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1.
   

Battle of the Concrete Blocks

https://commons.wikimedia.org/w/index.php?title=User:Ablazejo&action=edit&redlink=1

On this week's WeedWeek Podcast, Alex, Donny, and I discussed attempts last month by Toronto authorities to shut down plucky illicit dispensaries by blocking their doors and windows with stacks of 4,000-pound concrete blocks. This week, authorities brought the blocks back with a vengeance.
CBC Toronto

The day after the concrete blocks were installed, CAFE's Harbord-Street location hired a crane to remove them, removing blocks from in front of the door, while decorating remaining blocks with photos of their patio.
Twitter

  • Industry lawyer Harrison Jordan noted, "Individuals entering any CAFE location that has been closed could be subject to a charge under s. 18(3.1) of the Cannabis Control Act, a $100,000 fine and 1 year of prison. That's where enforcement could go next."
    Twitter
  • To date, 70 charges have been laid against CAFE, who said in a statement that their dispensaries are necessary because REC retail in Ontario has been inadequate.
    Globe and Mail

While the ownership structure of CAFE is obscure, the chain is owned by two partners, one of whom is a former wrestling champ who drives a Lamborghini. He described himself on Instagram as, "I ain't as famous as Dan Bilzerian, but I'm trying."
CBC Toronto, Twitter

  • CAFE's other partner keeps a low profile, perhaps partly because of his criminal record for fraud, forgery, and counterfeiting.
  • Organigram VP Public Affairs Cameron Bishop railed against the scofflaws, saying, "The boldness [with] which the owners of CAFE continue to flout the law is astounding. Enforcement needs to be stepped up, products seized and tested and the owners charged. Unbelievable that this continues. […] We can’t pick and choose which laws we follow."
  • Facing Twitter criticisms, Bishop deleted the original post and apologized.Twitter

Quick Hits

  1. Police in Dartmouth, NS raided the Atlantic Compassion Club for the second time in two weeks, charging five.
    Global News
  2. An Edmonton social group hopes to attract professionals who like to get stoned together and make social outings.
    The Star
  3. Threats of $700 fines didn't keep people from smoking grass at the Winnipeg Folk Festival.
    CityNews
  4. In the US, celebrities like Jay Z and Wiz Khalifia have joined the cannabis industry, following in the path of Snoop Dogg and Willie Nelson. Canada's tight advertising and sponsorship rules for cannabis make it all but impossible for Canadian LPs to profit from celebrity, however.
    Vice

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2.
   

More Stores, More Sales

Alexander Baranov, https://commons.wikimedia.org/w/index.php?curid=45069005

As stores continue to climb across the country, May sales figures jumped to $85M, up $11M from April.
Global News

  • The strongest growth was in BC, Ontario, and Quebec, where the number of REC retailers is increasing. Provinces like Nova Scotia and New Brunswick, which haven't opened new stores, have seen stable sales.
  • Strategist Nick Pateras noted Quebec sales "grew the most in May on an absolute basis (+$3.5M) while Ontario retained its leading ~26% market share. National monthly sales of $85.6M means we now have a billion dollar industry at an annualized run rate."
    Twitter
  • Bloomberg's David George-Cosh noted seasonally adjusted cannabis sales since October, per Stats Can numbers, have now more than doubled since legalization.

Quick Hits

  1. After announcing it would not carry clones, BC's Liquor Distribution Branch said it didn't yet open a call for producers to for infused cannabis products.
    MJ Biz Daily
  2. Some MED users feel "elbowed out" of access since legalization.
    Huffington Post
  3. Canopy's venture capital firm Canopy Rivers, which has invested in 18 companies, posted a $1.8M Qloss.
    CTV News
  4. Cronos moved to acquire an 84,000 GMP-compliant fermentation and manufacturing facility in Winnipeg previously owned by generic pharmaceutical giant Apotex. This facility will be able to produce large volumes of cultured cannabinoids.
    Yahoo Finance
3.
   

Will CannTrust Erode Sector Respectability?

https://commons.wikimedia.org/wiki/User:Fry1989

The CannTrust scandal threatens the still-fragile mainstream legitimacy of the cannabis sector, with insiders wondering what changed the company from strictly compliant to willing to flout regulations.
Globe and Mail, Bloomberg

  • "There’s always been an amount of skepticism about the Canadian industry’s compliance [from US banks]," said lawyer Patricia Olasker. "We have always pointed out that it is a highly regulated industry, with rigorous rules, and that this should be a great source of comfort...then CannTrust happens and it really shakes people’s confidence."
    Globe and Mail
  • Shares fell across the sector after the CannTrust news broke last week.
    The Straight
  • The Globe interviewed Peter Aceto, CEO of CannTrust, who would not answer questions about what he knew about allegedly illegal activity in the company's greenhouse.
    Globe and Mail
  • Bloomberg briefly interviewed Aceto, who said, "I'm human. […] The focus is on getting this business back in compliance."
    Bloomberg

The Ontario Securities Commission's enforcement team is reviewing a complaint that CannTrust harmed investors by not disclosing its lack of compliance. Meanwhile, the number of law firms launching class-actions climbed from 9 to 14.
Canada.com

Mackie Research Capital ended coverage of CannTrust, saying, "We have lost faith in management."
Bloomberg

  • Some analysts worry the CannTrust scandal may slow federal legalization in the U.S.
    Bloomberg
  • The scandal will likely end Health Canada's policy allowing growers to send in photo- and video-evidence packages as part of the application for site and room licenses. "Health Canada was trying to help the industry get licensed faster," BC Independent Cannabis Association president Courtland Sandover-Sly said, "and [CannTrust] has taken a big dump on that."
    Twitter

Quick Hits

  1. Health Canada revoked Agrima's licenses, following license suspensions that began last fall. So far Health Canada has said only that Agrima—a subsidiary of Ascent—was non-compliant with regulations, widely believed to have resulted from allowing its products to be sold in illicit dispensaries.
    CBC Business
  2. Bruce Linton may not have been fired from Canopy because of the losses last quarter, but rather because Constellation didn't like his way of doing business. It didn't help that he routinely disparaged the liquor industry.
    The Star
  3. Bank of America Merrill Lynch downgraded Aurora from "Buy" to "Neutral," adding, despite "focus on profit […] it is burning cash and by our estimates could be cash negative by first quarter 2020 (absent financing)."
    MarketWatch
  4. MYM Neutraceuticals' $200M production facility in Weedon, QC, appears to be abandoned due to lack of Health Canada permits.
    La Presse—In French

4.
   

Ontario REC Retail Insanity Ramps Up—Again

"The frenzy is heating up again!" warned lawyer Trina Fraser. "Would-be cannabis retailers in Ontario, I hope you are working hard on your bank letters and offer to lease!"
Twitter—Trina Fraser

  • When invoking "frenzy," it's worth bearing in mind what the pre-REC retail looked like in spring and summer of 2018: in May of last year, prospective retailers in Calgary were signing five- and ten-year leases on retail properties—sometimes at double the asking price—without even knowing whether they would get their licenses. Many were forced to wait for far longer than they'd anticipated .
    CBC Calgary

Quick Hits

  1. In the U.S., cannabis beverages capture roughly 1% market share—and in Canada, roughly 75% of cannabis users have never consumed cannabis in a beverage.
    Globe and Mail
  2. Cannabis patents are hot in Canada—but seven of the top ten patent holders in the country are multi-national pharma corporations, since cannabis remains a Schedule I substance in the US.
    Canna Law Blog
  3. Legalization is partly responsible for a 38% increase in foreign tourists visiting Canada. They have a growing number of hotel options.
    Canada.com, Toronto Star
5.
   

Chief Calls for First Nations Cannabis Economies

Jesse Staniforth
Chief Day (left, Standing) leading discussion at National Indigenous Cannabis and Hemp Convention

Chief Wiindawtegowinini Isadore Day of Serpent River First Nation in Ontario is a visible and confrontational activist Chief who has challenged the government of Canada on many fronts (including attempting to force his way through a group of Mounties and into the House of Commons during the 2013 Idle No More Indigenous rights protests). Chief Day has been adamant that First Nations should consider cannabis an economic engine for sovereignty in their communities.
Aboriginal People's Television Network

  • In an op-ed this week, he argued First Nations had developed a robust and reliable supply chain that was more efficient than that of licensed producers.
  • "Unlike the tobacco industry where only a few become rich," Day predicted, "we now have the opportunity to spread the wealth, which will improve the health and well-being of our communities."

Quick Hits

  1. Recent research from the University of British Columbia found "a high proportion" of residents in Vancouver's impoverished Downtown East Side community use cannabis for medical purposes, even if they don't officially buy MED.
    Botaniq
  2. Some farmers are switching to hemp to capitalize on the CBD boom, but others caution the trend may pass quickly. In the meantime, they caution against planting a large plot of hemp unless they have a partnership with a processing plant.
    Calgary Herald
  3. Vikings may or may not have grown and used cannabis when they occupied sites in Newfoundland between the 11th and 13th centuries.
    Ancient Origins

6.
   

48North: Second to Outdoor License, but Late to Plant

48North was at the head of the pack of LPs applying for outdoor growing licences, and received the second such license in mid-May. This week they announced they'd completed planting 10 cultivars over 100 acres and will have two harvests, in late August and mid-October.
NewsWire, Market Exclusive

  • 48North Co-CEO Jeanette VanderMarel told me, "We had a record-setting wet spring this year and the fields were not ready to be worked until the rain finally let up. We are on pace with farmers of other crops in our area and are very confident that we will have a substantial Harvest this year."

Quick Hits

  1. Cannabis growing cannabis is surprisingly reliant on fossil fuels, partly because the energy required for greenhouses is greater than could be derived easily from renewable sources.
    CBC Windsor
  2. Luxury grower Flowr withdrew an equity offering "due to prevailing market conditions." Investor Daniel Sax noted, "This is a good litmus test for the market. Not a great time to be looking for capital, even if you’re a solid company."
    Press Release, Twitter
  3. Toronto LP HeavenlyRX—a subsidiary of SOL Globalinvested $9M to acquire 25% of Seattle soft-drink manufacturer Jones Soda. They will develop a line of CBD beverages.
    GrowthOp
7.
   

Organigram Reports Loss,
but Four Positive Quarters

https://www.flickr.com/photos/wakalani/113300336/

Organigram reported a surprising $10.2M Q3 net loss, following Canopy, Cronos, and Supreme in falling short of earnings expectations. However, Organigram's EBITDA was positive for the fourth consecutive quarter.
CTV News, Bloomberg

Quick Hit

  1. The federal minister of justice and the parliamentary secretary to the minister of border security and organized crime reduction, announced $11.5M funding over five years to support police in Quebec cracking down on drug-impaired driving.
    NewsWire
  2. Researchers at Hamilton's McMaster University found evidence recent cannabis use tends to erode memory and attention, slow the ability to process and form thoughts, and complicate motor skills.
    Canoe.com
8.
   

Conservative Premiers Call for Crackdowns on Illicit Market

Public Domain

A gathering of the country's premiers—the majority Conservative—called on Ottawa to fix supply issues (though it's hard to say how much those still exist, and how much they remain a talking point for Conservatives attacking the federal Liberal government).
GrowthOp

  • The premiers called on Ottawa to make buying legal more desirable, but they also want Ottawa to crack down harder on illicit sales—particularly those made on widespread Mail-Order-Marijuana Sites (MOMS).

Quick Hits

  1. Alberta says REC supply remains strong for all.
    Globe and Mail
  2. Conservative MP, REC-opponent, and potential health minister in a Conservative government, Marilyn Gladu (best remembered for the anti-cannabis poem she wrote and read to the House of Commons) said she isn't sure legalization is the right decision.
    Blackburn News
  3. Justice Minister David David Lametti approved a second saliva-testing device for use by police at roadside stops. The Abbot SoToxa works better in cold weather than its predecessor, the Dragaer DrugTest 5000, and is said to be somewhat faster in delivering responses, the constitutionality of saliva tests has not yet been tested in court, but defence lawyers predict that will happen soon.
    National Post
9.
   

Extractor Valens' Revenues
Beat Expectations

Extraction powerhouse Valens GroWorks reported its Q2 revenue increased to $8.8M, surpassing analyst expectations. Valens' gross profits were $5.1M and the company posted a net loss of $10.5M.
NewsWire

  • Ahead of the extraction boom this fall, Valens is among the industry's most connected extractors, boasting partnerships with the Green Organic Dutchman, Hexo, and Tantalus, as well as a multi-year extraction deal with Canopy signed last December.
    NewsWire
  • The Deep Dive identified a questionable transaction from late April in Valens' numbers—Deep Dive authors highlighted a share-based purchase of Wyoming-based Straight Fire Consulting (a company with no assets or liabilities) for roughly $5M. Valens has not yet commented on the reasons for the
    Deep Dive

Quick Hits

  1. The process to launch new products for Legalization 2.0 began on Tuesday, meaning manufacturers had better hurry with their extract/edibles preventive control plans, said Cannabis Compliance's Brenna Boonstra. Such legally required plans lay out how food producers plan to address food-safety hazards.
    Twitter
  2. Hexo announced its cofounder, Adam Miron, is stepping down as Chief Brand Officer, though he will remain on the board.
    Globe NewsWire
10.
   

Newest Micro Grower Says
You Too Can Get Licensed

https://www.flickr.com/photos/64776479@N00

Canada's newest micro-cultivation licence holder, Joël Lacelle, said it took him nine months from application to the license he needed to get his company Hearst Organic Cannabis Products up and running.

  • Though Lacelle didn't hire consultants, the process still required roughly $700,000 investment—far more than the average legacy operator hoping to go legit may have on hand. But Lacelle tells other aspiring micro-growers, ""Start small. Start with what you have."
  • However, delays are still widespread and many feel Health Canada has failed to meet the needs of micro-cultivation applicants.
    Leafly

Quick Hits

  1. BC Compassion Club Society–founder and longtime MED activist-turned-Canopy-executive Hilary Black said the lack of diversity in the cannabis sector was directly related to how fast the industry grew.
    Bloomberg
  2. Angry produce farmers in BC's Delta region want cannabis growers to be forced onto areas in which soil quality is lower.
    The Tyee
  3. Cannabis remains the substance Vancouver police seized most frequently, though they rarely charged anyone with simple possession of drugs (21 charges out of 5,000 drug seizures in 2018).
    Vancouver Sun

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