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1

Breaking: Hexo Admits Growing in Unlicensed Rooms

Public Domain

Hexo published a Friday-afternoon press release acknowledging growing took place in unlicensed rooms at its Niagara Falls production site.
Globe NewsWire

  • Hexo said in the release that the unlicensed growing took place on the site when it was owned and operated by Newstrike, which Hexo purchased this past summer.
  • The company said confusion over licensing paperwork led Newstrike to believe its whole facility was licensed when the company began growing in unlicensed areas.
  • Hexo claims it reported the unlicensed growing to Health Canada immediately upon discovering it. The company said Health Canada was satisfied with Hexo's handling of the situation.

Expect this story to dominate next week.

2

Canopy Posts $300M+ Loss, Again

https://www.flickr.com/photos/47445767@N05

Canopy Growth reported a $374.6M loss for Q2 2020 (ending September 30), up 13% from its Q2 2019 loss of $330.6M.
NewsWire

Zekulin said, "The inability of the Ontario government to license retail stores, right off the bat, has resulted in half of the expected market in Canada simply not existing."

  • He noted LPs should accept responsibility for the initial supply shortage that forced Ontario to shut down REC retail licensing, but concluded, "The fact is: there are not enough stores [in Ontario…] and the inability to get more stores rolled out is dramatically hurting the sector."
    Bloomberg
  • Canopy president Rade Kovacevic said, "The Canadian market is 6-12 months behind where we thought it would be because of (slow) store openings."
    Twitter—Matt Lamers

Canopy CFO Mike Lee said the company assumes Ontario will begin licensing 40 new stores per month beginning in January.
Twitter—David George-Cosh

Canopy took "a restructuring charge of $32.7M for returns, return provisions, and pricing allowances primarily related to its softgel & oil portfolio"—two products unpopular with consumers.

Inventory writedowns could become more widespread as wholesale prices decline and LPs that estimated the value of their "biological assets" at far greater than the present selling price are forced to adjust.
Financial Post

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3

Everyone's a Loser

Public Domain

Canopy can take comfort that it wasn't alone in reporting a loss this week. Aurora reported $75.2M in quarterly revenue, well beneath analysts' estimates of $90.6M.
NewsWire

Cronos reported it more than tripled its revenue with $12.7M for the quarter, which nonetheless fell short of the $14.1M analysts forecasted.
New Cannabis Ventures, CBC Business

Tilray posted a US$35.7M net loss, up from US$18.7 year over year.
MarketWatch

Organigram issued Q4 guidance predicting net revenue of $16.3M, a significant step down from last quarter's $24.8M revenue, as well as from analyst predictions of $27M.
New Cannabis Ventures, MJ Biz Daily

Ontario LP Beleave abandoned plans for a production facility in London, Ontario, putting its greenhouse there up for sale.
London Free Press

Licensed processor and white-label producer MediPharm Labs posted optimistic quarterly results. CEO Pat McCutcheon said sector oversupply "bodes extremely well" for the company, as it will drive down the price of cannabis biomass.
Globe and Mail

4

Drake's Newest Beef: Health Canada

Getty Images

New entrant to Canadian licensed REC production, Drake, took aim at an enemy most would rather avoid: Health Canada.

Quick Hits

  1. Cirque du Soleil founder and MED user Guy Laliberté appeared before a judge in Tahiti, French Polynesia, accused of cannabis cultivation, possession, and consumption on Nukutepipi, his private Pacific atoll featuring a 21-bedroom, 25 bathroom mansion. Growing MED isn't legal in French Polynesia.
    CTV News
  2. Neil Young has lived in the US since the 1960s, but the Canadian rock legend has only now decided to apply for dual citizenship. Unfortunately, his years of impressive cannabis use mean that even though he passed his citizenship test, he's going to have to go through a separate test to prove his "good moral character."
    CBC World, Neil Young Archives

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5

Ontario Municipalities Still Confused about REC Retail

http://www.flickr.com/photos/9816248@N03

The Cannabis Council of Canada is adamant: Members want the Ontario government to immediately begin issuing more REC retail licenses. But Ontario municipalities have the final say about where those retail stores might go.
CBC Ottawa, Twitter—C3

In Windsor, city councillors who voted to opt into REC retail are at odds with city administrators, to whom they delegated REC retail.
Windsor Star

  • City administrators angered councillors by writing to the Alcohol and Gaming Commission of Ontario to formally oppose a planned REC store location. They argued the store was too close to a school and mental-health treatment centre, even though it was located outside provincial buffer limits around schools.
    CBC Windsor
  • Councillors accused city administrators of ignoring REC retail criteria they had laid out.
    Blackburn News

Last December, Toronto suburb Mississauga—Canada's sixth largest municipality—opted out of REC retail. A year later, it's rethinking that decision.

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6

Calgary: Lots of Stores, Millions Spent on Cannabis Policing

https://www.flickr.com/photos/95443147@N00

Calgary Alberta has 66 licensed REC stores open and production sites for three LPs, as well as 154 approved new REC locations in varying degrees of readiness. The city says that explains why Calgary's cannabis-related costs have exceeded $10.3M. The combined $6.7M in policing costs and $3.5M in other costs more than exceeds the one-time $3.84M payment the city received from the Alberta Municipal Cannabis Transition Program.
Calgary Herald

Quick Hits

  1. Alberta's UCP government is stripping cannabis producers of agricultural tax exemption ahead of the 2020 tax year. Noting big players like Aurora will be able to take the increase in stride, a Twitter user from MED producer Boaz responded to premier Jason Kenney, "Due to your removal of cannabis from agricultural tax exemptions, our small, family-run LP will pay 3x more property taxes in 2020."
    CBC Edmonton, Twitter—TheStarTrekGirl
  2. BC producers want the province to hurry up and allow farm-gate sales and on-site consumption lounges, with which many imagine they can turn regions of the province into cannabis facsimiles of tourist-friendly wine regions.
    Business in Vancouver, Twitter—Dan Sutton

7

Securities Regulators Warn LPs on Conflicts of Interest

https://www.flickr.com/people/hmrcgovuk/

The Canadian Securities Administrators, representing 13 provincial and territorial regulators, released a notice providing guidance in which they warned publicly traded LPs against withholding conflicts of financial interest in companies they acquire and sell.
Financial Post, MJ Biz Daily

Quick Hits

  1. LPs can't just throw solid cannabis plant waste—or, in the case of CannTrust, $77M in unlicensed product—in their municipal compost bins. The various ways they can get rid of such waste each have their pros and cons.
    Mondaq
  2. Four in 10 managers believe they don't have a duty to accommodate MED use, while 73% believe they can drug-test employees if the CEO approves. Meanwhile, three in 10 workers believe they can automatically consume MED on the job if they've disclosed they have a MED license. They're all wrong.
    Canadian HR Reporter

8

BC Cracks Down on Med Patients, Dry-Herb Vapes

Public Domain

British Columbia's provincial Community Safety Unit raided the Victoria Cannabis Buyers Club, a compassion club for MED patients in operation since 1996. The raid was immediately enormously unpopular.
CBC British Columbia, Facebook Video, Twitter—Mark Hauk, Kirk Tousaw, Buzz Dankyear, BC Independent Cannabis Association, Travis Lane.

  • Police in BC have traditionally left compassion clubs alone, and many saw the raid as a betrayal of trust between police and the MED patient community.
  • Mononymous grower Remo (of cannabis nutrients firm Remo Brands) called the VCBC "true medical access. Recreational people need not apply. […] What a devastating day for so many sick people."
    Twitter—Remo

The BC government announced a plan to tax all vapour products by 20%—including dry-herb vaporizers, and other cannabis vaporizers.
Government of BC, Business in Vancouver

Quick Hits

  1. Facing a lot of bad news in the Canadian sector, many are turning their hopes to Europe, which they expect will begin legalizing soon. Business In Vancouver
  2. Aleafia said its first outdoor harvest achieved the cheapest cannabis in the legal industry, produced at roughly $0.10 per gram.
    Bloomberg

9

C3 Call for Police Angers Legacy Growers

https://www.flickr.com/photos/72395857@N00

Legacy critics argued the Cannabis Council of Canada crossed a line in urging the federal government to increase enforcement against illicit markets, and asking provincial and federal governments to "prioritize the closure and removal of both illegal brick and mortar stores" and illicit online dispensaries.
Twitter—Travis Lane, Dan Goulet, Ryan Lee, Lisa Campbell

In Quebec, investigations have revealed a burgeoning illicit trade in selling MED prescriptions, people associated with the Hell's Angels operating an apparently illicit MED consultation clinic, and other biker-affiliated characters growing MED (and selling it).
La Presse, Journal de Montréal—Both in French

Quick Hits

  1. Rolanda Elijah, director of lands and environment for the Chippewas of the Thames First Nation, argued in Policy Options that a system of First Nations REC regulation might offer an opportunity to fix the decades-long conflict over tobacco in First Nations. Elijah suggested a comprehensive system of First Nations–led regulations for both cannabis and tobacco on-reserve.
    Policy Options
  2. The Quebec Cannabis Industry Association estimated the CAQ Quebec government's decisions to restrict edibles and extracts in the province while raising the age for consumption to 21 will cost the Quebec economy $300M per year.
    TVA Nouvelles—In French

10

New Brunswick to Privatize Cannabis NB: For One Buyer

https://www.flickr.com/photos/12508217@N08

New Brunswick finance minister Ernie Steeves announced after serious losses by Crown REC corporation Cannabis NB, the government is now looking for private operators to bid to take over selling and distributing REC throughout New Brunswick. Bids will be open until January 10.
CBC New Brunswick, MJ Biz Daily

  • Steeves said the private sector would find a way to make Cannabis NB profitable. He added, "I’m convinced Health Canada did not want it to succeed."
  • The Conservative government does not want to break the Cannabis NB monopoly up and sell each of the provincial stores to a different operator. Instead, they're looking for a single operator to take over the whole organization.
    Financial Post

Quick Hits

  1. Sad to see the Winnipeg Free Press retiring their reliable cannabis news offshoot the Leaf News after a busy two years. Ace reporter Sol Israel will continue reporting on cannabis for the Free Press, but I'll miss the focus the Leaf brought to the industry. Thanks for the good work, Leaf!
    The Leaf News

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