Common MJ Startup Mistakes | Cannabis Industry Con Artist Sentenced | STATES Act Update

Highlights

Common Mistakes Cannabis Startups Make

Canna Law Blog // 12.13.18

Running a cannabis business is difficult with a high failure rate. While federal prohibition initially kept big money sidelined, giving small business a head start, many small firms fail for a myriad of common reasons. Failure to properly estimate startup and transition timelines can hemorrhage the company’s resources. Additionally paying attorneys to process paperwork that can be done by paralegals can be costly. Over optimism, poor employment practices, and either no contractual agreements or informal contractual agreements are also common themes harming the industry.   

Cannabis Industry Con Artist Sentenced

OC Weekly // 12.12.18

A con man named Michael Edgar Cone, who flashed his lavish lifestyle and claims of operating three private equity offices to investors, was recently brought to justice by the FBI. Cone operated using aliases, swindling more than $4M from 60 wealthy investors during a seven month period. Contributing to his arrest, Cone unknowingly attempted to solicit an FBI special agent working on white collar crime. This month Cone was sentenced to 41 months in federal prison and ordered to pay $3.9M in restitution. The Securities Exchange Commission warns investors to thoroughly investigate proposals and the individuals offering them.

GOP Senator Wants to Attach ‘STATES’ Act to Prison Reform Bill

Marijuana Moment // 12.13.18

Sen. Cory Gardner (R-CO) the lead GOP co-sponsor of standalone bill, the Strengthening the Tenth Amendment Through Entrusting States Act (STATES Act), plans to file that bill as an amendment to the prison and sentencing reform bill. The STATES Act will allow states to implement their own marijuana laws without federal interference from the federal Controlled Substances Act. The STATES Act will protect individuals from federal trafficking charges if they are in full compliance with state cannabis laws. Additionally, financial institutions would receive the legal reassurance they require to conduct business with the cannabis industry.

Stocks

Canna Stocks: Yesterday in Review

Market Watch // 12.13.18

Proactive Investors // 12.13.18

Cannabis stocks were broadly lower Thursday, with only a few players coming out on top. After entering an extraction agreement with Canopy Growth Corporation (NYSE: CGC) (TSE: WEED), Valens GroWorks Corp. (OTCQB: MYMSF) (CSE: VGW) rose 12%, however the deal failed to boost Canopy shares which fell 4%. Innovative Industrial Properties Inc (NYSE: IIPR) climbed 2%.

Tilray (NASDAQ: TLRY) plunged 10%, Aurora (TSE: ACB) (NYSE: ACB) was down 7%, and GrowGeneration Corp.(OTCQX: GRWG) fell 7% after announcing its expansion to Maine. MariMed (OTCQB: MRMD) sank 15% after recently announcing a $3B investment into Kentucky-based GenCanna. The North American Marijuana Index was down nearly 6%.

HEXO: 506% Revenue Growth for Q1

New Cannabis Ventures // 12.13.18

HEXO Corp. (TSX: HEXO) reported its financial results for the first quarter of fiscal year 2019. The company raked in $6.7M in gross revenue for the quarter, which includes $5.2M of adult-use cannabis sales in the first two weeks of Canada’s legalization.  

Aurora Cannabis Spread Too Thin?

InvestorPlace // 12.13.18

InvestorPlace contributor Ian Bezek warns investors to keep a close eye on Aurora Cannabis (NYSE: ACB) (TSE: ACB). Including the recent all-stock purchase of Farmacias Magistrales, the company has acquired more than 40 companies to date. Bezeka argues that the Mexican partnership may not amount to much. Additionally, recent acquisitions may be spreading the company too thin, with Aurora’s share count exploding from 200M shares to almost a billion shares outstanding. Without a strategic partnership to raise share prices, Bezek predicts Aurora will dip below $5.

Green Growth Brands Acquires $13.4M Cultivation Facility in Nevada

New Cannabis Ventures // 12.13.18

Thursday Xanthic Biopharma Inc. d.b.a Green Growth Brands (CSE: GGB) announced that it has entered into definitive agreements with Wellness Orchards of Nevada LLC and Panorama WON LLC on Dec. 12, 2018 to acquire a cultivation facility in Pahrump, Nevada for a total purchase price of $13,372,162.

Up Cannabis Enters Supply Agreement with PEI Cannabis Management Corp.

News Wire // 12.12.18

Newstrike Brands Ltd. (TSXV: HIP) (OTCPK: NWKRF) announced that its wholly-owned subsidiary, Up Cannabis Inc. has received initial purchase orders from PEI Cannabis Management Corp. for adult-use products. Up has also formalized supply agreements with the Nova Scotia Liquor Corporation, Ontario Cannabis Store, and the Alberta Gaming, Liquor, & Cannabis Commission.

Aurora Cannabis Invests $7.5M in High Tide

Market Watch // 12.13.18

Aurora Cannabis Inc (NYSE: ACB) (TSE: ACB) announced its $7.5M investment in Alberta-based High Tide Inc., a retail cannabis and accessories company. In exchange, Aurora will gain 10K senior unsecured convertible indentures, priced at CA$1,000 each at an interest rate of 8.5% a year, convertible into High Tide stock amounting to 13.3M common shares at $0.75 each.

High Tide to Acquire Grasscity

New Cannabis Venture // 12.13.18

Thursday High Tide Inc. announced that it, through its newly formed subsidiary High Tide Inc BV, has entered into a share purchase agreement and other related agreements to acquire all outstanding and issued shares of two entities, SJV BV and SJV2 BV, that together operate as Grasscity. As per the agreements, a total purchase price of $6.73M will be paid to Grasscity shareholders.

Global News

St. Vincent Parliament Decriminalized Medicinal Cannabis

TV 6 NT // 12.13.18

St. Vincent and the Grenadines has become the first Organisation of Eastern Caribbean States to pass legislation decriminalizing cannabis for medicinal and scientific purposes. Agriculture Minister Saboto Caesar proposed two pieces of legislation, the Medical Marijuana Industry Bill and the Medical Marijuana Amnesty Bill, which were approved by Parliament.

South Africa’s First Cannabis Expo… Without Cannabis

Reuters // 12.13.18

South Africa’s first ever four-day cannabis expo, which opened in Pretoria on Thursday, was a stark illustration of the established grey-area the cannabis industry occupies in the country. Despite the Constitutional Court’s decision to decriminalize the use and cultivation of cannabis, the decision did not legalize its trade or distribution. Members of the expo defiantly protested by bringing cannabis to the expo.  

US News

CMU Drug Policy Expert Weighs In On Cannabis

Pittsburgh Post Gazette // 12.12.18

Jonathan Caulkins, a Carnegie Mellon University professor and drug policy management expert, weighs in on the cannabis industry. Caulkins warns about the social ramifications of marketing legalization. Further, the policy expert projects the price of cannabis reaching nearly zero as it becomes increasingly commoditized, which would drastically reduce the tax revenues states are projecting. According to Caulkins, forcing cannabis license holders to be non-profits would circumvent the black market most effectively.

States Are Looking to Cannabis Tax Revenues to Bail Out Pension Funds

Quartz // 12.12.18

The US is facing a pension crisis of epic proportions, according to Quartz’s Natasha Frost. States like New Jersey and Illinois are considering legalizing adult-use recreational cannabis in order to bridge the gap with tax revenues. Chicago’s mayor Rahm Emanuel hopes to funnel cannabis tax money straight to pension funds to cover its nearly $1B in annual retirement payments. In New Jersey, pension and debt bills will likely consume a third of the state’s budget by 2023. Currently New Jersey is grappling over proposed tax rates for the industry.

Fall River Reduces Cannabis Business Tax

Boston Globe // 12.13.18

Fall River Massachusetts has agreed to reduce the taxes placed on cannabis businesses from 4% annual revenue to 3% with a $50K one-time fee. While the changes may be minor, there was much ado about the municipality’s intentions. Legislators who drafted state marijuana laws felt the violation was deliberate municipal excess.

St. Paul City Council Backs Recreational Cannabis Resolution

CBS Minnesota // 12.13.18

In a 6-1 vote Wednesday the St. Paul City Council backed a resolution to legalize recreational adult-use cannabis. The resolution carries no legal weight, but will included in the city’s legislative agenda and sent to state lawmakers. Council member Dai Thao, the author of the resolution, argues that legalization would benefit state revenue.

First Two Ohio Medical Marijuana Testing Labs Scheduled For Inspection

Cleveland // 12.13.18

Thursday Ohio medical marijuana regulators announced that dates of inspection have been issued to two marijuana testing facilities next week. Inspections will occur at North Coast Testing Labs in Portage County, and Hocking College in Athens County. North Coast’s inspection is set for the 20th of December, where the lab expects to be granted an operational license. Testing should begin in early January. Once products are tested the first legal marijuana sales can be scheduled to commence.

Petition for Medical Marijuana Initiated in Nebraska

Omaha World Herald // 12.13.18

Thursday, Nebraska State Senators Anna Wishart and Adam Morfield, led a committee, Nebraskans for Sensible Marijuana Laws, in an effort to petition for a legal medical marijuana program. The group aims to put a proposed constitutional amendment in the 2020 ballot for voters to consider.

California News

California Cannabis Regulation Changes

Marijuana Business Daily // 12.13.18

California regulators from have wrapped up the final version of the state’s new proposed regulations governing the cannabis industry. The Office of Administrative Law is now reviewing the policy, if approved the regulations would be permanent. Deliveries will now be permitted anywhere in the state, regardless of municipal bans. Another significant win for cannabis is contract manufacturing (white label) products will also be permitted. Take a look for more details on the changes to come.

San Luis Obispo Co. Extends Deadlines For Cannabis Producers

New Times SLO // 12.13.18

Tuesday San Luis Obispo County supervisors agreed to extend the deadline for cannabis producers to submit land-use applications to April 1, 2019. Originally, the deadline was Dec. 31, 2018, however industry professionals argued the previous timeline would leave many in the dust.

Fresno Authorizes 2 Medical Cannabis Dispensaries

The Fresno Bee // 12.13.18

Thursday the Fresno City Council approved medicinal cannabis regulations that could potentially allow up to two dispensaries in each council district. The vote also allows commercial cultivation, manufacturing, and distribution to be established along HWY 99 and HWY 180.

Canadian News

Manitoba Cannabis Producer Issues Recall

Global News // 12.13.18

Winnipeg cannabis producer, Bonify announced that some of their products may fail microbial and chemical contaminant standards for cannabis regulations. The company is recalling its “Cherry Lime” and “Warlock Kush” products.

Mississauga & Markham Vote No On Cannabis Retail Stores

Global News // 12.12.18

The cities of Mississauga and Markham have voted to opt out of allowing cannabis retail locations in their municipalities. Due to ambiguities in the private retail model announced by the Ontario government earlier this year, Mayor Bonnie Crombie feels the most prudent decision is to opt out. Crombie also notes the province has failed to provide municipalities with control over where stores can be located.