Week in Review: NV cannabis licensing gripes, Connecticut permits more MMJ dispensaries & Q3 earnings roundup

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Nevada issues 61 additional provisional recreational marijuana retail permits, Connecticut doubles the number of medical cannabis dispensary licenses in the state, and some publicly traded MJ firms release third-quarter results.

Here’s a closer look at some notable developments in the marijuana industry this week.

Nevada licensing controversy

Nevada issued 61 provisional adult-use retail licenses, which would nearly double the number of rec stores serving the rapidly growing market.

But critics complained that a small group of highly capitalized companies won the lion’s share.

Moreover, the state didn’t disclose the winning companies – and said little about its selection process.

“It’s been a blackout,” cannabis consultant Jason Sturtsman said.

He also noted that a few losing companies could file a lawsuit. The companies have adult-use cultivation and processing licenses, but their retail store applications were denied.

“The worry (also) is that the mom-and-pop is no longer allowed to play in this game,” Sturtsman added.

Marijuana Business Daily identified four companies that won a total of 26 licenses:

  • Essence, which is being acquired by Chicago-based Green Thumb Industries
  • Ohio-based Green Growth Brands
  • TapRoot Holdings
  • GreenMart, a subsidiary of Toronto-based MPX Bioceutical

Sturtsman said Zen Leaf, operated by Chicago-based Verano Holdings, also won a number of licenses. But Verano spokeswoman Julie Shepherd declined to comment because the company doesn’t disclose license awards.

Stephanie Klapstein, spokeswoman for the Nevada Department of Taxation, told MJBizDaily that because of confidentiality provisions, the department doesn’t release names until licenses are final and stores are open.

Klapstein noted many of the provisional licenses are in jurisdictions that currently aren’t allowing MJ establishments, so the licensees will need those local governments to change their minds in order to open stores in those areas.

The recipients have 12 months to complete all their local and final state approvals.

As each business completes the final licensing, the state will publish the name of the retailer.

Supply shortage?

Connecticut doubled the number of its medical marijuana dispensaries from nine to 18 – without adding more growers to serve the retail outlets.

A state official said regulators aren’t worried about whether Connecticut’s four MMJ cultivators are up to the task of supplying all the dispensaries. And there are no immediate plans to add grower licenses.

“The situation remains the same,” said Lora Rae Anderson, spokeswoman for the state’s consumer protection department, which regulates medical cannabis in Connecticut.

“All of our growers have expanded or made plans to expand already.”

The state’s medical cannabis cultivators don’t have restrictions on canopy size or allotted square footage.

The growers also are allowed to expand as much as they want – provided they clear it with regulators and the municipality where they’re located.

David Lipton, a managing partner and CEO of Advanced Grow Labs, a cultivator in West Haven, said all four growers added capacity to their facilities in 2018. He’s about to start building out another flower room and more drying-room space.

“We’re just adding a little more to give us a little more production,” Lipton said.

There are no plans to release a request for applications from new producers, according to the state’s Anderson.

But it’s possible there could be a call for an additional grower license once the new dispensaries get up and running.

Anderson expects the new dispensaries to be open within 180 days, if not sooner.

Red ink

Of the major U.S. multistate cannabis operators to launch their trading debut on the Canadian Securities Exchange (CSE) this year, only one reported a profit in the third quarter. The rest posted red ink.

Illinois-based Cresco Labs (CL) recorded $3.9 million in net income in its fiscal third quarter, reversing its year-ago loss of $200,000. Net income for the first nine months of the year was $6.5 million, compared with a $1 million loss during the same period last year.

The multistate cannabis operator saw revenues spike 335% in the quarter versus a year ago, to $12.2 million. Year-to-date revenue was up nearly 250%, to $25.1 million.

Cresco has cultivation and dispensary operations in seven states with binding deals in two more.

The firm was among five multistate U.S. operators to make their CSE trading debuts in the third quarter. The others were Acreage Holdings, Curaleaf Holdings, Harvest Health & Recreation and MJardin Group.

While several major U.S.-based cannabis operators saw revenues soar in the quarter, many recorded multimillion-dollar losses.

Here’s a quick recap:

  •  New York-based Acreage (ACRG.U), which grabbed headlines earlier this year when it appointed former House Speaker John Boehner to its board, posted a net loss of $4 million on revenue of $5.5 million. Year-to-date revenue was up more than 90% to $10.6 million versus a year ago. The firm has operations and licenses in 19 states.
  • Massachusetts-based Curaleaf (CURA), which has operations in 10 states, recorded a net loss of $33.7 million in the quarter versus net income of $500,000 a year ago. Revenues were up nearly 290%, to $21.4 million compared with $5.5 million a year earlier.
  • Illinois-based Green Thumb Industries (GTIIrecorded a net loss of $3.3 million for the quarter. Revenues spiked more than 340%, to $17.2 million for the quarter. The firm has operations in eight states.
  • Arizona-based Harvest Health (HARV), a vertically integrated company with operations in 10 states, posted a net loss of $500,000 – which included $3.7 million in expansion-related charges. The firm saw revenues spike more than 60% from a year ago, to $11.15 million.
  • Colorado-based MJardin (MJAR), which operates 23 cultivation facilities across the U.S. and Canada, posted a net loss of $400,000 compared with net income of $600,000 in the previous year. Revenues for the quarter grew 65%, to $7 million.

Jeff Smith can be reached at jeffs@mjbizdaily.com

Bart Schaneman can be reached at barts@mjbizdaily.com

Lisa Bernard-Kuhn can be reached at lisabk@mjbizdaily.com