Cannabis Industry Daily News

Maine starts issuing recreational cannabis business licenses

The long-awaited recreational marijuana industry in Maine took another step toward launching this week when regulators began issuing business permits.

By Wednesday, the state’s Office of Marijuana Policy had upgraded six licenses to “active” for two retailers, three grow facilities and a testing lab.

The two stores have been approved to start rec sales on Oct. 9, the Portland Press Herald reported.

Regulators will be issuing more licenses on a rolling basis up to and beyond the adult-use sales launch date, according to the newspaper.

Voters in Maine approved recreational sales nearly four years ago, in 2016, but the market launch was delayed first by an anti-cannabis governor, then lengthy regulatory writing and, finally, the coronavirus pandemic.

Ohio medical marijuana program too expensive, study finds

More than 60% of Ohio residents are dissatisfied with the state’s medical cannabis program, citing high prices as the No. 1 reason, according to a recent study.

The study, conducted by Ohio State University Moritz College of Law’s Drug Enforcement and Policy Center, showed perceptions of the medical marijuana program’s effectiveness have improved some from a year ago but still have quite a ways to go.

The report noted that Ohio’s MMJ program, which launched in January 2019, is still “not fully operational, creating concerns around persistent delays and the overall functionality of the program.”

Some Ohio medical marijuana companies recently complained that the market is being constrained and called for more dispensaries and permission to expand cultivation facilities. They noted that Ohio lags far behind Pennsylvania in the development of its program.

Ohio also is losing marijuana business to Michigan, as Ohioans are crossing the border to buy less expensive products in a state that launched adult-use sales in December 2019.

Here are some of the key findings from the Ohio State University study:

  • 61.6% of the respondents said they were somewhat or extremely dissatisfied. (That’s an improvement from 67% last year).
  • 86.1% of those surveyed said they have a qualifying condition to use medical marijuana, but only 51.5% actually use MMJ. The top two reasons cited as preventing them from participating in the MMJ program were cost and fear of losing their jobs.

The recent Marijuana Business Factbook projected that Ohio MMJ sales would reach $175 million-$225 million this year. By comparison, Pennsylvania medical marijuana sales are expected to hit $400 million-$500 million.

Massachusetts cannabis workers OK three-year labor deal

Employees at a Massachusetts marijuana cultivation and processing facility ratified their initial collective bargaining agreement, 10 months after being the first cannabis workers in the state to vote to unionize.

The three-year labor contract at Sira Naturals in Milford will cover about 120 workers, said Gabriel Camacho, organizing/political director for the United Food and Commercial Workers Local 1445.

“It was ratified by an overwhelming vote, close to 90%,” after a series of Zoom meetings just before Labor Day weekend, Camacho told Marijuana Business Daily.

He said the agreement includes wage increases of 50 cents to a $1 an hour, annual pay hikes, health-care options, a 401(k) retirement plan and a three-step grievance procedure.

Workers at several other Massachusetts cannabis facilities have voted to join the UFCW in recent months, including:

NETA dispensary employees voted against unionizing, but the union has charged the company with coercive anti-bargaining tactics.

Marijuana firm Cronos replaces CEO with consumer packaged goods veteran

Cronos Group has become the latest Canadian cannabis company to shake up its top ranks, replacing former CEO Mike Gorenstein with experienced consumer packaged goods executive Kurt Schmidt.

The announcement comes one day after major Canadian producer Aurora Cannabis appointed its new CEO.

Schmidt’s appointment was the result of a yearlong search for “an experienced consumer focused executive who shares the company’s values and can help take us to the next level,” Gorenstein said in a news release issued Wednesday morning.

Gorenstein has been appointed executive chair of Cronos’ board of directors.

Schmidt’s CPG experience includes leadership roles at pet food producer Blue Buffalo Co. as well as Nestlé, Gerber and Kraft Foods.

In a note to clients Wednesday, analyst Owen Bennett of New York-based investment bank Jefferies wrote that he continues to “have (his) doubts around the long term value creation of the Cronos strategy, (but) today’s announcement is certainly a positive with regards to its ability to execute on it.”

Toronto-based Cronos Group reported a loss for the quarter ended June 30, with net revenue of $9.9 million.

The company wrote down $3.1 million of cannabis in Canada during the quarter and said it expects further write-downs.

However, Cronos remains flush with liquidity, with more than $1.1 billion of cash and cash equivalents and almost $214 million in short-term investments on hand at the end of the previous quarter.

“(Given) the highly acquisitive nature of companies where Schmidt had held executive positions before, we can also expect him to be well placed to put Cronos’ … cash pile to use effectively,” Bennett wrote.

Cronos trades as CRON on the Toronto Stock Exchange and the Nasdaq.

Cannabis MSO Columbia Care to buy California firm in $69 million deal

Multistate operator Columbia Care agreed to acquire Los Angeles-based marijuana grower and retailer Project Cannabis in a deal valued at $69 million.

“The acquisition of Project Cannabis enables Columbia Care to materially increase its scale throughout California and position its wholesale and manufacturing operations as one of the leading suppliers in the state,” the New York-based company said in a press release issued Tuesday.

Project Cannabis’ assets include a 32,000-square-foot cultivation facility, three adult-use shops in Los Angeles and a recreational store in San Francisco.

The company distributes to more than 100 California dispensaries, and will continue selling its portfolio along with Columbia Care products and merchandise from Columbia Care’s recent acquisition of The Green Solution.

Columbia Care CEO Nicholas Vita said the acquisition will bring operating synergies expected to increase gross margins for certain SKUs by 10% to 15%.

The acquisition’s $69 million price tag involves a concurrent deal in which Project Cannabis’ real estate will be sold to an unspecified third party and leased back for proceeds of between $12 million and $17 million.

Columbia Care will issue between $52 million and $57 million in stock to complete the transaction.

The company used a sale-and-leaseback deal to raise $35 million last December, and another such deal to raise $14 million in July.

Groups push to delay lottery for Illinois marijuana retail licenses

As often happens after winners of state cannabis licenses are announced, losing applicants for retail licenses in Illinois are going to court to delay awarding the permits.

Illinois announced finalists for 75 retail licenses last week, but only 21 total applicants scored high enough to make it, calling into question its intended effort toward social equity.

One lawsuit filed in federal court – Southshore Restore and Heartland Greens v. Illinois Department of Financial and Professional Regulation – argues the state “proposes to give away 75 cannabis dispensary licenses collectively worth more than $1 billion dollars to a group of 21 companies, many if not most owned by politically-connected insiders.”

The plaintiffs contend there has been no transparency regarding the application review or scoring process, among other claims.

Separately, a social equity group in Illinois is contesting the scoring of applicants for the new cannabis retail licenses, calling on the governor to provide transparency in how the licenses were awarded.

According to Chicago TV station WLS, the Social Equity Empowerment Network asserts that only 13 of the 21 companies that scored perfectly and qualified for the license lottery are owned and controlled by people of color.

The group is calling on state regulators to delay the lottery.

Cannabis banking numbers slip, but loans might be increasing

The number of financial institutions serving marijuana-related businesses declined slightly in the first six months of this year, according to federal data, likely because of COVID-19 and other factors.

But anecdotally, one industry expert said, banks and credit unions seem more willing to loan money to well-run marijuana businesses.

The number of financial institutions serving marijuana-related businesses dropped 4.7% from 729 at the beginning of the year to 695 as of June 30, according to data by the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Treasury Department.

FinCEN listed a number of possible factors:

  • Financial regulators have issued separate guidance for hemp, so those activities are no longer included in the reports.
  • Some marijuana businesses closed temporarily or permanently because of the coronavirus pandemic.
  • Some banks were late in filing suspicious activity reports required to be included in the federal data.

Mike Kennedy, co-founder of the Connecticut-based cannabis banking compliance software company Green Check Verified, told Marijuana Business Daily in a recent interview that he’s hearing anecdotally that more financial institutions are interested in loaning money to well-run marijuana businesses.

He said this trend is being expedited by the fact that few cannabis-related firms were able to access coronavirus stimulus funds, and marijuana businesses face exorbitant interest rates when tapping tight private capital markets.

Banks with strong compliance programs are more comfortable serving cannabis-related firms, Kennedy said.

Kennedy said he’s hearing banks are mostly loaning money for cultivation and processing equipment and some commercial real estate. But “eventually it will be for working capital and expansion capital,” he predicted.

Probe clears Maryland medical marijuana licensing of bias

An inquiry into Maryland’s 2019 medical marijuana licensing process found “no evidence of bias or undue influence,” according to a 40-page investigative report released last week.

The licensing round, which was designed to expand minority participation in the state’s MMJ program through four cultivation and 10 processing licenses, spurred allegations of racial bias, lack of transparency and improper influence.

But a six-month investigation led by former Baltimore City state attorney Gregg Bernstein found that a number of the allegations weren’t true, according to Maryland Matters, a nonprofit that covers Maryland politics.

“We did find evidence of conflicts of interest, in that MSU (Morgan State University) employees and officials were affiliated with license applicants, but we found no evidence that these conflicts resulted in any bias or special favorable treatment in the license application review process,” according to the investigative report, which was released Thursday.

The report didn’t investigate the evaluation or scoring criteria, or the accuracy of applicants’ representations about minority ownership.

It’s unclear what will happen next. The Maryland Medical Cannabis Commission is expected to review the findings at its Oct. 1 meeting, according to Maryland Matters.

One minority group remains in litigation with the state over the application process. One of the group’s minority owners told Marijuana Business Daily recently that she believes that there are systemic barriers to African-Americans trying to break into the cannabis industry.

Separately, a former Maryland state lawmaker recently was sentenced to two years in prison for taking bribes for legislative favors including votes that benefited a medical cannabis company.

Illinois to hold lottery for retail cannabis licenses later this month

(This story has been corrected to note the lottery is expected later this month.) 

Applicants for retail cannabis licenses in Illinois will be awarded in a lottery later this month, after all 17 regions saw only about 20 companies given perfect scores on their applications – meaning they tied for the permits.

Twenty-one qualifying applicants for the 75 new licenses were informed of the lottery after 1,667 applications were graded, the Chicago Sun-Times reported.

The tied applicants will get one entry into the lottery for each application fee paid, with the maximum entries equaling the number of licenses available in that region.

The lottery move seems to have rattled the industry, as many thought the licenses would be spread out among the larger pool of applicants – and not less than two dozen companies.

“I am shocked that the state went in this direction,” said Michael Mayes, a Chicago-based cannabis consultant. “It seems like the state is trying to avoid litigation at all costs.”

All the tied applicants qualify as social equity candidates.

According to the Illinois Department of Financial and Professional Regulation, of the qualifying applicants:

  • 17 have at least one minority owner.
  • 13 are majority-owned by minorities.
  • 16 have at least one female owner.
  • Two-thirds have at least one person involved with the business who has lived in an area disproportionately impacted by the war on drugs for five of the last 10 years.

Roughly 50 of the permits will be awarded in the Chicago area.

Pennsylvania GOP leader tosses cold water on marijuana legalization plan

One of Pennsylvania’s top-ranking Republicans said lawmakers likely won’t legalize recreational marijuana this fall, despite Gov. Tom Wolf’s pleas.

“Like with any issue, a bill would need to work its way through the Senate Committee process to be vetted,” Senate Majority Leader Jake Corman said, according to the Courier-Express in DuBois. “Movement on this issue should not be expected this fall.”

Wolf last month called on the Legislature to legalize an adult-use commercial program in part to relieve state fiscal pressures caused by the impact of the coronavirus pandemic.

He also wants to set aside 50% of marijuana tax revenues for historically disadvantaged small businesses.

The Democratic governor reiterated his call for legalization during a press conference Thursday.

While this year looks like a long shot, industry insiders say that there’s a good chance Pennsylvania will legalize a commercial recreational marijuana program next year.

Pressure especially will be on Pennsylvania to do so, experts say, if residents in neighboring New Jersey pass, as expected, an adult-use referendum in November.

Nevada judge rules cannabis licensing process can proceed

A Nevada judge ruled the state’s marijuana licensing process can resume, with some new retail marijuana stores allowed to open.

The decision, issued Thursday, also means some applications for licenses will be reviewed again by state officials and some companies will continue to be denied the licenses they didn’t get in December 2018.

The 30-page ruling in what Gov. Steve Sisolak characterized as “a very difficult, complex case” is unlikely to be the last word on the two-year legal fight involving dozens of parties over who can open marijuana shops in the lucrative Nevada market.

Judge Elizabeth Gonzalez acknowledged several times during the litigation – which involved more than a month of recent hearings – that she expected her decision will be appealed to the state Supreme Court.

But state Attorney General Aaron Ford interpreted Gonzalez’s ruling as a victory because it didn’t order a do-over of the licensing process begun when 462 applicants sought 64 new licenses in September 2018.

State taxation officials awarded 61 licenses, bringing to 125 the number of recreational marijuana shops allowed statewide.

Attorneys for plaintiffs, defendants and involved parties did not immediately respond to requests for comment.

Under Gonzalez’s ruling, some winning applicants with plans to reopen will remain on hold pending background checks of officers.

The judge did not say laws were broken, despite allegations by attorneys for some companies, and she did not specify who should now get a license – or not.

Gonzalez did fault Jorge Pupo, a former Department of Taxation deputy director who headed marijuana licensing at the time, for deleting text messages and being unable to provide his cellphone for examination at trial.

Other evidence showed that evaluation rules were changed after Pupo met with an industry lobbyist.

Associated Press and Marijuana Business Daily

Massachusetts credit union partners with marijuana payment processor

The GFA Federal Credit Union, which said in 2018 that it would serve Massachusetts marijuana companies, announced a new partnership this week with cannabis payment processor Hypur to bring digital payment options to MJ retailers in the state.

The move is another example of the slow but steady inroads the cannabis industry is making with financial institutions.

According to Benzinga, the goal is to allow for digital, contactless payment options for in-store purchases as well as through curbside pickup and delivery in order to provide more protection for both customers and staffers during the ongoing coronavirus pandemic.

Similarly, Arizona-based Hypur earlier this year debuted contactless payment options for California retailer Caliva and the online marketplace Dutchie.

“Digital payment solutions like Hypur Pay are now essential to helping cannabis businesses thrive and empowering cannabis consumers to buy products when and how they want to, just as they would for any other purchase,” Hypur’s chief revenue officer, Tyler Beuerlein, told Benzinga.