Clarence Thomas says federal marijuana laws may be outdated
Clarence Thomas says federal marijuana laws may be outdated
Mexico's top court decriminalizes recreational Cannabis. TPCO acquires Calma West Hollywood for $11.5M ($8.5M cash, $3M stock). SLANG acquires High Fidelity (VT) for $15M ($3M cash, 12M stock).
👋 Summary of Monday’s (6/28/21) news, for quicker updates, follow on LinkedIn.
Top News
Supreme Court Justice Clarence Thomas says federal marijuana laws may be outdated. Supreme Court Justice Clarence Thomas said that federal laws against the sale and cultivation of marijuana are inconsistent, making a national prohibition unnecessary. “A prohibition on interstate use or cultivation of marijuana may no longer be necessary or proper to support the federal government’s piecemeal approach,” Thomas, one of the court’s most conservative justices, wrote in a statement. The court’s decision not to hear a new case related to tax deductions claimed by a Colorado medical marijuana dispensary prompted Thomas to issue a statement that more broadly addressed federal marijuana laws. Thomas stated that a 2005 ruling in Gonzales v. Raich in particular, which determined that the federal government could enforce prohibition against marijuana possession, may be outdated. “Federal policies of the past 16 years have greatly undermined its reasoning,” Thomas added. “The federal government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.” Thomas referred to several policies that conflict with the 2005 ruling. Among them are memorandums issued by the Department of Justice in 2009 and 2013 that indicated the government would not intrude on state marijuana legalization schemes or prosecute individuals for marijuana-activity if it complies with state law. He added that since 2015, Congress has repeatedly prohibited the Justice Department from using federal money to interfere in the implementation of state medical marijuana laws. “Given all these developments, one can certainly understand why an ordinary person might think that the Federal Government has retreated from its once-absolute ban on marijuana,” he wrote. With 36 states permitting the use of medical marijuana and 18 allowing recreational use, Thomas asserted that marijuana businesses do not experience “equal treatment” under the law.
Mexico’s top court decriminalizes recreational marijuana use. Mexico's Supreme Court decriminalized recreational marijuana use for adults, drawing a cautious welcome from activists who said users face a "legal vacuum" until lawmakers pass a stalled legalization bill. "Today is a historic day for liberties," court president Arturo Zaldivar said, after eight of the 11 judges backed the decision declaring the drug's prohibition under the health law to be unconstitutional. The ruling comes after Congress failed to enact legislation allowing recreational marijuana use by an April 30 deadline set by the country's highest court.
Clever Leaves Launches Project Change Lives, Pledging $25M Worth of Medical Cannabis to U.S. Researchers. The Company has pledged to contribute up to $25M retail value of medical cannabis products to any eligible U.S. organization to help advance scientific research into the potential medical benefits of cannabinoids. By sponsoring Project Change Lives, Clever Leaves is offering to provide a historic amount of pharmaceutical-grade cannabis to leading research institutions in one of the most advanced pharmaceutical markets in the world. Clever Leaves is looking to supply up to 250,000 bottles of pharmaceutical-grade cannabis oils or ~5 tons of medical cannabis flower that will help research institutions develop new therapies. To eliminate an additional impediment to the advancement of scientific knowledge around cannabis, this research material will be provided at no cost to Clever Leaves’ research partners. The Company will be partnering with Biopharmaceutical Research Company, a company which holds federal licenses for importing, analyzing and manufacturing controlled substances, as its importer of record. Clever Leaves plans to begin working with U.S. investigators immediately and initiate their efforts with a research study focused on the DNA sequencing of a variety of their cannabis cultivars.
Juul to Pay $40 Million to Settle N.C. Vaping Case. The settlement is the first in a stream of lawsuits against the company, which has been accused of deceptive marketing practices that contributed to a wave of nicotine addiction in teenagers. The consent order also requires that Juul institute a barcode age-verification system of IDs at places where its products are sold, and that this system be tested through a retailer compliance program using mystery shoppers at 1,000 stores per year. For online sales, the company is ordered to restrict sales to individuals to no more than two devices per month, 10 devices per year and no more than 60 pods per month.
Hollister Biosciences — Launch of Pre-Roll Production and Distribution in Arizona. Commenced pre-roll production and distribution in Arizona to complement the Company's existing cannabis concentrate product suite in the state through its wholly owned Venom Extracts (Venom) subsidiary. The company has prepared for initial production of up to 10,000 units per day, with plans to expand capacity to 30,000 units per day by Q4.
Deals
The Parent Company — Acquires Calma West Hollywood for $11.5M. The $11.5M consideration is comprised of $8.5M cash and $3.0M in stock. 85% of the equity of Calma will be obtained by the Company upon approval by the City of West Hollywood. The transfer of the remaining 15% equity of Calma is expected to occur in 2022. The 3,250-square-foot dispensary opened July 21, 2020.
SLANG Worldwide — Creates Third Core Market with Signing of Definitive Merger Agreement to Acquire High Fidelity, Vermont's Largest Vertically Integrated Operation. HI-FI is one of Vermont's premier vertically integrated cannabis companies, founded in 2012 in Burlington. The Company owns two of the five medical cannabis licenses in Vermont, Champlain Valley Dispensary (CVD) and Southern Vermont Wellness (SVW), and services ~70% of registered patients. In June 2021, both CVD and SVW commenced operating under a new brand name, CeresMED. Retail sales in Vermont for adult-use cannabis products are expected to begin in the fall of 2022, with sales expected to reach up to $230 million in 2023. In the upcoming licensing process for adult use, current medical license holders will have early access to the market alongside Vermont's craft growers SLANG will pay $15M upfront ($12M stock, $3M cash). At the 18-month anniversary of the closing of the Merger, SLANG will pay an additional $250K by issuing 657,894 SLANG Shares ($0.38/share) and $2M cash. Pursuant to the Merger Agreement, SLANG may issue additional SLANG Shares upon the achievement of certain performance milestones.
HEXO — formalizes its US presence with acquisition of production facility in Colorado. HEXO closed its previously announced transaction to purchase its first US production facility through a wholly owned US subsidiary. The ~50,000 sq. ft. facility in Fort Collins, Colorado will provide US CPG companies and consumers access to the Powered by HEXO® technology and products.
Fire & Flower and Humble & Fume to Offer Expanded Online Product Catalogue of Cannabis Accessories to North American Consumers. Fire & Flower Holdings and Humble & Fume Inc. have entered into a strategic supply agreement to offer an expanded catalog of Humble's portfolio of products to Fire & Flower customers online and in-store throughout North America. The agreement will offer customers competitive pricing and leverage Fire & Flower subsidiary, Hifyre's, advanced digital retail platform. Customers will be able to shop online at www.fireandflower.com or place orders in-store with access to the newest humble + fume products and a wide breadth of the most popular cannabis accessories in the world. Customers will then have the option of home delivery or in-store pick-up, with orders drop shipped directly from Humble's Canadian and U.S. distribution network.
Earnings
Flower One — First Quarter 2021 Results
Revenue: $13.9M, consistent with its previous guidance of over $13.5M
Beginning in January, the Company underwent a complete restructuring transaction of its debt, which was completed in the second quarter of 2021. The successful debt restructuring, net proceeds from the convertible debenture financing and improved operating results enabled the Company to significantly improve its liquidity position by quarter end;
As of March 2021, the Company is the top flower provider in the state of Nevada, producing both the number one (Cookies) and number two (NLVO, the Company’s in-house brand) as top-selling flower brands in the state; Leading producer of distillate, bulk and white label flower sales in the state of Nevada;
Yielding cultivation analytics are reported up to 135.7 grams per plant through Q1 2021, at an average cost per gram of $0.58. The Company has historically reported its average cost per gram to be between $0.40 and $0.69 per gram;
Through updates to its post-harvesting process (drying, curing, trimming and packaging), the Company has recognized over 300% increase in its processing capacity in the first quarter of 2021, in comparison to fourth quarter of 2020.
Second Quarter 2021 Revenue Guidance: $16-$18 million
High Tide — Second Quarter 2021 Financial Results
$40.9M Revenue (37% GM), up 99% Y/Y
$4.7Adjusted EBITDA (11.5% GM)
$29.4M cash as of April 30, 2021