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Goodness Growth vows to take legal action after Verano scraps cannabis acquisition

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Goodness Growth Holdings vowed to seek “significant damages” after multistate cannabis operator Verano Holdings said on Friday that it was terminating its acquisition of the company and seeking millions of dollars in reimbursements and fees.

Minneapolis-based Goodness Growth accused Chicago-headquartered Verano in a news release of pulling the plug after Goodness refused to accept a lower purchase price.

The acquisition was valued at $413 million when the deal was first announced last February.

In its release, Goodness Growth acknowledged Verano’s repudiation of the deal, adding that “the transaction will not proceed” and the company “intends to immediately commence legal proceedings.”

Verano alleged in its own release that Goodness Growth breached covenants spelled out in the acquisition agreement.

Verano also cited “the occurrence of other termination events” and said it is seeking more than $14 million in termination fees and $3 million in transaction-expense reimbursements.

“We believe the decision to terminate this arrangement agreement was in the best interest of Verano and our shareholders,” George Archos, Verano founder and CEO, said in a statement.

“As we work through the termination process, we expect to provide additional commentary.”

Representatives for Verano and Goodness Growth did not respond to MJBizDaily requests for comment.

It’s the second time in two months that a multistate operator has taken steps to ditch a previously announced acquisition.

In August, Ascend Wellness Holdings called off its acquisition of MedMen Enterprises’ New York operation, citing concerns over the state of the company’s assets.

According to the Goodness Growth release, Verano has four ways to terminate the deal under the arrangement:

Alleged breaches of certain representations by Goodness Growth.
A failure by Goodness Growth to give reasonable consideration to Verano’s comments on the draft Goodness proxy circular. The document was prepared by Goodness Growth and reviewed and cleared by the U.S. Securities and Exchange Commission.
The Goodness Growth board’s refusal to reevaluate the terms of the transaction even though that no material adverse changes had occurred to either company.
Goodness Growth’s alleged failure to reaffirm its recommendation to shareholders to vote for the transaction, which Goodness said it was planning to do next week.

Goodness Growth said in its release that the company “believes that Verano is repudiating the Arrangement Agreement to avoid fulfilling its obligations thereunder after Goodness refused Verano’s request to reduce the agreed-upon consideration payable by Verano under the Arrangement Agreement.”

The acquisition would have given Verano one of two vertically integrated medical cannabis licenses in Minnesota, including a cultivation facility and eight dispensaries.

It also included one of 10 vertically integrated licenses in New York.

In addition, the deal would have given Verano assets in Arizona, Maryland and New Mexico.

On Verano’s Aug. 16 earnings call, CEO Archos reassured shareholders that, even though the New York market might have lost its appeal for Ascend Wellness, Verano was still on track to close its deal with Goodness Growth.

“We still think that New York is a very long-term viable market for us,” Archos said. “We’re positioned well there with the cultivation capacity, the stores. So we’re excited about that opportunity.

“But for us,” he continued, “Goodness Growth is not only New York. And you know, we look at New York as a good asset, but something I’ve always said is the jewel in that deal for us is Minnesota. That’s the market we’re really excited about, and New York was kind of the cherry on top.”

Shares of Goodness Growth on Friday tanked by roughly 62% on the Canadian Securities Exchange (GDNS) and the U.S. over-the-counter markets (GDNSF).

Verano shares dipped by about 3% on the OTC (VRNOF) and by less than 1% on the CSE (VRNO).

Source: https://mjbizdaily.com/goodness-growth-vows-to-take-legal-action-after-verano-scraps-cannabis-acquisition/

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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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