Marijuana Business Magazine January 2021 by MJBiz Daily

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Insights for cannabis executives, investors & entrepreneurs

VOL 8 â&#x20AC;˘ ISSUE 1 â&#x20AC;˘ January 2021

New Year, New Opportunities Amid continuing challenges, the cannabis industry enters 2021 with fresh markets and greater possibilities

Using Light Deprivation to Your Advantage Finding the Right Business Buyer

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January 40 NEW YEAR, NEW OPPORTUNITIES

Amid continuing challenges, the cannabis industry enters 2021 with fresh markets and greater possibilities.

Marijuana Business Magazine

January 2021 • Volume 8 • Issue 1

From the Editor

Q&A with John Mackey

DEPARTMENTS

FEATURES

TABLEOFCONTENTS

Hemp Notebook

58 LANDING A BUYER

Trends & Hot Topics

Executives who have closed M&A deals reveal what makes them commit to a purchase.

64 CONTROLLED SUNSET

Greenhouse and outdoor growers can use light deprivation to control harvest and improve quality.

Company News

Industry Developments

By the Numbers

Industry Players $12.95

Insights for cannabis executives, investors & entrepreneurs

VOL 8 • ISSUE 1 • January 2021

New Year, New Opportunities Amid continuing challenges, the cannabis industry enters 2021 with fresh markets and greater possibilities

Using Light Deprivation to Your Advantage Finding the Right Business Buyer

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On Our Cover Jacqueline Bennett, a partner with investment firm Highlands Venture Partners, stands outside the New York Stock Exchange. Photo by Porter Binks

Question of the Month

Fotmer Life Sciences employs light-deprivation techniques to increase its number of harvests. Learn more on page 64.

Courtesy Photo

Marijuana Business Magazine | January 2021

ContactUs | Whoʼs Behind This Magazine? Magazine feedback We are here to help the multibillion-dollar cannabis industry prosper. Let us know how we can serve you. Email us at m agazine@mjbizdaily.com with your thoughts, suggestions and any other feedback about the magazine and the stories we cover.

On the site To get the cannabis industry′s latest news and analysis, visit us at mjbizdaily.com and hempindustrydaily.com.

Find us on social media Marijuana Business Daily @mjbizdaily @MJBizDaily @MMJBusinessDaily

MJBizCon 2020 The inaugural digital MJBizCon has concluded. But showrooms, networking and 60+ on-demand sessions are available through March 2021 for paid ticket holders. Access content at mjbizcon.com. And watch this space for news about upcoming events in 2021. Thank you to all our sponsors, speakers, partners and attendees for making MJBizCon 2020 so memorable.

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Marijuana Business Magazine | January 2021

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Staff Writers Laura Drotleff Laura.Drotleff@HempIndustryDaily.com Solomon Israel Solomon.Israel@MJBizDaily.com Matt Lamers Matt.Lamers@MJBizDaily.com Ivan Moreno Ivan.Moreno@HempIndustryDaily.com Kristen Nichols Kristen.Nichols@HempIndustryDaily.com Alfredo Pascual Alfredo.Pascual@MJBizDaily.com Monica Raymunt Monica.Raymunt@HempIndustryDaily.com Omar Sacirbey Omar.Sacirbey@MJBizDaily.com Bart Schaneman Bart.Schaneman@MJBizDaily.com John Schroyer John.Schroyer@MJBizDaily.com Jeff Smith Jeff.Smith@MJBizDaily.com

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To start/change/cancel your subscription, visit MJBizMagazine.com, call us at (720) 213-5992, ext. 1 or email us at CustomerService@MJBizDaily.com. Marijuana Business Magazine subscriptions are currently free to qualified U.S. cannabusiness professionals and investors age 21 and over only. To advertise with us, email Sales@MJBizDaily.com or call us at (720) 213-5992, ext. 2. Marijuana Business Magazine, Volume 8, lssue 1, January 2021 lSSN 2376-7375 (print); lSSN 2376-7391 (online) Marijuana Business Magazine is currently published 10 times per year by Marijuana Business Daily™, a division of Anne Holland Ventures Inc. POSTMASTER: Please send address changes to: Marijuana Business Daily, 3900 S. Wadsworth Blvd., Suite 100, Denver, CO 80235. Copyright 2011-2021 by Marijuana Business Daily, a division of Anne Holland Ventures lnc. All rights reserved. Materials may not be reproduced in whole or in part without written permission. For reprints of any article, please contact Customer Service. MJBizMagazine.com

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FromtheEditor | Kate Lavin

Here Comes the Sun

A historic election, new retail trends and cautious optimism herald a new start

can’t remember a time when Americans were as eager to start a new chapter as we are today. From the coronavirus to a recession, mass unemployment and a contentious election, 2020 brought challenges both anticipated and completely unforeseen. But rather than run full speed into 2021, let’s take a moment to reflect on the year we just finished and the lessons we can implement going forward.

Curbside Pickup and Delivery While some marijuana markets already offered preordering and delivery services, the COVID-19 pandemic highlighted the importance of limited-contact retail options like never before. Dispensaries and recreational marijuana retailers joined grocery stores, restaurants and other businesses last spring in quickly implementing systems that allowed customers to feel safe while they shop. Considering that most states’ introduction to the legal marijuana market involves serving medical cannabis patients, the ability to offer limited-contact options to immunocompromised individuals is all the more crucial for cannabis businesses. Several states approved temporary curbside pickup and delivery services for marijuana companies during the early days of the pandemic, but the past year has proved that offering these options remains possible—and even necessary—after herd immunity is achieved and shelter-inplace orders expire. Let’s make sure lawmakers and regulators know that cannabis companies met the challenge to serve customers safely and should be able to offer these options going forward.

March Toward Full Legalization In addition to electing a ticket that included the first female vice president of the United States on Election Day 2020, voters approved every statewide marijuana legalization initiative on their ballots. And in South Dakota, voters approved both medical and recreational cannabis at the same time, an industry first. The election results proved that the public’s opinion of marijuana becomes more favorable each year. Even anti-cannabis lawmakers are recognizing that the will of the people must be respected: Vermont’s anti-MJ governor, Phil Scott, allowed legislation authorizing recreational marijuana to become law without his signature in October.

Marijuana Business Magazine | January 2021

Lawmakers are paid with our tax dollars. It’s long past time for them to put the will of their constituents ahead of their personal opinions.

Empty Prisons of Nonviolent Drug Offenders As the coronavirus surged in the United States, places where people live in close proximity—such as university dorms, nursing homes and prisons—were hit hardest. Even as cannabis businesses were deemed essential during the pandemic, thousands of Americans remained incarcerated for marijuana possession and other nonviolent drug crimes. The Marijuana Opportunity Reinvestment and Expungement (MORE) Act passed in December by the U.S. House of Representatives seeks to right this injustice, but with a deadly virus sweeping the nation’s prisons, change is not coming fast enough. The Last Prisoner Project is one organization raising awareness about the 40,000 men and women serving time for cannabis offenses. The nonprofit group organizes campaigns to release drug offenders from prison and works with partners to offer recidivists the training and employment needed to start their new lives. As we begin a new year that will hopefully see an end to the coronavirus pandemic, let’s commit to taking some of the hard-earned lessons from 2020 and applying them going forward. Sincerely,

Kate Lavin Marijuana Business Magazine Editor

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FiveQuestions | with John Mackey

Dialing in Dosage Industry needs to crack down on inflated CBD labeling before it damages consumer perceptions, Whole Foods co-founder says By Solomon Israel

ohn Mackey knows all about building a fringe business into a thriving mainstream brand.

The CEO and co-founder of Whole Foods Market saw an early opportunity in natural and organic foods, growing a small store in Austin, Texas, into a global natural foods leader that was acquired by Amazon for $13.7 billion in 2017. Mackey, who co-wrote the book “Conscious Capitalism: Liberating the Heroic Spirit of Business,” recently gave the keynote address at MJBizCon 2020 before sitting down for a virtual Q&A with Marijuana Business Daily CEO Chris Walsh.

We’ve been trying to land you as a keynote speaker at MJBizCon since 2016. Sometimes executives outside the industry are hesitant to speak at a cannabis business conference. Did you have any hesitancy in agreeing to join us? Initially, when you reached out a few years ago, my PR team looked at it and said, “There’s no upside for Whole Foods, but there might be downside.” But the world’s changed a lot in the last three, four, five years. More and more states are legalizing cannabis first for medical purposes and then recreationally. So it’s no longer seen as a radical thing. There’s little doubt that over time we’ll probably have it in, if not 50 states, in almost all the states.

Cannabis has a lot in common with the naturalproducts industry. Can you draw any parallels

between the evolution of natural products over the past couple of decades and what we might see as the cannabis industry grows and matures? When the natural-products industry got started, it was way on the fringe. That’s one of the things it has in common with the cannabis industry. It wasn’t taken seriously. It started out mostly with retail: Initially, we had a lot of retailers and not much product. Now that’s reversed because it’s moved into the mainstream. The supermarket companies are all selling natural and organic foods. Now it’s become more and more of a product-dominated industry. The retailers are almost secondary because the products are being sold everywhere. If you could create a category, and you could create the brand that would dominate that category, you could make a ton of money. I’ve seen it. I see no reason why that can’t happen in the cannabis industry. But as long as cannabis is seen as just a large category, then that will limit the potential for brands to stake a claim. Instead, you have to create categories within the cannabis industry.

Large grocery chains, including Whole Foods, have started selling topical CBD products over the past two years, and they’re devoting more shelf space to these products. What led Whole Foods to go that route? We wanted to sell CBD long before we started selling it. I’ve been using CBD myself for many years, mostly as a topical.

Those folks that have this passion and imagination and good entrepreneurial instincts, they’re going to reinvent the world.” — John Mackey CEO and co-founder of Whole Foods Market

10 Marijuana Business Magazine | January 2021

I find it helps relax muscles, and it’s great in massages, salves and things like that. I love CBD. Whole Foods was a little slow to do it because CBD was being legalized in states, but it didn’t have a national legalization. We were worried that if the FDA (U.S. Food and Drug Administration) wanted to clamp down on it, they would pick a visible target to punish. And we didn’t want to be that target. We didn’t want to be a first-mover in this. We wanted to get the OK from Amazon because we didn’t want to create negative publicity for the parent company. So that’s why we delayed. But now we’ve jumped in with both feet, because it looks like it’s all clear. It’s being sold everywhere now.

I know you’re far removed from specific decisions about CBD products that Whole Foods carries. But can you give us any insight into what you’ve seen in demand for CBD products? It’s definitely got cachet, it’s got momentum. I’d have to say a lot of people were confused about it, but it’s getting a new trial (from consumers). CBD has to be effective, meaning it has to have a dosage that’s sufficient for people to actually feel a relaxation effect. And I think the potency levels—or the efficacy of it, in my own personal experience—can vary tremendously. So that’ll be a quality issue that, somehow or another, the industry will probably have to work on. This happened in the supplement industry; there’ve been a lot of studies that show some of the vitamin manufacturers don’t put in what they claim to be putting in. It’s cheaper if you cut back a little bit less than what you’re supposed to do. Unfortunately, if you cut back too much, then you don’t have the efficacy, the effectiveness of the product. And that can hurt not just your brand, but it can hurt the entire industry. So that’ll be something the industry will need to regulate itself, or it runs the risk of people becoming skeptical that CBD is actually doing any good for them.

How have you kept up with changes in consumer demand over the years? They say one way to best deal with the future is to create it yourself. And to a large extent, that’s what Whole Foods did: We invented a category, invented a new market. Retailing natural, organic foods in a large-scale and supermarket form, we invented that. We were creating that for a long time. There’s a lot more competition today. Whole Foods keeps up with it because we have a marketing team, and that’s what they do. But if you’re a small business starting out, you have to realize you probably know the market better than anybody

Whole Foods was deliberate about when to begin selling CBD at its retail stores. Courtesy Photo

else because you’re living it: You are the market. You embody it, you know the customers. And that gives you an authenticity that these big players will never have. The entrepreneur has that firsthand knowledge for living the market itself. They’re part of it. They understand it in a way that the big players will not understand, at least right now. That will change over time. We’re at the entrepreneurial stage for (the cannabis industry) right now. The best entrepreneurs who have the greatest intuition, who can see what their customers want and create value for them, they’re going to win. And market research will be playing catch-up. But that entrepreneurial phase has probably got 10, 15 years left, and then it’s going to become more professional with marketing research and whatnot. Those folks that have this passion and imagination and good entrepreneurial instincts, they’re going to reinvent the world. I think they’re doing it right now. I can’t wait to see how it turns out. This interview has been edited for length and clarity.

Solomon Israel is a reporter for Marijuana Business Magazine and Marijuana Business Daily International. You can reach him at solomon.israel@mjbizdaily.com.

January 2021 | mjbizdaily.com

HempNotebook | Kristen Nichols

It’s Not About You As we hope for a brighter 2021, remember that failed businesses don’t mean failed founders

e made it! Through 2020, that is. But for many in the hemp

and CBD business, it’s hard to celebrate. As the United States opens this year hoping for a reprieve from a merciless pandemic, hemp entrepreneurs have even more crises to confront—plummeting wholesale prices, dwindling investor interest and ongoing legal uncertainty from federal regulators on how hemp can be grown and sold. Half the CBD businesses in existence at the start of 2020 aren’t around today. Wholesale biomass prices are down 80% in some states after reaching historic highs. My inbox is full of emails about large quantities of unsold hemp, along with pleas for help in finding buyers. It’s a dark time for an industry that, to many, represents the best path to a healthier planet and a prosperous future for the farm economy.

The Good News Your business challenges don’t determine your personal worth. Many great people have had businesses fail, made bad investments or gambled on a novel business opportunity that went sour. So, if you lost a business or crop in 2020, you’re in great company. Farmers are especially vulnerable to blaming themselves for business losses. That’s because so many farmers inherit a family business, and their generational identity is tied to its success. But resources are available to struggling hemp producers. Nearly every state department of agriculture shares mental-health resources free of charge.

Academia is helping, too. I highly recommend the free Rural Resilience courses developed by the universities of Illinois and Wisconsin and Michigan State University, Montana State University and South Dakota State University. Sign up for sessions on tackling farm debt, managing stress in a rural setting and finding mentalhealth resources far from a big city.

Off the Farm Growers aren’t the only ones who can be reluctant to ask for help. Entrepreneurs are known for accepting risks and responsibilities most folks could never stomach, making it a lonely road for founders. They sleep less, worry more and often conflate their companies’ success with their own. The good news is that here, too, hemp entrepreneurs have abundant resources to find business assistance and counseling. I especially like the free “Startup Therapy” podcast from Wil Schroter and Ryan Rutan. They talk about the real problems founders face steering new businesses. Some of their best advice is simple but way too easy to forget: “You are not your startup.” Put that on a T-shirt and wear it under your clothes every day. If your hemp business fails, that doesn’t mean you failed. Likewise, if profits rain down so quickly that you’re fending off fistfuls of investor cash, it doesn’t mean you’re a great person.

Optimism for 2021 I hope I’ve made clear that your success or failure in the hemp industry does not reflect on your personal value. There are countless

12 Marijuana Business Magazine | January 2021

stories from across the hemp supply chain about businesses that failed. Every young industry goes through growing pains. The dot-com bubble of the late 1990s and early 2000s threw many Americans out of work. It did not mean that the internet failed or that e-commerce was a fleeting trend. The same is true for hemp. Looking ahead to the new year, let’s focus on the potential this plant represents for entrepreneurs as well as the planet. So consider 2020 an ugly spot in the rearview mirror. It was painful—and even deadly—for many. Let’s find out together what’s in front of us. Kristen Nichols is editor of Hemp Industry Daily. She can be reached at kristen.nichols@hempindustrydaily.com.

Trends & HotTopics | Jeff Smith

Have Residency Requirements Worn Out Their Welcome?

ontana voters passed a recreational marijuana initiative on Election Day that will require licensed operators to be state residents, as is now the case with its medical marijuana program.

In keeping this requirement, Montana is a rare breed. Several states have abandoned residency requirements in recent years, and similar mandates in other states are being challenged as unconstitutional. It remains to be seen whether Montana’s residency requirement will face lawsuits as well. But the issue raises questions about whether residency requirements in the marijuana industry eventually will become a thing of the past.

Worthy Purpose, Mixed Results The original purpose of residency requirements in the marijuana industry seemed worthy enough: Advocates of the effort were concerned about corporate takeovers of the cannabis industry and believed that residents—rather than out-ofstate investors—should derive the economic benefits of the nascent sector.

The architects behind the regulations also believed that residency requirements would help curb illicit markets. But as many states have found, residency requirements can become a rather onerous form of economic protectionism and don’t necessarily repress illicit sales. Instead, they can prevent the industry from developing or growing naturally by restricting the flow of capital. Several states ditched residency requirements as a result: • Oregon, for example, initially required majority control of marijuana businesses by individuals who had been residents for at least two years. The state got rid of those requirements in 2016. • Colorado passed a law in 2019 that opened its marijuana industry to out-of-state investors. • An Idaho businessman is challenging Washington state’s residency requirement in the courts. • In Maine, legal action by an affiliate of New York-based Acreage Holdings prompted the state to abandon a residency requirement for adult-use licenses. The issue is still being fought in the courts.

As many states have found, residency requirements can become a rather onerous form of economic protectionism and don’t necessarily repress illicit sales.”

14 Marijuana Business Magazine | January 2021

• Oklahoma, which otherwise is a wide-open medical marijuana market, is facing a legal challenge to its two-year residency requirement that allows nonresidents to own only up to 25% of an MMJ business.

New Priorities Today, residency requirements arguably are being supplanted by social equity provisions as well as new license types such as small-grower permits—measures designed to try and ensure that minorities, women and small businesses get a fair slice of the licensing pie.

In Illinois, for example, entrepreneurs and businesses that qualify as social equity applicants are awarded extra points on applications for dispensary, craft grower, processing and transport licenses. They also can receive technical support, reduced license and application fees and access to lowinterest loans. Some of the applicants were directly impacted by anti-marijuana laws or live in communities disproportionately impacted by the war on drugs. Other applicants must be committed to hiring most of their employees from such neighborhoods. When Illinois first launched its program, many in the industry believed the plan could become a template for social equity initiatives in other states. But the first retail licensing round is

mired in litigation amid allegations of an unfair process after only 21 applicants qualified for 75 new retail licenses. Another big hurdle facing social equity applicants and small businesses in general is financing. Without cannabis banking reform, marginalized groups and small businesses likely will continue to struggle to access the capital needed to start and expand new business operations. Vermont’s adult-use market might be one to watch in terms of trying to balance in-state and out-of-state interests without having a specific residency requirement. Multistate operators there hold three of five existing vertically integrated medical cannabis licenses in a state that prides itself as having a “Made in Vermont” ethos.

But small, homegrown businesses could flourish as well: Vermont’s adult-use marijuana law allows each licensed company to operate only one marijuana retail storefront. There are no easy answers to ensure that small businesses run by residents can participate fully in the marijuana industry. As such, the dilemma is no different than trying to nourish local businesses in any retail industry. But because of marijuana’s unique history with the war on drugs, it’s paramount that regulators and industry leaders continue to try. Jeff Smith is a reporter covering politics and regulations for Marijuana Business Daily and Marijuana Business Magazine.

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CompanyNews | U.S., Canada & International

U . S . D E V E LO PM E N T S

By Omar Sacirbey

Recent deals, acquisitions and other announcements from cannabis companies

facility in Taneytown, Maryland, and the Herbology dispensary in Gaithersburg. Curaleaf also announced the sale of Curaleaf Maryland, which holds a processing license in Cumberland, for $4 million. The company did not reveal the buyer in that transaction.

Weedmaps Readies IPO Valued at $1.5 Billion Weedmaps owner WM Holding Co. announced that the cannabis advertising giant is merging with Silver Spike Acquisition, a blank-check acquisition firm, in a deal to go public that values the resulting company at $1.5 billion. The transaction will provide up to $575 million of gross proceeds, including $325 million through a fully committed common stock PIPE, or private investment in public equity transaction, according to a news release. The business pulled in at least $439 million in revenue from 2015 through 2019, according to U.S. Securities and Exchange Commission filings. It is expecting $160 million in revenue this year and estimates that revenues in 2021 will hit $205 million.

Mega-Merger Announced Marijuana multistate operator Verano Holdings announced a definitive agreement to acquire Florida-based Alternative Medical Enterprises (AltMed) for an undisclosed price, creating one of the nation’s largest cannabis companies with 44 retail locations in 14 states. The merger gives Illinois-based Verano, which was active in 12 states before the deal, a strong presence in Florida’s rapidly growing medical marijuana market as well as a vertical license in Arizona, where voters legalized an adult-use market on Election Day. Company executives didn’t disclose the value of the deal but indicated the transaction will mostly involve stock. The combined company will operate under the name Verano.

TerrAscend Buys Curaleaf Assets Cross-border marijuana firm TerrAscend Corp. of Ontario, Canada, announced an agreement to acquire HMS, a Maryland medical cannabis processor and cultivator, from Curaleaf Holdings for $27.5 million. The price tag includes $25 million in cash plus a $2.5 million note at 5% annual interest due to Curaleaf in April 2022. The deal is subject to regulatory approval. Massachusetts-based Curaleaf said the sale of HMS will allow it to proceed with its proposed acquisition of Maryland Compassionate Care and Wellness, which has a 55,000-square-foot cultivation and processing

16 Marijuana Business Magazine | January 2021

Ayr Makes Debt, Acquisition Deals Multistate marijuana operator Ayr Strategies announced that it has increased a $75 million debt offering to $110 million because of strong demand, and also acquired a competitor. Ayr, which is based in New York but has offices in Toronto, said proceeds will be used to complete marijuana facilities in Arizona, Ohio and Pennsylvania, and to fund additional expansion. The secured notes were issued at a 12.5% interest rate. Ayr also raised $25 million from investors exercising stock-warrant options, providing the company with $135 million in capital. The company also announced an $81 million acquisition deal that gives it three storefronts in the Phoenix area and two cultivation facilities. Ayr purchased a company that operates under the dispensary brand Oasis for $10 million in cash, $41 million in stock and $30 million in seller notes.

Jushi Raises $76 Million Multistate marijuana operator Jushi Holdings listed $76.4 million of secured debentures for trade on the Canadian Securities Exchange. The publicly traded notes were issued to some holders of that debt who swapped private notes for public notes, according to a news release. Senior secured notes worth nearly $7 million remain privately held. The secured debt bears 10% interest per year, payable quarterly up to the maturity date of Jan. 15, 2023. The Florida-based MSO recently announced it will invest $50 million to expand its cultivation and processing facility in Scranton, Pennsylvania. San Diego-based Innovative Industrial Properties will partly finance the expansion project through an amended lease agreement, Jushi said in a news release.

Regulators Association Created State marijuana regulators from across the country announced the formation of the Cannabis Regulators Association (CANNRA), a nonpartisan organization to assist federal, state and local jurisdictions that have approved or are considering MJ legalization. Cannabis regulators from 19 states have joined to establish

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CompanyNews | U.S., Canada & International CANNRA, and additional state regulators are expected to join soon. Membership is limited to regulators and representatives from relevant government offices. Membership in CANNRA is not available to industry participants or advocacy organizations. The Cannabis Regulators Association is not an advocacy group and takes no formal position for or against marijuana legalization. Rather, it seeks to provide governments with information to make informed decisions. CANNRA will facilitate engagement between subjectmatter experts in regulatory approaches for industrial hemp and medical and adult-use marijuana. This will include exchanges with research organizations, public-health officials, policymakers, legal authorities, advocacy groups and cannabis industry participants. CANNRA members will be able to access a national registry of member regulators, resources for cannabispolicy development and staff training, and the group will help develop standards and best practices for marijuana regulation.

Copperstate Grows in Arizona Copperstate Farms Management is expanding its footprint in Arizona through an agreement to acquire control of two licensed medical marijuana dispensaries in North Scottsdale and Tempe. The dispensaries, Level Up, were formerly the property of Los Angeles-based MedMen Enterprises and branded as MedMen Arizona. Financial terms weren’t disclosed for the deal, which includes a 25,000-squarefoot cultivation and processing warehouse.

Subversive SPAC New York-based Subversive Capital Acquisition Corp., a special purpose acquisition company (SPAC), acquired two California cannabis companies. The company is purchasing marijuana brand Caliva and cannabis investment firm and producer Left Coast Ventures. The purchases will create a new parent company, TPCO Holding Corp., and include $36.5 million worth of equity commitments from new and existing shareholders, according to a news release. Terms of the transaction, which is expected to close this month, were not disclosed.

Michigan MSO Raises Funds for Expansion C3 Industries, a vertically integrated multistate cannabis company based in Ann Arbor, Michigan, closed two funding rounds in November that brought its

18 Marijuana Business Magazine | January 2021

total capital raised to about $45 million, the company announced. C3 will use the capital to launch operations in Massachusetts and Missouri and expand existing operations in Michigan and Oregon.

Pennsylvania Company Raises Millions to Expand Grow Pennsylvania-based Organic Remedies plans to build out a 240,000-square-foot cultivation and processing facility and three additional medical marijuana dispensaries, thanks to a $22 million raise. Florida-based Advanced Flower Capital, also known as AFC Gamma, is providing the credit facility, which can be drawn over the course of one year. The loan is secured by first-lien mortgages on Organic Remedies’ properties and certain other assets.

4Front Uses Leaseback Deal to Cut Debt Multistate operator 4Front Ventures is utilizing a $30 million sale-leaseback transaction to rid itself of debt to a corporate lender, the company said. The allcash deal with California-based Innovative Industrial Properties (IIP) involves the sale of cultivation and production facilities owned by 4Front in Tumwater, Washington, and Georgetown, Massachusetts. IIP will then lease the facilities back to 4Front under 20-year agreements so the Arizona company can continue to use them. The money will be used by 4Front to “pay down the outstanding senior secured debt obligation to affiliates of Gotham Green Partners” of California, according to a news release.

Big Raise for Hydro Grow Company GrowGeneration Corp., a publicly traded company that owns a chain of hydroponic garden centers, intends to raise $125 million through a secondary stock offering to fuel expansion, according to a filing with the U.S. Securities and Exchange Commission. Denver-based GrowGeneration also announced its acquisition of Grassroots Hydroponics, a three-store chain of hydroponic garden centers in Southern California.

Acreage Gets $12 Million Loan Multistate cannabis operator Acreage Holdings agreed to a $12 million construction loan to complete the expansion of its cultivation and processing facility in the fast-growing Illinois market. The financing is from The Pelorus Fund, a cannabis-focused real estate investment trust, and carries an annual interest rate of 16% over a term of 18 months.

CompanyNews | U.S., Canada & International Harvest Sells Arkansas Assets to Focus on Arizona, Raises $35M Arizona-based multistate marijuana operator Harvest Health & Recreation completed the sale of its Arkansas medical marijuana operations for $25 million; the move will allow the company to focus on markets such as Arizona. Harvest said it netted $12.9 million in cash from the sale of Natural State Wellness, a vertically integrated operation. The assets included a dispensary in Little Rock that opened in February 2020. Harvest also raised $34.5 million through a public offering of subordinate stock, the company said. Each unit was sold for $1.70, which included a subordinate share of stock and half a warrant, according to a news release.

Tech Companies Combine for Dispensary eCommerce Solutions

CAN ADA DE V ELO PMEN T S

Bend, Oregon-based Dutchie, a cannabis-focused e-commerce solutions company, is partnering with Seattlebased Highopes, a cannabis branding agency, to launch Flynt—a software-as-a-service solution to help dispensaries build user-friendly websites and online shopping

Toronto-based Retailer Acquires Rival Adult-use cannabis retailer Fire & Flower Holdings Corp. entered an agreement to buy store operator Friendly Stranger Holdings. Under the deal, Torontobased Fire & Flower would issue 31.1 million shares to Friendly Stranger shareholders, valuing the proposed transaction at about $18.1 million (CA$24.6 million). Fire & Flower also acquired all issued and outstanding shares of Quad Nine Investments, which owns and operates a licensed cannabis retail store in Toronto currently operating as Blaze Cannabis. The purchase price is $704,000 (CA$900,000), plus the net working capital of the business (including inventory) at the date of closing plus 124,069 common shares of FFHC.

Intra-Ontario Finance Deal Smiths Falls, Ontario-based Canopy Growth Corp. and Arise Bioscience, a CBD company and subsidiary of Mississauga, Ontario-based TerrAscend Corp., entered into a $20 million loan financing arrangement pursuant

20 Marijuana Business Magazine | January 2021

experiences. The platform will come prebuilt with Dutchie’s online ordering technology.

Institutional Investors Chip In $40 Million for LeafLink Cannabis wholesaling platform LeafLink announced new funding worth $40 million from a Series C investment round. The $40 million funding round was led by Founders Fund, with participation from Thrive Capital, Nosara Capital and Lerer Hippeau. Leaflink will use the capital to expand in current markets by bringing on new brands and retailers as well as capitalizing on markets that legalized cannabis in 2020.

Woman-owned Canna-franchiser Launches The Open Dør, a national cannabis retail franchise company, launched in early December. The company is headquartered in Scottsdale, Arizona. The Open Dør, which was founded by Kathryn Blackwell and Chelsea Mulligan, said cannabis franchise opportunities are available in states with legal medical and adult-use marijuana programs.

to a secured debenture. In connection with the loan, TerrAscend has issued 2.1 million common share purchase warrants to Canopy. The debenture will bear interest at a rate of 6.1% per year and will mature Dec. 9, 2030. The debenture is secured by the assets of Arise, is not convertible and is not guaranteed by TerrAscend. Arise plans to use the loan proceeds for general corporate purposes, the repayment of indebtedness and other permitted purposes.

Alberta-based Retailer Applies for Nasdaq Listing High Tide, a cannabis retailer and ancillary-product company with nearly 70 stores in Canada, has applied to list on the Nasdaq. The company will continue to maintain the listing of its shares on the TSX Venture Exchange.

Edmonton Company Strikes Israeli Supply Deal Edmonton, Alberta-based license holder Aurora Cannabis entered into a strategic supply agreement with Cantek Holdings, an Israeli medical cannabis company. Aurora will supply Cantek with dried bulk flower over a two-year period with the option to extend. Aurora intends to provide Cantek with a minimum of 4,000 kilograms (8,818 pounds) of bulk dried flower annually, which will be processed into finished product and co-branded under the Aurora and Cantek names for the Israeli market and potential international sales.

I N T E R N AT I O N A L D E V E LO P M E N T S

Khiron Products Get Insurance Coverage in Colombia

German-Danish Supply Agreement AMP German Cannabis Group, a medical cannabis product company with headquarters in Berlin and Erfurt, Germany, and Schroll Medical ApS, a Danish cultivator of medical cannabis, entered into a nonexclusive, three-year supply agreement for bulk and packaged EU-Good Manufacturing Practice (GMP)-certified cannabis flower to be sold under the AMP brand.

Toronto-based Khiron Life Sciences, a vertically integrated cannabis leader with core operations in Latin America and Europe, announced that its medical cannabis products and clinic services are now covered by the country’s major health-insurance providers, including medical cannabis as a first-line therapy. More than 94% of Colombia’s population has health insurance. Under the Colombian program, Khiron clinics receive government and insurance company authorization to fill patient prescriptions for magistral preparations; subsequently, Khiron is reimbursed once products have been dispensed to the patients. Have a company announcement you want us to consider? Send a news release or general information to omar.sacirbey@mjbizdaily.com. (Note: We’re looking for news about expansions, financing, deals, partnerships and similar developments, not product-related announcements.)

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IndustryDevelopments | International & State MAP LEGEND High level of medical development/implementation Medium level of medical development/implementation Low level of medical development/implementation Other - federally illegal but unique circumstances Recreational

Countries included have passed legislation at the federal level and must fulfill at least one of the following criteria: • Cultivation, manufacture or sale of medical and/or recreational cannabis allowed. • Doctors can prescribe medical cannabis. • Import and/or export of medical cannabis allowed. High: Countries at the forefront of the global industry. Frameworks are established, and adoption is well underway. Medium: Implementation has begun but is still limited or restricted; lots of room for the market to develop. Low: Legislation has been passed, but implementation is very limited or nonexistent. Decriminalization is not included.

National & International News U.S. House Passes MORE Act The U.S. House of Representatives passed a bill that would remove marijuana from the Controlled Substances Act and end the federal government’s decades-old prohibition on the plant. Lawmakers in effect voted to legalize marijuana by approving the social justice-focused Marijuana Opportunity, Reinvestment and Expungement (MORE) Act by a margin of 228-164 after an hour of debate. In the likely event that the MORE Act dies in the Senate during the current legislative session, it would have to start over in the House in January, when the new Congress convenes.

24 Marijuana Business Magazine | January 2021

Even with a new Congress, the more conservative Senate might be resistant to such a major change in federal marijuana policy. Opponents of the MORE Act criticized Democrats for prioritizing marijuana during the coronavirus crisis and voiced concerns about health risks for youth.

United Nations Approves WHO Recommendation to Reschedule Cannabis The United Nations Commission on Narcotic Drugs (CND) accepted a recommendation by the World Health Organization to remove cannabis and cannabis resin from Schedule IV of the 1961 Single Convention on Narcotic Drugs.

The historic vote, held Dec. 2 in Vienna, could help boost medical cannabis legalization efforts now that the CND tacitly acknowledges the medical utility of the drug. The vote also could encourage countries to reevaluate how they classify cannabis on their own lists of narcotic drugs, potentially paving the way for more research into medical marijuana.

Canadian Province Criticized for Not Properly Monitoring Cannabis Inventory Ontario, Canada’s adult-use cannabis regulator has not been adequately monitoring the movement of marijuana products in the province’s growing number of retail stores,

according to Bonnie Lysyk, the province’s auditor general. Ontario marijuana stores had 84,228 fewer units of product on hand than the amount recorded in their inventory system over an 11-month period starting in September 2019, according to a report released by Lysyk’s office. In response to the report, the Office of the Auditor General of Ontario said it will: • Conduct unannounced inventory counts at retail stores. • Review surveillance evidence to verify reports of cannabis destruction. • Regularly review any discrepancies in retail cannabis store inventory purchases.

January 2021 | mjbizdaily.com 25

IndustryDevelopments | International & State WA MT OR

MN ID

NE SD

KSNE

KS OK

LA TX

RI NJ

DE MD DC

AL TN GA

MA ME

DE MD DC

NC WV

KY IN

IA MO

NY NJ

OH MI

RI PA

SC MS

FL FL

■ Medical ■ Recreational HI

Note: This map does not include states that have legalized only CBD-based oils.

State News California Health warning labels will be required for all cannabis products sold in California starting Jan. 3. The warning labels are designed to alert consumers to the possible health impacts of marijuana smoke and THC. The new requirement covers hempderived CBD products, too. Proposition 65, a California law passed in 1986, requires the state to: • Publish a list of chemicals known to cause cancer or birth defects. • Call for the placement of consumer warnings on all product labels that contain any of the chemicals on the list.

Georgia Regulators are taking applications to process and manufacture medical marijuana oil for the state’s limited MMJ program. On Nov. 23, the Access to Medical Cannabis Commission began the licensing process for businesses seeking to manufacture the “low-THC” MMJ oil that Georgia is making available to its 14,000 registered patients. The two types of licenses are awarded based on the size of the facility. THC potency is capped at 5% under Georgia law, and only six companies will receive cultivation permits.

26 Marijuana Business Magazine | January 2021

Illinois Members of the state’s cannabis industry are calling on lawmakers to allow existing medical marijuana dispensaries to relocate without losing the ability to add an adult-use sales license. Under the current administration’s interpretation of Illinois’ marijuana law, relocation prevents medical cannabis dispensaries from having a recreational license at the same site. Pro-legalization lawmakers asked Gov. J.B. Pritzker last August to reconsider the interpretation of the law. The Pritzker administration responded by saying the law was meant to “balance … early growth for existing medical dispensaries with our commitment to bringing in new applicants through the social equity program.”

Massachusetts Marijuana stores in the state may sell Massachusetts-produced hemp and hempderived products under a provision in the state budget signed into law by Gov. Charlie Baker on Dec. 11. The products must be made by farmers or manufacturers licensed by the state Department of Agricultural Resources. Hemp products made in other states still are forbidden to be sold by Massachusetts marijuana retailers. Massachusetts joins more than a dozen U.S. markets that in the past year have decided to allow marijuana stores to sell CBD and other hemp-derived products.

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IndustryDevelopments | International & State Michigan Regulators in Detroit will start accepting applications for recreational marijuana business licenses in January, and the permits are expected to be issued this summer. The city has lagged far behind other municipalities in Michigan, which launched state-legal marijuana sales Dec. 1, 2019. The city’s residents can begin applying for Detroit Legacy certification online on Jan. 19. The licenses are for 75 retail stores, 35 consumption establishments and 35 microbusinesses. Other license types such as cultivation, event organizers and secure transporters are not capped by the city. According to Mayor Mike Duggan, 50% of the licenses in any category must first go to Detroit residents.

Minnesota Regulators are adding two conditions that qualify patients to receive recommendations for medical cannabis, bringing the total to 17 afflictions. The Minnesota health department announced that chronic vocal or motor tic disorder and sickle cell disease will be added to the list of qualifying conditions effective in August 2021. A petition to add anxiety as a qualifying condition was denied.

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Mississippi The National Institute on Drug Abuse said it again intends to award a federal contract to the University of Mississippi to grow cannabis for federal research purposes. To date, the university has been the only institution granted such permission. According to a contract notice of intent published online, the agency will award a noncompetitive contract to the university that extends the current contract through March 22, 2022. The University of Mississippi has held the sole federal contract for growing marijuana—for research purposes only—since 1968.

Missouri

Clovr, the state’s first licensed edibles maker, was prepared to begin production in December. The company eventually will be one of 86 licensed processors in Missouri. Clovr plans to produce cannabis edibles, vape cartridges, pre-rolls and other infused products. In another matter, a Pennsylvania man sued Missouri medical marijuana regulators, declaring that the state’s residency requirement violates the U.S. Constitution and stifles investment in the industry.

January 2021 | mjbizdaily.com 29

IndustryDevelopments | International & State Montana State regulators are beginning the process to make adult-use cannabis cultivation and retail licenses available by Oct. 1. Only medical marijuana operators may apply for the new recreational licenses for the first 12 months they are available. The program also has a residency requirement. State officials said they anticipate lawmakers will address certain aspects of the initiative during the legislative session that begins Jan. 4.

Nevada Two marijuana companies might lose their business licenses and incur fines from state authorities for alleged violations of industry regulations. The Nevada Medical Group is accused of allowing six employees to work with expired state-mandated ID cards at its Las Vegas facility, Body and Mind Cannabis. The company could lose its business license and be fined up to $255,000. Silver State Cultivation is accused of not keeping a proper security camera malfunction log, skipping a required audit, not following marijuana waste guidelines and having an inventory log that didn’t align with the state’s seed-to-sale tracking system. The company could lose its business permit and be fined up to $35,000.

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New Jersey Legislative leaders and Gov. Phil Murphy agreed on a compromise to establish the state’s recreational marijuana market. Under the compromise, 37 cultivation licenses will be issued during the first two years of the adult-use program, with an exception for microbusinesses with 10 or fewer employees. Additionally, 70% of the tax revenue from sales will go to programs aiding communities and individuals disproportionately affected by the war on drugs. The programs will include mentoring, legal aid and health care.

New Mexico The state’s medical marijuana advisory board recommended that purchase limits be nearly doubled to 15 ounces over 90 days. The board also recommended expanding the list of qualifying conditions to include anxiety, attention-deficit disorders, Tourette syndrome and some substance-abuse disorders. Such an expansion also would bolster sales, but approval of that recommendation is seen as less likely.

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IndustryDevelopments | International & State Ohio Medical cannabis businesses in the state have begun changing hands now that a yearlong waiting period for the sale of dispensaries has expired. Six MMJ dispensaries and two cultivation operations have already been sold, and three dispensaries are poised to be sold, according to the Cleveland Business Journal. Under state law, dispensaries had to wait at least a year after starting operations before selling to another owner. Cultivators and other MMJ business types are under no such restriction.

Oregon Marijuana regulators adopted temporary rules for recreational cannabis business applicants to speed up the process and help ease a licensing backlog. Key changes include: • Altering the definition of an applicant, including raising the ownership threshold from 10% to 20%. • Requiring less information and documentation for license applications. • Lowering notification requirements for licensees altering the structure of the business or financial interests. • Modifications to background checks and fingerprinting for applicants.

32 Marijuana Business Magazine | January 2021

Pennsylvania The state health department cleared Organic Remedies to start growing, producing and experimenting with medical marijuana at its facility in Carlisle. The company received a research grant agreement to partner with the Philadelphia College of Osteopathic Medicine and study MMJ’s effects on: • Chronic pain and opioid-use disorder. • General quality of life impacts. • Usage trends over time for patients.

Rhode Island Members of the state Senate Finance Committee met to begin hammering out details for a bill to legalize adult-use marijuana in 2021. One of the fundamental questions is whether the state will establish a government-run industry, which Gov. Gina Raimondo has proposed, or allow private industry to take the lead. No states that currently have recreational marijuana industries are run by their respective state governments. However, Louisiana’s medical marijuana program is run by universities, the only state-approved cultivators, and licensed pharmacies, the only approved retailers.

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IndustryDevelopments | International & State South Dakota The state’s attorney general is asking a judge to dismiss a lawsuit filed by two law enforcement officers that challenges an adult-use marijuana legalization measure passed by voters. Pennington County Sheriff Kevin Thom and South Dakota Highway Patrol Superintendent Rick Miller took aim at the constitutionality of the adult-use amendment and allege the ballot measure wrongly dealt with more than one subject, a violation of the state constitution. The judge hearing the case granted two pro-legalization groups permission to intervene in the case. All parties have until Jan. 8 to file motions and briefs with the court.

Utah A report by the Office of the State Auditor took issue with how the Utah Department of Agriculture and Food handed out eight cultivation licenses last year and recommends the state reevaluate the permits. Two members of the committee that scored roughly 80 applications were found to have ranked the top seven applicants in similar order. After the initial application evaluations, the audit found that other committee members’ scores were adjusted to reflect the tallies of the first two members. Three of the winning cultivators wouldn’t have succeeded without those adjustments, according to the report.

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Washington state A proposal to require growers to test their recreational marijuana for pesticides and heavy metals is encountering blowback from industry officials. The proposed rules would require growers to test each lot as well as concentrates for pesticides starting Aug. 1. Heavy-metal testing would kick in Jan. 31, 2022. The LCB also is proposing to increase the marijuana flower lot size from 5 pounds to 10 pounds. Regulators said the proposed rules would cost up to $400 per test. Washington state is the only adult-use market that doesn’t require growers to test for pesticides.

West Virginia State regulators announced the 10 medical cannabis processors that will be receiving business licenses, with several going to multistate operators such as Columbia Care of New York, Holistic Industries of Massachusetts, Trulieve of Florida and Verano Holdings of Illinois. The winners will be able to process medical marijuana and sell their products to licensed MMJ dispensaries. Regulators are expected to begin issuing MMJ patient cards this spring.

Note: Entries sourced from Marijuana Business Daily, Hemp Industry Daily and other international, national and local news outlets. These developments occurred before this magazine’s publication deadline, so some situations may have changed.

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Election Roundup

arijuana advocates had at least five reasons to celebrate on Election Day 2020. All of the ballot measures to establish medical or adult-use cannabis markets in the United States were successful with voters. Arizona, Mississippi, Montana, New Jersey and South Dakota all approved new cannabis programs by ballot initiative. Read on to learn how some of these votes made history, while others are expected to usher in business opportunities worth hundreds of millions of dollars.

26,241

Number of marijuana industry jobs expected to be created by 2025 in states that passed legalization initiatives in the 2020 election. Source: Vangst

68%

Nearly 70% of Mississippi voters cast ballots in favor of Initiative 65, a proposal to create a medical marijuana program in the state. The success of the measure came as a surprise to many in the industry who assumed the Deep South state would be among the last to legalize marijuana. Source: Marijuana Business Daily, Mississippi Secretary of State’s Office

Zero

Time between voter approval of medical marijuana and adultuse cannabis in South Dakota. The state made history on Election Day for legalizing both types of marijuana sales simultaneously. Typically, U.S. markets establish a medical marijuana market and add provisions for a rec market years later.

Number of cultivation tiers established by Montana’s new adult-use initiative. Growers with a micro-tier license can grow a canopy of up to 250 square feet; the largest site can be up to 30,000 square feet.

Source: Marijuana Business Daily

$850M-$950M

Cannabis sales are expected to reach nearly $1 billion in New Jersey by 2024 now that state voters have opted to create an adult-use marijuana market in addition to the MMJ program that was approved in 2010. Source: Marijuana Business Factbook

Source: Marijuana Business Daily, South Dakota Secretary of State’s Office

319%

Estimated growth in marijuana sales between 2019 and 2024 in Arizona, where voters approved adult use. Medical marijuana sales totaled $181.5 million in 2019, and combined sales for medical and recreational cannabis in the state are projected to reach $760 million by 2024. Source: Marijuana Business Factbook

38 Marijuana Business Magazine | January 2021

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New Year, New Opportunities

40 Marijuana Business Magazine | January 2021

Amid continuing challenges, the cannabis industry enters 2021 with fresh markets and greater possibilities By Omar Sacirbey

The bronze statue â&#x20AC;&#x153;Fearless Girlâ&#x20AC;? looks up at the New York Stock Exchange, where several Canadian cannabis businesses and U.S. ancillary companies are traded. Photo by Porter Binks

January 2021 | mjbizdaily.com 41

New Year, New Opportunities

Joe Biden and Kamala Harris will take over the White House this month. As a U.S. senator, Harris sponsored the MORE Act and SAFE Banking Act.

Cannabis professionals have a lot to look forward to in 2021, but success will require being mindful of several key factors: • Cannabis businesses being declared essential, electoral victories and a larger pool of mature companies have restored investor confidence in the sector.

et’s face it: As terrible as 2020 was for numerous business sectors, it was surprisingly good for the cannabis industry in multiple ways. And the good things that happened for cannabis in 2020 should carry into the new year, setting the stage for burgeoning markets and business opportunities in the United States and around the globe. U.S. cannabis companies begin the year on stronger footing—this after most states with legal marijuana markets declared MJ businesses “essential” in 2020, allowing them to remain open during the coronavirus pandemic and the stay-at-home orders it prompted. The essential designation took a chunk out of the stigma around marijuana and made it more acceptable and accessible to millions of Americans—a long-term impact that is harder to measure but arguably more important than the financial gains of one year. The government-sanctioned designation also buoyed investor confidence in the space. Investors now believe there is a better selection of stronger, well-run companies than before. On top of the essential designation, new marijuana markets were approved in a mix of blue and red states in 2020. In October, Vermont became the 11th state to legalize recreational marijuana after lawmakers approved an adult-use market and Gov. Phil Scott allowed the legislation to become law. The next month, voters

approved recreational marijuana markets in Arizona, Montana and New Jersey. Mississippi voters OK’d medical marijuana, and South Dakota residents approved both MMJ and adult use. That clean sweep on Election Day could generate more than $2.5 billion in annual medical and recreational cannabis sales by 2024. “With the passage of these initiatives, one-third of the population now lives in jurisdictions that have legalized cannabis for adult use, and 70% of all states have embraced cannabis for medical use,” Steve Hawkins, executive director of the Marijuana Policy Project, declared after the Nov. 3 vote. While those states begin building their new cannabis industries, entrepreneurs have a plethora of existing markets where regulators are planning dramatic expansions in available licenses, including California and Illinois. In Washington DC, meanwhile, the Biden administration moves into the Oval Office amid hopes among cannabis industry executives that federal marijuana reform might be more forthcoming. Around the world, fresh business opportunities look to be on the way after the United Nations in December reclassified cannabis as a less dangerous drug. Indeed, the blockbuster merger announced last month between Canadian companies Aphria and Tilray

42 Marijuana Business Magazine | January 2021

• Investors might feel more bullish, but they are also more fastidious with their investment picks and are seeking out mature companies that are profitable and boast experienced management teams. • As the cannabis industry matures, stabilizes and moves into the mainstream, business executives need to follow economic indicators—consumer spending and interest rates among them—just like other mainstream companies. • Entrepreneurs seeking opportunities will find them in existing markets where local and/or state officials are increasing the number of available licenses, such as California and Illinois. • Newly approved medical and recreational marijuana markets in six states—Arizona, Mississippi, Montana, New Jersey, South Dakota and Vermont—will offer fresh business opportunities starting this year.

is recognition of the improved global outlook for cannabis. All in all, the cannabis industry landscape appears vastly different entering 2021 than it did one year ago, offering business owners and investors a reset of sorts from the turbulence of 2020. In the following pages, Marijuana Business Magazine breaks down that new landscape, looking at what it offers and how entrepreneurs can take advantage of the new year.

Omar Sacirbey is a reporter for Marijuana Business Magazine. You can reach him at omar.sacirbey@mjbizdaily.com.

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New Year, New Opportunities

Factors That Signal a More Bullish Cannabis Investment Climate Declining cost of capital and renewed interest by investors offers hope to industry executives By Omar Sacirbey

fter a turbulent two years that culled weaker businesses from the cannabis industry, investors now have a stronger field of companies from which to choose. At the same time, marijuana businesses seeking capital will find it more available than it has been of late, though investors will likely be pickier about where to wager their money. The cannabis industry “is at the tail end of a nearly two-year bear market,” said Al Foreman, managing partner at Tuatara Capital, a cannabis-focused private equity firm in New York City. That bear market, Foreman explained, followed a period of irrational exuberance when investors—including retail players and family offices, plus a much smaller number of established angel investors and private equity firms—pumped money into unproven cannabis companies and often got burned. That period helped usher in the bear market that Foreman said started with a downturn in Canadian public exchanges in the first quarter of 2019 and continued through the vape crisis as well as the coronavirus pandemic-triggered recession in 2020. Only in the second half of the year did a trickle of investments herald a thaw. That thaw continues, thanks to reasons ranging from the November election—in which five states legalized new marijuana programs—to dozens of states designating cannabis businesses as “essential” and allowing them to stay open during the pandemic. “There are multiple tailwinds really

Investors say a bull market might return for publicly traded cannabis companies in 2021. Photo above and below right by Porter Binks

Al Foreman

benefiting the industry now,” said Jacqueline Bennett, a partner with investment firm Highlands Venture Partners in New York City. Foreman agreed that several variables are reviving confidence in the cannabis space. “Operators and companies attempting to raise capital should see a

44 Marijuana Business Magazine | January 2021

Jacqueline Bennett

positive shift in the supply-side dynamic sometime in the first half of 2021,” he said. While companies seeking to raise capital will find investors more willing to provide it, that doesn’t mean the irrational exuberance of 2018 will return, insiders cautioned. Rather, investors will be much more selective.

“We will see more appetite in the coming year for sure,” said Karan Wadhera, managing partner at Casa Verde Capital, a cannabis-focused investment firm in Los Angeles. “I don’t think necessarily it comes back to absurd pandemonium, bubbly levels again, because people have learned their lesson. It will be a crawl back to those levels of excitement in terms of dollars coming into the space. … A lot of those dollars historically have been more retail and less institutional.” Here are six factors that point to a more positive investment outlook for the cannabis industry.

might be more comfortable placing their capital in the marijuana space. Changes, in fact, already are emerging in the halls of Congress. In December, the U.S. House of Representatives passed the MORE Act, which would remove marijuana from the federal Controlled Substances Act. How much more comfortable investors become will depend on whether the less-cannabis-friendly Republicans keep control of the Senate or lose it in Georgia’s two Senate runoff elections on Jan. 5. These election-related changes, Foreman said, “give a pretty good indication that the industry’s bear market is about to take a turn” and will “provide momentum for cannabis in what will hopefully be a bull market cycle beginning in 2021.”

‘ESSENTIAL’ AND RESILIENT

ELECTION IMPACT The Nov. 3 U.S. election provided the cannabis industry with a twofold boost likely to impact cannabis investing. First, voters in the existing medical markets of Arizona, Montana and New Jersey legalized recreational marijuana, while voters in Mississippi legalized medical marijuana. South Dakota voters legalized both. Wadhera calculated that those new states expand the “addressable” cannabis market by 10% to 15%. “It’s very positive for the macro story at the minimum,” Wadhera said. “This is also very positive for sentiment. Except for New Jersey, all the states that passed legalization have been ‘red’ states. It shows investors that this is no longer a partisan issue.” With Joe Biden’s victory in the presidential election and a potentially cannabis-friendly White House that could abet banking reform and other policies good for the cannabis industry, investors

Industry observers have long speculated that cannabis is a recessionresistant product much like alcohol or tobacco. The pandemic backed up that theory. “COVID-19 was a net positive for the industry. The most important thing that COVID did from an investor perspective was really prove out how noncyclical the industry is,” Wadhera said. “We actually have the data now to really show that obviously cannabis has done incredibly well during COVID. We’ve seen many record sales months in states across the country. It was largely deemed essential.” Encouraged by this evidence of resilience—especially in maturing markets such as Illinois, Massachusetts

and Michigan—investor interest in cannabis will continue into 2021. “I think 2021 will really be an extension of that,” Wadhera said. “We see a lot of upside in 2021.”

BETTER COMPANIES Although investors are ready to spend again, companies must show profitability, scalability and other positive traits. “It’s going from pretty loose financial profiles and dangerous cash-flow levels to being far more pragmatic. You’re learning from the past—and having that type of responsible governance across operations gives confidence to the investor group who had been hesitant to come into the industry,” Bennett said. Foreman agreed: “This underscores the new dynamic of the industry investment landscape, which is more traditional standards and analysis to drive investment decisions.” Beyond profitability and scale, these traditional standards include management teams that have C-suite experience both outside and inside the cannabis space, obtaining legal protections for intellectual property and copyrights as well as professional recordkeeping and accounting. “We’ve trended in the way of reconciled books and records, people switching from maybe a QuickBooks platform as their financial services platform and upgrading to CPAs and qualified CFOs with C-suite experience. You’re seeing more of that,” said Donnie Emmi, a partner with Hoban Law Group headquartered in Denver.

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New Year, New Opportunities

This applies not only to small businesses that might be new to raising capital but also to older and larger cannabis companies. “Multistate operators are starting to get their homes in order, and that’s started to bear significant fruit during COVID, given that many MSOs have put up record numbers in Q3 (of 2020),” Wadhera said. “The stage we’re at now is there’s going to be a real focus on businesses that are fundamentally strong, and those will be the ones who attract the most capital from investors.”

While institutional investors are wading in, they are more earlier stage than later stage, Wadhera said. “You’re seeing folks who are happy being earlier stage and others in more venture-type situations. You haven’t yet seen more of the traditional private equity dollars flow into this space, but it will happen for sure. There is still a lot of capital waiting on the sidelines,” said Wadhera, noting that many institutional outfits are prevented from participating because of things such as limited partner agreements, vice clauses and the like.

INSTITUTIONAL CAPITAL COMING IN Another change that already has started to take place and can be expected to continue in 2021 is the entry of institutional capital in the cannabis space. “You’ll see more institutional dollars start creeping in,” Wadhera said. His own firm, he said, has partnered on deals with institutional firms such as Drive Capital in Columbus, Ohio, and former Starbucks CEO-turned-venture capitalist Howard Schultz. Other wellknown mainstream venture capital and angel firms include San Franciscobased Founders Fund and New Yorkheadquartered Lerer Hippeau, while the California Public Employees Retirement System—the biggest pension fund in the United States—plus Boston-based mutual fund company Putnam Investments also have made cannabis investments. “You’re seeing more of that. I don’t think it Karan Wadhera will all explode at once. You will see more capital inch back into the space. I don’t think it’s going to reach 2018 levels immediately. It’ll take a couple of years.”

“As federal trends change, as financial institutions evolve toward this space, so too will the registered investDonnie Emmi ment advisers … or (they’ll) run the risk of becoming irrelevant. It would be akin to if General Motors decided to ignore the electric vehicle craze and said, ‘We’re only going to focus on giant gas-guzzling engines.’”

DECLINING COST OF CAPITAL AND INCREASING DEBT OPTIONS

RISE OF THE INVESTMENT ADVISERS The looming increase of available capital, coupled with the inexperience of willing investors, will also create opportunities for investment advisory firms focused on marijuana. “There are growing numbers of investors who are interested in deploying capital in cannabis but aren’t sure how,” Bennett said. That presents an opportunity for people to “become a trusted voice” about cannabis investing to those people. Emmi agreed. “We’re going to see more investment advisory services, and I believe money and investors will trend toward that. If you have an extra $1 million and don’t know anything about marijuana, you go to an investment advisory firm specializing in marijuana. People are going to start talking to their registered investment advisers to see if cannabis meets their investment objectives,” he said.

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With more capital likely to be made available and competing for opportunities in 2021, the cost of that capital—equity or debt, among others—should come down for those trying to raise it, Foreman said. “The resulting impact would be a potential downward pressure on the overall cost of capital for cannabis operators,” he said. “The timing is really the big question. My perspective would be that where you’d really see a dramatic shift in the cost of capital would probably be 12 to 18 months from now.” The declining cost of capital, decreasing stigma around marijuana and the existence of well-run marijuana businesses with solid financials is also making it easier for cannabis companies to get money through debt, Bennett said. Indeed, many companies that were running unsustainable cash flows have cleaned up their balance sheets. “So, you’ve got companies who can actually service debt, and their financial profile is less risky. And then interest rates are lower because of that risk association,” Bennett said. “Generally speaking, the cost of capital is going to be coming down and the ability to raise debt with equity will also drive down the overall cost of capital.”

Checking the

Economic Pulse Cannabis companies can boost their bottom lines by keeping tabs on key economic indicators By Omar Sacirbey

s increasing state legalization and declining social stigma push cannabis into the mainstream, companies will need to adopt some traditional business practices, including monitoring economic indicators that affect their access to capital, costs and bottom lines. Knowing these figures can inform decisions that will help executives maximize savings and revenue. Following economic indicators is something executives should incorporate into their routines going forward. That said, one of the first things to know about economic indicators is that, thanks to the coronavirus pandemic, 2021 will likely be different than most years. “Being knee-deep in the coronavirus pandemic is the overarching lens that we have to use as we go into

2021, because it’s not a real comparative,” said Jessica Velazquez, a CPA and managing partner at Indiva Advisors, a Jessica Velazquez cannabis-focused accounting firm in Las Vegas. “Analysts do yearover-year (comparisons). We take into account any major items, but this one is different than most.” That said, there are several indicators that are easy to follow. But it’s important to differentiate how those indicators are performing in your local area compared to the rest of your state and across the nation, Velazquez and other economic

observers said. It’s also important to note that cannabis is not a typical consumer packaged goods (CPG) product and the usual rules and expectations of business and economics might not always apply Keep reading to learn about six economic indicators to watch.

CONSUMER SPENDING AND CONFIDENCE Business research groups such as The Conference Board and Trading Economics, both headquartered in New York, predict consumer spending will rebound in 2021 after an up-and-down 2020 in which consumer spending was partially propped up by government stimulus checks.

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New Year, New Opportunities

Stimulus checks passed by Congress helped prop up spending last spring, even as employment levels were plummeting.

Spending fell more than 10% during the second quarter of 2020, according to a report from New York-based consulting firm Deloitte, but it picked up later in the year. In December, Congress agreed on a new round of stimulus checks as part of a $900 billion coronavirus relief package. The National Retail Foundation in Washington DC, Fitch Ratings in New York and Deloitte all predict depressed retail spending in 2021. Such forecasts partly reflect worries that millions of Americans will be without work and unemployment benefits in 2021, meaning they won’t be able to spend as before. But cannabis consumers have so far bucked that trend. “I think what 2020 proved to us is that the industry is somewhat recession-proof,” said Velazquez, noting that marijuana sales remained strong during the pandemic. “Remember that a relatively small proportion of people are responsible for most of the marijuana bought (in legal

markets), and those people will keep buying,” said Robert Sonara, associate director at the Bureau of Business and Economic Research at the University of Montana. Indeed, a 2017 study by Washington DC-based cannabis data-analytics firm New Frontier and Denver-based consumer-relationship management firm Baker found that medical marijuana patients spend about three times as much as their recreational counterparts. In other words, recreational cannabis spending might be vulnerable to decline, but the medical and die-hard consumers who account for the majority of sales will continue to buoy marijuana retail. Still, Velazquez warned, cannabis retailers should worry about illicit businesses siphoning off cash-strapped customers in search of cheaper products. “I think where we might see things shift is whether consumers go to the unregulated market,” Velasquez said.

48 Marijuana Business Magazine | January 2021

Retailers “have to understand their consumers and what’s driving them. And they need to look at their customers from a very local level and not just a 30,000-foot level.” In other words, changes in the local economy—such as a major employer closing or laying off workers—can impact the consumer base.

INTEREST RATES A limited number of banks and lending institutions are willing to service marijuana businesses as customers. If the federal government passes cannabis banking reform in the form of the SAFE Banking Act, marijuana companies will increasingly be able to get loans from government-insured banks. While cannabis companies shouldn’t expect the same interest rates as mainstream businesses—interest rates for MJ companies can be several points higher than those for mainstream

businesses—they can be a useful guide for what rates lenders who work with marijuana entities will charge. Also, having debt options in addition to equity are good for cannabis businesses. “With more banks serving cannabis companies and the potential passage of the SAFE Banking Act, that will drive down the cost of capital,” Velasquez said. “What I expect to see is less equity plays and more operators getting debt, risking it on themselves, versus introducing equity partners into their operations. “That will really be the last stranglehold of backed capital,” she said. “That’s access to real money that the industry needs, and operators need to be successful.”

COMMERCIAL REAL ESTATE PRICES AND RENTS In the wake of the coronavirus pandemic, scores of commercial properties have been vacated either from businesses closing or significant numbers of office staff working from home. As a result, both sales and rental prices for commercial real estate are edging downward in some areas, but not all. For example, an October 2020 report from the Chicago-headquartered National Association of Realtors found that in the third quarter of 2020, mall, strip mall and stand-alone retail space prices were down 7%, 5% and 3%, respectively. But land prices for industrial and agricultural purposes were up 4% and 1%, respectively. A December report from Deloitte revealed similar findings. These trends will probably continue well into 2021, with retail real estate prices expected to stay depressed until COVID-19 is contained enough to enable a return to something close to normal shopping activity. That means entrepreneurs seeking retail storefronts for dispensaries should be able to find good deals. Executives

seeking cultivation and manufacturing properties, meanwhile, shouldn’t hold their breath for bargains. Nevertheless, now might be a better time to invest in a warehouse or land for cultivation, because prices could be driven up even higher as large players enter the industry. “If bigger corporations move in and buy thousands and thousands of acres of land or loads of warehouse space,” warned Robert Sonora, associate director of the Bureau of Business and Economic Research at the University of Montana, “land prices are going to be an issue.” Executives should, of course, assess situations at a local level.

ELECTRICITY PRICES Besides labor, the biggest cost for most cannabis businesses—especially cultivators and manufacturers—is electricity. Commercial and industrial electricity prices are a valuable cost indicator to watch. A December 2020 report from the U.S. Energy Information Administration (EIA) forecast commercial electricity prices rising to 10.74 cents per kilowatt hour (kWh), on average, in 2021 from the 2020 average of 10.61 cents. The energy agency forecast that industrial electricity prices would increase to 6.76 cents per kWh from 6.71 cents in 2020. But like other economic indicators, electric rates vary by region and provider, observers said. For example, Central Maine Power and Duke Energy’s Florida unit will charge lower electric rates in 2021, while Southern California Edison and Pacific Gas and Electric are seeking to raise prices this year, according to news reports.

GASOLINE PRICES The pandemic has vaulted delivery to the forefront of retail, including in the cannabis industry. Many cannabis retailers

reported huge increases in delivery sales in 2020, thanks to the combination of marijuana businesses being declared essential and limits on in-store shopping. Although delivery sales are expected to slow as the threat from COVID-19 recedes and people return to more normal in-store shopping, delivery is expected to remain an important component for many businesses. So it makes sense to watch gasoline prices. According to the EIA, U.S. gasoline prices in early December 2020 were lower than the year-earlier period by 28 cents to 42 cents, depending on the region. Gasoline prices are expected to rise in 2021 as the economy gains steam. The energy agency forecast that the prices for the benchmark Brent crude oil, which averaged $43 per barrel in the fourth quarter of 2020, will average $47 per barrel in the first quarter of this year and rise to an average of $50 per barrel by the fourth quarter. Again, regional differences must be considered. California has the nation’s highest gasoline prices, followed by other West Coast states, according to the EIA. Florida and other Gulf Coast states plus Ohio and other Midwest states have the lowest gasoline prices.

UNEMPLOYMENT The national unemployment rate fell to 6.7% in November from 6.9% in October, but the employment recovery has been slowing, and many millions of Americans haven’t been able to regain or replace the jobs they lost because of the pandemic. For marijuana companies—especially those with plans to expand—that means a greater pool of executives and workers to choose from. “In this kind of economy, where companies are trying to reduce their operating costs, there’s going to be some great talent that’s been laid off and seeking work,” Velasquez said. “That’s going to provide the industry with a great talent pool to reach into.”

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States to Watch in 2021 Evaluating new and existing marijuana markets for business opportunities

etween the new marijuana markets legalized by voters in November and changes in store for states with existing medical and adult-use cannabis programs, finding the best opportunities can be a challenge. In the following pages, we profile five states that are making changes to their cannabis programs—California and Illinois—or bringing new markets online—Montana, New Jersey and South Dakota. To rate each location on potential profitability and ease of

doing businesses, Marijuana Business Magazine looked at the following factors in each state to score them on a scale of 1 leaf (least business friendly) to 5 leaves (most business friendly): • Population. • Estimated cannabis revenue. • Level of business regulations. • Medical marijuana patients per capita. • Licensing opportunities and fees. Keep reading to find out what we expect to see in 2021.

CALIFORNIA Business-Friendliness Score: 4 out of 5 leaves

California’s massive population, broad licensing categories and long list of conditions eligible for medical marijuana make it a good bet for investors. The lack of buy-in by many local governments has stunted the market’s potential, but that seems likely to change. The streamlining of regulatory agencies will only improve the ease of doing business in this state. Milestone: Merging three state regulatory agencies into one—the Department of Cannabis Control—in 2021. Initiative: Consolidation stems from a

legislative proposal put forward by Gov. Gavin Newsom. Market Data: Marijuana Business Daily projects that, by 2024, the California market will generate $6.9 billion to $8.1 billion in annual sales through adult-use retailers and another $200 million to $240 million in annual medical cannabis sales. While only about a third of the state’s cities and counties had embraced the industry as of 2020, more licensing is slated for the coming year—and likely more after that. Additional localities are expected to opt in over time, in part to generate tax revenue to offset budget

50 Marijuana Business Magazine | January 2021

shortfalls caused by the coronavirus pandemic. More than two dozen cities and counties approved marijuana-related ballot measures in 2020, for instance, setting the stage for more business opportunities. And hundreds more licenses will be issued in Los Angeles alone in 2021. Companies in the Market: California has no state license cap and no residency requirement, so anyone with initiative and capital can obtain a business license. That has made the state home to both well-capitalized multistate operators with immense portfolios—such as Arizona-

New Year, New Opportunities

based Harvest Health & Recreation, Terra Tech Corp. in Irvine and MedMen Enterprises in Los Angeles—as well as an array of mom-and-pop startups and family-run companies, plus small farms and independent retailers. Big Picture: The merging of three state agencies that oversee cannabis regulation means that, for businesses, regulatory issues will become much simpler to navigate. That will likely come as a relief for cannabis business owners because a common complaint has been conflicting answers to policy questions and interpretations of state rules from different agency officials. In addition, the merger will likely lead to a simplification of the complex licensing process, particularly for vertically integrated companies that currently must deal with all three agencies.

Finally, the consolidation will likely mean a more centralized effort at cracking down on the unlicensed cannabis market, which remains the biggest competitor for legal marijuana companies in California. To date, enforcement efforts have included a patchwork of raids, arrests, inspections, citations and lawsuits from officials at the local, state and federal levels. While it’s unclear whether this will be a primary focus of the new department, it certainly will be part of its jurisdiction, so increased enforcement could be on the way in 2021. Key Details: Since 2017, the state Department of Food and Agriculture has overseen growers and the Department of Public Health has overseen manufacturers. The Bureau of Cannabis Control has jurisdiction over all other

plant-touching business types, including storefront retailers, testing labs, distributors and others. The new agency will be called the Department of Cannabis Control, and the merger was originally slated to be completed by July 2021. But the coronavirus pandemic threw that timeline out the window, so it’s unclear when the consolidation might be finished. - John Schroyer

market will generate $10 million to $12 million in annual sales by 2024. MJBizDaily has yet to project the recreational marijuana market’s size. Companies in the Market: None yet. Big Picture: The fact that residents of a deeply conservative state would pass both medical and recreational cannabis might foreshadow how federal marijuana

reform could eventually play out in the more conservative U.S. Senate. However, South Dakota Gov. Kristi Noem is not a cannabis advocate, saying that support of marijuana is a “wrong choice” for the state, its communities and its families. Noem, a Republican, vetoed the state Legislature’s attempt to legalize indus-

SOUTH DAKOTA Business-Friendliness Score: 2 out of 5 leaves

With fewer than 1 million residents and a governor who is outspoken against marijuana legalization, South Dakota may initially present an uphill battle for cannabis businesses. Unlike other recreational marijuana markets that launch years after medical cannabis has been established, South Dakota's will be starting from scratch. But many unknown factors such as licensing structure and application fees could work in favor of new businesses and increase this score over time. Milestone: South Dakota was the first state in the country to simultaneously legalize medical and adult-use marijuana in the November election. Initiatives: Measure 26 (medical marijuana) passed by a margin of 69.9% to 30.1%. Amendment A (adult use) passed by a vote of 54.2% to 45.8%. Market Data: Marijuana Business Daily projects the medical cannabis

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trial hemp in 2019, and she has backed a lawsuit challenging the recreational marijuana measure. The legal challenge came after voters passed the constitutional amendment. The lawsuit argues in part that the constitutional amendment was improperly enacted because it created a new article as opposed to adding a section to an existing article. The legalization campaign called the argument “utterly insufficient” for overturning a constitutional amendment approved by voters. Key Details: It’s unclear how open either market will be and whether the

legal challenge will delay the recreational marijuana program’s implementation. The South Dakota Department of Revenue already has announced it is working with the state Department of Health on a plan to implement a commercial marijuana program. Local jurisdictions can’t ban medical marijuana, but they will be able to limit the number of establishments. Physicians must certify a patient has a debilitating condition to use MMJ, and a dispensary cannot sell more than 3 ounces of cannabis to a qualified patient during a 14-day period. The recreational cannabis amendment

is short on specifics, only calling for the state Revenue Department to issue “enough licenses to substantially reduce the illicit production and sale of marijuana throughout the state.” State regulators also are directed to limit licenses “to prevent an undue concentration” in any municipality. Local jurisdictions may ban recreational marijuana operations, but they cannot prohibit the transportation of cannabis products through their jurisdictions by businesses licensed elsewhere in the state. The amendment calls for adult-use marijuana products to be taxed at 15%. - Jeff Smith

were supposed to have been handed out in May but have been in limbo because of the coronavirus and lawsuits filed by jilted applicants. As of December 2020, only 74 retail and 21 cultivation licenses had been handed out. In addition to the 75 new retail permits, stakeholders are awaiting news on when the application window for another 110 retail licenses, 40 craft cultivation permits and 40 manufacturing licenses will open. All of those were supposed to have been awarded by the end of 2021, but it’s unclear how the legal fight over the 75 retail permits has upset that timetable. Companies in the Market: Multistate operators have a major presence in Illinois—including Cresco Labs, Green

Thumb Industries and Acreage Holdings—but so do small businesses. The stalled 75-license retail round is aimed at providing an opportunity in the market for entrepreneurs and small businesses from communities disproportionately impacted by the war on drugs. Big Picture: Thanks to the state’s large population, Illinois is one of the hottest markets to come online in recent years. But legal wrangling, a delayed rollout of the new adult-use retail licenses and questions about the state’s social equity program have raised doubts about when the market might reach its full potential. In mid-November, an Illinois judge threw out one legal challenge that sought to halt the state’s decision to allow many applicants for the 75 hotly contested

ILLINOIS Business-Friendliness Score: 4 out of 5 leaves

Illinois has a well-regulated marijuana market and a large population. Recent stumbling blocks in awarding 75 retail licenses have cast doubt upon a program initially hailed as the gold standard for social equity. But hundreds of licenses remain, leaving ample room for entrepreneurs looking to put down roots in the state. Milestone: Problems and lawsuits have delayed marijuana business licensing and the state’s social equity program, which is aimed at getting more minorities and victims of the war on drugs involved in the industry. Initiative: State officials are continuing to roll out the adult-use market and fulfill a social equity program. Market Data: Marijuana Business Daily projects that by 2024, Illinois will reach $2.4 billion to $2.9 billion in recreational cannabis sales and another $310 million to $380 million in medical marijuana sales. Though Illinois caps the number of business permits available, it remains well below the allowable limit. Several hundred additional licenses must still be awarded, including 75 retail permits that

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retail permits to refile their paperwork with amendments aimed at correcting previous errors. That, in turn, could result in changes to the permit winners. But that was only one of several lawsuits filed, and the licensing situation overall remains murky, with no clear timeline for any new business permits as of press time. Key Details: The state’s social equity program has been a key factor contributing to the delays and problems plaguing the rollout of an expanded adult-use industry. Social equity has been a growing

trend in various U.S. cannabis markets, as victims of the war on drugs make the argument that their demographic deserves a special place in the industry given the decades of legal warfare largely mounted against minority communities in the name of cannabis prohibition. The problem with most social equity programs has been infighting over a limited number of business permits. In Illinois, that manifested this year with only 21 social equity applicants qualifying for a lottery that will determine the

winners of the 75 retail permits. That development resulted in several lawsuits from social equity applicants who alleged they weren’t given the opportunity to amend errors in their paperwork—a chance they were supposed to get under Illinois law. Naturally, those challenges were met with pushback from other applicants who were loath to relinquish any claim to a cannabis retail permit in Illinois, and so the legal fights have continued. - John Schroyer

is expected for recreational cannabis. Tourism could help boost sales. Montana attracted 12.9 million tourists in 2019, and those numbers should be strong once the coronavirus pandemic is over and people feel safe to travel again. Montana residency will be required to get an adult-use business license, and existing medical marijuana companies will get an exclusive opportunity to enter the recreational market for the first 12 months. Pepper Petersen, spokesman for New Approach Montana, the committee running the legalization campaign, said the residency requirement was carefully considered. The Marijuana Policy Project also played a key role in crafting the initiative. “We wanted to make sure the people who participate have already proven their worth in the Montana system,” Petersen said. “It keeps things tighter and a little more homegrown.” It is possible that the residency requirement will be challenged in the courts, as happened recently in Maine and other states. Maine ultimately backed off its residency requirement, but

the issue remains in litigation. Key Details: Adult-use marijuana sales are expected to launch in late 2022 or early 2023. Local governments will be able to ban marijuana operations—but only after getting permission from voters to do so. Licensees must be vertically integrated. However, licensed operators will be allowed to sell up to 50% of the products they grow or manufacture on the wholesale market to other cannabis businesses. The initiative calls for 10 cultivation tiers, including a micro-tier of up to 250 square feet. But experts say that, in some areas, cultivation companies already have the market covered, so there could be few opportunities for new growers. A seed-to-sale tracking system will be implemented. - Jeff Smith

MONTANA Business-Friendliness Score: 4 out of 5 leaves

When it comes to the fees and availability of cannabis business licenses in Montana, the state boasts a lot of advantages. Montana residents have been accepting of the state’s medical marijuana program, with patient counts reaching 3.8% per capita. With fewer than 1.1 million residents spread across a large area, however, sales will never reach the astronomical levels seen in more populated areas. Milestone: Voters approved a recreational marijuana program in the November election by a margin of 57% to 43%. Initiative: Initiative 190. Market Data: A University of Montana study projects an adult-use market will generate $217 million in the first full year of sales (likely 2023) and $234 million in 2024. Companies in the Market: Only Montana residents can obtain medical marijuana licenses, and that will be the case with the recreational cannabis program as well. There are no statewide limits on medical marijuana providers, and as of the third quarter, there were 278 licensed MMJ operators and 368 dispensaries in operation. Big Picture: Montana has embraced medical marijuana, and the same

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NEW JERSEY Business-Friendliness Score: 3 out of 5 leaves

The widely anticipated legalization of adult-use marijuana along the densely populated East Coast is tempered in New Jersey by high fees and limited licensing availability. Sales in this heavily regulated market are expected to grow quickly, however, buoyed in part by visitors from nearby states that have yet to legalize adult-use marijuana. Milestone: Voters approved a referendum in November to legalize recreational marijuana by a margin of 66.3% to 33.7%. Initiative: Public Question 1. Market Data: Marijuana Business Daily projects the adult-use market will generate $850 million to $950 million in annual retail sales by 2024. New Jersey has a restricted medical marijuana market. The state has issued only 12 vertical licenses, and just 13 dispensaries were in operation as of Nov. 30. State lawmakers approved an expansion to issue a mix of 24 additional MMJ licenses, but the licensing has been held up by litigation. Companies in the Market: Multistate operators have a strong foothold in the market, partly through acquisitions. MSOs with licensed operations in

New Jersey include Acreage Holdings, Columbia Care, Curaleaf, Green Thumb Industries, iAnthus and TerrAscend. Big Picture: The New Jersey vote is expected to put pressure on other states to follow suit across the Northeast and down the East Coast, including Connecticut, Delaware, Maryland, New York, Pennsylvania, Rhode Island and Virginia. Legalization in the densely populated region would create billions of dollars in business opportunities for planttouching marijuana companies and ancillary businesses such as makers of cultivation and procession equipment, consultants and law firms. One potential hurdle: New Jersey’s limited medical cannabis market could make it difficult to flip the switch to adult use and create enough supply to meet pent-up consumer demand. Several operators are busy preparing for a recreational market by expanding cultivation and processing capacity. Key Details: Lawmakers passed an implementation bill Dec. 17. Provisions include: • The state’s 12 licensed medical marijuana operators will be fasttracked into the adult-use market but first must show they can meet MMJ demand. • Cultivation licenses will be limited

to 37 for the first two years of the program. The exception is microbusinesses with 10 or fewer employees. The program is designed to offer plentiful opportunities to microbusinesses owned by residents. • Priority consideration also will be given to applicants living in “impact zones,” or areas affected by high jobless rates, poverty or past marijuana enforcement activity. • Priority consideration in general will be given to minorities, women, disabled veterans and residents of at least five years with significant investment interest in an entity. • Labor peace agreements are required except for microbusinesses. • Adult-use sales will be taxed at 7%, and the Cannabis Regulatory Commission has the option of assessing a small grower tax. • 70% of the sales tax revenue and the possible grower tax revenue will go to programs that assist individuals and communities disproportionately impacted by the war on drugs. • Municipalities would have 180 days to decide whether to ban adultuse operations. They could pass ordinances to charge local sales taxes of up to 2%. - Jeff Smith

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Landing a By Adrian D. Garcia

Buyer Executives who have closed M&A deals reveal what makes them commit to a purchase

58 Marijuana Business Magazine | January 2021

Owners looking to sell their cannabis operations must be prepared before they can engage and secure a potential buyer. Acquiring companies gather information far beyond the business listing as part of their due-diligence process. Here are some considerations for sellers to keep in mind: • Put together a due-diligence folder with critical information about your business as well as a presentation deck highlighting your unique selling propositions and intellectual property. • Make sure your financial information—especially your balance sheet and profit and loss statement—are accurate and up to date. Some buyers might want these materials audited.

Multistate operator Columbia Care announced a deal to purchase Project Cannabis in Los Angeles.

• Consider enlisting a broker to help navigate the selling process, including marketing the listing to their network and on thirdparty sites, vetting inquiries and negotiating with interested parties.

Courtesy Photo

cquisitions remain a key strategy for companies looking to enter or expand their reach within the cannabis industry, but sellers must be ready to seize such opportunities. Owners who would like to exit the marijuana space or join larger conglomerates should be ready to: • Decide whether to engage a broker. • Ensure their financial information is ready for close scrutiny during the due-diligence process. • Demonstrate how the purchase would prove valuable to a buyer. A would-be acquisition target also must be ready to vet its purchaser and contemplate how the transition will play out—including possible new management—after the deal closes. “There’s a lot of prerequisite work that goes into putting a business up for sale,” said Ryan George, founder of California-based 420Property.com, CannabisMLS.com and other sites that list cannabis businesses and assets for purchase. Firms should start the process by making sure their books and financials are in order. They also need to gather

• Ensure you are working with a credible potential buyer by asking them for documentation proving they have the funds to purchase your business. Ask them to sign a nondisclosure agreement to keep your sensitive information confidential. Nicholas Vita

documentation regarding intellectual property such as patents and marketing materials, he said. George’s sites recorded roughly 250,000 views and 30,000 users in August. He anticipated those numbers would grow close to 350,000 page views per month and 50,000 users by the end of 2020, thanks to new states legalizing cannabis sales and marijuana retailers being deemed essential during the COVID-19 pandemic.

HOW BUYERS IDENTIFY TARGETS

New York -based multistate operator Columbia Care announced a deal on

Sept. 8 to purchase Project Cannabis, a vertically operated marijuana firm in Los Angeles, for $69 million. The same month, Columbia Care also announced it had completed its acquisition of The Green Solution, Colorado’s largest vertically integrated cannabis operator, for $140 million. The latter deal was first announced Nov. 5, 2019. “The process we go through to determine whether or not (a deal) makes sense is very internally driven,” Nicholas Vita, CEO of Columbia Care, said of the company’s acquisition strategy. “Everybody has to own the outcome, and everyone has to own the integration because, frankly, we all have to work together going forward.”

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Landing a

Buyer Vita said Columbia Care focuses on four primary factors when determining whether a company is a good merger or acquisition target: • The operation’s resources and assets. • Its business strategy. • Corporate ethos and financial conditions. As part of the M&A process, Vita’s team also assesses the strength of a target’s leaders and employees as well as its supplier list, customer base and other physical and intangible assets. Companies looking to be acquired by larger conglomerates may position themselves well by creating a presentation deck that includes such details. “Some companies bring with them real expertise in cultivation,” Vita said. “Others bring specific types of licenses; others bring brands and products.” Columbia Care also focuses on how a target’s business is being run, such as whether it has procedures in place to follow compliance regulations, pay taxes and fulfill financial obligations. The firm looks for companies that can help Columbia Care achieve its national goals, such as by complementing its existing operations or adding additional revenue opportunities. These targets also must show they can help Columbia Care “get deeper and more embedded into the leadership position” that it would like to achieve in the markets where it operates.

BEING PREPARED

Thoughtful Brands, a Vancouver, Canada-based CBD and e-commerce retailer, makes similar assessments when identifying companies and brands to add to its operations. “We look to acquire e-commerce CBD brands with existing customers and revenue,” Thoughtful Brands CEO Ryan Hoggan said. The company is particularly interested in brands with more than $500,000 in annual revenue. Ryan Hoggan “At the moment, we are looking for traditional direct-to-consumer brands and also brands with retail distribution—usually regionally,” he said of potential acquisition targets. “Another appealing factor is if a brand has a unique product or delivery mechanism that, with our resources, we can help grow.” Thoughtful Brands, which formerly operated as Mota Ventures, announced last January that it completed the acquisition of U.S.-based CBD brand Nature’s Exclusive. The company subsequently announced a series of deals, including the September acquisition of Kentucky-based hemp-extraction company American CBD Extraction Corp. Hoggan recommends companies looking for a buyer put together a due-diligence folder with critical information about their business as well as a presentation deck showing their unique selling propositions and intellectual property.

60 Marijuana Business Magazine | January 2021

Vetting Potential Buyers Sensitive information is shared during the acquisition process, and those selling a cannabis business must ensure that they are working with a credible buyer. “There are a lot of lookie-loos in the cannabis industry,” said Ryan George, founder of California-based 420Property.com, CannabisMLS.com and other sites that list marijuana businesses and assets for sale. “You don’t ever really see a business put its name out there when they’re up for sale. It’s more or less something like, ‘There’s a business for sale in the Denver area. These are the general figures that it’s doing per month, and here’s the price,’” George said. “If you want more information, you have to fill out a (nondisclosure agreement) and provide proof that you have the capacity to purchase that business.”

PROTECTING CONFIDENTIAL INFORMATION

Owners with active listings should be aware that companies and individuals sometimes inquire about a business listed for sale just to get more information about the industry, to investigate area competition or other purposes not related to proper due diligence. Cultivation facilities and other operations with plants and products on-site also must be careful about sharing information from a security standpoint. Brokers can serve as the gatekeepers to sellers and keep their proprietary information safe until the appropriate time. California-based Cannabis Business Brokers asks prospective buyers to provide either a bank statement, letter from a financial adviser, balance sheet or some other financial documentation before sharing a seller’s confidential materials or contact information. “When we bring somebody to our sellers, we have to know that the potential buyer can close the transaction, or we’re doing them a disservice and ourselves a disservice,” said Karen Muller, founder of Cannabis Business Brokers.

TWO-WAY STREET

New York-based Columbia Care welcomes companies that it is considering for acquisition to perform their own due diligence of its corporate culture and operations, CEO Nicholas Vita said. This happens both through a sharing of documentation such as investor pitch decks as well as walk-throughs of business operations and discussions during the negotiation process. “Our job is to make sure that the people who partner with us trust us with their reputations and with the value they’ve created in their own businesses. That’s a very serious responsibility,” Vita said. – Adrian D. Garcia

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Buyer “It’s important for the seller to explain to the prospective buyer who their target demographic is. For instance, are they beginners or advanced CBD consumers? It’s also key to have a lot of data on what customers of the brand/ company in question are buying and how the asset can be innovated to meet those demands,” he said.

New York-based Columbia Care acquired The Green Solution in Colorado for $140 million. Courtesy Photo

OPENING THE BOOKS

Buyers will insist on reviewing updated financial information before striking a deal. As a publicly traded company, Thoughtful Brands prefers this information to be audited by an independent certified public accountant, Hoggan said. Sellers might be expected to explain how they came up with certain figures. For instance, some firms have different definitions of their earnings before interest, taxes, depreciation and amortization, or EBITDA, Vita said. Typically, buyers are looking to see a profit and loss statement and a balance sheet, said Karen Muller, founder of Santa Monica, California-based Cannabis Business Brokers. The company looking to sell should set up a Dropbox folder or something similar to share all financial records and other documents the buyer will need to study during due diligence, Muller said. The information should include documentation on inventory, leases, licenses, payroll, tax returns and vendor lists. This information is also important for determining the valuation amount. “The hardest part of this process—and our secret sauce—is how we price the entity for sale, which is something we don’t publicly talk about,” Muller said. Generally speaking, determining a company’s worth includes looking at its current financials, growth projections, assets and the regulatory outlook in the states where they are operating. Hoggan introduces valuation into the conversation early on to ensure the parties are well matched. “Based on our previous transactions, we have used revenue as the basis for valuation. The

discussion is a collaborative process between the seller and our board.”

SELECTING A BROKER

Sellers can enlist a growing number of brokers who work or specialize in the cannabis industry to help to find buyers for their businesses. Karen Muller “In a regulated industry, you probably want someone who has some level of expertise,” Muller said. “Most of the people that come to us neither have the time nor the inclination to deal with the day-to-day process of selling a business, which requires that you stay on top of everything.” Brokers can help owners navigate the selling process, including marketing the listing to their network and on third-party websites, handling inquiries and vetting/ negotiating with interested parties. “Under the standard business broker model, people think business brokers charge 10%. That’s only true if the transaction is at $1 million. As the price of the transaction goes up, the commission rates go down,” Muller said. Cannabis Business Brokers typically charges a commission of about 6% of the transaction price, but the rate varies depending on the size of the deal, she said.

AFTER THE DEAL

Business owners should think through what role they will play—along with

62 Marijuana Business Magazine | January 2021

their staff members—once the company is sold. Some executives might want to retain their roles permanently or for a transition period, while others might choose to stay on as investors or advisers to the venture. These details can be worked out during the negotiation process. “Employees should be spoken to about the sale,” said Clint Sheer, a broker at Cannabis Business Brokers. “You always hear from these business owners that their employees are like family. Well, in a well-run family, there’s open communication.” Sheer recommends sellers notify staff—especially at the point where the buyer’s team might be walking through the business as part of duediligence efforts. Cautious companies can ask workers to sign nondisclosure agreements to keep potential or imminent deals under wraps. A lack of communication about a potential sale could lead to dampened worker morale. Employees sometimes find out via listings or other methods, Sheer said. Sellers can encourage buyers to retain staff or create severance packages when retention is not possible. Additionally, key employees can be offered retention agreements, which sometimes include bonuses, to stay on after the new owners take over.

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Using light deprivation techniques such as automated curtains can help growers control their harvest schedule. Photo Courtesy of High Life Farms

64 Marijuana Business Magazine | January 2021

Sunset Controlled

By Bart Schaneman

Greenhouse and outdoor growers can use light deprivation to control harvest and improve quality

ight deprivation can help cannabis growers looking to dial-in control, add more harvests to a production cycle and protect their plants from outdoor contaminants. The technique, which involves using tarps or curtains to block out sunlight—typically in greenhouses or hoop houses—is growing in popularity as cultivators work to maximize production. Light deprivation pushes cannabis plants to start the flowering process. To accomplish this, growers use shade cloth or other materials to allow in only 12 hours of sunlight, mimicking the amount of sun a plant would receive in a natural setting during the flowering phase. “Every advantage a light-dep grower can eke out—lower cost of production, more harvests per year, something to mitigate the smoke damage—all adds to their long-term viability,” said David Kessler, vice president and head of horticulture at Agrify, a producer of indoor-farming equipment in Aurora, Colorado.

Cannabis growers looking to improve efficiencies and control might find success using light-deprivation techniques. The system, where growers use either tarps or curtains to control the amount of sun a plant receives, aids production by: • Increasing the number of harvests one operation can produce each year. • Allowing growers to work on a set time frame, which means more tightly controlled planning. • Making the labor force more efficient by spreading out the workload and reducing the need for seasonal labor.

INCREASED HARVESTS According to Kessler, the operation can be as simple as pulling a tarp over a hoop house at 5 p.m. and pulling it off again at 5 a.m.

In addition to light deprivation, that layer can partially protect plants from smoke, hail and torrential rain. “The biggest advantage is adding a level of control to outdoor cultivation,” Kessler said. At High Life Farms in Chesaning, Michigan, Head of Cultivation Don Newman said light deprivation allows each room in his greenhouse cultivation operation to be harvested 51/2 times per year. With three flowering bays in the operation, High Life harvests between 15 and 18 times per year. Newman’s greenhouses all use mechanical curtains in a fully automated system. “It really helps to keep a more consistent environment like you would see indoors,” Newman said. “Even on cloudy days, we’re able to benefit from the sun.” Newman likes to use Kush and OG varieties because they consistently finish at around 60 days and work well with High Life’s growing system. According to Newman, the quality of cannabis grown outdoors using a

January 2021 | mjbizdaily.com 65

Sunset Controlled

Outdoor growers can use light-deprivation setups to protect their plants from ash and other contaminants. Photo Courtesy of Fotmer Life Sciences

light-deprivation system can be as good if not better than indoor-grown marijuana, as the plants receive extra UV rays from the sun, which helps them develop terpenes and cannabinoids.

SET SCHEDULE Light-deprivation ensures that outdoor growers maximize the amount of time available for sun-grown cannabis and don’t fall victim to the weather, said of Humboldt, California-based Kristin Nevedal, chair of the International Cannabis Farmers Association. She pointed out that a lot of cannabis growers in the mountains of Northern California get only one crop per year, so it’s important that it comes in on time. The set schedule offered by light deprivation also means that growers can plan around a definite harvest date and adjust their operation accordingly.

Proponents of light deprivation say the technique doesn't have a negative impact on overall flower quality. Photo Courtesy of Fotmer Life Sciences

She agreed that cannabis grown with light-deprivation techniques can yield superior flower. “It gives you an opportunity to produce very high-quality material,” Nevedal said.

66 Marijuana Business Magazine | January 2021

She also prefers the way light deprivation allows growers to finish plants at a consistent size, say 3-4 feet, meaning workers aren’t struggling to take down much larger plants.

Controlling the hours of sunlight that plants get allows growers to achieve consistency. Photo courtesy of Oriana

Using hoop houses with tarps can help ensure the plant doesn’t take too long to flower, which could put the harvest at risk for early frost, fall-season wildfires or rain and resulting moisture problems. Nevedal said the growers with lightdeprivation structures had additional protection against ash falling from wildfires that ravaged the West Coast last fall.

LABOR EFFICIENCY Dr. Jordan Lewis, CEO of Fotmer Life Sciences, a cannabis cultivation and extraction company based in Montevideo, Uruguay, called light deprivation a “fundamental tool.” His team uses the technique in specially designed greenhouses with mechanical curtains to create two harvests where it would otherwise have only one. Lengthening the harvest window allows Lewis to spread out the processing segment of the labor flow, cutting back on the need for seasonal labor and ensuring employees have enough work to stay busy.

Using light deprivation to stagger harvest schedules helps to prevent workflow bottlenecks in a cultivation facility. Photo Courtesy of Fotmer Life Sciences

Fotmer Life Sciences is growing in 18 different greenhouses right now, and the set schedule allows them to stagger the harvests, which helps with managing the labor needed for trimming and curing.

“We don’t have as many bottlenecks,” Lewis said. He also points out that staggered harvesting is a risk-management tool: For example, shortening the life cycle of the plant by adjusting the light can help to prevent contamination between batches. “The shorter the life cycle of the plant, the less opportunity (there is) for disease to be impactful,” Lewis added. Another tip: Light deprivation does not permit a lot of room for error. A pinhole of light getting through a curtain can cause plants to herm and go to seed, ruining the whole crop. “You have to make sure there’s no light, or you don’t get the results you need,” Lewis said.

Bart Schaneman is a reporter for Marijuana Business Magazine and Marijuana Business Daily. You can reach him at bart.schaneman@ mjbizdaily.com.

January 2021 | mjbizdaily.com 67

IndustryPlayers | New Hires & Promotions

Dianna Houenou

By Omar Sacirbey

A look at some recent hiring moves in the marijuana industry

New Jersey Names Top Regulator

ianna Houenou was already acquainted with marijuana legalization issues when New Jersey Gov. Tim Murphy asked her to chair the state’s new Cannabis Regulatory Commission (CRC). As policy counsel with the American Civil Liberties Union of New Jersey, Houenou developed legislative strategies and led advocacy efforts for marijuana legalization. In March 2019, she joined Murphy’s office, serving as senior policy adviser and associate counsel, advising Murphy on matters such as cannabis, criminal justice, military and veterans, community affairs and immigrants’ rights. Nevertheless, when Murphy asked Houenou to take New Jersey’s top cannabis job, she was surprised and initially said she needed time to consider how she could work to advance social and racial justice issues in that role. “I took (the job) because it’s a unique chance to help build this industry in a way that’s inclusive and that will help people who have been hurt most by the war on drugs to participate in this industry,” Houenou said. Houenou plans to leverage her ACLU experience to facilitate communication between the CRC and communities, and she believes her experience in Murphy’s administration will help her to navigate New Jersey’s governmental bureaucracy and coordinate with the state’s cannabis industry and other stakeholders. That said, Houenou acknowledges that she’s

California’s Top MJ Regulator Moves Into Craft Beer Lori Ajax retired from her post as head of the California Bureau of Cannabis Control after five years in a role in which she oversaw the rollout of the state’s marijuana regulatory system. Ajax’s resignation was effective Dec. 2, and shortly later she was appointed executive director of the California Craft Brewers Association. She begins that role Jan. 4.

still learning about the industry and challenges faced by businesses—as well as learning about cannabis regulations. “Regulations can be dense,” Houenou said. “I’m brushing up on regulations from other jurisdictions.” She added that she also is learning from networks of cannabis regulators around the country. Houenou’s priorities as CRC chair include equity and maintaining patient access. “My hope is that we can, in the first formative years of the program, put ourselves on a path where the Commission will be able to promote inclusivity in the market and reinvestment in Black and brown communities harmed by the drug war.” Houenou also will benefit from her existing relationship with Jeff Brown, who, as assistant commissioner at the New Jersey Department of Health, oversaw the Division of Medicinal Marijuana. Brown was appointed executive director of the CRC. As head of New Jersey’s marijuana division, Brown helped increase the number of enrolled patients from 17,000 to more than 95,000 and more than doubled the state’s number of participating physicians and dispensaries. Murphy also appointed Krista Nash as a member of the CRC upon the recommendation of Senate President Steve Sweeney. Nash previously served as program director of the PROMISE program at Volunteers of America Delaware Valley and as a mentor at Oaks Integrate Care and Transitions for Youth.

Ajax was chosen in February 2016 by then-Gov. Jerry Brown to oversee the state’s Bureau of Medical Marijuana Regulation. Her appointment came only a few months after legislators approved the first statewide regulatory system for California’s MMJ industry in fall 2015. Ajax remained chief of the agency after its name was changed to the Bureau of Cannabis Control (BCC) after the 2016 election, when voters

68 Marijuana Business Magazine | January 2021

approved recreational legalization, and then oversaw the rollout of the state’s legal marketplace in January 2018. She was retained by Gov. Gavin Newsom after he took office in January 2019. Her replacement is Tamara Colson, the BCC’s current assistant chief counsel, who will serve as acting bureau chief. The BCC will merge with two other state agencies that oversee the California cannabis industry. The new

agency will be called the Department of Cannabis Control.

Curaleaf CEO Change Marijuana multistate operator Curaleaf Holdings announced that Joseph Bayern, who joined the Massachusetts-based company in December 2019, will replace Joseph Lusardi as CEO effective Jan. 1. Bayern previously served as president of Indus Holdings, a vertically integrated cannabis company in California, and he has management and operations experience with Dr. Pepper Snapple Group and Cadbury. Lusardi, who guided Curaleaf from a single medical cannabis dispensary in New Jersey to an MSO with operations in 23 states, will become the company’s executive vice chair of the board. Boris Jordan, Curaleaf’s executive chair and one of its prime financial backers, characterized Bayern as an “outstanding leader with a proven track record of success.”

after a career spent largely in the pharmaceutical sector, stepped down but retained his role as board chair. Keith Strachan, MediPharm co-founder and president, succeeds McCutcheon as interim CEO. Strachan continues to serve as co-owner of Scoops and Cones, a seasonal ice cream company in Barrie. Olga Utkutug was appointed interim chief financial officer effective Dec. 8. Utkutug had been MediPharm’s director of finance since February 2019 and, before that, held senior finance posts with Cisco, General Electric and PricewaterhouseCoopers. She replaces Bobby Kwon, who left the company for family reasons in November, one year after taking the position.

Leadership Change at PharmaCielo PharmaCielo, a Toronto-based company that operates mainly in South America, announced that Henning von Koss, previously the company’s president and director, took over as CEO on Dec. 1. PharmaCielo announced in a news release that it reached a mutual agreement with David Attard and he would step down as chief executive officer and board member. Attard is being retained by the company in a consultancy capacity, a spokesperson said.

MediPharm Replaces Top Execs MediPharm Labs, a Barrie, Ontariobased extraction and manufacturing business, announced leadership changes intended to take the company to its next level of growth, executives said. At the CEO post, Pat McCutcheon, who joined MediPharm in 2017

with the American Herbal Products Association, also in DC.

 Common Citizen Welcomes CFO Common Citizen, a Marshall, Michigan-based cannabis product maker, announced that veteran Chief Financial Officer Brian Smith joined the company as CFO. Smith most recently served as vice president and corporate finance leader at Stanley Black & Decker, where he worked closely with the company’s executive leadership to transform their manufacturing, supplychain, pricing, planning and global marketing strategies. He also has held financial posts at General Motors, Pfizer and Walmart. At Common Citizen, Smith is tasked with developing internal controls for financing and building up the company’s brand.

Former Columbian Finance Minister Joins Khiron Board of Directors  Minority Cannabis Business Association Appoints New Executive Director The Minority Cannabis Business Association installed Amber Littlejohn as its executive director. Littlejohn, an attorney, joined the group in April 2019 as a senior policy adviser. In that role, she helped develop the group’s federal policy program. In her new role, Littlejohn is tasked with leading the growth and expansion of the MCBA and its policy and programming initiatives. Littlejohn is also director of the U.S. Hemp Authority, a post she’s held since July. Littlejohn has also worked as an attorney with the Watts Group in Washington DC and as a government and regulatory affairs consultant

Khiron Life Sciences, a vertically integrated cannabis company based in Toronto with core operations in Latin America and Europe, appointed Carlos Echeverry to the company’s board of directors. From 2015 to 2017, Echeverry served as CEO and president of Ecopetrol, Colombia’s largest corporation and the fourth-largest Latin American oil and gas producer included in the Fortune Global 500. Echeverry was Colombia’s minister of finance from 2010 to 2012, served as the nation’s minister of economic planning from 2000 to 2002 and represented Colombia before the InterAmerican Development Bank. Echeverry is also a founding partner of EConcept, a Bogotá-based consultancy, and partner of Global Source, a New York-based consultancy

January 2021 | mjbizdaily.com 69

IndustryPlayers | New Hires & Promotions with a presence in 21 emerging economies. He also is a former dean of economics at Universidad de los Andes (Bogotá) and a past visiting professor at IE Business School in Madrid and Georgetown University in Washington DC.

Testing Lab Adds Four Execs CannaSafe, an ISO-accredited cannabis testing laboratory headquartered in Van Nuys, California, added four new senior management executives. Todd Geller was appointed vice president of business development with supervisory responsibilities in the sales and marketing department. Geller comes to CannaSafe from LeafLogix, where he was the former VP of sales responsible for expanding into all states where cannabis is legal. Before joining LeafLogix, Geller worked as senior VP of sales and marketing at CallSource. Matthew McCormack is CannaSafe’s new chief financial officer. Before CannaSafe, McCormack was CFO at Merieux North America and CFO at both Intelligentsia Coffee and Ornua Foods North America. McCormack also spent more than eight years at Accenture, holding several financialmanagement roles across multiple business units. Keith Wheatstone joins the company as senior VP of mergers and acquisitions, drawing upon his career managing environmental testing labs across the globe. For seven years before joining CannaSafe, Wheatstone served as president at various Eurofins business units and as president and CEO of Eurofins Environment Testing. Wheatstone is also the current president and owner of Building Water Sampling Services, where he writes compliance and sample plans for testing for Legionella in hospitals, hotels, offices and more. Aaron Stancik leads the company’s scientific initiatives as VP of science.

Before CannaSafe, Stancik was the chief science officer at Earth Labs, where he supervised a staff of 30 employees and led the company through ISO 17025 accreditation and Metrc implementation. He earned a Ph.D. in physical chemistry in 2012 from the University of Ohio, where he studied spectroscopy and biochemistry.

New Jersey Trade Group Changes Leadership The New Jersey CannaBusiness Association announced that Scott Rudder stepped down as president. Edmund DeVeaux, policy director for the NJ CannaBusiness Association and a lobbyist with Burton Trent Public Affairs, will take Rudder’s place, according to NJ.com. DeVeaux has worked as a capitalbudget analyst in the U.S. Department of the Treasury’s Office of Management and Budget. He also has worked for former U.S. Sen. Bill Bradley and served as New Brunswick mayor. DeVeaux also served as an officer in the U.S. Army. Rudder, a former mayor and state assemblyman who founded the association, will stay on as a member of its board of directors. Tara “Misu” Sargente, founder of the edibles company Blazin’ Bakery, will move from executive director of the New Jersey CannaBusiness Association to its board of directors. No replacement has been identified for the executive director role, NJ.com reported. Bill Caruso, a lobbyist with Archer Public Affairs who currently sits on the board of the association, was appointed general counsel of the trade group.

TGOD Changes CEOs Toronto-based cannabis producer The Green Organic Dutchman replaced CEO Brian Athaide amid mounting losses. Athaide, who joined TGOD in March 2018 as chief financial officer and

70 Marijuana Business Magazine | January 2021

became CEO a few months later, also stepped down from TGOD’s board. Chief Financial Officer Sean Bovingdon will fill in as CEO on an interim basis. Vice President of Operations Michel Gagné was promoted to CFO. The decision to swap CEOs “was made by the board of directors,” a company spokesperson told Marijuana Business Daily via email. Athaide’s severance is being negotiated.

Vertosa Innovation Officer Appointed to Cannabis Regulatory Commission Vertosa, an Oakland, California-based cannabis company that makes customized emulsion systems for infused products, announced that Chief Innovation Officer Austin Stevenson was appointed by Mayor Libby Schaaf to serve on Oakland’s Cannabis Regulatory Commission. Stevenson also was recently selected to be an advisory board member for Eaze’s Momentum Program, a business accelerator designed to support and empower underrepresented founders in the licensed cannabis industry. Stevenson is one of three newly announced board members, who also include former National Basketball Association player Matt Barnes and Kiva Confections founder Kristi Palmer.

Valens Announces Change to its Board of Directors The Valens Co. in Kelowna, British Columbia, announced that Renee Merrifield stepped down from the board of directors after she was elected to the Legislative Assembly of the Kelowna-Mission district of British Columbia in the provincial general election held Oct. 24. Merrifield served on Valens’ board of directors as an independent member and a member of the board nominating and corporate governance committee since June 2020.

Driftless Extracts Adds New Advisory Board Member Lone Rock, Wisconsin-based Driftless Extracts appointed Josh Hendrix, a founding member of the U.S. Hemp Roundtable, to its advisory board. Hendrix was elected to serve as president of the Roundtable’s board in 2019 and currently serves on the board of the U.S. Hemp Authority, U.S. Hemp Growers Association and Friends of Hemp. As director of business development at CV Sciences, a publicly traded CBD company, Hendrix helped grow the company’s revenue 367% from 2015 through 2019.

head of innovation, technology and clinical research. Davidson is an internationally recognized expert on statins, novel lipid-lowering drugs and omega-3 essential fatty acids. He has coordinated more than 1,000 clinical trials and published 250-plus articles for leading medical journals.

iAnthus Resignation Joy Chen resigned her post as a member of iAnthus Capital Holdings’ board of directors. Chen joined iAnthus’ board in December 2019 as part of the formation of the company’s independent board of directors, which includes Diane Ellis, Michael Muldowney and Robert Whelan Jr.

 Geocann Adds Physician to Roster Geocann, a cannabis product manufacturer in Fort Collins, Colorado, announced that Dr. Michael Davidson joined the company as

officer of Omthera Pharmaceuticals, which was acquired by Astra Zeneca in 2013 for $443 million. In 2014, he founded Corvidia Therapeutics, where he also served as chief scientific officer before the company was acquired in June 2020 for $2.1 billion by Novo Nordisk.

Davidson founded the Chicago Center for Clinical Research, now owned by Radiant Research, and also was the co-founder and chief medical

Hired or promoted someone for a senior-level position? Send a news release or general information to omar.sacirbey@mjbizdaily.com.

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QuestionoftheMonth | Deliveries By Omar Sacirbey

ach month, we survey a group of cannabis executives and ask them an industry-related question. We welcome your suggestions for topics. Email us at magazine@mjbizdaily.com. Because deliveries have become such an important part of the industry, we asked: How have cannabis deliveries evolved during the past year in terms of order sizes and the products people buy, and what do you expect in 2021?

Have co ns changed umers the type and qua n tity of product s they or der through delivery ?

Gregory “Kasi” Reeves

Founder and CEO, Lit Delivery Service, Oakland, California Cannabis delivery has been very unpredictable this year. We saw a huge spike in business around May, when things started getting serious with COVID-19. People were stocking up on flower, edibles, vapes—whatever they could. Our average order size was $120. In August, things started to calm down. Flower was still the highest-selling product, but the average order went down to $45. In 2021, I think we’ll see a lot of growth in the topical sector. Older people are starting to find out about topical cannabis, its benefits and accessibility. Still, flower will be our No. 1 seller for the next few years.

Meredith Mahoney

President, Lantern, Boston (operates in Massachusetts and Michigan) Delivery saw an incredible uptick in the wake of the COVID-19 pandemic. In the states where Lantern operates, curbside pickup or delivery were the only ways to purchase, with delivery being the much easier and more convenient way to shop. We saw average order size increase significantly from March through April. People stocked up due to the uncertainty of whether dispensaries would be allowed to stay open. Delivery across all categories continued to increase through the fall, with flower being the most popular category consistently, followed by edibles and vapes. Looking toward 2021, it’s exciting how quickly delivery is pushing the industry to evolve, becoming more mainstream and improving accessibility to a wider range of consumers. Even in emerging markets where cannabis was just legalized, consumers now expect that most things they buy can be delivered to their homes. Cannabis is no different.

Brady Cobb

CEO, Bluma Wellness and One Plant, Fort Lauderdale, Florida We launched (our) next-day e-commerce-enabled home delivery model in Florida in July 2019 and saw steady increases in orders and patients throughout 2019. Then the COVID-19 pandemic hit in early 2020, and amid lockdowns and stay-at-home orders, our delivery model ensured we could still safely and efficiently serve existing patients and add record numbers of new patients. Our average delivery ticket is in excess of $200, and patients purchase the full range of products for delivery, including flower, pre-rolls, distillate vape cartridges, solventless concentrates as well as tinctures and balms.

74 Marijuana Business Magazine | January 2021

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