Cannabis Industry Daily News

CA marijuana social equity advocates demand help, threaten to sue state

A coalition of stakeholders from across California joined forces to deliver a message to Gov. Gavin Newsom and the state Legislature: Help victims of the war on drugs get into the legal cannabis industry or face a court fight.

Kika Keith, president of the Los Angeles-based Social Equity Owners and Workers Association, and other social equity backers – including state Sen. Steven Bradford – asserted Monday that local governments and the state have fallen short in attempts to right the wrongs done to minority communities by the war on drugs and called upon lawmakers and the governor to address the issue.

The social equity advocates said they’re pushing for two bills currently before the Legislature:

  • Senate Bill 603, which would help offset marijuana business license fees for qualified social equity applicants.
  • Senate Bill 398, which would establish a new oversight committee to watch how state social equity grants are used.

If something isn’t done, Keith said, the Social Equity Owners and Workers Association (SEOWA) is prepared to file a lawsuit against the state for violating the 2018 California Cannabis Equity Act.

“The state of California has failed to achieve its lofty policies,” said Keith, whose SEOWA is one of 11 groups that comprise the new California Cannabis Equity Alliance.

“We stand here to give notice that we are prepared to file a writ of mandate against the state of California for the injustice inflicted upon us, because there has been no oversight” of state grant monies given to various social equity programs around California.

Keith said she has spoken with Nicole Elliott, Newsom’s senior adviser for cannabis, and also sent a letter to the governor outlining the advocates’ position and setting a May 31 deadline for a response – or else a lawsuit would ensue.

Elliott did not immediately respond to a request for comment.

Bradford, a state senator from Los Angeles County, noted that although California has doled out roughly $55 million of state money to localities such as L.A. for social equity program support, “it’s far from enough.”

“Black and brown people were locked up in jails and denied freedoms for the very same thing that is enriching the wallets and lives of many white entrepreneurs today,” Bradford said.

“We need to give people of color real opportunities to get into the legal cannabis market by helping them.”

Bradford said he’s hoping California will set aside an additional $50 million for social equity through the state budget process this year, including:

  • $30 million for direct financial assistance to social equity applicants.
  • $20 million to fund local social equity programs.

The social equity advocates also issued a statement blasting Newsom’s recent state budget proposal as “racist.”

They pointed out that the governor’s California Comeback Plan calls for $126 million in funding for “police enforcement against traditional cannabis operations,” which the advocates claim “dwarfs” the $15.5 million Newsom’s proposal set aside for social equity programs.

Minnesota lawmakers OK medical cannabis smokable flower

Minnesota’s Legislature approved smokable flower for medical cannabis patients, which could significantly boost sales in what has been a heavily regulated MMJ market that has only two operators.

The change, effective no later than March 2022, will provide a more affordable option to customers and might financially strengthen the state’s MMJ program overall.

House lawmakers also passed adult-use marijuana during the legislative session, which ended Monday, but that bill died in the Senate.

The smokable-flower provision was part of an omnibus health bill, HF 2128.

Gov. Tim Walz is expected to sign the bill into law.

Flower sales aren’t likely to be fully incorporated into Minnesota’s medical marijuana program until sometime in 2022.

The provision will be effective by March 1, 2022, or earlier if determined by the state Commissioner of Health after rules are adopted and independent testing procedures and equipment are in place.

The newly released MJBizFactbook projects 2021 Minnesota MMJ sales will reach $60 million-$70 million. The program currently has 34,163 registered patients, according to the state.

Marijuana REIT announces $200 million private placement

Innovative Industrial Properties, a marijuana real estate investment trust (REIT), said it plans to raise $200 million through a private placement of senior notes for continued cannabis-related property investments.

The San Diego-based company said the placement, under its IIP Operating Partnership, will grant initial purchasers of the notes a 30-day option to buy an additional $30 million of debt.

The notes, due in 2026, will be fully guaranteed by the company and the operating partnership’s subsidiaries, and they will rank equally with existing senior debt, according to a news release.

Innovative Industrial Properties engages in sale-leaseback deals with the marijuana industry’s leading operators. Its current portfolio includes cannabis properties in 18 states, according to the company’s website.

Samuel Adams brewer to research cannabis beverages in Canada

The Boston Beer Co., the maker of Samuel Adams, announced plans to establish a subsidiary in Canada to research nonalcoholic cannabis beverages.

The subsidiary will serve as a dedicated research and innovation hub focused on nonalcoholic cannabis beverages, according to a news release.

The company did not say where it intends to sell any products it develops in Canada, nor did it share any associated costs tied to the initiative.

Boston Beer said it hired Paul Weaver to lead the subsidiary in Canada.

Weaver was previously director of innovation for Smiths Falls, Ontario-based cannabis producer Canopy Growth. He also served as senior innovation manager at the Molson Coors Beverage Co.

“This new subsidiary will enable the company to develop and pilot unique cannabis beverages while cannabis regulations continue to evolve in the United States and worldwide,” the company wrote in the release.

Boston Beer follows in the footsteps of other brewers entering the cannabis space, such as Pabst Blue Ribbon with its Cannabis Infused Seltzer in California and California-based Lagunitas Brewing Co.’s 2018 partnership with AbsoluteXtracts, another California marijuana company.

Molson Coors entered the Canadian cannabis industry in 2020 by partnering with Canadian producer Hexo Corp.

The biggest to date has been Corona brewer Constellation Brands, which made headlines in 2018 with a $3.8 billion investment in Canadian cannabis company Canopy Growth.

However, cannabis-infused beverages have thus far failed to catch on in mature adult-use markets in the United States: In Colorado, weekly market share for marijuana beverages ranged from 0.9% to 1.5% during the first half of 2020.

In Washington state, cannabis beverages captured around 1.4% of the marijuana market over the same time period.

Some brewers are staying on the sidelines.

Last year, Ontario-based Waterloo Brewing halted its cannabis plans after concluding “the size of the prize” did not warrant the investment.

Shares of Boston Beer trade on the New York Stock Exchange as SAM.

Curaleaf acquires Los Sueños for $67M, expands CO marijuana footprint

Massachusetts-based multistate marijuana operator Curaleaf Holdings plans to grow its footprint in the Colorado cannabis market by acquiring the cultivation and retail assets of Pueblo, Colorado-based Los Sueños Farms.

The proposed acquisition is worth $67 million, 61% of which will be paid in Curaleaf subordinate voting shares, 29% in cash at closing and 10% in assumed debt.

A contingent payment worth another $8 million “will be paid based upon operating cash flow-based targets for 2022,” Curaleaf said in a Monday news release.

Curaleaf first entered the Colorado market in 2020 when it purchased Denver-based edibles producer BlueKudu.

The Los Sueños acquisition includes three outdoor cannabis cultivation sites in Pueblo totaling 66 acres, an indoor cultivation facility and two adult-use retail stores.

“The acquisition of Los Sueños will add over 50,000 pounds per year of low-cost wholesale capacity to Curaleaf’s footprint in Colorado, which we intend to double to over 100,000 pounds, representing a significant market share,” Curaleaf CEO Joseph Bayern said in a statement.

The new production capacity will also “fuel the further deployment” of Curaleaf’s Select brand of cannabis products, which is already available at 230 Colorado retailers, Bayern added.

“Ultimately, our goal is to cultivate cannabis at less than $100 per pound, and this acquisition is a significant step in the right direction,” Curaleaf Executive Chair Boris Jordan in a statement.

Curaleaf shares trade as CURA on the Canadian Securities Exchange and as CURLF on the U.S. over-the-counter markets.

Los Sueños was poised to be acquired by Denver-based Schwazze in 2020, but the deal fell apart last July.

Colorado bans hemp-derived delta-8 THC

(A version of this story first appeared at Hemp Industry Daily.)

Colorado regulators banned hemp-derived THC isomers such as delta-8 in foods, drinks and dietary supplements, but the status of marijuana-derived THC isomers wasn’t immediately made public.

A notice issued Friday by the Colorado health department says that “chemically modifying or converting any naturally occurring cannabinoids from industrial hemp is non-compliant with the statutory definition of ‘industrial hemp product.’”

The move comes as THC isomers derived from hemp extracts such as CBD have shaken up the cannabis market. The health department cited in its ruling uncertainty about how the isomers are made.

“Insufficient evidence exists to determine whether or not any toxic or otherwise harmful substances are produced during these reactions and may remain in the regulated industrial hemp products ingested or applied/used by consumers,” the agency said.

“Therefore, these tetrahydrocannabinol isomers are not allowed in food, dietary supplements or cosmetics.”

The notice referenced a delta-8 THC ruling from the state’s Marijuana Enforcement Division (MED), which oversees dispensaries and high-THC cannabis. But the MED’s notice wasn’t posted publicly on Friday.

Proponents of products such as delta-8 and delta-10 THC argue that because the 2018 Farm Bill legalized hemp extracts, the products are legal.

However, the U.S. Drug Enforcement Administration disagreed, saying that because delta-8 THC is manufactured from hemp-derived CBD, not extracted directly from the hemp plant, it is a controlled substance.

The conflict has not yet been decided in court; the Hemp Industries Association and a South Carolina hemp manufacturer are challenging that rule in Washington DC.

The Colorado Department of Public Health and Environment and MED said they would convene “stakeholder conversations on this topic as necessary.” No date was set.

California marijuana company buys fourth retail store for $16 million

Grupo Flor, a vertically integrated marijuana company based in Salinas, California, spent $16 million to acquire the White Fire cannabis store in San Jose and expand its portfolio.

Grupo Flor, founded in 2015, already owns two dispensaries operating as East of Eden in Salinas and Moss Hill and plans to open another store, under the Flor name, in Union City.

The company plans to open an additional White Fire outlet in Prunedale before the third quarter of 2021, according to a news release.

Grupo Flor also expanded its board of directors, adding Darren Dykstra, who founded the company in 2015, and Sean Kali-rai, who is founder of the Silicon Valley Cannabis Alliance and a registered state lobbyist.

The company made news in late 2020 when it stepped in to try to keep afloat famed California cannabis business Magnolia Wellness.

Grupo Flor took over oversight of Magnolia, which was struggling financially after damage incurred during rioting and looting in the aftermath of the killing of George Floyd.

Ex-Massachusetts mayor found guilty in cannabis bribery scheme

A former mayor of Fall River, Massachusetts, on Friday was convicted of corruption after prosecutors alleged he engaged in a bribery scheme in which he solicited payments from cannabis companies in exchange for permission to do business within the town’s boundaries.

According to the Associated Press, ex-mayor Jasiel Correia engaged in “old school pay-to-play political corruption,” prosecutors alleged during his trial, which extended not only to marijuana businesses but also investors who believed he was a successful app developer.

Correia, who pleaded not guilty and maintained his innocence throughout the trial, was convicted on 21 counts of wire fraud, filing false tax returns and extortion.

One cannabis entrepreneur who had tried to open a marijuana shop in Fall River told the jury that Correia first asked him for $250,000 before the two settled on a lower sum as a bribe, after which Correia told him, “You’re family now.”

According to Law360, the former mayor “intended to shake down these marijuana vendors,” one of the prosecutors told the jury.

Correia, who was elected mayor of Fall River in 2015, was arrested for fraud in 2018 and then arrested again in 2019 for the marijuana bribery-related charges. He survived a recall election in 2018, only to be ousted by voters in 2019 during his run for reelection.

The trial finally took place this year after multiple delays in 2020 because of the coronavirus pandemic.

Marijuana REIT to invest $67.8 million in Pennsylvania facility

Innovative Industrial Properties (IIP) and Atlanta-based multistate marijuana operator Parallel have struck another sale-leaseback deal.

The San Diego-based real estate investment trust (REIT) said it has closed on a transaction valued at up to $67.8 million to purchase a cultivation and processing facility owned by Parallel in Pittsburgh and to fund improvements to the facility.

The purchase price is $41.8 million with up to $26 million of improvements expected, according to a news release.

When totally redeveloped, the facility is expected to comprise 239,000 square feet of industrial space.

Parallel, formerly known as Surterra Wellness, is expected to use 124,000 square feet of space in the first phase, and an additional 36,000 square feet of space are available for expansion. The remaining 79,000 square feet of space would be subleased, according to the news release.

The Pennsylvania medical cannabis market has been red-hot, and operators also are preparing for eventual adult-use legalization.

IIP owns and leases back to Parallel two cannabis cultivation and processing facilities in Florida and one property in Texas.

Canadian cannabis producer Hexo to enter US with Colorado facility

(This story has been updated to correct the timing of Hexo’s shelf prospectus.)

Hexo Corp. entered purchase and sale agreements for a 50,000-square-foot cannabis production facility in northern Colorado, marking a step forward for the Canadian producer’s U.S. ambitions.

Hexo’s first facility in the United States involves a wholly owned U.S. subsidiary, according to a Friday news release.

The facility “is zoned for production of a full range of cannabinoids and offers multiple operational capabilities,” said Hexo, which is headquartered in Ottawa, Ontario.

It “will provide Hexo with the necessary infrastructure to begin production and enable the company to continue expanding our joint venture with Molson Coors to create Truss CBD-infused beverages, while also creating the necessary capacity to support future, non-beverage CPG partnerships,” Hexo CEO Sebastian St. Louis said in a statement.

Hexo’s news release offered no details about the cost of the facility or in which city it will be located.

However, a Hexo shelf prospectus dated May 7 describes the company’s attempts to acquire and retrofit a Colorado production facility, and the company confirmed to MJBizDaily that the facility referenced in the prospectus and the facility announced Friday are the same.

According to the disclosure document, Hexo expected to pay approximately $6 million to acquire the Colorado facility and $16.5 million-$49.5 million for retrofitting and improvements.

The facility will be used by Ontario-based Keystone Isolation Technologies USA (KIT USA), a Hexo joint venture with British Columbia extraction technology company Chroma Global Technologies, according to the prospectus.

“KIT USA will allow for in-state, Hexo-controlled cannabis extraction activity to support the manufacturing of CBD beverages and future products in the U.S.,” according to the prospectus.

Hexo’s transaction is expected to close in the fourth quarter.

The company’s shares trade as HEXO on the New York Stock Exchange and Toronto Stock Exchange.

Minnesota House OKs adult-use marijuana; Senate passage unlikely

In a historic vote, Minnesota House lawmakers approved an adult-use marijuana market, but the state Senate is unlikely to consider the measure before the legislative session ends May 17.

House lawmakers voted 72-61 in favor of the bill, HF 600, after five hours of debate late Thursday.

The measure includes provisions such as training and startup funds for social equity applicants as well as funding for disadvantaged communities.

Senate Majority Leader Paul Gazelka, a Republican, has made it clear he has no intention of bringing the measure up for a vote before the legislative session ends.

But Gazelka has said he is open to expanding the state’s restrictive medical marijuana industry.

A measure to allow smokable flower is considered to have a good chance of passing, which could substantially boost MMJ sales in the state.

The adult-use measure had an arduous path to Thursday’s successful House vote.

The effort was the culmination of 15 community meetings across the state, the Minneapolis Star Tribune reported, and 12 House committees held public hearings before advancing the measure.

Before this legislative session, adult-use legislation in Minnesota had been heard only once in the state Senate, according to the Star Tribune.

Strict Nebraska medical cannabis bill stalls; ballot measure is next step

A restrictive medical cannabis bill met its demise in the Nebraska Legislature on Wednesday after state lawmakers failed to overcome a filibuster.

The bill, sponsored by Nebraska Sen. Anna Wishart, would have legalized MMJ only for patients with 17 medical conditions and would have prevented home cannabis cultivation by patients, according to the Associated Press.

Wishart framed the bill as a “last chance” for state legislators to approve regulation of medical marijuana before the issue returns to voters in a ballot measure expected next year, AP reported.

A 2020 ballot measure to legalize medical marijuana failed last September after the Nebraska Supreme Court ruled the bill was unconstitutional because it ran afoul of the state’s “single-subject rule” for ballot measures.

Nebraska cannabis advocates are planning a revised ballot measure in 2022.

“To the families, I am sorry I failed again and I promise not to give up,” Wishart tweeted on Wednesday.

“Now onward to the ballot.”

For now, Nebraska remains one of only a few U.S. jurisdictions where cannabis is still completely illegal for any purpose.