Cannabis Industry Daily News

Marijuana MSOs given leg up for cultivation permits, Utah lawsuit alleges

A lawsuit in Utah claims that out-of-state marijuana companies were given preference during the application process for eight medical cannabis cultivation licenses the state awarded in 2019.

According to The Salt Lake Tribune, the federal complaint alleges officials at the Utah Department of Agriculture and Food coached multistate marijuana growers on how to succeed in the application process.

The suit, filed by JLPR, also alleges those officials allowed their personal connections to affect their judgment in the scoring process.

“This [bias] in the selection process, directly resulting from improper connections, has harmed Utah patients, violated the law, and violated JLPR’s due process and equal protection rights,” the complaint charges.

JLPR is asking the court to order state regulators to grant the company a cultivation permit or “put it first in line for a license when the next one becomes available,” the Tribune reported. JLPR also is seeking unspecified monetary damages.

State regulators told the newspaper they have not seen the suit and have no comment on the allegations.

One key contention in the lawsuit: The state made a last-minute change to its licensing rules that allowed out-of-state companies to apply.

At first, only Utah-based businesses were permitted to apply for licenses.

The suit alleges several multistate operators applied for the licenses before the rule change. That’s why JLPR believes out-of-state companies were given inside information, considering how long it takes to put together a business application.

JLPR and five other companies that didn’t receive licenses filed an appeal in 2019, but the appeal was denied.

Cannabis retailer High Tide continues US e-commerce acquisition spree

Canadian cannabis retail chain High Tide is making yet another U.S. e-commerce acquisition, entering a $3.85 million deal to acquire online marijuana accessories retailer DankStop.

Under the terms of the deal announced Tuesday, High Tide’s U.S. subsidiary will purchase 100% of DankStop shares for $3.85 million in High Tide shares.

The planned acquisition is the latest in a series of deals that High Tide described as part of a plan to “dominate the e-commerce marketplace for consumption accessories and merchandise, especially targeting the United States.”

Those deals include the acquisition of:

Feliks Khaykin, co-founder of New Jersey-based DankStop, will join High Tide as director of U.S. operations, and DankStop director Gabe Aronovich will become High Tide’s director of U.S. business development.

High Tide said DankStop has more than 200,000 email subscribers and nearly 335,000 Instagram followers, adding a new sales channel and boosting its social media reach.

DankStop is already a supplier for High Tide’s drop-shipping catalogue, High Tide added, “resulting in enhanced efficiencies and vertical integration.”

“Being vertically integrated in the consumption accessories space and having access to the end consumer will continue to result in our ability to make meaningful high margin sales across all of our channels,” High Tide CEO Raj Grover said in a statement.

“Having already commenced online cannabis sales in three Canadian provinces, and already possessing an established customer network in place in the U.S. positions us well to commence online cannabis sales and cannabis subscription boxes in the United States if and when federally permissible.”

High Tide shares trade as HITI on the Nasdaq exchange and the TSX Venture exchange.

Ayr Wellness buys two Illinois marijuana stores for $30 million

Marijuana multistate operator Ayr Wellness agreed to purchase Illinois-based Herbal Remedies Dispensaries for approximately $30 million, continuing the company’s spree of cannabis acquisitions.

The Herbal transaction, which comes on the heels of Ayr’s $17 million purchase of two Nevada cannabis businesses, includes $10 million in stock, $12 million in seller notes and $8 million in cash.

The deal, which is expected to close in the fourth quarter of 2021, nets Ayr an operator of two licensed retail dispensaries, according to a news release. Herbal will add roughly 50 employees to Ayr’s total headcount.

The Illinois acquisition adds another state to Ayr’s growing portfolio, which also includes existing or impending operations in Arizona, Florida, Massachusetts, Nevada, New Jersey, Ohio and Pennsylvania.

Jonathan Sandelman, chair and chief executive officer of Ayr Wellness, said the company sees Illinois as a state that will deliver “meaningful revenue.”

“The total cannabis market in Illinois is already run-rating at $1.8 billion in annual sales, despite adult-use launching only 18 months ago,” he added.

Ayr Wellness, which has offices in New York and Toronto, trades on the Canadian Securities Exchange as AYR.A.

Cannabis sector shows resiliency during short COVID-19 recession

The economic recession in the U.S. caused by the COVID-19 pandemic in 2020 was deep but lasted only two months, according to one of the most authoritative groups on the topic.

The National Bureau of Economic Research said this week that the downturn lasted only from February 2020 to April 2020, the shortest recession in U.S. history.

But the recession was fierce, marked by a mind-boggling 31.4% drop in the gross national product for the second quarter of 2020.

It was initially unclear how the legal marijuana sector would fare during a recession, but sales in a number of states showed resiliency from the start.

Cannabis sales in Oregon and Washington state, for example, surged even during the beginning stages of the coronavirus pandemic in the United States.

Illinois faces legal challenge to latest marijuana social equity licensing plan

A Michigan-based cannabis company is trying to stop Illinois’ already long-delayed process for issuing additional retail recreational marijuana licenses.

The federal lawsuit filed by Sozo Illinois comes on the heels of Illinois Gov. J.B. Pritzker signing legislation that created two lotteries to issue a total of 110 retail licenses beginning July 29 as well as a do-over of a process that was supposed to end in the awarding of 75 licenses last year.

Sozo said in a lawsuit filed in the Northern District of Illinois that it has invested more than $350,000 in the licensing process and had qualified for social equity status through an employment provision.

But now, according to the suit, Sozo is effectively excluded from 130 of the 185 potential licenses because of new rules that “give special priority to those social equity applicants who qualified under the ‘ownership method,’ while specifically excluding those that qualified under the ’employee method.'”

“This is fundamentally unfair and damages applicants like Sozo who relied on the original Act and (regulatory) guidance in structuring their businesses and preparing their applications under the employee method,” according to the suit.

Illinois, once heralded as having established a blueprint for social equity licensing in the cannabis sector, has struggled mightily to transform that ideal into practice.

The process to issue the first 75 licenses last year became entangled in legal challenges after only 21 applicants qualified for those licenses.

Cannabis cultivation company GrowGeneration expands OR footprint

GrowGeneration Corp., one of the largest and fastest-growing cannabis-focused hydroponic and gardening chains in the nation, acquired Aqua Serene, a hydroponic garden center with two stores in southern Oregon.

Terms of the deal were not disclosed, but Aqua Serene’s two stores in Ashland and Eugene generate more than $14 million in revenue annually, GrowGeneration said in a news release.

As of July 7, there had been 14 deals in the ag-tech sector and Denver-based GrowGeneration had completed 10 of them, according to Viridian Capital Advisors and MJBizFinance.

Aqua Serene has 10 employees and GrowGeneration more than 600.

The two Aqua Serene stores will give GrowGeneration four locations in Oregon. The company has 57 stores around the U.S., including 20 in California and eight in Colorado.

GrowGeneration also operates an online shopping site for cultivators and a B2B platform.

The Parent Co. uses Apple platform to offer marijuana purchases, delivery

The Parent Co., a vertically integrated marijuana operator based in California, is taking advantage of Apple opening up its App Store to cannabis businesses.

The company is following on the heels of California delivery business Eaze, which recently began offering an app via Apple.

Apple changed App Store terms in June to allow licensed pharmacies and cannabis retailers to offer purchasing, providing the consumers are legal and geogated.

The Parent Co. is launching an app through its Caliva subsidiary that will allow marijuana consumers to place pickup or delivery orders, pay electronically and chat online.

California consumers 21 and older can also use the Caliva app to track orders and consult with company consultants.

“This is a major milestone for both the legal cannabis industry and consumers alike,” Dennis O’Malley, chief operating officer of The Parent Company, said in a statement.

Curaleaf violated labor law in MA cannabis union case, judge says

U.S. cannabis multistate giant Curaleaf engaged in unfair labor practices by “implicitly” promising certain retail store workers in Massachusetts increased benefits and better employment conditions if they didn’t support unionization, a labor court judge ruled.

The 25-page decision last week by National Labor Relations Board administrative law judge Ira Sandron in Washington DC is a cautionary tale for marijuana businesses in terms of how they communicate with employees when unionizing activities are under way.

However, the judge dismissed several other allegations against Massachusetts-based Curaleaf, including a claim the company unlawfully terminated an employee because of her pro-union views.

The conflict arose when the United Food and Commercial Workers Local Union 328 began formal efforts to unionize workers at Curaleaf’s Hanover, Massachusetts, retail store in April 2020, during the early stages of the coronavirus pandemic.

The employees, who wanted hazard pay and better benefits, have since voted in favor of joining the union.

The critical communications occurred between management and two employees in May and June 2020 in closed-door sessions that constituted a “significant deviation” from the company’s customary practice to have short staff huddles or meetings in the open, according to the NLRB judge’s decision.

Former Curaleaf CEO Joe Lusardi, now executive vice chair, attended one of those meetings.

Sandron said he drew an “adverse inference” from Curaleaf’s decision not to call Lusardi to testify during the trial, held remotely May 4-6, 2021.

The NLRB judge characterized Curaleaf regional President Patrik Jonsson’s testimony about the meetings as being “often vague and nonspecific” and was bothered by Jonsson not keeping handwritten meeting notes.

Curaleaf didn’t immediately respond Monday to MJBizDaily‘s request for comment.

Sandron’s order calls for Curaleaf to “cease and desist” from unfair labor practices and take certain “affirmative” actions to follow lawful labor practices.

– Jeff Smith

Ayr to acquire Nevada marijuana grower, concentrates producer for $17M

Multistate marijuana operator Ayr Wellness said it is spending $17 million to acquire two Nevada cannabis businesses, Tahoe Hydroponics Co., a cultivator, and NV Green, a concentrates producer.

Tahoe and NV Green are separate companies but have “the same principals involved,” according to an Ayr spokesperson.

The acquisition’s $17 million price tag includes $5 million in cash, $3.5 million in debt and roughly $8.5 million in stock.

“The Tahoe Hydro acquisition perfectly encapsulates Ayr’s strategy,” Ayr CEO Jonathan Sandelman said in a statement.

“We seek to be the largest-scale cultivator of high-quality cannabis in every market where we operate.”

Ayr, which has offices in New York and Toronto, said the acquisition includes the following Nevada licenses:

  • Two for cultivation.
  • One for production.
  • One for distribution.

Ayr’s Nevada presence already includes “(providing) administrative, consulting and operations services to one cultivation facility, two production facilities, and six dispensaries,” according to a news release announcing the deal.

Tahoe Hydro operates a total of approximately 33,000 square feet of cultivation and manufacturing space in Carson City and Sparks, Nevada.

“The acquisition will add significant cultivation capacity to Ayr’s Nevada operations and provide the company with expanded access to high-quality premium flower for its operations throughout the state,” said Ayr.

That will enable “the company to better serve its retail customers with increased availability and selection of high-quality, Ayr-grown flower in its retail stores, and provide additional capacity to expand its wholesale presence within Nevada.”

The acquisition will bring Ayr 75 employees, whom it “plans to deploy both within Nevada and nationally.”

Ayr shares trade on the Canadian Securities Exchange as AYR.A.

New Oregon law reduces regulatory burdens for cannabis businesses

Oregon relaxed some of its cannabis regulations that industry officials said were limiting business growth, hurting licensees and threatening the economic viability of the state’s $1 billion-plus industry.

Most of the provisions of recently enacted Senate Bill 408 will go into effect Jan. 1, 2022, unless regulators take action earlier through emergency rule-making.

“The passing of SB 408 into law is a huge step towards overhauling and modernizing Oregon’s cannabis regulations – creating a better business environment for the industry,” Jesse Bontecou, co-director of the Oregon Retailers of Cannabis Association, said in a statement.

Kim Lundin, executive director of the Oregon Cannabis Association, noted that “overregulation particularly impacts small businesses” that lack capital, and “jeopardizes businesses of all sizes looking to compete on a national level.”

The new law, which was recently signed by Gov. Kate Brown, includes these provisions:

  • Limits conditions under which Oregon Liquor Control Commission (OLCC) may delay processing, approving or denying a license application.
  • Allows for the transfer of certain marijuana products between producers and processors as well as producers with common ownership.
  • Requires regulators to adopt rules supporting marijuana plant diversity, such as by allowing a qualified producer to receive seeds from any source in the state.
  • Simplifies rules regarding tracking documents for deliveries.
  • Increases edibles concentration limits to bring Oregon in-line with other states and allows regulators to write rules to increase purchase limits.
  • Requires the OLCC to identify ways to further reduce the use of plastics by the cannabis industry and submit its findings to the state Legislature by Dec. 31, 2022.

Court approves Canadian marijuana producer CannTrust’s restructuring plan

A court approved a plan for troubled Canadian marijuana producer CannTrust Holdings to reorganize under Canada’s Companies’ Creditors Arrangement Act (CCAA), the Ontario-based business said.

CannTrust expects the plan approved by the Ontario Superior Court of Justice to be implemented within three to five months, according to a Friday afternoon news release.

However, the plan’s implementation is still subject to conditions in relation to a U.S. class action lawsuit as well as appeal periods, CannTrust warned.

CannTrust is also seeking a new listing for its shares on a Canadian stock exchange, according to the release.

The company was delisted from the Toronto Stock Exchange in May 2020, and from the New York Stock Exchange in April 2020.

CannTrust was initially granted creditor protection at the end of March 2020.

The Ontario-based cannabis producer ran into trouble with Canadian cannabis regulator Health Canada in 2019 after being caught cultivating in unlicensed areas.

CannTrust’s licenses were suspended in September 2019 but were later reinstated.

The company said in its Friday announcement that it plans to launch new products in the second half of this year.

Documents relating to CannTrust’s CCAA restructuring are available here.

Cannabis MSO Harvest Health leaves Utah market, expands in Florida

Harvest Health & Recreation, one of the largest cannabis multistate operators in the U.S., is no longer in the Utah market after selling its cultivation and processing operations in Ogden.

Arizona-based Harvest also announced the opening of its 11th medical marijuana dispensary in Florida.

The company, which was awarded a Utah medical marijuana business license in 2019, sold its assets there for an “immaterial amount of cash” to a “local operator,” according to a news release.

The identity of the buyer was not disclosed.

“We are pleased to have completed this divestiture as part of our strategic plan,” Harvest CEO Steve White said in a statement.

“We will continue to allocate resources to growth opportunities in our core markets.”

Harvest said its new dispensary is located in South Miami Beach.

The company’s other Florida dispensaries are in Gainesville, Jacksonville, Kissimmee, Lehigh Acres, Longwood, North Miami Beach, North Port, Olympia Heights, Tallahassee and West Palm Beach.

Harvest was acquired in May by Florida-based MSO Trulieve in a $2.1 billion deal.