Cannabis Industry Daily News

COVID-19 impact on marijuana retail sales varies by state

While state cannabis markets have unique dynamics, sales generally have been strong during the COVID-19 pandemic, according to Nancy Whiteman, CEO of Boulder, Colorado-based edibles company Wana Brands.

During a Marijuana Business Daily webinar, Whiteman shared her company’s insights alongside broader data presented by Liz Connors, director of analytics at Seattle-based Headset.

Eli McVey, MJBizDaily’s research editor, moderated the session.

Some markets have struggled. Specifically, adult-use cannabis sales in Colorado and Nevada declined in April.

Connors suggested  those drops resulted from the sudden elimination of travel and tourism in both states. With no spring-break trips to Colorado ski towns or the Las Vegas strip, retailers were limited to local customers.

However, Wana Brands posted record sales in May in Arizona, Illinois, Michigan and Ohio, Whiteman said.

The brand also successfully launched in Oklahoma two weeks after that state’s safer-at-home orders began.

The clip below from the conversation focuses on the impact of COVID-19 on cannabis sales. Access the full, 60-minute conversation on our website.

 


Eli McVey will share other industry data at the “A Look Ahead: The Marijuana and Hemp Markets” session, part of MJBizConNEXT Direct.

Minnesota tribe approves medical cannabis with flower sales

Red Lake Nation citizens, an Ojibwe American Indian tribe in Minnesota, voted in favor of developing a medical marijuana program.

Red Lake Nation News reported that 80% of the tribe said yes to a medical marijuana program that would allow the sale and use of medical cannabis flower, which the state of Minnesota prohibits.

The state’s program permits only medical cannabis in liquid, pill or vaporized forms.

Red Lake will also have a longer list of medical conditions to be eligible for a medical cannabis recommendation, including opioid-addiction recovery.

The Red Lake Nation joins American Indian tribes in South Dakota, Oklahoma and elsewhere that have legalized or considered legalizing cannabis on reservations.

Arkansas high court allows marijuana permit dispute to move forward

In a split decision, the Arkansas Supreme Court ruled that a would-be medical marijuana cultivator who sued the state over alleged unfair business licensing application treatment can proceed – despite objections from the state’s attorney general.

Arkansas Attorney General Leslie Rutledge had tried to get the Carpenter Farms lawsuit dismissed by arguing that the state couldn’t be sued under the doctrine of sovereign immunity, but the high court rejected that claim, the Arkansas Times reported.

In its lawsuit, Grady-based Carpenter Farms alleged that the Arkansas Medical Marijuana Commission broke state law by not adopting “model rules for ranking applications,” the Times reported, and therefore the cultivator’s constitutional rights were violated.

The lawsuit claims that while Carpenter Farms’ application was rejected for “deficiencies” in its paperwork, other applicants with similar issues remained in consideration for business licenses.

‘Essential’ designation does not help cannabis companies’ bankruptcy cases

Federal bankruptcy protections remain unavailable for marijuana companies, even though the medical cannabis industry has been deemed “essential” during the COVID-19 pandemic by every state that has a functional MMJ program.

According to The Wall Street Journal, the U.S. Department of Justice continues to argue in court against extending bankruptcy protections for marijuana companies, and there’s no solution on the horizon unless Congress acts to remedy the situation.

At issue is a longstanding Justice Department policy that bankruptcy can’t be used to protect federally illegal businesses, including state-approved marijuana companies, a DOJ spokesperson told the Journal.

Although the DOJ’s policy forbidding bankruptcy protections for marijuana businesses has been in place since 2017 and was an industry problem for years even before that, the coronavirus crisis has brought the issue back to the fore with multiple cases having been fought out in court, the Journal reported:

  • A Pennsylvania couple were recently denied Chapter 13 protections because the wife works for a cannabis cultivation operation owned by Illinois-based Cresco Labs.
  • A Denver judge in March ruled in favor of the DOJ in a case that dealt with a woman’s investment in a marijuana company.

Nevada reviewing alleged campaign illegalities by marijuana MSO MedMen

The Nevada secretary of state’s office is reviewing allegations made by a former MedMen Enterprises executive that the cannabis company’s co-founders made illegal campaign donations to Democratic Gov. Steve Sioslak.

The allegations by former MedMen Chief Financial Officer James Parker were contained in a January 2019 lawsuit filed in California and were made public by Politico.

Wayne Thorley, deputy secretary of state for elections, wrote in an email that the office “only recently became aware of the allegations” and his office was reviewing them.

Sisolak’s office and Los Angeles-based MedMen did not respond to messages seeking comment.

Parker alleged in the lawsuit that MedMen board member Adam Bierman, the multistate operator’s co-founder and former CEO, gave the maximum $10,000 campaign donation allowed by law to a Nevada politician who is not named in the lawsuit.

The lawsuit alleges Bierman illegally forced Parker to make a similar donation and that company funds were illegally used to buy furniture for MedMen co-founder and executive Andrew Modlin in order to reimburse Modlin for a similar campaign donation made in his name.

State campaign finance records show that Sisolak was the only Nevada politician who received the maximum donation from the three. State campaign finance records show Bierman, Modlin and Parker each gave $10,000 to Sisolak in October 2018, when he was running for governor.

That same month, Sisolak, then serving as chair of the Clark County Commission, attended the opening of a MedMen store in Las Vegas, presented a placard to Bierman and Modlin and declared it “MedMen Day.”

The state Republican Party on Tuesday called for Sisolak to return the donations and for Attorney General Aaron Ford, a Democrat, to investigate.

A spokesperson for Ford said, “As is our office’s normal practice, any complaint we receive will be sent to the appropriate personnel for review and consideration.”

The campaign donation accusations are among a list of allegations Parker detailed in his lawsuit.

Los Angeles-based MedMen has filed a countersuit against Parker, accusing him of breach of contract and other allegations, Politico reported.

– Associated Press

Medical cannabis sales in West Virginia delayed another year

Medical marijuana companies in West Virginia, which has one of the slowest-launching programs in the cannabis industry, will have to wait at least another year before beginning sales.

Bill Crouch, cabinet secretary of the state’s Department of Health and Human Resources, said the agency is “looking at making the product available in the spring of 2021,” according to WVNews.

Marijuana Business Daily previously projected sales would start sometime in 2020 in West Virginia, which passed medical cannabis legislation in April 2017.

But bureaucratic holdups have mired the program in red tape.

Reviews have been completed for applicants seeking business licenses to grow and process marijuana. There’s now a 30-day period for applicants to provide any supplemental materials and answer questions from state regulators.

Dispensaries are still under review, but doctors interested in recommending medical marijuana to patients can begin registering on May 28.

Marijuana REIT seeks to raise $100 million in public offering

Innovative Industrial Properties (IIP), a real estate investment trust based in San Diego that specializes in sale-leaseback deals in the marijuana industry, plans to raise $100 million by selling more than 1 million shares.

The underwritten public offering of 1,348,389 shares of IIP’s common stock is expected to close May 29.

Proceeds from the offering will be used “to invest in real estate assets for cannabis cultivation and processing and general corporate purposes,” according to an IIP news release.

IIP recently agreed to a $17.5 million sale-leaseback deal with Kings Garden, a cannabis company based in California’s Coachella Valley. The transaction involved a 70,000-square-foot facility.

Innovative Industrial Properties, which trades on the New York Stock Exchange as IIPR, has seen its stock fall 2.6% this year.

Arkansas medical cannabis dispensary wins trademark dispute against MSO

What’s in a name? Plenty, at least to a locally owned Arkansas medical cannabis dispensary pitted against a large multistate operator.

Harvest Cannabis Dispensary, a family owned business licensed in the central Arkansas city of Conway, won a preliminary injunction prohibiting two facilities managed by Arizona-based MSO Harvest Health & Recreation from using the Harvest name.

The trademark lawsuit was filed in Faulkner County Circuit Court against Natural State Wellness Dispensary and Natural State Enterprises, affiliates of Harvest Health. The properties include a dispensary in Little Rock and a cultivation facility in Newport.

“We have been open and honest about our intentions and branding since September 2017 when we first came up with the name around the breakfast table and sought a license from the state,” Elizabeth Barnett, CEO for Conway-based Harvest Cannabis Dispensary, noted in a news release.

“We were shocked when the Little Rock store put their sign up on their building after we had been open for months calling themselves ‘Harvest House of Cannabis,'” Barnett added. “This ruling proves that sometimes the little guy wins.”

Harvest Health had argued that it had established a nationwide seniority in the use of the name.

“With respect to the trademark dispute in Arkansas, we disagree with the decision and we plan to appeal,” Christine Hersey, Harvest Health’s director of investor relations, wrote in an email to Marijuana Business Daily.

“We will comply with the ruling. However, we view this as a temporary setback and we will continue to do everything possible to protect the Harvest brand.”

Only 10% of Maryland medical marijuana investors are minorities

One in 10 investors pumping money into Maryland’s medical marijuana industry are minorities, again highlighting the overwhelming stakes held by whites in the cannabis sector.

The Capital News Service reported that the data, which comes from the state Medical Cannabis Commission, also shows that the few minority investors who do exist in Maryland tend to hold smaller ownership stakes than their white counterparts.

The data emerged from the commission’s Annual Report on Minority and Women Owners and Employees, which requires information from licensed MMJ companies by June 1 annually.

Other findings included:

  • Green Leaf Medical, which has 34 black investors, the most of any MMJ company in Maryland, is only 21% owned by all those black investors combined.
  • Just four of 26 licensed cultivation or processing businesses are owned by women or minorities. Those are HMS Health, Seven Points Agro, Kind Therapeutics and Chesapeake Alternatives.
  • Only two companies licensed to cultivate or process are owned by minorities: HMS Health and Seven Points Agro.

Oregon cannabis companies beat racketeering suit

A racketeering lawsuit against more than 200 Oregon marijuana companies is resulting in what looks to be a victory for the group of cannabis companies that refused to settle.

The case is one of many in recent years to use the Racketeer Influenced and Corrupt Organizations (RICO) Act against the cannabis industry, a move that has led to financial losses, including legal fees, time spent fighting the cases and lost potential investment.

The RICO suit against the Oregon cannabis businesses was thrown out earlier this month, the Portland Business Journal reported.

The suit was filed by plaintiff Laura Underwood, who alleged in July 2018 that smells from a neighboring marijuana processor diminished the “use and enjoyment” of her property, according to the Business Journal.

Named in the suit were 226 companies and their principals who conducted business with a marijuana processor by the name of Oregon Candy Farm.

As the case progressed, the court dismissed cannabis retailers from the suit, which cut the number of defendants in half. Other defendants settled, and the settlement amounts declined to $1,000.

Another RICO case in Oregon is pending.

In 2019, a judge found that Momtazi Vineyard has legal standing under the RICO Act to pursue a case that the vineyard suffered “plausibly alleged harm” from a neighboring cannabis operation.

Oklahoma governor shoots down medical marijuana delivery legislation

Oklahoma’s growing medical cannabis market suffered a rare setback when Gov. Kevin Stitt vetoed a bill that would have allowed home delivery and pre-roll production and sales.

The Republican-controlled Legislature passed the bill by a wide margin, so some lawmakers had hoped they could muster an override of the governor’s veto, which occurred last week.

However, the state Senate adjourned Friday for the legislative session.

A number of states have allowed home delivery at least on a temporary basis during the coronavirus crisis.

In Oklahoma, only licensed caregivers are able to deliver to patients. In early April, regulators warned that “scam” companies were telling license holders that they could deliver MMJ for a fee.

The legislation would have allowed dispensaries to deliver within a 10-mile radius of their location.

For patients who live farther away, a dispensary in the same county would have been authorized to make deliveries to those individuals.

Oklahoma’s MMJ market has been going strong since it launched in October 2018. Sales hit a record $61 million in April.

Cannabis producer Aphria moving US listing to Nasdaq from NYSE

Canadian cannabis cultivator Aphria is moving its U.S. stock listing to a new venue, departing the New York Stock Exchange (NYSE) in favor of the Nasdaq Global Select Market.

The move will take place after markets close on Friday, June 5. Shares of Aphria will start trading on the Nasdaq as of Monday, June 8 under the same APHA ticker symbol.

In a news release issued Tuesday, Aphria CEO Irwin Simon described the move as reflecting the Ontario company’s “ongoing commitment to find cost-effective ways of operating so we can continue to deliver long-term value to shareholders.”

The move could be driven by cost-cutting concerns despite Aphria’s healthy balance sheet, Jeffries equity analyst Owen Bennett observed in a Tuesday note to clients.

Listing fees on the Nasdaq exchange are generally lower than NYSE fees, Bennett wrote.

“Another advantage of a Nasdaq listing, as we understand, is the reduced transaction fees involved in issuance/conversion/cancellation of shares,” Bennett wrote.

“Against this backdrop, and in light of Aphria’s strong balance sheet and Aurora’s recent acquisition of a U.S. CBD company, another possible read here could be M&A, and a move into the U.S. potentially on the radar.”

Aphria posted its fourth successive profitable quarter in April.

The Leamington, Ontario-based company’s primary listing will remain on the Toronto Stock Exchange, where, like the NYSE, it trades as APHA.

Struggling Canadian cannabis firm CannTrust was delisted from the NYSE in April after seeking a creditor protection order.

Another major Canadian marijuana producer, Hexo, recently received a warning that its shares could be delisted from the NYSE after falling below the $1 mark. Hexo shares are still trading below $1, but the company remains listed on the exchange.

Aurora Cannabis received a similar warning from the NYSE and subsequently consolidated its shares on a 12-to-1 basis to maintain its listing.