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Cannabis operator Organigram posts CA$213.5M loss, frets over THC inflation

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New Brunswick-based cannabis grower and manufacturer Organigram Holdings posted a net loss of 213.5 million Canadian dollars ($162.1 million) for its third quarter, driven by a CA$191.2 million impairment loss.

The impairment charges for the quarter ended May 31 included CA$37.9 million in intangible assets and goodwill as well as CA$153.3 million in property, plant and equipment.

“A meaningful contributing factor to the conditions that led to the quantum of the impairment charge related to the impact to flower sales and margins due to THC inflation,” Organigram noted in a news release.

Organigram CEO Beena Goldenberg acknowledged on a Friday earnings call that THC inflation – the dishonest practice of labeling cannabis products with exaggerated THC levels – is not a new phenomenon.

But, she added, it “was more widespread in the last year.”

Goldenberg said nearly 50% of cannabis flower sales in the third quarter consisted of flower labeled as containing 26% THC or more.

“And the number of SKUs (stock-keeping units) that have THC labeled values above 26% has doubled in the last 10 months,” she said.

“Another stat that we look at is the number of SKUs labeled above 30% grew tenfold versus last year.”

Goldenberg said Organigram has been particularly impacted by THC inflation in the bulk 28-gram cannabis flower category.

“We see that there are some licensed producers who were averaging sales of flower in the 21% (to) 22% range … and now are showing 28% to 32%,” she said.

“This is not something that even the most advanced cultivation techniques could make happen,” Goldenberg continued.

“There is something – and I think it’s the increasing behavior – that’s really starting to impact the results.”

Goldenberg said Organigram had to cut flower pricing “so we could address the value equation to consumers.”

She said the Moncton-headquartered company is working to increase cannabis potency “in a proper way, with proper (THC) testing.”

“And at the same time, we have been talking to key stakeholders,” Goldenberg went on.

“We’ve been sending in comments to Health Canada, we’ve been talking to the (provincial cannabis wholesale) boards, and we’ve been talking to other labs and really looking at finding solutions to address this issue. ”

Organigram, which claimed a third-place position in Canadian recreational cannabis for May, said its adult-use net revenue grew by 7% from the second quarter to the third.

Total net revenue for the quarter was CA$32.8 million, a decline of 14% from the same quarter last year and a sequential decline of 17% from Organigram’s second quarter.

Goldenberg attributed the weaker quarterly financial results to:

  • “Lower-than-expected growth in the flower category.”
  • Delayed international cannabis shipments.
  • The company’s inability to sell its Edison Jolts cannabis lozenge product in light of a disputed decision by regulator Health Canada.

She said a judicial review of Health Canada’s decision regarding Jolts will take place “in late July.”

Organigram recently consolidated its shares to maintain its U.S. equity listing on the Nasdaq exchange.

The company’s shares lost value in early trading on Friday morning in the wake of the quarterly report.

Organigram reported cash of CA$75 million as of May 31 and said it has “sufficient liquidity available for the near to medium term.”

Source: https://mjbizdaily.com/cannabis-operator-organigram-posts-ca213-5-million-loss/

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New Mexico cannabis operator fined, loses license for alleged BioTrack fraud

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New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.

The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.

Golden Roots operates the The Cannabis Revolution Dispensary.

The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.

The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.

Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.

After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.

In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.

The company requested a hearing, which the regulator scheduled for Sept. 1.

At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.

Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.

Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.

The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:

Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.

Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/

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Marijuana companies suing US attorney general in federal prohibition challenge

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Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.

According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”

Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.

The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”

The companies want the case to go before the U.S. Supreme Court.

They hired prominent law firm Boies Schiller Flexner to represent them.

The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.

Similar challenges to the federal Controlled Substances Act (CSA) have failed.

One such challenge led to a landmark Supreme Court decision in 2005.

In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.

In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.

Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.

“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.

“Moreover, the facts on which those precedents are based are no longer true.”

Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”

While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.

“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”

Source: https://mjbizdaily.com/marijuana-companies-suing-us-attorney-general-to-overturn-federal-prohibition/

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Alabama to make another attempt Dec. 1 to award medical cannabis licenses

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Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.

The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).

Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.

Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.

That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.

Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.

Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.

A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.

Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/

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