Cannabis Industry Daily News

NJ is key to East Coast adult-use cannabis legalization, stakeholders say

New Jersey is the “linchpin” for coming recreational marijuana legalization on the East Coast, a panel of industry experts said Tuesday on the second day of MJBizConNEXT Direct, Marijuana Business Daily‘s three-day virtual cannabis business conference.

Panelist Rob DiPisa, partner and co-chair of cannabis law group Cole Schotz, called New Jersey a “hot market” that has continuously expanded its medical marijuana program and, therefore, has the infrastructure in place for a successful recreational program.

“It’s something of a linchpin. I think New Jersey ties the knot,” said Jeremy Unruh, senior vice president of public and regulatory affairs for Illinois-based cannabis firm PharmaCann. “It also places a tremendous amount of pressure on New York” to legalize.

Unruh pointed out that New York Gov. Andrew Cuomo doesn’t want to see state revenue go to bordering New Jersey.

“The focus right now is certainly New York and New Jersey,” DiPisa added.

Unruh said the likelihood of New York legalizing recreational marijuana in the near future is “limited at best.”

He also said it will be difficult for New York’s lawmakers to take up social justice and inclusion questions during the coronavirus pandemic.

But pressure from New Jersey and Pennsylvania as well as New York’s substantial budgetary issues could help to drive the governor’s budget in 2021, Unruh added.

Bridget Hill-Zayat, counsel for Denver-based Hoban Law Group, said Pennsylvania might see momentum toward adult-use legalization because of the state’s massive budget shortfall amid the pandemic.

“People who weren’t considering adult-use previously may be taking another look,” she said.

Unruh added that “gaming and cannabis are really the only two turnkey options to generate revenue for the state.”

Another state ripe for recreational legalization is Maryland, Hill-Zayat said. It’s “an inevitability,” she added. “The money is too palatable right now.”

She noted that, in other markets, converting from medical marijuana to a recreational program is the “natural progression.”

Information about any of these virtual events is available here.

– Bart Schaneman

Second medical marijuana provider in Louisiana poised to roll out products

Only two entities in Louisiana – both colleges – are authorized to produce medical marijuana for patients, and Southern University on Wednesday is expected to join Louisiana State in rolling out its first product line.

Southern’s product debut is also an industry landmark because the Baton Rouge university is the only historically Black college in the United States allowed to produced medical marijuana, according to a news release.

Southern, in conjunction with Ilera Holistic Healthcare, will launch a brand line called AYO. The university will also sell hemp-based CBD products from ALAFIA, a brand that will launch later this year, according to the release.

The product launch comes on the heels of an expansion of the state’s MMJ program that will allow an increased number of physicians to recommend medical cannabis for any ailment.

The other university licensed to grow and dispense medical marijuana in the market, Louisiana State, began supplying pharmacies with MMJ when sales officially began in summer 2019.

Illinois delays awarding 80 cannabis business permits

The governor of Illinois on Monday signed an executive order delaying the issuance of 80-plus marijuana business permits that were scheduled to be awarded on July 1, and now it’s unclear when the licenses might be granted.

According to the Chicago Tribune, Illinois Gov. J.B. Pritzker’s order delays indefinitely 40 new craft cultivation permits, 40 infuser licenses and an uncapped number of transporter permits. There’s also no indication when the licenses might be given out.

That has some applicants worried that they could be on the hook for property-rental payments while they wait, since the state required applicants to have business properties lined up before the licenses were awarded.

Several applicants told the Tribune they believe the delays could cost them thousands, if not tens of thousands, in extra rent they might not be able to afford, which could mean the delay cost them the opportunity to enter the industry.

Social equity applicants are among those who now might not be able to get into the industry, the Tribune reported.

Earlier this year, a similar delay occurred for 75 new storefront licenses. Those permits still have not been handed out, nor have the applicants been given a timeline for when the licenses might be granted, the Tribune reported.

Iowa governor signs bill expanding medical marijuana THC formula

Iowa Gov. Kim Reynolds signed into law a bill that replaces the 3% THC cap with a per-patient limit of 4.5 grams of THC for a 90-day period, but it’s unclear how much the move will boost the state’s heavily regulated medical cannabis market.

The provision is a much weaker version of a measure that Reynolds vetoed last year. That would have capped THC quantities at 25 grams for 90 days.

The state’s largest provider of MMJ, MedPharm Iowa, already has warned the formula might not meet the needs of some existing patients, according to the Des Moines Register.

Patients certified as terminally ill can get more than the 4.5-gram limit, and a doctor can recommend a higher amount to treat a particular medical condition.

Another potential issue is cultivation/manufacturing supply.

New York-based marijuana multistate operator Acreage Holdings, doing business as Iowa Relief, recently pulled out of Iowa, indicating the market didn’t show enough potential for growth.

Iowa Relief was one of only two licensed cultivator/manufacturers in the state. Regulators are determining the timetable to take applications and select another cultivator/manufacturer.

The new Marijuana Business Factbook, released Monday at MJBizConNEXT direct, estimates that Iowa medical cannabis sales will reach $7 million-$9 million this year, up from $4 million-$5 million in 2019.

Ways to shake up cannabis firms and keep as many workers as possible

The coronavirus pandemic has caused the cannabis industry to focus on operational efficiency rather than rapid growth, a shift that has resulted in layoffs in California and other locations across the country.

But panelists at the MJBizConNEXT Direct conference on Monday also talked about ways operational disruptions can be cushioned by the creative restructuring of staff roles, and being vigilant about all expenses.

A silver lining for cannabis companies that have the resources right now: It’s a good time to recruit talent from other industries.

Three experts shared those views and others in a panel called, “Overcoming Staffing and Operational Challenges Resulting from COVID-19.”

Here were some of their insights:

Michael Ray, founder and CEO of California-based Bloom Farms: He described the industry as going from “hypergrowth” to efficiency mode. “Oftentimes the path to profitability requires significant cuts and looking for savings wherever you can find them.” Bloom put in place some pay cuts, he said, but none for those making under $60,000 a year.

Peter Flint, partner of Pennsylvania-based executive recruitment firm JM Search: The cannabis industry needs executives today that can focus on cash management and operational efficiency. Providing equity in lieu of cash could be attractive to employees if they believe the company has a long-term future. For companies so positioned, it’s a good time to recruit talent from other industries, such as the consumer packaged goods industry.

Andrea Brooks, founder and CEO of California cannabis company Sava: Sava did a complete restructuring of its work force, with cross-training, to try to keep the staff as intact as possible. Additional advice: Watch every dollar, measure every spend. It’s critical to be transparent about the state of the industry and the company so employees understand what’s happening. Provide perks that make people feel valued.

– Jeff Smith

Cresco CEO: How marijuana firms can ‘slingshot’ out of recession, pandemic

If cannabis companies can survive this “giant curveball” and economic downtown, those businesses can “slingshot out of it” in better shape and with more opportunities than before the coronavirus.

That was one of the central messages delivered Monday by Charlie Bachtell, co-founder and CEO of Chicago-based Cresco Labs, while offering business tips during an appearance at the MJBizConNEXT Direct virtual conference on Monday.

He stressed the engagement and commitment needed to keep a cannabis company’s balance sheet and employees healthy during these unprecedented times.

“No one forecasted pandemics in their operational plans,” Bachtell said Monday during a talk called “Survive to Thrive Executive Strategies: “Restructuring your Business for Sustainability Amid Market Contraction.”

Bachtell has been through a recessionary challenge before; he worked as a lawyer in the residential mortgage banking business during the Great Recession of late 2007 to mid-2009.

Here are some of Bachtell’s tips:

  • Develop a business model and mission that really speaks to today’s environment.
  • Don’t focus exclusively on putting out the fires; address your high-level strategy to see whether you need to pivot – and, if so, how.
  • Control costs and manage for profit and loss.
  • Engage immediately to fight through the difficult environment. A company needs a “kick down doors” mentality to find opportunities amid challenges.
  • Build your infrastructure and devote resources to face the headwinds.
  • Develop a trusted relationship with regulators and lawmakers so you’re in the room with the people who will have a huge say in the way the industry develops.

– Jeff Smith

California cannabis regulators extend license fee deferrals amid coronavirus

The three regulatory agencies that oversee California’s marijuana industry said Monday they’re again offering license fee payment deferrals for up to 60 days – this time for business permits that are expiring in July and August.

The announcement was made by the California Bureau of Cannabis Control, which oversees most MJ companies, in tandem with the state Department of Public Health and the Department of Food and Agriculture.

The three agencies announced in May that any marijuana company whose permit expired between May 14 and June 30 would be allowed to take up to 60 extra days to pay renewal fees, given that the coronavirus outbreak has increased pressure on businesses and their employees.

The same reasoning was applied for the deferral extension through Aug. 31.

Once a company obtains a deferral, the license payment will be due 60 days from when the license expires.

“We hope that today’s announcement will provide assistance to the industry as we continue to work together to address the challenges created by the pandemic,” BCC chief Lori Ajax said in the news release.

Additional deferrals for licenses that expired before July 1 are not available.

San Diego creates new marijuana business regulatory agency

San Diego has joined cities such as Los Angeles, Sacramento and San Francisco in creating a cannabis-specific agency to oversee its marijuana industry.

The city’s fledgling Cannabis Permitting Bureau will have an annual operating budget of just under $1 million and a staff of nine full-time employees to focus on licensing as well as industry oversight, according to The San Diego Union-Tribune.

“We will be doing proactive code enforcement where necessary and revoking permits for what we call ‘bad actors,’ if necessary,” P.J. Fitzgerald, an assistant deputy director in the city’s Development Services Department, told the newspaper.

Plenty of other cities in California and other states already have established their own marijuana-centric government offices, given the unique and evolving nature of the industry.

San Diego has five licensed cannabis storefronts and another five waiting to open. Forty production facilities are licensed in the municipality, 11 of which are operational.

But the city – along with the rest of Southern California – is still grappling with an immense illicit market, driven by the high costs of operating a legal marijuana business.

Acreage completes New Jersey medical cannabis acquisition

Multistate marijuana operator Acreage Holdings said it has closed on a deal to acquire a New Jersey medical cannabis operation for $10 million, plus the assumption of debt.

The acquisition, announced last year, gives Acreage a firm foothold in a marijuana market positioned for potential adult-use legalization. New Jersey residents will vote on an adult-use initiative in November.

Acreage’s acquisition of Compassionate Care Foundation Inc. includes licenses for cultivation, processing and three dispensaries.

Acreage said it currently has licenses to operate two other New Jersey dispensaries – one in Egg Harbor and another on the Atlantic City Boardwalk. The company operates under The Botanist brand.

The closing of the New Jersey deal comes just a few days after Canadian cannabis producer Canopy Growth reached an agreement to amend its acquisition of Acreage and slash the values of the deal from $3.4 billion to about $900 million. The price cut reflects the cannabis stock slide and Acreage’s financial condition.

Reflecting a cash-strapped status, New York-based Acreage recently secured a short-term loan for $15 million with an interest rate of 60%.

Acreage’s revenues in the first quarter of this year totaled $24.2 million, up 15% from the previous quarter, but the company has yet to break even on its operations.

Acreage trades on the Canadian Securities Exchange as ACRG.U and on the U.S. over-the-counter markets as ACRGF.

MJBizConNEXT keynoter Simms urges marijuana industry to ‘be audacious’

MJBizConNEXT Direct and Hemp Industry Daily Direct kicked off Monday with a virtual keynote speech from Dia Simms, an award-winning entrepreneur and member of The BRN Group, a New York-based cannabis tech company.

Simms called on the cannabis industry to move in unison to overcome over a century of stigma, to think bigger and to consider innovation and creativity.

She mentioned the virtual conference as an example of the industry creating a new product that required “a ton of work” but could create lasting value for business owners in the cannabis space.

“During unusual and trying times, you shift, have an opportunity to learn – even if the backdrop is more difficult than what we’re accustomed to,” Simms said.

Her talk was themed around “leaning into audacity.”

Among other points, she challenged the industry to think creatively about distribution points – including how and where products are sold, because “historically over 50% of customer decisions are made at the point of purchase.”

“If your company is glossing over what happens at that point of purchase, you’re doing yourself a disservice,” Simms said. “When you think about building brands and being audacious you need to think through … what are some unique distribution places besides dispensaries and grocery stores and drug stores?”

She encouraged the industry to recognize that this is a “once in a millennium” opportunity to change the global economy.

“There’s no reason that this industry couldn’t be a trillion dollar industry,” she said.

Business owners have a chance to build it from scratch “in the proper way,” Simms added.

“In the way that science and data shows us work,” she said, “we know for a fact that companies that are more diverse make more cold, hard cash. If you’re not doing it for your heart, you should be doing it for your wallet. Countless studies reiterate that point.”

More information about MJBizConNEXT Direct is available here.

– Bart Schaneman

Oklahoma cannabis firms sue over residency, zoning laws

(This story has been updated to include new information from an Oklahoma cannabis attorney.)

A group of medical marijuana businesses in Oklahoma have sued the state in efforts to prevent regulators from enforcing new definitions to a 1,000-foot school buffer zone and a stricter two-year residency requirement.

The disputes threaten to upset a fast-growing, free-wheeling market, and the school buffer rules are an especially thorny issue.

The MMJ businesses, which filed the lawsuit in Oklahoma County District Court, say the new buffer rules could affect “hundreds if not thousands” of licensed dispensaries, according to The Oklahoman.

Oklahoma cannabis attorney Sarah Lee Parrish told Marijuana Business Daily that the 1,000-foot buffer rule from a school has been in effect for some time. But regulators expanded the definition to include preschools and head-start programs, and measuring the 1,000 feet has been a moving target.

For example, what if a school adds a softball field on the side of the property closest to a dispensary?

Parrish said that if a dispensary was in compliance when it was awarded its license, then “to force the business to move (by denying a license renewal) likely would trigger great constitutional arguments.”

She said she successfully argued for a client last summer that had set up a dispensary at a location based on the National Center for Education’s SAFE (Schools are Far Enough Away) map. However, the dispensary was unaware of a school’s existence on the second floor of a nearby church building.

As for the stricter residency requirement, businesses issued a medical marijuana license before the law was enacted last summer are exempted.

But companies that applied for licenses between the enactment date of March 15, 2019 and its effective date of Aug. 30, 2019, are in limbo. The governor vetoed legislation that would have fixed that issue.

Fortunately, however, Parrish said the state regulators are treating those licensees in a “pending” status and she believes discussions to resolve the issue will be successful.

The Oklahoma Medical Marijuana Authority (OMMA), which regulates the industry, didn’t immediately respond for comment.

As of June 1, Oklahoma’s largely free-market MMJ industry had 9,266 active business licenses, including 2,035 dispensaries, according to the OMMA.

Medical marijuana sales in Oklahoma totaled nearly $300 in the first five months of 2020.

New Jersey medical marijuana dispensaries can now deliver

New Jersey’s 11 medical marijuana dispensaries are now allowed to deliver products to patients at home, provided they fill out a state waiver.

According to NJ.com, the state department of health has issued paperwork for MMJ shops to fill out so their employees can begin performing home deliveries.

That options may well result in a sales uptick for dispensaries, since many patients are staying at home to avoid the coronavirus.

There are caveats. Among others:

  • Only dispensary employees can perform deliveries.
  • Any vehicle performing deliveries must be outfitted with a GPS tracking device, additional security and a lock box.

Although a change to the state MMJ law last summer allowed for delivery provisions, no action was taken until recently, NJ.com reported.

New Jersey joins multiple other states – including California, Oregon and Nevada – that already allow marijuana to be delivered.

The delivery trend has grown during the coronavirus outbreak, since many MMJ patients prefer ordering from the safety of their own home.

Also, regulators in multiple markets have agreed that it’s a safer approach for providing patients with their medicine.