Cannabis Industry Daily News

San Francisco delays marijuana tax a second time to combat illicit market

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By MJBizDaily Staff

San Francisco authorities approved a second one-year suspension of the city’s marijuana business tax, a decision intended to help licensed cannabis businesses become more competitive with illegal dealers.

According to San Francisco TV station KPIX, the variable tax rate of 1%-5% on gross receipts for marijuana businesses will not be enforced until Jan. 1, 2023.

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The tax rate was originally approved by voters in 2018 and set to go into effect in January 2021.

But the San Francisco Board of Supervisors voted to push back the implementation by a year to New Year’s Day 2022.

The second delay is justified, Supervisor Rafael Mandelman said, because of the need to eradicate the underground cannabis market.

“Sadly, the illegal market is flourishing by undercutting the prices of legal businesses, which is bad for our economy as illegal businesses pay no taxes while subjecting workers to dangerous conditions and consumers to dangerous products,” Mandelman said in a statement reported by KPIX.

“Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators.”

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The move also comes after a spate of robberies at San Francisco Bay Area cannabis companies and other mainstream retailers such as Louis Vuitton, which likely lent even more support to the one-year tax delay.

Cannabis industry leaders in Oakland this week called for “tax amnesty” to give marijuana companies some financial wiggle room after the robberies, which reportedly affected at least 25 businesses in the Bay Area.

Emerald exiting Canada’s cannabis industry after losing over CA$200M

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Emerald Health Therapeutics plans to exit Canada’s recreational and medical cannabis sectors after racking up more than 200 million Canadian dollars ($156 million) in losses since its inception.

The Victoria, British Columbia-based business is the first mass-producer to choose to exit the cannabis industry.

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The move comes after Emerald Health reported years of losses, underscoring how challenging the industry is to navigate for some executive teams.

The company plans to sell off its recreational and medical cannabis assets and pivot to a focus on pharmaceutical development, where its board has more expertise, Emerald Health announced Monday.

Emerald Health grew rapidly with Canada’s burgeoning cannabis industry but ultimately never made a profit in the sector.

The company lost a total of CA$224.6 million between 2015 and June 2021.

In that time, the company’s workforce grew from a couple of dozen employees to 166 in 2019, then fell to 111 this year.

Emerald Health, which once was known by the corporate names T-Bird Pharma and Thunderbird Biomedical, owns various cannabis assets, including:

  • 100% of the shares of EHTC, a British Columbia-based license holder.
  • 100% of the shares of Verdélite Sciences, a Québec-based license holder.

At one time, Emerald Health owned 41.3% of Pure Sunfarms, arguably Canada’s most successful mass-producer of cannabis.

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However, after relations soured between the two parties, Village Farms International bought out Emerald Health earlier this year for CA$79.9 million, which included CA$60 million in cash and the remainder due six months from the closing date.

Emerald Health has had a turbulent year.

The former CEO, Avtar Dhillon, was arrested in the United States on Aug. 3 and charged with conspiracy to commit securities fraud as well as two counts of obstruction of a proceeding before the U.S. Securities and Exchange Commission (SEC), according to a Glacier Media news report.

Emerald said in a statement it became aware of Dhillon’s arrest on Aug. 5 but was “not aware of any improper trading in Emerald securities, and no allegations have been made against any other person associated with Emerald.”

Dhillon resigned as Emerald chair on Aug. 6.

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Read our exclusive guide for strategies and tips from expert cultivators who have amassed decades of experience studying horticulture lighting. Curated by MJBizDaily.

Inside:

  • Horticultural professionals debunk 8 common lighting myths in cannabis
  • How cannabis extraction companies can reduce energy costs
  • Why experts say the future of horticultural lighting is in LED technology
  • Cannabis lighting Glossary of Terms
  • Buyers checklist

He had been a director of the company since April 23, 2015, and also helmed the industry body Cannabis Canada Council in 2018.

The company’s CFO, Jenn Hepburn, stepped down in October.

In November, Emerald signed an agreement to co-launch, sell and distribute cannabis beverages. It’s unclear where that partnership will go with Emerald’s planned exit from cannabis.

Cannabis beverages have been a flop so far in Canada, with industrywide sales amounting to only CA$23.6 million, or just 1.3% of the Canadian cannabis market, in the first half of this year.

In March, Emerald Health withdrew a registration statement relating to securities to raise up to CA$150 million.

Earlier this year, Emerald Health delisted from the TSX Venture Exchange and listed its common shares on the Canadian Securities Exchange (CSE) in an attempt to try to capitalize on the American cannabis industry.

No progress appears to have been made to that end.

Emerald’s revenue in the latest quarter was CA$3.78 million with a net loss of CA$13.96 million.

The company’s shares, which are traded as EMH on the CSE, are down 99% from their peak in early 2018.

Treasury Secretary Yellen gives nod to marijuana banking reform

By MJBizDaily Staff

Treasury Secretary Janet Yellen expressed implicit support this week for allowing state-legal marijuana companies to access federal banking services – as a way to help tax collection.

According to the New York Post, Democratic Congressman Ed Perlmutter, a longtime sponsor of cannabis banking reform, asked Yellen at a U.S. House Financial Services Committee meeting whether she thought allowing legal marijuana firms access to big banks would help the Internal Revenue Service collect taxes.

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“Yes, of course it would,” Yellen reportedly answered.

Groups across the country, including large banks, increasingly have been advocating for the support of the Secure and Fair Enforcement (SAFE) Banking Act.

SAFE would allow banks to do business with state-legal marijuana companies without fear of federal reprisal.

Currently, many marijuana businesses deal only with cash, raising public security issues.

The U.S. House passed SAFE. but the legislation has yet to gain traction in the more conservative Senate. And now Senate Majority Leader Chuck Schumer wants to tackle comprehensive marijuana reform.

Key insights to inform decisions: MJBizFactbook 

Say hello to marijuana business data, curated by the editors of MJBizDaily to help cannabis industry leaders make informed decisions.

  • U.S. marijuana industry financials
  • Licensing, funding and investment trends
  • State-by-state guide to regulations, taxes and opportunities
  • Insights for business and investment strategy

The latest effort is to try to include SAFE in the defense spending bill.

Former Treasury Secretary Steven Mnuchin also articulated support for a legislative solution to cannabis banking.

Mnuchin agreed it was a public-safety problem and also expressed concerns about the IRS handling cash from marijuana businesses.

Constellation CEO Newlands exits board of cannabis producer Canopy

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Bill Newlands, CEO of Canopy Growth benefactor Constellation Brands, resigned from the board of directors of the struggling Canadian cannabis producer last week, according to a regulatory filing dated Nov. 29.

Newlands notified Canopy of his resignation Nov. 24, effective immediately.

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The resignation of Newlands comes on the heels of a major shake-up among Canopy’s senior management team, weeks after the company notified shareholders it no longer expects to be profitable this year.

However, Newlands’ exit – which is understood to have been in the works for some time – is not believed to be related to the C-suite shake-up.

The 63-year-old resident of Winnetka, Illinois, is being replaced on Canopy’s board by Garth Hankinson, the chief financial officer and executive vice president of New York-based Constellation, a major producer of beer, wine and spirits.

Constellation owns approximately 36.1% of Canopy’s issued and outstanding shares and is entitled to nominate four of Canopy’s directors.

Assuming full exercise of warrants and full conversion of notes, Constellation could increase its stake to 53.2%.

In a statement to MJBizDaily, Canopy thanked Newlands.

“Garth (Hankinson) brings with him his extensive background managing financial and accounting divisions in a CPG environment, and his presence on the board will help expedite our path to profitability while supporting long-term shareholder value,” a Canopy spokesperson said regarding the newest board member.

Canopy has lost nearly 4 billion Canadian dollars ($3.1 billion) since Constellation’s initial investment in Canopy in 2018, which now totals around CA$5 billion.

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  • Pros and cons of common benching systems
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  • Cannabis greenhouse Glossary of Terms
    What is evaportranspiration? Download the guide to find out and learn more technical jargon unique to greenhouse and the cannabis industry.

 

Canopy is in the process of replacing three of its top five executives:

Canopy and rival mass-producers Aurora Cannabis and Tilray have lost significant market share in Canada over the past year, despite spending billions of dollars on mergers and acquisitions.

Over that time, Canadian cannabis sales have grown more than 40%.

Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq.

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.

Minnesota adds edibles products to medical marijuana program

By MJBizDaily Staff

Minnesota regulators are adding medical marijuana edibles to the list of products available to MMJ patients, a move that could boost sales for both processors and dispensaries.

The state health department said it will approve cannabis-infused edibles in the form of “gummies and chews,” effective Aug. 1, 2022, according to a news release.

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The department needs to undertake the rulemaking process for labeling, safety messaging, packaging and testing. That process is expected to begin this month.

At the moment, medical marijuana patients in Minnesota may purchase MMJ pills, vapor oil, liquids, topicals, powdered mixtures and orally dissolvable products such as lozenges.

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Read our exclusive guide for strategies and tips from expert cultivators who have amassed decades of experience studying horticulture lighting. Curated by MJBizDaily.

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  • Horticultural professionals debunk 8 common lighting myths in cannabis
  • How cannabis extraction companies can reduce energy costs
  • Why experts say the future of horticultural lighting is in LED technology
  • Cannabis lighting Glossary of Terms
  • Buyers checklist

“Expanding delivery methods to gummies and chews will mean more options for patients who cannot tolerate current available forms of medical cannabis,” said Jay Malcolm, Minnesota’s commissioner of health.

In March 2022, patients will also be eligible to purchase smokable cannabis flower, which was approved this year by the Minnesota Legislature.

The health department also said no new illnesses – specifically anxiety disorders – have been added to the list of conditions that can be treated with medical cannabis.

– Bart Schaneman

Arizona accepting applications for 26 social equity cannabis licenses

By MJBizDaily Staff

Regulators in Arizona are taking applications for social equity cannabis retail licenses despite ongoing lawsuits seeking to stop multistate marijuana operators from getting the permits.

The Arizona Department of Health Services started accepting the applications despite the pending lawsuit, which was filed against the state by a group of social equity advocates alleging that regulators haven’t ensured that the 26 permits will go to entrepreneurs who were actually harmed by the war on drugs.

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Maricopa County Superior Court Judge Randall Warner recently heard from plaintiffs in one lawsuit but decided against ordering the health department to halt taking applications, the Arizona Republic reported.

The deadline for would-be applicants to submit the required paperwork is Dec. 14.

The Greater Phoenix Urban League and social equity group Acre 41, plaintiffs in one lawsuit, argue the regulations don’t prohibit “venture capital firms and large, mostly white-owned, multistate marijuana companies from snatching up all social equity licenses from the 26 successful applicants – effectively defeating the purpose of the voter-approved social equity program.”

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Get strategies and tips from expert processors on choosing cannabis extraction systems, costs, safety precautions and more. Curated by MJBizDaily.

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  • How to choose between solvent-based and solventless extraction methods
  • Learn which strains are most efficient for each extraction process
  • Tips on safety precautions from design to training to protective equipment

Another group of potential applicants, called Black Seed, sued Nov. 24 over a similar complaint.

Warner set a tentative hearing for late January to hear oral arguments after a health department attorney said the agency would not issue the licenses before then.

The 26 permits could prove valuable considering they will bring the total number of retail licenses to 169 in the limited market.

Marijuana fintech company raises $125 million to fund growth

By MJBizDaily Staff

Los Angeles-based financial technology firm Bespoke Financial said it closed on a $125 million credit facility with institutional investors to increase its lending capacity.

Exact details of the credit facility weren’t disclosed.

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“This added lending capacity demonstrates that more institutional investment firms are recognizing the cannabis industry’s potential,” Bespoke Financial CEO George Mancheril said in a news release.

“Institutional investors are chasing high yields and seeking to minimize volatility, especially through investments that are not subject to future COVID-related market disruptions.

“Cannabis debt financing checks all of these boxes.”

Bespoke provides a technology platform and data-driven application process to help licensed cannabis operators access financing quickly.

Key insights to inform decisions: MJBizFactbook 

Say hello to marijuana business data, curated by the editors of MJBizDaily to help cannabis industry leaders make informed decisions.

  • U.S. marijuana industry financials
  • Licensing, funding and investment trends
  • State-by-state guide to regulations, taxes and opportunities
  • Insights for business and investment strategy

The company, founded in 2018, operates in 12 regulated markets from California to Maine, financing lines of credit in amounts as large as $15 million.

Bespoke Financial is backed by such venture capital firms as Casa Verde Capital, Sweat Equity Ventures, Greenhouse Capital Partners, Outbound Ventures, Ceres Group Holdings and Vista Investment Group.

SPAC raises $200 million to target cannabis-related companies

By MJBizDaily Staff

A California-based special purpose acquisition company (SPAC) raised $200 million in an initial public offering to target companies involved in the growing medical cannabis or cannabinoid industry.

Canna-Global Acquisition Corp. started trading on the Nasdaq on Wednesday under the ticker symbol CNGLU after offering 20 million units at $10 a share.

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Each unit consists of one share of the company’s common stock and one warrant entitling the holder to purchase a share of stock at a price of $11.50.

“We seek to create a “best-in-class” multinational cannabis operator, operating across key markets globally, from cultivation to production and processing, productization, and sales and distribution,” the company said in a prospectus filed with the U.S. Securities and Exchange Commission on Nov. 30.

Canna-Global, which also will target ancillary cannabis businesses, said it won’t invest in a business that is in violation of the U.S. Controlled Substances Act.

SPACs, also known as blank-check companies, have become prevalent in recent years in the cannabis industry as a vehicle to go public quickly and acquire assets in growing markets.

In its prospectus, Canna-Global said it “hasn’t yet initiated any substantive discussions, directly or indirectly, with any business combination target.”

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  • Pros and cons of common benching systems
    Help weigh out the best choice for your greenhouse benching system with this overview.
  • Cannabis greenhouse Glossary of Terms
    What is evaportranspiration? Download the guide to find out and learn more technical jargon unique to greenhouse and the cannabis industry.

 

The company’s chief executive officer is J. Gerald Combs, who also serves as CEO of Hong Kong-based Cash International Asset Management.

New York-based financial services firm EF Hutton managed the offering.

Canna-Global said it granted the underwriters a 45-day option to purchase up to an additional 3 million units at the initial public offering price to cover over-allotments, if any.

Marijuana industry lender Chicago Atlantic plans to become REIT with IPO

By MJBizDaily Staff

Marijuana industry lender Chicago Atlantic Real Estate Finance is planning an initial public offering on the Nasdaq stock exchange.

The Chicago-based company plans to be taxed as a real estate investment trust and “provide attractive, risk-adjusted returns for stockholders over time,” according to a news release issued Monday.

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“Chicago Atlantic intends to achieve this objective by originating, structuring and investing primarily in first mortgage loans to state-licensed operators in the cannabis industry, secured by real estate, equipment, receivables, licenses or other assets of the borrowers.”

Under the IPO, Chicago Atlantic would sell 6.25 million shares of common stock, or roughly 35.9% of the company’s common stock, according to an amended prospectus dated Nov 30.

The stock would be sold for $16-$18 per share, and the underwriters would have a 30-day option to purchase additional shares.

According to the prospectus, Chicago Atlantic “(seeks) to target operators and facilities that exhibit relatively lower-risk characteristics, which we believe include generally limiting exposure to ground-up construction, lending to cannabis operators with operational and/or profitable facilities, diversification of geographies and distribution channels, among other factors.”

Growing is all about the lighting: MJBizDaily Lighting Buyers Guide 

Read our exclusive guide for strategies and tips from expert cultivators who have amassed decades of experience studying horticulture lighting. Curated by MJBizDaily.

Inside:

  • Horticultural professionals debunk 8 common lighting myths in cannabis
  • How cannabis extraction companies can reduce energy costs
  • Why experts say the future of horticultural lighting is in LED technology
  • Cannabis lighting Glossary of Terms
  • Buyers checklist

Chicago Atlantic’s portfolio includes loans to 17 different borrowers worth roughly $160.1 million in principal as of Nov. 22, according to the prospectus, with the company “evaluating 45 potential new loans.”

The company has proposed REFI as its Nasdaq ticker symbol.

Vermont doctors push to lower cannabis potency cap

By MJBizDaily Staff

A coalition of Vermont doctors is urging state lawmakers to cap the amount of THC allowed in all cannabis products at 15%, a move that, if implemented could have major ramifications for marijuana companies in the state.

According to VTDigger, the Vermont Medical Society – which represents 2,400 doctors and physician assistants – sent a resolution to the Legislature asking the state Cannabis Control Board to establish a new potency cap for the sake of consumer safety.

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The physicians’ resolution also:

  • Calls for health warnings to be mandated on cannabis product packaging and ads.
  • Cited the state health department, which reported last year that “marijuana use is a significant public health problem in Vermont, and it is getting worse.”

It’s not clear yet whether regulators or lawmakers will act on the resolution.

Vermont already has a potency cap for its upcoming recreational marijuana market, with flower capped at 30% THC and concentrates at 60% THC.

Medical marijuana products in Vermont, however, are not limited on potency.

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MJBizDaily Cannabis Extraction Buyers Guide 

Get strategies and tips from expert processors on choosing cannabis extraction systems, costs, safety precautions and more. Curated by MJBizDaily.

Inside:

  • How to choose between solvent-based and solventless extraction methods
  • Learn which strains are most efficient for each extraction process
  • Tips on safety precautions from design to training to protective equipment

Vermont currently is the only state in the nation with THC potency limits, though lawmakers in Colorado and other states have been weighing such caps.

The new adult-use market in Vermont is expected to launch next spring.

Colorado Harvest scuttles marijuana acquisition attempt by Stem Holdings

By MJBizDaily Staff

Denver-headquartered marijuana business Colorado Harvest Co. terminated a deal in which it was to be acquired by Florida-based Stem Holdings, known as Driven by Stem.

Under the original letter of intent, Stem Holdings was to purchase Colorado Harvest’s two cultivation facilities, three retail outlets and two delivery permits.

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Stem approached Colorado Harvest after the Denver company obtained the first recreational delivery license in the state earlier this year.

No purchase price was disclosed, but the companies agreed to a December 2021 closing.

Delays by Stem Holdings pushed that closing date well into 2022, according to a news release.

Key insights to inform decisions: MJBizFactbook 

Say hello to marijuana business data, curated by the editors of MJBizDaily to help cannabis industry leaders make informed decisions.

  • U.S. marijuana industry financials
  • Licensing, funding and investment trends
  • State-by-state guide to regulations, taxes and opportunities
  • Insights for business and investment strategy

Colorado Harvest rejected an offer to extend the contract, and the term sheet was voided.

“We were disappointed to have to walk away from Stem, but when one door closes another opens,” Colorado Harvest CEO Tim Cullen said in the release.

Cannabis reform group CPEAR adds two former Congress members

By MJBizDaily Staff

Two former members of Congress signed on as co-chairs of a national cannabis reform group, further adding to the ranks of ex-lawmakers who are now advocating for federal marijuana legalization.

Democrat Tom Daschle, a former U.S. Senate majority leader, and Republican Greg Walden, a 22-year veteran of the U.S. House of Representatives who retired this year, are joining the Coalition for Cannabis Policy, Education and Regulation (CPEAR), according to a news release.

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“I joined CPEAR because of their data-driven approach to cannabis legalization that provides a comprehensive regulatory framework that also recognizes the need to address the disparities caused by the War on Drugs,” Daschle said in the release.

“Congress needs to get this right the first time and end the patchwork system across the country.”

Walden added, “As former lawmakers, we appreciate the importance of finding realistic opportunities for cooperation and unified action.”

Daschle and Walden are hardly alone among former federal officials who have signed on with marijuana advocacy groups and businesses.

Grow better: MJBizDaily Greenhouse Components Buyers Guide 

Maximize your output and quality with the right equipment. Curated by the editors of MJBizDaily, our new, free Greenhouse Components Buyers Guide helps you choose wisely and covers irrigation, automation and ROI.

Inside:

  • Cannabis greenhouse buyers checklist
    Keep track of everything you need.
  • Pros and cons of common benching systems
    Help weigh out the best choice for your greenhouse benching system with this overview.
  • Cannabis greenhouse Glossary of Terms
    What is evaportranspiration? Download the guide to find out and learn more technical jargon unique to greenhouse and the cannabis industry.

 

Other noteworthy recruits to the legalization cause include:

  • Ex-House Speaker John Boehner and former U.S. Sen. Cory Gardner, both Republicans, who now work closely with the National Cannabis Roundtable (NCR).
  • Former Obama-era officials Kathleen Sebelius and ex-Deputy Attorney General James Cole, who also work with the NCR.
  • Former Florida Congressman Carlos Curbelo, a Republican who joined the Cannabis Trade Federation in 2019.