Week in Review: Pennsylvania flower sales, Oregon’s cannabis surplus & MassRoots’ big losses

Just Released! Get realistic market forecasts, state-by-state insights and benchmarks with the new 2024 MJBiz Factbook member program, now with quarterly updates. Make informed decisions.

Pennsylvania’s medical cannabis dispensaries get the OK to sell flower for vaping, Oregon’s marijuana glut is hurting the state’s smaller growers, and MassRoots reveals that its losses widened to $44 million in 2017.

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

Positive in Pennsylvania

The announcement that Pennsylvania’s medical marijuana dispensaries can sell dry leaf and flower for vaping is good news for the industry’s bottom line, according to a Keystone State MMJ business owner who is trying to build her company.

Corinne Ogrodnik, the CEO and co-founder of Pittsburgh-based Maitri Medicinals, said the allowance of flower will bring more patients into the program and help grow a market that could become one of the nation’s largest.

“It will be a more affordable product because we won’t have to be utilizing the equipment to process the flower and leaf into concentrates,” she said. “It will also require less intensive packaging.”

Ogrodnik also is hopeful that being able to offer flower will help her business get off the ground.

The restraints on Pennsylvania’s MMJ business owners make it a capital-intensive process, including costs for:

  • Renovating properties
  • Security
  • Medical staff

“We were looking at a few years of lean times,” Ogrodnik said, “and (flower) is really going to enable us to fully implement our business plan with the anticipation of how the market is going to expand.”

Other medical marijuana markets that allow flower for vaping require the dry plant material to be offered in a prepackaged vaping device.

Ogrodnik said it’s unclear how Pennsylvania will regulate the sale and consumption of dry leaf and flower.

She hopes dispensaries will be able to sell whole flower, rather than prepackaged or preground plant matter, and patients are allowed to decide how they will vaporize it.

No matter how it plays out, Ogrodnik believes the program is moving in the right direction.

“It demonstrates that the Department of Health supports this program working, which then translates to the viability of our business,” she added.

Oregon’s supply woes

News that droves of small-scale cannabis farmers in Oregon have been leaving the industry is no surprise to Sam Chapman, a longtime marijuana industry consultants.

“While it is unfortunate that so many smaller craft cannabis businesses are going under, the fact that Oregon is producing more cannabis than it can consume is old news,” Chapman wrote in an email to Marijuana Business Daily.

“Unless you have several million dollars of capital stashed away in a rainy-day fund, you’re probably in the same boat as the rest of the industry in trying to stay afloat while the market attempts to stabilize over the next few years.”

Oregon’s cannabis-supply glut has been building for years, to the point where some marijuana is now selling at the wholesale level for $100 a pound, or even less.

That’s an unsustainable business model for small farmers that can’t afford to produce at commercial-scale levels and a sign that market contraction is underway.

“I suspect less than 50% of the operators licensed today will be in business two years from now,” Chapman wrote.

At the start of April, there were 963 licensed MJ growers, and another 910 were awaiting state permits.

“Given the current trajectory,” Chapman wrote, “I suspect the cannabis industry will be 60% vertically integrated companies that have been around for a while or are buying existing businesses, and the other 40% craft cannabis companies that have managed to figure out how to compete and survive.”

Chapman believes supply-and-demand economics are determining Oregon’s industry winners and losers.

“The free-market approach that Oregon took was the first of many major indicators that our newly established cannabis market was soon to be defined by survival of the fittest and best-capitalized,” he wrote.

MassRoots a ‘dumpster fire’

Talk about dismissive.

Cannabis industry expert Nic Easley, the CEO of Denver-based 3C Consulting, said MassRoots has proved itself to be a “dumpster fire” of a company.

His assessment stemmed from the Denver marijuana tech company’s 2017 annual report, which showed a net loss of $44 million last year, more than doubling from $18 million in 2016. Last year’s revenue totaled just $319,000 in revenue.

After MassRoots’ filing with the U.S. Securities and Exchange Commission, the publicly traded company’s stock (OTC: MSRT) dropped to less than 28 cents per share. The stock had been at about 32 cents per share.

“MassRoots is a shining example of what not to do” as a marijuana tech business, Easley said before offering a laundry list of mistakes the company has made over its five-year history:

“How they structured their board, choosing to go public too early, not having a revenue model, intellectual property or a plan on how to monetize the company.”

The business, which initially aspired to be the “Facebook of marijuana” and even sought a Nasdaq listing, now appears to be struggling to keep its doors open.

“We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern,” according to the SEC filing submitted by MassRoots, which is exploring blockchain technology as a path toward profitability.

Easley said the door hasn’t completely shut on MassRoots’ sustainability, but he added that it’s difficult to see how the company can survive with such stark financials.

“At this stage, if you don’t have something that’s unique that can lend itself toward monetization, that grand image – that ‘Facebook of marijuana’ – can’t really happen,” Easley said.

“Maybe it happens … but we need to take a deep look at how to make it real.”

John Schroyer can be reached at johns@mjbizdaily.com

Bart Schaneman can be reached at barts@mjbizdaily.com