Cannabis Industry Daily News

Federal judge shoots down Missouri’s medical marijuana residency rule

By MJBizDaily Staff

A federal judge in Missouri, as expected, struck down the state’s residency requirement for medical marijuana businesses, opening the fast-growing market to out-of-state operators.

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Judge Nanette Laughrey reportedly made the final ruling from the bench after only a seven-minute video conference, according to the Springfield News-Leader and other media.

But the permanent injunction barring the state from enforcing the residency requirement wasn’t a surprise because Laughrey had issued a similar preliminary injunction in June.

In the June order, she wrote that the state had failed to meet the legal burden of showing how the residency requirement would achieve its articulated goal of preventing marijuana from being trafficked out of state.

The Missouri residency rule required that medical marijuana businesses be at least 51% owned by state residents. It had defined residents as those who had lived in Missouri for at least one year.

A day after Laughrey’s ruling last week, New York-based Columbia Care announced the grand opening of its first MMJ dispensary in Missouri under its Cannabist banner.

Legal medical marijuana sales launched in Missouri in October 2020 and brought in a cumulative $136 million as of Oct. 1 this year, according to the Missouri Department of Health and Senior Services.

Sales exceeded $20 million a month for the first time in July and are now running at an annual pace of roughly $250 million.

Lawsuits against cannabis firm Coastal withdrawn after sale disclosure

By MJBizDaily Staff

Only days after The Parent Co. said it was purchasing California-based Coastal Holding Co., former MedMen executives Andrew Bierman and Andrew Modlin withdrew multiple state and federal lawsuits they had filed in an attempt to halt the sale.

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The dismissals of the suits bring to a quick end a legal fight that had the potential to completely upend the acquisition. They also likely clear the path for a smooth sale closing.

Bierman and Modlin, who are partial owners of Coastal, first filed suit against five other owners of the company in Orange County Superior Court on Sept. 15, claiming that their rights as minority owners were being violated and that they did not consent to a sale of Coastal.

When the defendants objected to the state court’s jurisdiction, the case was moved to federal court, and multiple versions of the lawsuit wound up being filed in U.S. District Court in the central district of California.

Do you have a ticket to MJBizCon in Las Vegas, October 19-22?

Tens of thousands of cannabis executives already have reservations for the most anticipated event of the year:

  • 1,100 exhibits for cultivators, manufacturers and retailers.
  • 70+ presentations, plus a keynote by Shark Tank’s Daymond John
  • Networking and partnerships

But all of those were dismissed by Oct. 7, according to court records, three days after San Jose, California-based The Parent Co. announced it was purchasing Coastal for $56.2 million.

Another, parallel lawsuit by Bierman and Modlin, filed in Santa Barbara County Superior Court on Sept. 22, was also quickly removed to federal court and likewise dismissed.

Court records didn’t provide any reason for why the cases were withdrawn.

An MJBizDaily message left for the attorney for Bierman and Modlin seeking comment was not returned, and the defendants’ attorney could not be reached for comment.

– John Schroyer

US senators ask Justice Department to deschedule marijuana

By MJBizDaily Staff

U.S. Sens. Cory Booker and Elizabeth Warren last week sent a letter to U.S. Attorney General Merrick Garland urging that the Department of Justice remove marijuana from the federal Controlled Substances list.

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The Democratic senators, from New Jersey and Massachusetts, respectively, wrote that descheduling marijuana is long overdue and “would allow states to regulate cannabis as they see fit, begin to remedy the harm caused by decades of racial disparities in enforcement of cannabis laws, and facilitate valuable medical research.”

The letter cites President Joe Biden’s 2020 campaign trail words that “nobody should be in jail for smoking marijuana,” although Biden’s moderate stance on reform also has frustrated legalization advocates.

Increased pressure on the executive branch – Booker and Warren asked Garland to respond by Oct. 20 whether his office would order a review of marijuana’s classification – comes at a time that Congress is giving some consideration to the issue.

The U.S. House Judiciary Committee recently again advanced a social justice-focused legalization measure called the MORE Act, while Sen. Majority Leader Chuck Schumer, Booker and Sen. Ron Wyden of Oregon are proposing a sweeping reform bill in the Senate called the Cannabis Administration and Opportunity Act.

But the Senate still is seen as a major hurdle to legalization, at least in the short term.

The letter by Booker and Warren notes that the federal Controlled Substances Act empowers the U.S. attorney general to initiate proceedings to deschedule or reschedule a drug.

In fact, as the letter pointed out, the executive branch considered petitions to reschedule cannabis in 2016, but the U.S. Drug Enforcement Administration rebuffed the efforts, partly because the United States had signed an international treaty regulating cannabis.

However, Booker and Warren wrote, the landscape has changed since, as evidenced by the landmark United Nations vote last December to reschedule cannabis.

Still, as noted in a 2015 blog by two experts at the Brookings Institution, a Washington DC thinktank, the administrative process just to reschedule marijuana would be time-consuming, involving a lot of steps.

The process also reflects a paradoxical situation that mostly still holds true today, as one listens to legalization debates in Congress and across the country.

“The catch-22 in the rescheduling debate is that keeping marijuana as a Schedule 1 drug severely restricts the capacity for scientists to study its potential medical benefits, while the lack of scientific research on medical use is simultaneously offered as evidence for keeping marijuana in Schedule 1,” Brookings senior fellow John Hudak wrote at the time.

– Jeff Smith

Arizona unveils applicant criteria for new recreational cannabis retail permits

By MJBizDaily Staff

Arizona regulators announced a list of 87 zip codes across the state where applicants for 26 social equity retail marijuana licenses must have recently resided.

The 2020 ballot measure passed by voters legalizing adult-use marijuana business requires the state health department to issue the 26 licenses to applicants “from communities disproportionately impacted by the enforcement of previous marijuana laws.”

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Applicants must have lived in a zip code for at least three of the five past years, the Arizona Republic reported.

Other scoring criteria include past marijuana convictions of the applicant or family member as well as household income.

The list appears to focus on zip codes in proximity to Native American reservations, according to the Republic.

Do you have a ticket to MJBizCon in Las Vegas, October 19-22?

Tens of thousands of cannabis executives already have reservations for the most anticipated event of the year:

  • 1,100 exhibits for cultivators, manufacturers and retailers.
  • 70+ presentations, plus a keynote by Shark Tank’s Daymond John
  • Networking and partnerships

“This is the first time I’m aware of the state of Arizona has basically admitted there are some communities that have been unfairly targeted by law enforcement and prosecutors,” Will Humble, executive director of the Arizona Public Health Association, told the newspaper.

“They had to be forced by voters to admit it.”

The licenses are expected to be awarded in early 2022, after the screen process is complete, the Republic reported.

The additional 26 licenses will bring the total adult-use retail stores in Arizona to 169.

Marijuana MSO Curaleaf faces more Oregon suits over THC-CBD mix-up

By MJBizDaily Staff

Marijuana multistate operator Curaleaf now has been hit with four federal lawsuits in connection with a product-labeling snafu in Oregon that resulted in some customers ingesting high-THC instead of CBD wellness drops.

The case, which involves the Select brand in Oregon, underscores the importance of sound quality-assurance processes.

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Curaleaf completed its acquisition of Portland-based Cura Cannabis, which owned the Select brand, in February 2020.

According to the lawsuits filed between Sept. 29 and Oct. 6, at least three people went to hospital emergency departments after suffering adverse reactions.

One elderly man was taken to emergency because of concerns he was having a stroke. He wound up allegedly undergoing an unnecessary surgery to remove what doctors believed was a potentially infected hematoma in his leg.

The Oregon Liquor and Cannabis Commission, which issued an expanded product recall on Sept. 24, said 13 people reported taking the mislabeled drops.

Massachusetts-based Curaleaf told MJBizDaily on Friday that it doesn’t comment on litigation.

But a spokeswoman emailed a copy of a statement the company issued late last month, which attributed the mix-up to an “unintentional human error at our facility that led to the production of a batch of CBD drops that were actually THC drops and vice versa.”

Curaleaf said it has worked with Oregon regulators to recall the two batches in question. They were produced in May.

Approximately 500 bottles of CBD-labeled drops that contained elevated THC were sold before the recall as well as 630 bottles of THC-labeled drops that contained CBD but little or no THC, the company said.

The Oregonian reported that some customers who took drops from the mislabeled bottles might have received more than 30 milligrams of THC.

Curaleaf apologized to customers affected by the mistake and said it is “grateful” to regulators and individuals “who brought this serious matter to our attention.”

“In response to this event, as initial steps, we are reviewing production practices and controls to improve quality assurance processes, and conducting additional training sessions with our production team beginning immediately and continuing regularly,” Curaleaf said in its statement.

Oregon requires marijuana products to be tested, but the testing is done before packaging.

State regulators continue to investigate but, in the meantime, have allowed Curaleaf to continue normal business operators in Oregon, according to The Oregonian.

Each of the four lawsuits against Curaleaf, filed in U.S. District Court in Portland by the same attorney, seek punitive damages up to 1% of Curaleaf’s net worth.

Oklahoma advocates file two ballot initiatives to legalize adult-use cannabis

By MJBizDaily Staff

A cannabis advocacy group in Oklahoma filed two initiative petitions to legalize adult-use sales and replace the state’s medical marijuana regulatory agency.

Oklahomans for Responsible Cannabis Action will have 90 days to gather 178,000 signatures for each initiative, barring any legal challenges, according to The Oklahoman.

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The adult-use petition would allow anyone 21 or older to possess up to 8 ounces of marijuana purchased from legal retailers and to grow up to 12 plants that would not count toward the 8-ounce limit.

Anyone wishing to exceed the limits set by the amendment would need a marijuana business permit.

The other petition would create an Oklahoma State Cannabis Commission to regulate the industry, replacing the Medical Marijuana Authority.

The current regulatory agency was created under the state health department.

One of the advocacy group’s goals is to create an agency independent from the health department “to increase transparency and create a structure that could be functional,” the Tulsa World reported.

Marijuana MSO 4Front expands in Massachusetts with $55M acquisition

By MJBizDaily Staff

Marijuana multistate operator 4Front Ventures signed a definitive agreement to acquire Massachusetts-based cultivator New England Cannabis Corp. (NECC) for $55 million, a move intended to expand 4Front’s wholesale operation in the state’s fast-growing adult-use market.

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Arizona-based 4Front said in a news release that the purchase will be funded with $25 million in cash and 25 million shares of stock.

The cash portion will be financed partly through proceeds from the sale of $15 million of three-year convertible notes, 4Front said. That deal is being led by Navy Capital.

The NECC acquisition will more than double 4Front’s total flower canopy in Massachusetts to 30,000 square feet, with the potential of adding 10,000 square feet.

The acquisition, which is expected to close in the fourth quarter, also will roughly triple 4Front’s kitchen, processing and distribution space.

4Front is trading at slightly more than $1 a share on the U.S. over-the-counter markets under the ticker symbol FFNTF. The company also trades on the Canadian Securities Exchange as FFNT.

Adult-use sales in Massachusetts are on a record pace and on the verge of exceeding $1 billion for the year.

Sales to date this year total $985 million, according to the state Cannabis Control Commission.

CA city revokes cannabis shop license after owner pleads guilty to bribery

By MJBizDaily Staff

The coastal California town of San Luis Obispo announced it was revoking a business license for Natural Healing Center, a cannabis shop whose owner, Helios Dayspring, pleaded guilty to two felony charges this summer.

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Natural Healing Center had not yet opened for business but was poised to do so as one of three retailers granted an initial permit, San Luis Obispo TV station KSBY reported.

The store now will not be allowed to open because of the criminal case.

“Natural Healing Center would never have received the permit had we known then what we know now,” San Luis Obispo’s deputy city manager, Greg Hermann, said in a news release.

“Operators who participate in illegal activities are not welcome in San Luis Obispo.”

Dayspring pleaded guilty in July to one charge of filing a false federal tax return and one charge of bribery for allegedly paying off a county supervisor who later took his own life.

After the charges against Dayspring were announced, another company he runs – 805 Agricultural Holdings – was fined $40,000 by Santa Barbara County officials for violating cultivation regulations at a marijuana grow facility, KSBY reported.

Natural Healing Center operates cannabis stores in Grover Beach, Morro Bay and Lemoore and has another slated to open in Turlock, according to the TV station.

Item 9 to acquire Colorado marijuana retailer for Unity Rd. franchise

By MJBizDaily Staff

Vertically integrated cannabis company Item 9 Labs signed a deal to buy an unspecified licensed marijuana store in a Denver suburb for an undisclosed sum.

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The location will become the first corporate-owned store under Item 9’s dispensary franchise brand Unity Rd. “and is anticipated to open within the next 4-6 months,” Item 9 said in a Thursday news release.

Phoenix-based Item 9 closed its acquisition of Denver-headquartered One Cannabis Group and its Unity Rd. franchise model in March.

Unity Rd. is one of several cannabis retail franchise brands aiming to make inroads in multiple states.

Item 9 said the upcoming corporate-owned Unity Rd. store in Adams County, Colorado, is still awaiting regulatory approvals.

The acquisition is part of a broader acquisition strategy in Colorado, according to the release.

“The company plans to convert acquired dispensaries into Unity Rd. shops, operate them internally and sell them to an existing or future franchise partner.”

“Our eyes are set on Colorado and building up the Unity Rd. brand to become one of the main players in the market,” Item 9 Chief Strategy Officer Jeffrey Rassas said in a statement.

“We’re in multiple ongoing negotiations with other Colorado dispensaries to become Unity Rd. shops.”

The franchisor is also targeting Arizona, Montana and Oklahoma “as part of these development efforts,” according to the release.

Item 9 shares trade on over-the-counter markets as INLB.

Tilray CEO open to M&A in Canada as cannabis revenue misses target

By MJBizDaily Staff

Canadian cannabis producer Tilray reported net revenue of $168 million (210 million Canadian dollars) for the June-August quarter, the first full quarter of sales after the merger between Aphria and Tilray closed earlier this year.

The revenue was shy of analysts’ expectations, who had forecast quarterly sales of over $170 million.

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Tilray’s net loss grew to $34.6 million in the quarter, more than 60% higher than the same period one year ago.

However, adjusted EBITDA, another measure of profitability, was $12.7 million.

In a conference call with retail investors and analysts, CEO Irwin Simon acknowledged that Tilray’s market share in Canada was only 16% in the company’s first fiscal quarter, but he said the company had maintained the leading market share in Canada this summer.

Before the merger, the two businesses had commanded almost 20% of Canada’s overall market together, according to regulatory filings.

Simon suggested Tilray might have to dip into the M&A pool to achieve his goal of owning almost one-third of Canada’s market.

“I’ve said we want to (have) 30% market share (in Canada). Originally, I felt we could do that on our own. There may have to be acquisitions and more consolidation in this marketplace,” the CEO said on the call.

“With 507 (licensed producers) out there, there’s got to be some more consolidation. Yes, Tilray would be open for other acquisitions in the Canadian market if it made sense.”

In the first fiscal quarter, Tilray’s cannabis revenue jumped 31.2% from the previous quarter to $70.5 million.

But as Canaccord Genuity analyst Matt Bottomley noted, the previous quarter included only about one month of sales from the original Tilray.

Bottomley estimates the latest cannabis sales were likely flat, or only slightly higher, compared to the previous quarter.

Cannabis revenue made up less than half of Tilray’s overall sales.

By category, net sales in the quarter consisted of:

  • Cannabis revenue of $70.5 million, or 42% of sales.
  • Distribution revenue of $67.2 million, or 40% of sales.
  • Beverage alcohol revenue of $15.5 million, or 9% of sales.
  • Wellness revenue of $15 million, or 9% of sales.

Tilray reported gross medical cannabis revenue of $8.4 million for the June-August period, significantly lower than the $6.4 million in the same three months of 2020.

Gross recreational cannabis sales were $69 million, up from $57 in the year-ago period.

Wholesale cannabis gross revenue of $1.7 million was about half of 2020’s $3.8 million.

Revenue from international cannabis products was $10.3 million. No comparable figure was provided for 2020.

During the call, Simon told investors and analysts that “we’re the largest grower of cannabis in the world today and have the ability to grow over 265,000 kilos (of cannabis annually).”

Tilray said it has generated annualized cost savings of $55 million so far this year after announcing its plan to shut down a “flagship facility in Nanaimo, British Columbia.

The closure is part of the company’s plan to save money after its merger with Aphria.

Shares of Tilray trade on the Nasdaq as TLRY.

Trulieve plans massive marijuana production plant with $2 million PA grant

By MJBizDaily Staff

Florida-based Trulieve Cannabis reportedly is planning to build a mammoth, half-million-square-foot cultivation and processing operation at a former steel mill in Pennsylvania with the help of a $2 million state redevelopment grant.

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The plan, first reported by the Pittsburgh Post-Gazette, comes on the heels of Trulieve completing the acquisition of Arizona-based Harvest Health & Recreation and raising $350 million of capital at an 8% annual interest rate.

The financing deal closed on Wednesday.

The Pennsylvania project also reflects an emerging trend in which marijuana multistate operators obtain government incentives to revitalize economically distressed areas.

Illinois-based Green Thumb Industries is receiving tax incentives to build out a $50 million marijuana cultivation and processing facility at a former prison in Warwick, New York.

Trulieve has completed more than $120 million worth of acquisitions since 2020 to enter and expand its presence in the fast-growing Pennsylvania MMJ market. The company lists six Pennsylvania medical marijuana dispensaries on its website.

Harvest Health has had one of the largest retail presences in Pennsylvania, with 11 MMJ dispensaries listed on its website and a 12th “coming soon” to Pittsburgh.

The 2021 MJBizFactbook projects the Pennsylvania MMJ market will hit $775 million to $925 million in sales this year.

Trulieve purchased three buildings at the former U.S. Steel Tube Works and 37 acres of land from the Regional Industrial Development Corp. for $10.3 million, the Post-Gazette reported, citing RIDC President Don Smith.

Trulieve intends to build an MMJ processing and cultivation facility totaling at least 508,000 square feet, according to the report. The timeline and total project cost weren’t provided.

The announcement also comes just a week after Pennsylvania lawmakers introduced an adult-use legalization bill.

Gov. Tom Wolf has been pushing for legalization, and there’s increasing pressure to do so now that neighboring New Jersey has legalized recreational marijuana and is working toward launching a market next year.

However, a GOP-controlled state Senate could be a formidable obstacle to the measure passing this year.

New York eases medical cannabis rules to allow sale of smokable flower

By MJBizDaily Staff

At its first meeting, New York’s marijuana regulatory agency amended the state’s medical cannabis program, including broadening the sale of flower and who can recommend MMJ as a treatment.

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The newly formed, five-member Cannabis Control Board will allow a wide range of medical professionals to recommend medical cannabis, from midwives to dentists, according to the Buffalo News.

Allowing smokable flower for patients likely will provide a revenue boost for the state’s medical cannabis companies as flower is typically more affordable than infused products and is a familiar format for new consumers.

The MMJ program has 150,000 New Yorkers certified to obtain medical marijuana, but that number likely will increase with the new changes as well as the permanent removal of a $50 registration fee for patients and caregivers.

All of this is happening before the launch of recreational marijuana sales, which lawmakers say will begin in about 18 months.