, the LAFD will be working to identify all similar businesses and ensuring those companies are displaying mandatory warning placards denoting that potentially flammable substances are being stored on-site.

An investigation into the cause of the explosion is ongoing, and the probe now involves more than 50 staffers from the LAFD, the L.A. Police Department and the federal Bureau of Alcohol, Tobacco, Firearms and Explosives.

What investigators have not found is any evidence yet that Smoke Tokes was illegally manufacturing cannabis products with the butane canisters that likely caused the explosion, the Times reported.

Smoke Tokes is not a licensed cannabis business, and the Times reported that investigators have found no marijuana or any manufacturing setup inside the building where the explosion happened.

But Smoke Tokes might have been supplying illegal marijuana product manufacturers that use volatile solvents – such as butane – in the production process.

Several members of the Los Angeles’ legal marijuana industry told the Times the episode highlights the possible dangers of the unregulated cannabis market: Smoke Tokes was located in an area of the city that’s well-known for supplying illicit MJ operators.

The newspaper noted it has been unable to contact the owner of Smoke Tokes.

Marijuana MSO Harvest announces layoffs, other pivots in $24M cost-cutting

Arizona-based multistate cannabis operator Harvest Health & Recreation revealed that it recently cut $24 million in expenditures – including laying off an undisclosed number of workers – in an effort to “rightsize” the company’s operations.

According to the Phoenix Business Journal, Harvest disclosed during a May 20 earnings call that a “small amount” of the company’s roughly 1,000 staffers have been let go and that many acquisition deals have been suspended to cut costs.

Harvest, which has a marijuana footprint in eight states, reported a net loss of just under $20 million against revenues of $45 million for the first quarter of 2020. That’s a much-improved performance over the fourth quarter of 2019, when Harvest lost $88.9 million.

CEO Steve White told the Business Journal that 80% of Harvest’s expenditures throughout 2020 – likely to total $10 million-$30 million on top of the $15 million the company spent in the first quarter – will focus on four key markets: its home base of Arizona as well as Florida, Maryland and Pennsylvania.

Harvest trades on the Canadian Securities Exchange as HARV and on the U.S. over-the-counter markets as HRVSF. 

High Times’ deal to buy cannabis grow, processing facilities falls apart

High Times Holding Corp.’s move to expand into marijuana operations hit a snag with the collapse of a deal to buy a cultivation and processing business in California.

The parent of the iconic High Times magazine said in a U.S. Securities and Exchange Commission filing that its planned acquisition of Humboldt Heritage was terminated by “mutual agreement” on May 15.

No purchase price was announced for the deal, which included Humboldt subsidiaries Humboldt Sun Growers Guild and Grateful Eight.

High Times Executive Chair Adam Levin had touted the Humboldt agreement as one that would add “200+ of the best cannabis-producing farms in the world and the rest of the capabilities we’ll need to grow into the future as a larger High Times family.”

It’s unclear how the termination of the transaction, which would have provided High Times a large marijuana supply chain, will affect the company’s plan to aggressively expand into retail in California.

High Times recently agreed to acquire 13 operating and planned cannabis retail outlets in California from multistate operator Harvest Health & Recreation for $80 million, mostly in stock.

That deal is challenging because the licenses involve a number of jurisdictions and minority partners.

High Times also has been trying since 2018 to complete a Regulation A public stock offering. The offering has been extended frequently, most recently to June 30, according to regulatory documents.

High Times has said publicly that it has raised more than $20 million, but its initial goal was $50 million.

Peter Horvath recently became High Times’ third CEO in a little more than a year.

Nevada marijuana sales up 20% in 2019, but COVID-19 slows progress

Nevada marijuana sales for 2019 reached $692 million, a 20% increase from fiscal year 2018, but lost sales stemming from the market disruption caused by the coronavirus pandemic is throwing cold water on future projections.

That information comes from a new study by Las Vegas-based RCG Economics.

The report, “2020 Marijuana Economic & Fiscal Benefits Analysis: Nevada,” was commissioned by the Nevada Dispensary Association (NDA) to highlight revenue and other economic impacts the cannabis industry has had in Nevada in 2020.

The economic impact study projects that total marijuana sales in Nevada will hit $956 million by 2024. One caveat: The report and projections were based on pre-coronavirus conditions.

Nevada’s economy is largely dependent on tourist visits to Las Vegas and other areas of the state. So, because tourism has been dramatically slowed by the COVID-19 outbreak, those expectations must be tempered.

“Although COVID-19 may result in lower-than-projected sales and collections, it is helpful to know what the industry is capable of accomplishing and contributing to the state, given the right conditions,” said Riana Durrett, executive director of the NDA.

According to the report, Nevada’s marijuana industry created an estimated 8,200 jobs in licensed cannabis establishments and an additional 2,000 ancillary positions.

Earlier this month, recreational cannabis retailers in Nevada were allowed to resume in-store transactions.

In response to the coronavirus pandemic, regulators initially allowed adult-use sales only via delivery, then later permitted curbside pickups.

For more of Marijuana Business Daily’s ongoing coverage of the coronavirus pandemic and its effects on the cannabis industry, click here.

Cannabis firm Green Growth Brands gets initial creditor protection

Ohio-based marijuana retailer Green Growth Brands said Wednesday it has filed for insolvency protection in Canada.

The financially troubled multistate operator – with operations in Florida, Massachusetts and Nevada – trades on the U.S. over-the-counter markets as GGBXF and on the Canadian Securities Exchange as GGB.

Former Green Growth Brands CEO Peter Horvath, who resigned from the company in March, was recently appointed CEO of marijuana magazine publisher High Times Holding Corp.

Green Growth Brands received an initial protection order from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act, the federal bankruptcy and restructuring law in Canada.

Green Growth Brands’ U.S. subsidiaries, collectively known as GGB Group, “have always been cash-flow negative,” according to court filings that say the group faced “liquidity issues” starting in early 2019.

Efforts to find more financing “coincided with the cannabis market being less robust than anticipated, and as a result, investors becoming concerned about investing in cannabis operations,” according to a filing.

Green Growth Brands now has more than $100 million in secured debt and faces lawsuits in the U.S. and Canada.

The company has entered into a debtor-in-possession loan deal worth up to $7.2 million with one of its secured lenders, All Js Greenspace. All Js will also act as a stalking horse bidder if the court approves a sale and investment-solicitation process.

Green Growth Brands unsuccessfully attempted a hostile takeover of Canadian cannabis producer Aphria in late 2018 and early 2019.

More recently, the company announced it was trying to sell off its CBD retail business to focus on marijuana, then placed that CBD business into receivership.

LivWell continues Colorado expansion, buys marijuana retail chain Mindful

Colorado-based LivWell Enlightened Health continued its acquisition spree this month with the purchase of competing retail chain Mindful, which owns five cannabis stores in the state.

According to Denver alt-weekly Westword, the acquisition expands LivWell’s footprint to 22 storefronts in Colorado with the addition of Mindful’s shops in Aurora, Berthoud, Colorado Springs and Denver to the company’s portfolio.

Financial terms of the acquisition were not disclosed.

In April, LivWell acquired longtime Colorado edibles maker Sweet Grass Kitchen.

Michael Lord, LivWell’s senior vice president of business development, told Westword that 2020 is shaping up to be one of “incredible and strategic growth” for the company.

He said industry watchers should “stay tuned” for more possible acquisitions by LivWell.

The company also purchased Fort Collins marijuana retailer Infinite Wellness Center in 2019 and has been relocating various shops strategically around the Denver area, Westword reported.

Maine’s largest city OKs adult-use cannabis, caps store licenses at 20

Portland, Maine, has opted into the state’s recreational marijuana industry with plans that call for 20 retail licenses and a scoring bonus for applicants who have been residents for at least five years.

The City Council of Maine’s biggest city voted 8-1 to approve the proposed licensing ordinance after more than a year of deliberations, according to the Portland Press Herald.

Councilors rejected a city staff recommendation to drop the residency scoring bonus.

The state recently decided it wouldn’t enforce a four-year residency requirement because officials didn’t believe the requirement could withstand a legal challenge by Maine’s largest medical cannabis operator, Wellness Connection of Maine.

Portland also will provide scoring points, according to the Press Herald, to applicants that fit the following categories:

  • Majority-owned by an economically disadvantaged applicant.
  • Experience in running regulated/licensed businesses.
  • Committed to creating well-paying jobs, good benefits, giving back to the community.
  • Have ownership of the retail location or a longstanding lease on the property.
  • Medical marijuana caregivers.
  • Well-capitalized, with at least $150,000 in liquid assets.

Roughly 40 Maine communities have opted into the state’s adult-use market so far.

The program was scheduled to launch this spring, but state officials recently said sales won’t start until enough stores are approved and ready to meet demand.

Maine’s voters legalized adult use in 2016, but former Gov. Paul LePage delayed implementation.

The updated Marijuana Business Factbook estimates that in-state customers will range from 190,000 to 230,000. Maine recreational cannabis stores also are expected to benefit from the state’s huge tourism industry.

Michigan expands parameters of marijuana social equity program

Michigan is again revamping its marijuana social equity program in an attempt to draw more entrepreneurs impacted by the war on drugs into the industry.

To date, the program has awarded only two recreational marijuana business licenses – for an event organizer and a retailer – though 172 applicants have been deemed eligible for permits, MLive.com reported.

So, beginning June 1, the program will offer a 40% discount on the $6,000 application fee and permit fees that range from $25,000 for retailers to $40,000 for growers and processors.

In addition, any applicant with a marijuana-related felony will qualify for the program as long as the crime wasn’t for selling to a minor, according to MLive.com.

Applicants with marijuana-related misdemeanors or anyone who has lived in a “designated social equity community” for five of the past 10 years will also qualify for a 25% discount on license fees.

A 10% discount will be granted to anyone who’s been a registered medical marijuana caregiver for at least two years between 2008 and 2017.

One of the hurdles Michigan’s social equity program has encountered is that many applicants who could benefit from it live in one of the roughly 1,400 cities that have thus far opted to ban recreational marijuana businesses.

But the program has also been updated to expand the number of qualifying communities, to 184 from 41, MLive.com reported.

Cannabis chain Strawberry Fields says no to being acquired in $31 million deal

Colorado Springs, Colorado-based Strawberry Fields terminated a $31 million agreement in which Denver-based Schwazze would have acquired the marijuana retail chain.

Strawberry Fields filed paperwork with the U.S. Securities and Exchange Commission to terminate the arrangement, according to Denver alt-weekly Westword.

Schwazze, a vertically integrated marijuana company, and Strawberry Fields agreed to the stock and cash deal in 2019.

At the time of the Strawberry Fields deal, Schwazze was known as Medicine Man Technologies and was in the midst acquiring 11 cannabis companies for the year.

Rich Kwesell, co-owner of Strawberry Fields, told Westword the scuttling of the deal wasn’t the result of the coronavirus pandemic or the subsequent economic fallout.

He said the company wants to remain independent “for the near future” but is readying other plans for down the road.

“Our team has major developments coming into fruition and new products being released. It’s not the right time for us,” Kwesell said.

Strawberry Fields, which worked with Schwazze for many years, owns four recreational dispensaries in Colorado and operates a greenhouse grow. The company plans to stay independent, Kwesell told Westword.

Schwazze, which took the name of a proprietary marijuana pruning technique developed by the company, trades on the over-the-counter markets as SHWZ.

Overtime-pay issue leads CO marijuana security firm to US Supreme Court

A cannabis security company based in Colorado has petitioned the U.S. Supreme Court to review a lower-court decision requiring state-legal marijuana businesses to adhere to federal labor laws such as overtime pay.

In its petition, Helix TCS argues that a ruling last September by the U.S. Court of Appeals for the 10th Circuit in Denver should be overturned because federal labor laws shouldn’t apply to workers engaged in illegal conduct – behavior that violates the federal Controlled Substances Act.

The closely watched case could have broad implications on how state-legal marijuana businesses compensate employees.

The 10th Circuit ruled that a lower court “correctly reasoned and case law has repeatedly confirmed that employers are not excused from complying with federal laws just because their business practices are federally prohibited.”

Helix countered that the 10th Circuit decision merely “deepens the confusion, conflict and lack of uniformity between state and federal law” regarding workers participating in the marijuana industry.

“In the absence of congressional action, which is not anticipated any time soon, this Court should rule that an individual perpetrating a federal drug crime is not entitled to federally mandated compensation for their efforts,” Helix wrote in its request for a Supreme Court review of the case.

Robert Kenney alleged in a suit that he and fellow Helix security guards regularly worked more than 40 hours a week for a 14-month span in 2016 and 2017 without receiving paid overtime in violation of the Fair Labor Standards Act (FLSA).