New Jersey Senate Judiciary Committee to Hold Oct. 22 Hearing on Legalization

New Jersey Senate Judiciary Committee to Hold Oct. 22 Hearing on Legalization

Thomas Hobbes famously stated that life can be “solitary, poor, nasty, brutish and short.” Hobbes could have well been predicting the state of the 21st century cannabis industry, with all its brutishness and nastiness. But we hope this article puts us in solidarity with you and other cannabis business owners, mitigating the solitude, and we hope our advice results in your experience in cannabis being neither poor nor short.

RELATED: 6 Cannabis Business Lessons We Learned Too Late

1. BUDGET FOR THE UNKNOWN

Do not forget to budget for the “Oops, we forgot about…” In our prior article we emphasized understanding the revenue and expense cycles of the particular verticals you operate within (grow, processing, retail, etc.) and to pull them together into a pro forma. Almost every significant expense line will have unanticipated situations come up.

Let’s say you are designing an indoor grow and you are ready to install all your lighting and air management equipment. Your electrician says you need to upgrade the electrical capacity to handle all the equipment you identified. This could easily be a $50,000 additional expense.

Or, as another common example, labor expenses are often underestimated and can drain your cashflow before you start monetizing your crop. If, for example, you are delayed in planting your crop or processing by only a few months, your payroll budget still needs to cover the people you already hired. When doing your pro forma, and before you give any rosy scenarios to investors, it is best to add an additional six months of payroll expense as a “contingent payroll cost” (aka cover your assets (CYA)).

Another consideration for extraction operations: You will be working with highly tuned pieces of equipment that do wear out. A failed compressor, pump or chiller can easily take your machine down for a day or two—which is precious processing time. Budget cash to purchase extra key components to keep on hand—items that may otherwise have to be ordered or reconditioned before you can again get up and running.

2. VERIFY ALL INPUTS INTO YOUR DECISION MAKING

In our prior article we warned against trusting experts; you can apply that idea to your actual decision making.

Everybody is eventually wrong at some point in their cannabis journey. We’d even go so far as to say everybody will be wrong in a very big way at least once. “Everybody” not only includes you, but less intuitively, this lesson includes everybody else internal and external to your core management team. Be very careful of internal and external sources of expertise that advise by assertions. Assertions are dangerous, because if they are delivered with a sense of certainty you may just believe them if you trust the person providing the assertion. People who operate by assertion usually know less than they assert (a term for this, coined by authors Peter Boghossian and James Lindsay in their book “How to Have Impossible conversations,” is the “Unread Library Effect).

All information going into your management team’s decision making needs to be verified and re-verified. One of your best management skills is that of a highly skilled journalist. Such journalists try to have more than one source for their information—they corroborate the information they receive.

3. DON’T AVOID BORING ADMINISTRIVE TASKS

engineered extracts

Engineered Extracts

 

Paperwork and administrative activities can become boring. It takes a special individual to be wired for the constant battle of fighting back against burial by paperwork. It is all boring until the moment there is a problem—then suddenly an existential crisis makes paperwork the opposite of boring. Crisis can include compliance issues around licensing, track-and-trace systems, accounting, payroll, insurance of all kinds, property taxes, payroll taxes, income taxes, warranties, standard operating procedures (SOPs), contracts of all kinds, on and on and on. 

When companies start out, they necessarily put paperwork related to some of those areas on the back burner. They say: “Why do we need SOPs? It is just me and my buddies. We’ll get to that later.” Or, “Insurance in cannabis is so expensive, we’ll probably never need it.” Well the fallacy of that position has again been cast in the spotlight given all the recent fires in the Western states. How many times have you heard someone say they are operating on a handshake deal? How many times do you think these deals work out? Answer: practically never.

One of the most valuable individual(s) you will add to your team is someone with administrative skills. These will be dedicated individuals or key management members who take on the admin duties. Consider them the frontline workers of your company. The company will not exist in the future if all the administrative stuff is not complete. Don’t let the avalanche of paperwork bury your business.

4. STOP ADVOCATING FOR FEDERAL LEGALIZATION RIGHT NOW

There is incessant talk about federal legalization needing to happen immediately.  But we believe that when federal legalization does come, the floodgates of competition will open. Especially if you are a small or mid-size cannabis company, you need as long a runway as possible to get on solid footing and to make yourself a survivor, either as a contender to buy other firms or as a target of a purchase. Each state has struggled with getting legalization correct. While you are dealing with these challenges, you don’t need an overlay of federal challenges to your survival. 

So, what do you advocate for? Advocate for decriminalization, not federal legalization. Advocate for the repeal of IRS Tax Code Section 280E.

Finally, we should all be advocating for the expungement of past criminal records related to cannabis on principle alone.  

5. WHAT KIND OF BUSINESS STRUCTURE SHOULD YOU BUILD?

This is the kind of question that can be hard to ask yourself, especially if you have your heart set on only being in retail or being “the best grower” ever or geeking out permanently with your buddies extracting oil and distillate and hoping to scale to stay in business.  Our admittedly biased opinion is that you have to build some kind of vertically integrated intrastate business.

We don’t have the perfect template, but we define a vertically integrated cannabis business as one in which you are in at least three verticals. For example, you have a grow, a processing division and a retail outlet. Or maybe you have a grow, a distribution business and an intellectual property licensing business. The idea is that each business has its own revenue cycle (see our previous article) and the whole is greater than the sum of its parts. With multiple opportunities to capture margin, why risk everything on one market segment?

Say you own a grow operation and you can wholesale your flower at $1,500 per pound. Let’s assume you don’t have any commission charges for distribution. Now, if you owned a retail shop, you can sell that same pound of flower, broken down into 1/8ths for double or triple the $1,500. You also could create and sell your own oil and distillate without the tolls charged by contracting such services.

We can go on and on with examples, but the important idea is to think through what the long term game plan is. As we noted above, we believe federal legalization will be an extinction event for most cannabis companies. By being vertically integrated and managed well you will become a target for purchase by a much larger firm; or you become a target for investment allowing you to scale your dream. Long-term, there will be standalone firms in each vertical, we grant that outcome. But the standalones will be so large they will basically be part of oligopolies in each vertical. They will serve their purpose, but they won’t create much diversified value. We believe more value will be created per dollar invested in a vertically integrated company than a vertical one only and vertical integration will increase your survival odds.

6. BE AWARE OF WHIZ BANG TECHNOLOGY

Automation, smart devices, artificial intelligence, sensors, remote controls, etc., are all great ideas, and in a perfect world you would have an unlimited budget to try out all these productivity- touting applications.  However, balancing the appeal and benefits of technology with your financial bandwidth is essential. As is exploring any technology’s long-term viability. Choose your initial equipment wisely.  Do your due diligence and talk to actual people who are running the equipment you are looking at to learn about benefits and any specific issues with the equipment.  

IN CONCLUSION

We offer these lessons as the result of our own learning curve. Cannabis is susceptible to the “shiny object syndrome” in that it is easy to get distracted by activities and business deals that are not core to your long-term success. This industry is a slog. The more the slog you endure, the stronger and deeper you build the foundation of your business and elevate your chances for success. As we noted in our prior article, we touched upon the concept that a chain of objective successes is the result of a multiplication of probabilities. And learning from others is the cheapest way to increase any and all of your objectives’ probability weightings.

Loren Picard is CEO at High Desert Flower Inc. in Oregon.

Andrew Olsson is vice president at High Desert Flower Inc. and is the co-founder of Engineered Extracts LLC, also in Oregon.

Published at Wed, 21 Oct 2020 17:24:00 +0000

Medipharm Labs Is Trading At A Steep Discount To Its Peers Despite Transformational Changes Across Several Key Business Units

Medipharm Labs Is Trading At A Steep Discount To Its Peers Despite Transformational Changes Across Several Key Business Units

A few weeks ago, we issued an update on MediPharm Labs Corporation (LABS.TO) (MEDIF) after it expanded its presence on the international side of the industry. Through strategic agreements with leading operators in the European Union (EU) and South America, the company has significantly enhanced its growth prospects.

Despite the positive developments that were reported by MediPharm, we believe that the market substantially discounts the upside that is associated with the business in Canada and abroad.

When compared to Neptune Wellness Solutions Inc. (NEPT.TO) (NEPT), MediPharm is valued at less than half of Neptune (from a market capitalization standpoint as of October 15, 2020). We find the valuation disparity to be worth highlighting and believe that MediPharm has a favorable risk-reward profile as a result.

Executing on a Multi-National Growth Strategy

2020 has been a challenging year for the global economy and many companies pivoted the business model to be levered to the opportunities that were created by the COVID pandemic. During the crisis, Neptune entered the hand sanitizer business and started selling products across Canada.

When Neptune reported this development, the market responded extremely positive to the announcement. Since then, the shares have pulled back and we believe that the change of focus benefited MediPharm. By taking the full focus of the cannabis concentrate market, MediPharm was able to benefit and capitalize on its competitor’s change of model.

While Neptune was off making hand sanitizer, MediPharm was executing on a multi-national growth strategy. Currently, MediPharm has more than 30 tolling and processing agreements with operators in 8 countries. When compared to its peers, we believe that the company has more attractive growth prospects in Canada and abroad.

Although MediPharm has substantial domestic and international growth prospects, we believe the market is discounting this aspect of the story. In the first half of 2021, MediPharm expects to see international revenue growth ramp higher which should result in substantial margin expansion. In the EU, the price of cannabis products is incrementally higher than Canada and this is an attractive aspect of the international market.

Going forward, we believe that MediPharm will continue to take market share from companies like Neptune. The company operates a state-of-the-art GMP facility that allows them to capitalize on international markets while it continues to service the Canadian medical and recreational market.

During the last quarter, we have noticed a substantial increase in the amount of cannabis 2.0 products that are being sold in Canada. To create these products, licensed producers need access to cannabis oil, and this is where MediPharm comes into play. The leading Canadian cannabis oil company has formed strategic relationships with leading brands and operators and are bullish on this aspect of the story.

A Business that is Reaching a Key Inflection Point

We believe that MediPharm is in the beginning of a major transformation that will result in the business being more a junior pharmaceutical company. The agreement that MediPharm recently entered into with STADA puts the business in a league of its own and we are favorable on the potential avenues that it will have for growth.

In our opinion, MediPharm was miles ahead of its competition from the beginning. From the beginning, the management team understood that the best long-term opportunity would require that they have leverage to the global cannabis oil market. The Canadian market quickly became saturated and this made the economics of the business less attractive. MediPharm invested in the construction of a state-of-the-art processing facility that meets EU GMP standards to capitalize on the global market and this is an important pillar of the business.

One of MediPharm’s largest clients is Canopy Growth Corporation (WEED.TO) (CGC). Since inception, the management team focused on working and partnering with companies that are considered to be leaders in their respective industries. This stands true for the relationship that MediPharm has with STADA and we are bullish on the growth prospects that are associated with it.

Currently, STADA is a leader in its field and has approx. 20% of market share of the generic pharmaceutical industry in EU and Germany. We expect the relationship to play a key role in how MediPharm is able to capture market share and believe that the market discounts the potential that is associated with this opportunity.

Trading at a Discount on Several Metrics

From a valuation perspective, we believe that MediPharm represents a compelling opportunity. We are of the opinion that the Canadian cannabis oil company is trading at a discount when measured by profitability metrics, comparative analysis, and a forward-looking view of the business.

Over the next year, we expect MediPharm to report margin expansion as it continues to cut costs and ramp revenues. Once the international side of the business starts to ramp up, we expect the market to take notice. At this time, we are of the opinion that MediPharm will have laid the necessary infrastructure in key jurisdictions through its relationship with STADA. We believe the management team is bringing the business down a path to profitability and consider the opportunity to be underappreciated at current levels.

On top of the potential that is associated with the international opportunity, MediPharm is capitalizing on Canada’s cannabis 2.0 market. This market includes vape pens, edibles, topicals, beverages, concentrates, and more. To make these products, companies need access to cannabis oil. MediPharm makes the key input product that these operators and brands need and is positioned to be a major beneficiary of Canada’s 2.0 market.

Currently, MediPharm is making more than 60 products that are on the 2.0 market and we believe that the market does not fully understand the size and scope of the business. We consider MediPharm to be an undervalued opportunity that is focused on the pharmaceutical side of the industry. The company has a strong balance sheet and will be generating significant cash flow to support this side of the business. Going forward, we believe that MediPharm is well positioned to execute on several major growth projects and is an opportunity that we are excited about.

If you are interested in learning why we believe MediPharm Labs is positioned to take market share in Canada and abroad from companies like Neptune, please send an email to support@technical420.com with the subject “MediPharm” to be added to our distribution list.

Pursuant to an agreement between StoneBridge Partners LLC and Medipharm Labs we have been hired for a period of 180 days beginning August 18, 2020 and ending March 18, 2020 to publicly disseminate information about (LABS) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (LABS) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero (0) shares of (LABS), which we purchased in the open market. We plan to sell the “ZERO” shares of (LABS) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (LABS) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

Share

Share - Facebook


Share - Twitter

Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Published at Wed, 21 Oct 2020 12:27:39 +0000

6 More Lessons We Learned From Our Cannabis Business

6 More Lessons We Learned From Our Cannabis Business

Thomas Hobbes famously stated that life can be “solitary, poor, nasty, brutish and short.” Hobbes could have well been predicting the state of the 21st century cannabis industry, with all its brutishness and nastiness. But we hope this article puts us in solidarity with you and other cannabis business owners, mitigating the solitude, and we hope our advice results in your experience in cannabis being neither poor nor short.

RELATED: 6 Cannabis Business Lessons We Learned Too Late

1. BUDGET FOR THE UNKNOWN

Do not forget to budget for the “Oops, we forgot about…” In our prior article we emphasized understanding the revenue and expense cycles of the particular verticals you operate within (grow, processing, retail, etc.) and to pull them together into a pro forma. Almost every significant expense line will have unanticipated situations come up.

Let’s say you are designing an indoor grow and you are ready to install all your lighting and air management equipment. Your electrician says you need to upgrade the electrical capacity to handle all the equipment you identified. This could easily be a $50,000 additional expense.

Or, as another common example, labor expenses are often underestimated and can drain your cashflow before you start monetizing your crop. If, for example, you are delayed in planting your crop or processing by only a few months, your payroll budget still needs to cover the people you already hired. When doing your pro forma, and before you give any rosy scenarios to investors, it is best to add an additional six months of payroll expense as a “contingent payroll cost” (aka cover your assets (CYA)).

Another consideration for extraction operations: You will be working with highly tuned pieces of equipment that do wear out. A failed compressor, pump or chiller can easily take your machine down for a day or two—which is precious processing time. Budget cash to purchase extra key components to keep on hand—items that may otherwise have to be ordered or reconditioned before you can again get up and running.

2. VERIFY ALL INPUTS INTO YOUR DECISION MAKING

In our prior article we warned against trusting experts; you can apply that idea to your actual decision making.

Everybody is eventually wrong at some point in their cannabis journey. We’d even go so far as to say everybody will be wrong in a very big way at least once. “Everybody” not only includes you, but less intuitively, this lesson includes everybody else internal and external to your core management team. Be very careful of internal and external sources of expertise that advise by assertions. Assertions are dangerous, because if they are delivered with a sense of certainty you may just believe them if you trust the person providing the assertion. People who operate by assertion usually know less than they assert (a term for this, coined by authors Peter Boghossian and James Lindsay in their book “How to Have Impossible conversations,” is the “Unread Library Effect).

All information going into your management team’s decision making needs to be verified and re-verified. One of your best management skills is that of a highly skilled journalist. Such journalists try to have more than one source for their information—they corroborate the information they receive.

3. DON’T AVOID BORING ADMINISTRIVE TASKS

engineered extracts

Engineered Extracts

 

Paperwork and administrative activities can become boring. It takes a special individual to be wired for the constant battle of fighting back against burial by paperwork. It is all boring until the moment there is a problem—then suddenly an existential crisis makes paperwork the opposite of boring. Crisis can include compliance issues around licensing, track-and-trace systems, accounting, payroll, insurance of all kinds, property taxes, payroll taxes, income taxes, warranties, standard operating procedures (SOPs), contracts of all kinds, on and on and on. 

When companies start out, they necessarily put paperwork related to some of those areas on the back burner. They say: “Why do we need SOPs? It is just me and my buddies. We’ll get to that later.” Or, “Insurance in cannabis is so expensive, we’ll probably never need it.” Well the fallacy of that position has again been cast in the spotlight given all the recent fires in the Western states. How many times have you heard someone say they are operating on a handshake deal? How many times do you think these deals work out? Answer: practically never.

One of the most valuable individual(s) you will add to your team is someone with administrative skills. These will be dedicated individuals or key management members who take on the admin duties. Consider them the frontline workers of your company. The company will not exist in the future if all the administrative stuff is not complete. Don’t let the avalanche of paperwork bury your business.

4. STOP ADVOCATING FOR FEDERAL LEGALIZATION RIGHT NOW

There is incessant talk about federal legalization needing to happen immediately.  But we believe that when federal legalization does come, the floodgates of competition will open. Especially if you are a small or mid-size cannabis company, you need as long a runway as possible to get on solid footing and to make yourself a survivor, either as a contender to buy other firms or as a target of a purchase. Each state has struggled with getting legalization correct. While you are dealing with these challenges, you don’t need an overlay of federal challenges to your survival. 

So, what do you advocate for? Advocate for decriminalization, not federal legalization. Advocate for the repeal of IRS Tax Code Section 280E.

Finally, we should all be advocating for the expungement of past criminal records related to cannabis on principle alone.  

5. WHAT KIND OF BUSINESS STRUCTURE SHOULD YOU BUILD?

This is the kind of question that can be hard to ask yourself, especially if you have your heart set on only being in retail or being “the best grower” ever or geeking out permanently with your buddies extracting oil and distillate and hoping to scale to stay in business.  Our admittedly biased opinion is that you have to build some kind of vertically integrated intrastate business.

We don’t have the perfect template, but we define a vertically integrated cannabis business as one in which you are in at least three verticals. For example, you have a grow, a processing division and a retail outlet. Or maybe you have a grow, a distribution business and an intellectual property licensing business. The idea is that each business has its own revenue cycle (see our previous article) and the whole is greater than the sum of its parts. With multiple opportunities to capture margin, why risk everything on one market segment?

Say you own a grow operation and you can wholesale your flower at $1,500 per pound. Let’s assume you don’t have any commission charges for distribution. Now, if you owned a retail shop, you can sell that same pound of flower, broken down into 1/8ths for double or triple the $1,500. You also could create and sell your own oil and distillate without the tolls charged by contracting such services.

We can go on and on with examples, but the important idea is to think through what the long term game plan is. As we noted above, we believe federal legalization will be an extinction event for most cannabis companies. By being vertically integrated and managed well you will become a target for purchase by a much larger firm; or you become a target for investment allowing you to scale your dream. Long-term, there will be standalone firms in each vertical, we grant that outcome. But the standalones will be so large they will basically be part of oligopolies in each vertical. They will serve their purpose, but they won’t create much diversified value. We believe more value will be created per dollar invested in a vertically integrated company than a vertical one only and vertical integration will increase your survival odds.

6. BE AWARE OF WHIZ BANG TECHNOLOGY

Automation, smart devices, artificial intelligence, sensors, remote controls, etc., are all great ideas, and in a perfect world you would have an unlimited budget to try out all these productivity- touting applications.  However, balancing the appeal and benefits of technology with your financial bandwidth is essential. As is exploring any technology’s long-term viability. Choose your initial equipment wisely.  Do your due diligence and talk to actual people who are running the equipment you are looking at to learn about benefits and any specific issues with the equipment.  

IN CONCLUSION

We offer these lessons as the result of our own learning curve. Cannabis is susceptible to the “shiny object syndrome” in that it is easy to get distracted by activities and business deals that are not core to your long-term success. This industry is a slog. The more the slog you endure, the stronger and deeper you build the foundation of your business and elevate your chances for success. As we noted in our prior article, we touched upon the concept that a chain of objective successes is the result of a multiplication of probabilities. And learning from others is the cheapest way to increase any and all of your objectives’ probability weightings.

Loren Picard is CEO at High Desert Flower Inc. in Oregon.

Andrew Olsson is vice president at High Desert Flower Inc. and is the co-founder of Engineered Extracts LLC, also in Oregon.

Published at Tue, 20 Oct 2020 19:44:00 +0000

USDA Approves Hemp Plans For Six Additional States And Three Indian Tribes

USDA Approves Hemp Plans For Six Additional States And Three Indian Tribes

The U.S. Department of Agriculture (USDA) has signed off on hemp plans for six additional states and three Indian tribes this month, with a new batch of approvals coming on Friday.

Illinois, Indiana, Michigan, New Mexico, Oklahoma and South Dakota each had their regulatory proposals accepted within the past two weeks, as did the Comanche Nation, the San Carlos Apache Tribe of Arizona and the Seminole Nation of Oklahoma.

That raises the total number of approved plans to 69.

USDA has been signing off on hemp proposals on a rolling basis over the past year. Last month, it accepted plans from Utah and the Torres Martinez Desert Cahuilla Indians.

Read More

Published at Mon, 19 Oct 2020 16:44:33 +0000

VIVO Cannabis™ Withdraws $5 Million Offering and Provides Business Update

VIVO Cannabis™ Withdraws $5 Million Offering and Provides Business Update

VIVO Cannabis Inc. (TSX: VIVO) (OTCQX: VVCIF) (” VIVO ” or the ” Company “) announced today that it is terminating a planned offering of $5.1 million , which it had previously announced on October 6, 2020 .

Vivo Cannabis Logo (CNW Group/VIVO Cannabis Inc.)

The decision to terminate the offering was taken amidst what the Company views as highly unusual trading activity in VIVO’s shares. During the two days following the announcement of the offering, trading volume increased by approximately 8,000% to a cumulative total of 18,980,048 shares, compared with 236,517 shares traded in the two days prior to the announcement.

“While VIVO is unaware of the reasons for the increased trading activity and downward pressure on our stock price, we have reported last week’s highly unusual trading activity to securities regulators,” said Barry Fishman , CEO of VIVO. “We are hoping that in the short-term, trading activity will stabilize at a level that reflects VIVO’s current business fundamentals, recent achievements and future potential.”

The Ontario Securities Commission (OSC) and the Investment Industry Regulatory Organization of Canada (IIROC) jointly announced on October 1, 2020 that they are encouraging the submission of tips related to potential abusive trading in securities of Ontario reporting issuers, including illegal insider trading, market manipulation or abusive short selling. In particular, they are seeking specific and credible evidence about short selling into or ahead of public offerings or private placements of Ontario securities.

https://www.osc.gov.on.ca/en/NewsEvents_nr_20201001_osc-and-iiroc-appeal-for-tips-on-abusive-trading.htm

All VIVO insiders have been and remain subject to a regularly scheduled trading blackout until at least after the Company announces its Q3 2020 results, which is anticipated to be in mid-November.

Business Update

During the past few months, VIVO’s business fundamentals continue to strengthen with several notable successes:

  • Achieved a leading position in the cannabis concentrates category
  • Initiated the largest harvest in the company’s history in Napanee, Ontario
  • Canna Farms was named the fourth most recognized cannabis brand among Canadian consumers
  • Expanded market access, including product listings in Quebec and with Medical Cannabis by Shoppers™
  • Restructured $27 million in current liabilities, leaving the Company with $6.6 million in 6% convertible debt due September 15 , 2022.

About VIVO Cannabis™

VIVO Cannabis™ is recognized for trusted, premium cannabis products and services. It holds production and sales licences from Health Canada and operates world-class indoor and seasonal airhouse cultivation facilities with proprietary plant-growing technology in Hope, British Columbia and Napanee, Ontario . VIVO has a collection of premium brands, each targeting different customer segments, including Canna Farms™, Beacon Medical™, Fireside™, Fireside-X™, Lumina™ and Canadian Bud Collection™ . The Company is expanding its production capabilities and distribution network. Harvest Medicine, VIVO’s patient-centric, scalable network of medical cannabis clinics, has serviced over 100,000 patient visits. VIVO is pursuing several partnership and product development opportunities and is focusing its international efforts on Germany and Australia . For more information visit: www.vivocannabis.com

Disclaimer for Forward-Looking Information:

All dollar amounts in this news release are in Canadian dollars. Certain statements in this news release are forward-looking statements, which are statements that are not purely historical, including statements regarding the beliefs, plans, expectations or intentions of VIVO and its management regarding the future. Forward-looking statements in this news release include statements regarding potential future offerings by the Company, the potential terms of same, the filing of any prospectus supplement with respect thereto, proposed use of proceeds, assuming completion, the anticipated closing date and the satisfaction of all necessary closing conditions, including the approval of the TSX. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the forward-looking statements, including: that the COVID-19 pandemic may last longer and have a more significant impact on the Company’s operations, financing abilities, the Canadian cannabis industry, or the global economy generally, than currently expected; and other factors beyond the Company’s control. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors, and the more extensive risk factors included in the Company’s management’s discussion and analysis for the three months ended June 30, 2020, which is available on SEDAR, carefully in evaluating the forward-looking statements contained in this news release, and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements in this news release are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.

SOURCE VIVO Cannabis Inc.

Published at Fri, 16 Oct 2020 11:20:47 +0000

NJ CAN 2020 Enlists Help of New Jersey Governor in Campaign’s Efforts to Support State’s Cannabis Referendum

NJ CAN 2020 Enlists Help of New Jersey Governor in Campaign’s Efforts to Support State’s Cannabis Referendum

New Jersey has grappled with the idea of adult-use cannabis legalization for a while now, especially since Gov. Phil Murphy took office in 2018 with the promise of cannabis policy reform.

When a legalization bill stalled in the legislature last year, lawmakers placed an adult-use legalization question on the state’s 2020 ballot.

With just over two weeks until Election Day, many are surely wondering how the election will shape cannabis policy in the U.S.

“I’m excited to see what happens in New Jersey,” Rachel Gillette, partner and chair of Greenspoon Marder’s Cannabis Law Practice, tells Cannabis Business Times and Cannabis Dispensary. “I’m also excited to see what happens in states like Arizona and to see how many more states choose to legalize cannabis in this election.”

RELATED: UPDATE: 5 States Voting on Cannabis Legalization This November

Here, Gillette offers her predictions on whether New Jersey’s adult-use referendum has the support it needs to pass on Election Day, as well as what comes next, from how the law will be implemented and its potential impact on existing medical cannabis businesses to how cannabis policy reform in New Jersey might affect neighboring states that have yet to legalize.

Melissa Schiller: How likely is it that New Jersey voters approve adult-use cannabis legalization this November?

Rachel Gillette: I haven’t seen any recent polling, so this is pure guessing, but my guess is that we’re going to see more and more states pass adult-use, either through ballot initiatives or through the legislative process, which just brings to the forefront the fact that the federal government is going to have to address the issue of federal legalization at some point. I’m relatively confident, given that New Jersey already has medical marijuana, that it will pass [adult-use]. I think that people have moved past this [idea] that marijuana is the devil’s weed and should be prohibited in the United States. I think generally, more people favor the legalization of it, having seen what has happened in other states like Colorado, California, the Northwest and other states that have chosen to legalize. It can be done in a very safe way and can lend itself to providing significant tax revenue for the state, and, also, the more states that legalize, the more the black market gets squashed. I think the only reason the black market survives is because of federal prohibition and other states that have chosen not to legalize cannabis.

MS: What are your predictions for how New Jersey will implement the referendum and regulate adult-use cannabis in the state? What key provisions do you expect to see in New Jersey’s cannabis law?

RG: The ballot question seems relatively basic. It [asks if voters] approve of amending the Constitution to legalize a controlled form of marijuana for adults at least over 21 years old, and there would be a state commission created to oversee the state’s medical program and the new personal-use cannabis market.

My hope is that a state like New Jersey will not follow other states like Florida [and] New York, [which are] what I call “competitive licensing” states, which create these, for lack of a better word, very limited marketplaces that don’t allow for free market competition. It’s this merit-based application system, which lends itself to corruption and, frankly, the state getting sued every time.

My hope is that New Jersey will follow states like Colorado, California, Oregon [and] Washington that have more opened-up licensing, allowing for local jurisdictions to have some input in the time, place and manner of cannabis businesses within their jurisdictions, but not having the state have the ultimate control to limit the number of licenses or have a select few compete for these licenses. Those types of systems just don’t work, first of all. It’s very arbitrary to basically say, “Oh, here’s what you have to put in the application. Now you have to compete and we’re going to grade you.” Then the businesses that lose by .001 or the first loser are going to end up suing the state because they think it was arbitrary and they should have been granted a license. Not only that, it leaves all of these smaller mom-and-pop models behind, and it doesn’t give real people an opportunity to get into this marketplace.

My hope is that it will be a better system that what we’ve seen in other states. We’re now seeing other states that have done this competitive or merit-based licensing being sued—Florida, Maryland, Arkansas, Illinois is now a complete mess [and] Missouri has a whole bunch of people upset. I just don’t think that those systems work, and I wish states would avoid it.

MS: How might adult-use legalization impact the state’s economy, especially in the wake of the COVID-19 pandemic?

RG: There’s no doubt that cannabis can contribute to the tax base. The problem is, you have to tax it in a way that diminishes the black market and allows the regulated market to thrive—more people [have] to go to the regulated market and get away from the black market. The idea of how much it should be taxed on the state and the local level is a really important question, and I think states and local jurisdictions have to get that right. Otherwise, it can go the wrong way. Certainly, we have seen record sales in states like Colorado, [with] a significant amount of revenue being generated not only by special sales taxes associated with cannabis, but also, the first $40 million of the excise taxes goes to the construction of schools. I think there’s a lot of potential that the tax revenue raised can positively impact the economy.

What I would really like to see is that the tax revenue go to communities that have been disproportionately impacted by the drug war, so there’s actually some thought into why we’re legalizing cannabis or why the voters have decided to legalize cannabis and reinvesting that into community programs and things more focused on social equity. I think that’s really important, that we don’t forget about the communities and the people that have been affected by the failed war on drugs.

MS: How might adult-use legalization impact New Jersey’s medical cannabis program? In many states, patient counts start to drop when adult-use comes online—do you anticipate that happening in New Jersey, as well?

RG: Probably, and the reason that happens is because people are using cannabis both for medical use and for recreational use. If it becomes relatively easy to purchase if you’re an adult over 21, you don’t have to go through the process, even if you are using it for medical use, of getting a doctor recommendation and getting on a registry and all of that. A lot of people prefer the ability and the ease of being able to just walk into a store and buy cannabis because they’re over 21, rather than having to get their name on some register somewhere.

I do anticipate that the patient count will probably be impacted to some extent, but I hope they give credibility and resources to the medical cannabis market and medical cannabis consumers. We cannot forget about patients, even in light of adult-use legalization. They have different needs than people who consume from a recreational perspective. They may need higher THC levels or other cannabinoids in their products.

For example, in Colorado, if you’re a medical patient, you can purchase more cannabis than if you are an [adult-use] consumer, or you can purchase products that come in a higher dosage of THC than if you’re an adult-use consumer. I think that’s an important consideration. People are legitimately using cannabis for medical reasons, and they should be able to continue to do so and those products should continue to be available for them in the marketplace.

MS: With all of that in mind, how should existing medical cannabis businesses prepare for adult-use legalization?

RG: Probably, medical cannabis businesses are going to be the first that will be able to sell to adult-use consumers. I hope that there are other opportunities in New Jersey for other potential businesses, that the state doesn’t just limit it so people can only get adult-use licenses if they’re currently medical. I think they’re going to have to think about what kind of products an adult-use consumer may be taking other than a medical consumer, and [they should be] able to serve both types of customers in their facility.

I think it does get to be a diminished market as far as medical versus adult-use, once you open it up to everybody over 21, meaning you may have the same number of medical patients, but you’re going to have a lot more consumers that are over 21. I think that’s just the natural progression of legalizing for adult-use, that proportionally, you’re going to have more people buying products that are over 21 than are medical patients, so you have to play into that.

MS: How might legalization in New Jersey impact cannabis policy in neighboring states such as New York and Pennsylvania, which have also been considering adult-use legalization in recent years?

RG: I think the local authorities and legislators are going to see a bunch of people driving across the border to buy cannabis legally, and they’re going to say, “Maybe it’s time we consider legalizing, as well,” because that’s just tax revenue going to another state. It’s sort of like when I lived in Connecticut. They didn’t allow beer or wine to be sold on Sundays, of all days, when football is being played, and people used to just drive over the border to buy it. I think the same thing is going to happen, and I think, just like eventually Connecticut realized that not selling beer or wine on Sunday was not a great idea, [New York will] probably figure out that not legalizing cannabis isn’t a great idea either. They’ve already got Massachusetts there, too, in that Northeast area where people are probably driving across the border into Massachusetts to buy cannabis.

The same thing happens at a smaller level, when a local jurisdiction decides not to allow cannabis businesses. So, I think eventually, it’s going to come to the tri-state area. It’s just a matter of when.

Editor’s Note: This interview has been edited for style, length and clarity.

Published at Fri, 16 Oct 2020 12:00:00 +0000

Michigan Governor Signs Expungement Bill Into Law, Illinois Collects More than $100 Million in Cannabis Tax Revenue: Week in Review

Michigan Governor Signs Expungement Bill Into Law, Illinois Collects More than $100 Million in Cannabis Tax Revenue: Week in Review

Multistate cannabis operator Cresco Labs is committed to being a responsible player in the rapidly growing industry, and has now set out to help other companies build brands the right way through the release of its Responsible Advertising and Marketing Standards (RAMS).

The advertising and marketing code, which was made public Oct. 8, includes a set of guiding principles to ensure that Cresco markets and promotes its brands and products responsibly. The standards include guidance on commercial communications to help prevent underage appeal and ensure companies make appropriate claims about cannabis’s benefits. The code also offers best practices for consumer-facing promotional events and merchandising.

Here, Cresco COO Greg Butler and SVP of Brand Marketing Cory Rothschild share why the company developed and published these standards, as well as how they will ultimately benefit the industry as it continues to grow.

Melissa Schiller: Why did Cresco develop these standards? What was the company’s overall goal in releasing these to the industry?

Photos courtesy of Cresco Labs

Cresco COO Greg Butler

Greg Butler: The reason why we wanted to publish this is, as we look to the end of this year and into next year, what we expect to see in the U.S. cannabis market is an increase in investment across all companies in building their brands. There are a couple key trends driving that. One is competition that continues to grow, so everyone is fighting to grow their brand with customers. The second is companies are strengthening their financial positions. They’re able to invest more in brands. And then the third is we’re also seeing more opportunities for cannabis brands to invest in marketing, so there are more ways they can spend money. With that, there are a lot of tailwinds that are driving toward more spend for brands in the space.

As we looked at it, as we’re competitive and we expect everyone to be competitive, we wanted to create some guidelines that set a series of best practices to ensure that we’re building brands the right way and that it’s always in service of what’s best for consumers.

Cory Rothschild: We obviously operate under different laws and regulations in every state that we compete in. Foundationally, we do believe that there are some standards that shouldn’t change or vary depending on where you’re talking about cannabis. Even in certain states that have more relaxed laws, there are certain things when it comes to conversations around promoting responsible consumption or avoiding underage-appealing imagery. Those don’t change, and we must commit to those as an industry, not even just as a company, if we’re going to build a category that not only reaches its potential, but does what is best for consumers along the way.

MS: What do Cresco’s Responsible Advertising and Marketing Standards entail? What are some key best practices that are outlined in these standards?

CR: If you look at our guidelines, in some ways, it’s just some things that shouldn’t even be up for debate, from [the fact that] you should never advertise to a minor to how [to] display pictures of people and images in your ads to the claims that you make, and then how do you run events to ensure we’re doing everything in our ability to operate in a way in which a young consumer wouldn’t see our marketing? So, the gambit of our code reaches everything from media through to experience.

MS: What was the overall process like for developing these standards?

CR: It started with developing our own internal standards and adhering to those in all the work that we do on an ongoing basis. Our company is founded on being professional and helping to normalize the industry, and what that [means] is holding ourselves to standards that are above what is being asked of us. So, we developed this set of norms to what we felt was appropriate and to what we believed was the right way to operate our business.

We did look to other codes and responsible use practices that exist in the broader CPG space, whether that’s in alcohol or pharmaceuticals, to look to how we could set our own industry standards above and beyond the regulations that are imposed on us currently to make sure that we are proactively building the right category.

MS: How will these standards help prevent underage consumption?

Cresco SVP of Brand Marketing Cory Rothschild

CR: I would hope that these standards are overwhelmingly a no-brainer for most people. We hope that people nod as they read them because they seem reasonable and responsible. So, to point to a few—one is that when we show individuals in our advertising, those people should be over the age of 21, and that should be made clear in the ways in which they’re shown. This is something that’s commonly practiced across other CPG categories where there are age restrictions around usage, and there’s no reason we shouldn’t be doing the same. There are examples within our industry where there are underage individuals being shown or at least seemingly underage individuals being shown in advertising that wouldn’t be appropriate.

The other piece is showing imagery that would be somehow juvenile, whether that’s a logo, an endorsement, [or] some sort of imagery or dress that connotates use or young culture. That’s not appropriate to connect to cannabis when you’re building and making advertising. That’s something that we believe is common sense, but it’s worth us committing to as a group because we know that this is a product that can have an appeal to underage individuals if frequently shown in advertising.

MS: How will these standards help Cresco and other cannabis advertisers make appropriate claims about cannabis’s benefits?

GB: One of the things that’s difficult in an industry like cannabis is you don’t have a lot of FCC guidelines or health and safety guidelines of what product claims you can or cannot make. There isn’t a lot of oversight for brands that are making claims. As you think of an industry that’s brand new with consumers, you don’t want to allow brands to make misleading statements that might cause confusion or even misuse of products. So, in a world where you’re not governed by bodies that ensure you’re using clinical trials, we want to encourage everyone to be responsible on how they make or allude to product claims associated with product.

MS: How do the standards help establish best practices for promotional events and merchandising?

CR: I think the part that is unclear at the local level is, how should companies interact with people who are under 21 with product? Of course, if you’re hosting an event in California that has a license to sell cannabis, that’s a 21-and-over event by definition and is obviously associated with ID checking and all kinds of age gating, but that’s not the case when you’re putting up a booth at a community fair or a booth at an arts festival. These are all things [where] anyone can have a booth or show up, and you have to make judgement calls around whether or not you’d like to participate in those events. Then, when individuals at the event want to approach your booth and have a conversation with your company, how do you make sure you’re having appropriate conversations with appropriate individuals?

A lot of the code is trying to fill in some of those gray spaces that we’ve run into as a company on a daily basis as we try to do different events in different states. These are meant to be a complement to existing regulation and law as opposed to either rewriting or stating the obvious.

An example of Cresco’s advertising for its Liquid Live Resin

MS: How will these standards be distributed, or how do you hope they will be adopted by the industry?

GB: Our hope by publishing them is that it’s somewhat of a call to action. We hope that everyone looks at their own business and maybe finetunes and creates their own [standards]. While we’re all building our brands, we all want to do it the right way, so we’ll make [our standards] publicly available on our website for anyone who wants to read [them], and our only real objective on this is that others read, understand and adapt to it or their own version.

CR: Just to build on that, we’ve gotten a great response from other businesses that are interested in partnering, and we’re just beginning to have some of those conversations. My hope is that this becomes bigger than just Cresco Labs, as Greg mentioned, and that it pushes us to work together as an industry to build what’s right for our category. We [want to] continue to open more and more opportunities with partners in the media space, vendors [and] agencies so that more people are able to participate in cannabis and we can have greater and better marketing overall.

Editor’s Note: This interview has been edited for style, length and clarity.

Published at Sat, 17 Oct 2020 12:30:00 +0000

Cannabis Stocks React on Recent Polling Data (GTBIF, GRWG, SGMD, CRLBF)

Cannabis Stocks React on Recent Polling Data (GTBIF, GRWG, SGMD, CRLBF)

The Cannabis space has heated up in the wake of the vice-presidential debate, wherein Senator Kamala Harris, Joe Biden’s running mate, made crystal clear that the Biden administration, if it prevails, will pursue a course of marijuana decriminalization at the federal level.

“We will decriminalize marijuana and we will expunge the records of those who have been convicted of marijuana,” the Democratic vice-presidential nominee said. “Times have changed — marijuana should not be a crime. We need to start regulating marijuana and expunge marijuana convictions from the records of millions of Americans so they can get on with their lives. As marijuana becomes legal across the country, we must make sure everyone — especially communities of color that have been disproportionately impacted by the war on drugs — has a real opportunity to participate in this growing industry.”

It should also be noted that, at this stage, no challenger to an incumbent in a presidential campaign has ever held such a commanding lead in the polls this near the election. Hence, market participants may begin to act very much like assets should price according to a Biden presidency from here forward, which could mean a powerful jump in interest for cannabis stocks as we close in on the results.

With that in mind, we take a look at some of the more active and interesting names in the space, including: Green Thumb Industries Inc (OTCMKTS:GTBIF), GrowGeneration Corp (OTCMKTS:GRWG), Sugarmade Inc (OTCMKTS:SGMD), and Cresco Labs Inc (OTCMKTS:CRLBF).

Green Thumb Industries Inc (OTCMKTS:GTBIF) is a producer and distributor of cannabis products including flower, concentrates for dabbing and vaporizing, edibles, and topicals. The company markets its products through third party retailers. It also owns and operates a chain of 50 retail stores under the RISE dispensaries name.

The company is a national cannabis cultivator, processor and dispensary operator, is dedicated to providing dignified access to safe and effective cannabis nationwide while giving back to the communities in which they serve.

Green Thumb Industries Inc (OTCMKTS:GTBIF) most recently announced the grand opening for adult-use cannabis sales at Rise Naperville (formerly 3C Compassionate Care Center) on October 8 which included a ribbon cutting ceremony with Naperville Mayor Steve Chirico. Profits from the first day of adult-use sales will benefit Loaves & Fishes, a local poverty-fighting and hunger relief nonprofit agency. Rise Naperville is the first store to offer adult-use cannabis sales in Naperville, the third most populous city in the state, and will remain the only store in the city to serve medical patients.

“We worked hard to offer adult-use cannabis sales in Naperville and are excited to meet new customers while continuing to serve our patients,” said Green Thumb Founder and Chief Executive Officer Ben Kovler. “We have been proud members of the Naperville community since 2016 and will remain good neighbors, creating jobs and tax revenue and making a positive impact through our corporate responsibility programs.”

And the stock has been acting well over recent days, up something like 19% in that time.

Green Thumb Industries Inc (OTCMKTS:GTBIF) generated sales of $165.8M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 20.1% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($113M against $181.8M, respectively).

GrowGeneration Corp (OTCMKTS:GRWG) is at the heart of the recent return of momentum in the cannabis stock space.

GRWG trumpets itself as a retail hydroponic and organic gardening play in the US market, with a clear ecommerce presence already in place. GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers.

GrowGeneration Corp (OTCMKTS:GRWG) just announced its acquisition of Hydroponics Depot, Phoenix’s largest indoor and outdoor garden center. With the addition of Hydroponics Depot, GrowGen’s portfolio of hydroponic garden centers now includes 29 stores across 11 states.

According to the release, GrowGen’s entry into the Arizona market comes as voters consider Prop 207, which would legalize limited possession, cultivation and use of marijuana for adults ages 21 years or older. If approved, it is estimated that Arizona’s cannabis market could grow from over $700 million market in 2020 into a $2 billion market, including both recreational and medical marijuana.

And the stock has been acting well over recent days, up something like 12% in that time. Shares of the stock have powered higher over the past month, rallying roughly 21% in that time on strong overall action.

GrowGeneration Corp (OTCMKTS:GRWG) pulled in sales of $43.5M in its last reported quarterly financials, representing top line growth of 123%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($14.8M against $18.8M, respectively).

Sugarmade Inc (OTCMKTS:SGMD) is an extremely interesting speculative prospect in the California cannabis marketplace, with a major interest in BudCars, one of the fastest growing vertically integrated cannabis delivery players in the space.

SGMD is a product and branding marketing company investing in operations and technologies with disruptive potential. Its Brand portfolio includes CarryOutsupplies.com, SugarRush™ and Budcars.com.

Sugarmade Inc (OTCMKTS:SGMD) just this morning provided shareholders with a preannouncement of BudCars performance for the three months ended September 30, 2020, which featured steadily strong gross margins, nearly $2M in Gross Receipts, and more than 60% growth in Net Sales, Customer Orders, and Gross Profits on a sequential quarterly basis.

“BudCars continues to perform, setting records in basically every key metric we track,” stated Jimmy Chan, CEO of Sugarmade. “It was a tremendous quarter, with a big jump in customers and regional market share and robust margins on every sale. That paints a very motivating picture as we gear up to significantly expand our service territory, with upcoming expansion into the North Bay and Wine Country areas as well as our upcoming grand opening of BudCars LA.”

According to the release, management notes that BudCars growth has continually tracked ahead of expectations. However, the Company believes that geographic expansion is the key to unlocking a further dramatic acceleration in growth. As announced in a recent Letter to Shareholders, the Company is expanding BudCars initially into the North San Francisco Bay Area and the Wine Country Counties. That will be followed by the grand opening of BudCars Los Angeles, which is anticipated to take place in November.

Sugarmade Inc (OTCMKTS:SGMD) also achieved an additional strategic goal during the quarter by securing rights to a property zoned for cannabis cultivation where it intends to establish a licensed cannabis cultivation facility, which presents the potential to widen profit margins further through vertical supply chain integration and the establishment of a branded line of cannabis products.

Cresco Labs Inc (OTCMKTS:CRLBF) trumpets itself as one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco is built to become the most important company in the cannabis industry by combining the most strategic geographic footprint with one of the leading distribution platforms in North America.

Employing a consumer-packaged goods approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi, High Supply, Reserve, Good News and Mindy’s Chef Led Artisanal Edibles created by James Beard Award-winning chef Mindy Segal.

Cresco Labs Inc (OTCMKTS:CRLBF) just announced the approval and the location of its tenth Illinois dispensary in Naperville. The adult-use dispensary is located in one of the busiest shopping areas in Naperville, the 3rd largest city in Illinois with approximately 150,000 residents.

“We have been consistent in choosing locations for our dispensaries in Illinois, focusing on high traffic areas in traditional retail environments. Sunnyside Schaumburg, which is adjacent to Illinois’ busiest mall and our new Naperville dispensary, which shares a block with Costco, Walmart, and Starbucks, are great examples of this strategy,” said Charlie Bachtell, Cresco Labs’ CEO and Co-founder. “Our approach of meeting the consumer where they are and providing a normalized cannabis shopping experience is allowing our dispensaries in Illinois and all Sunnyside stores nationwide to outperform industry averages.”

And the stock has been acting well over recent days, up something like 21% in that time.

Cresco Labs Inc (OTCMKTS:CRLBF) pulled in sales of $130.6M in its last reported quarterly financials, representing top line growth of 226.5%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($100.6M against $222.5M, respectively).

COMPENSATION DISCLOSURE: Section 17(b) of the 1933 Act requires publishers to disclose who paid them, the amount, and the type of payment. In order to be in full compliance with the Securities Act of 1933, Section 17(b): Tiger Global Management Partners LLC has compensated a third party to produce and present weekly content for various companies for the publication. For more information, please click here. In addition, this article is part of JournalTranscript.com Networks. Read the JournalTranscript.com Networks Disclaimer.

Published at Wed, 14 Oct 2020 12:24:39 +0000

Toxic Debt Could Have Some Major Cannabis Companies In Bankruptcy Court Very Soon

Toxic Debt Could Have Some Major Cannabis Companies In Bankruptcy Court Very Soon

With the US election less than one month away, we are highly focused on who the winner of Presidential election will be as well as the states that will pass legal cannabis legislation (medical and recreational).

A handful of states are voting on the legalization of medical or recreational cannabis and we expect to see a majority of these ballot initiatives get passed by voters. Although we believe that the cannabis industry has benefited from this potential outcome, not all companies will benefit from this trend.

During the last year, the cannabis sector has been under considerable pressure. Although we believe the industry has significant potential catalysts for growth, the recent trend has forced several companies to file for bankruptcy. Going forward, we expect additional companies file for bankruptcy and believe that some of the businesses that could file are considered to be high-profile players in the space.

From a capital markets standpoint, one of the most significant changes is related to the securities that are being sold by a company to raise capital. From 2015 to 2018, the vast majority of cannabis companies raised capital through private placement equity offerings. At the height of the cannabis industry from a capital point of view, companies were easily completing oversubscribed private placements of $100+ million of equity capital.

During the last two years, equity capital markets have all but dried up for cannabis companies (especially Canadian based businesses). Companies have been forced to raise debt capital in order to fund growth initiatives and the interest rates that are associated with these loans are well above the average rate.

Since cannabis is legal at the federal level in Canada, companies can raise debt capital at lower rates than US companies. So far this year, there has been an increase in the number of companies that cannot pay the interest expense that is associated with previously issued loans and the market has punished the companies for it.

Over the next year, we expect to see additional cannabis companies (US and Canadian) file for bankruptcy and believe that our readers need to be aware of this. Some of the companies that we expect to see file for bankruptcy are some of the best known names in the industry.

Companies like Aurora Cannabis Inc. (ACB.TO) (ACB) and MedMen Enterprises (MMEN.CN) (MMNNF) are two examples of high-profile names in the cannabis industry that have taken on a lot of debt. Going forward, we are not sure if the businesses will be able to service the debt and this is a trend that we will be following.

Share

Share - Facebook


Share - Twitter

Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Published at Fri, 16 Oct 2020 12:43:59 +0000

Building Brands the Right Way: A Look at Cresco Labs’ Newly Released Cannabis Advertising and Marketing Standards

Building Brands the Right Way: A Look at Cresco Labs’ Newly Released Cannabis Advertising and Marketing Standards

Multistate cannabis operator Cresco Labs is committed to being a responsible player in the rapidly growing industry, and has now set out to help other companies build brands the right way through the release of its Responsible Advertising and Marketing Standards (RAMS).

The advertising and marketing code, which was made public Oct. 8, includes a set of guiding principles to ensure that Cresco markets and promotes its brands and products responsibly. The standards include guidance on commercial communications to help prevent underage appeal and ensure companies make appropriate claims about cannabis’s benefits. The code also offers best practices for consumer-facing promotional events and merchandising.

Here, Cresco COO Greg Butler and SVP of Brand Marketing Cory Rothschild share why the company developed and published these standards, as well as how they will ultimately benefit the industry as it continues to grow.

Melissa Schiller: Why did Cresco develop these standards? What was the company’s overall goal in releasing these to the industry?

Photos courtesy of Cresco Labs

Cresco COO Greg Butler

Greg Butler: The reason why we wanted to publish this is, as we look to the end of this year and into next year, what we expect to see in the U.S. cannabis market is an increase in investment across all companies in building their brands. There are a couple key trends driving that. One is competition that continues to grow, so everyone is fighting to grow their brand with customers. The second is companies are strengthening their financial positions. They’re able to invest more in brands. And then the third is we’re also seeing more opportunities for cannabis brands to invest in marketing, so there are more ways they can spend money. With that, there are a lot of tailwinds that are driving toward more spend for brands in the space.

As we looked at it, as we’re competitive and we expect everyone to be competitive, we wanted to create some guidelines that set a series of best practices to ensure that we’re building brands the right way and that it’s always in service of what’s best for consumers.

Cory Rothschild: We obviously operate under different laws and regulations in every state that we compete in. Foundationally, we do believe that there are some standards that shouldn’t change or vary depending on where you’re talking about cannabis. Even in certain states that have more relaxed laws, there are certain things when it comes to conversations around promoting responsible consumption or avoiding underage-appealing imagery. Those don’t change, and we must commit to those as an industry, not even just as a company, if we’re going to build a category that not only reaches its potential, but does what is best for consumers along the way.

MS: What do Cresco’s Responsible Advertising and Marketing Standards entail? What are some key best practices that are outlined in these standards?

CR: If you look at our guidelines, in some ways, it’s just some things that shouldn’t even be up for debate, from [the fact that] you should never advertise to a minor to how [to] display pictures of people and images in your ads to the claims that you make, and then how do you run events to ensure we’re doing everything in our ability to operate in a way in which a young consumer wouldn’t see our marketing? So, the gambit of our code reaches everything from media through to experience.

MS: What was the overall process like for developing these standards?

CR: It started with developing our own internal standards and adhering to those in all the work that we do on an ongoing basis. Our company is founded on being professional and helping to normalize the industry, and what that [means] is holding ourselves to standards that are above what is being asked of us. So, we developed this set of norms to what we felt was appropriate and to what we believed was the right way to operate our business.

We did look to other codes and responsible use practices that exist in the broader CPG space, whether that’s in alcohol or pharmaceuticals, to look to how we could set our own industry standards above and beyond the regulations that are imposed on us currently to make sure that we are proactively building the right category.

MS: How will these standards help prevent underage consumption?

Cresco SVP of Brand Marketing Cory Rothschild

CR: I would hope that these standards are overwhelmingly a no-brainer for most people. We hope that people nod as they read them because they seem reasonable and responsible. So, to point to a few—one is that when we show individuals in our advertising, those people should be over the age of 21, and that should be made clear in the ways in which they’re shown. This is something that’s commonly practiced across other CPG categories where there are age restrictions around usage, and there’s no reason we shouldn’t be doing the same. There are examples within our industry where there are underage individuals being shown or at least seemingly underage individuals being shown in advertising that wouldn’t be appropriate.

The other piece is showing imagery that would be somehow juvenile, whether that’s a logo, an endorsement, [or] some sort of imagery or dress that connotates use or young culture. That’s not appropriate to connect to cannabis when you’re building and making advertising. That’s something that we believe is common sense, but it’s worth us committing to as a group because we know that this is a product that can have an appeal to underage individuals if frequently shown in advertising.

MS: How will these standards help Cresco and other cannabis advertisers make appropriate claims about cannabis’s benefits?

GB: One of the things that’s difficult in an industry like cannabis is you don’t have a lot of FCC guidelines or health and safety guidelines of what product claims you can or cannot make. There isn’t a lot of oversight for brands that are making claims. As you think of an industry that’s brand new with consumers, you don’t want to allow brands to make misleading statements that might cause confusion or even misuse of products. So, in a world where you’re not governed by bodies that ensure you’re using clinical trials, we want to encourage everyone to be responsible on how they make or allude to product claims associated with product.

MS: How do the standards help establish best practices for promotional events and merchandising?

CR: I think the part that is unclear at the local level is, how should companies interact with people who are under 21 with product? Of course, if you’re hosting an event in California that has a license to sell cannabis, that’s a 21-and-over event by definition and is obviously associated with ID checking and all kinds of age gating, but that’s not the case when you’re putting up a booth at a community fair or a booth at an arts festival. These are all things [where] anyone can have a booth or show up, and you have to make judgement calls around whether or not you’d like to participate in those events. Then, when individuals at the event want to approach your booth and have a conversation with your company, how do you make sure you’re having appropriate conversations with appropriate individuals?

A lot of the code is trying to fill in some of those gray spaces that we’ve run into as a company on a daily basis as we try to do different events in different states. These are meant to be a complement to existing regulation and law as opposed to either rewriting or stating the obvious.

An example of Cresco’s advertising for its Liquid Live Resin

MS: How will these standards be distributed, or how do you hope they will be adopted by the industry?

GB: Our hope by publishing them is that it’s somewhat of a call to action. We hope that everyone looks at their own business and maybe finetunes and creates their own [standards]. While we’re all building our brands, we all want to do it the right way, so we’ll make [our standards] publicly available on our website for anyone who wants to read [them], and our only real objective on this is that others read, understand and adapt to it or their own version.

CR: Just to build on that, we’ve gotten a great response from other businesses that are interested in partnering, and we’re just beginning to have some of those conversations. My hope is that this becomes bigger than just Cresco Labs, as Greg mentioned, and that it pushes us to work together as an industry to build what’s right for our category. We [want to] continue to open more and more opportunities with partners in the media space, vendors [and] agencies so that more people are able to participate in cannabis and we can have greater and better marketing overall.

Editor’s Note: This interview has been edited for style, length and clarity.

Published at Fri, 16 Oct 2020 12:05:00 +0000