Business
How a Canadian cannabis nursery got nearly CA$2 million in federal funding
Saskatchewan cannabis nursery Mother Labs’ recent success securing 1.8 million Canadian dollars ($1.4 million) in federal funding shows how Canada’s cannabis industry can benefit from government financing at a time when capital is scarce.
“It’s smart money, and it will be truly helpful for us to grow and expand throughout the prairies and throughout western Canada,” Brian Bain, CEO of privately held Mother Labs, told MJBizDaily.
Public records show that cannabis business funding – in some cases worth millions of dollars – has been made available from a range of Canadian federal government bodies for applications including business development, expansion and research.
The investment in Mother Labs from federal agency Prairies Economic Development Canada (PrairiesCan) was announced in late June, alongside funding to 10 other Saskatchewan businesses.
Selling equity or raising funds from a private lender is particularly difficult in the contemporary cannabis sector, Bain said.
“Money is not easy to get for us right now, and it’s not easy to get for anyone in the space,” he explained.
“So when it comes, you have to take it, and it was definitely in line with where we were as a company in our growth stage,” Bain said, adding that this was the second time Mother Labs applied for funding.
As a nursery, Mother Labs supplies licensed Canadian marijuana producers with starting materials and helps them source and manage cannabis genetics.
“If a grower has a genetic – let’s say it’s dirty or they don’t want to grow (it) for a few years – we can take that in, store it, help them manage it and give it back to them,” Bain explained.
Mother Labs funding
Mother Labs’ government funding comes in the form of an interest-free loan meant to match funds from the company, Chief Financial Officer Jeff Bourassa wrote in an email to MJBizDaily.
Bourassa said the nursery has a three-year window to execute its project using the funds, followed by a five-year repayment period.
The loan is interest-free as long as payments are made on time, he wrote.
CEO Bain said Saskatoon-based Mother Labs will use the money to expand into British Columbia, as well as investing in automation and hiring new talent.
He described the application process as “quite arduous,” particularly in the fast-changing cannabis space.
“They need details in terms of where the capital is being utilized, what the plan is, how it benefits the province, how many hires it will involve — there’s a lot of information, a lot of due diligence we have to go through to really be able to accurately predict the future.”
Nevertheless, Bain believes the funding application process was roughly as much work as applying for funding from a bank, and he noted that a bank might be “a little less risk tolerant.”
“This is definitely something to help emerging businesses,” he said, adding that banks typically want “a sure bet.”
Finding funding opportunities
PrairiesCan is one of seven regional development agencies that fall under the portfolio of Canada’s federal Innovation, Science and Economic Development ministry (ISED).
Other ISED regional development agencies have funded cannabis business initiatives as well.
A spokesperson for the Atlantic Canada Opportunities Agency, another regional development group, told MJBizDaily that applications for funding are judged based on criteria including compliance, economic benefit and agency priorities. Agencies also evaluate potential recipients’ “technical and financial management capacities” as well as their “ability to deliver the proposed project activities.”
Canadian cannabis companies in search of government funding might consider exploring Canada’s Open Government database, which lists grants and contributions from various federal departments and agencies to cannabis companies including laboratories, processors and producers.
Examples of government grants and contributions to cannabis producers include:
- A nearly CA$100,000 contribution toward an automated pre-rolling machine for Northwest Territories grower Boreal Cultivation from the Canadian Northern Economic Development Agency (CanNor), lasting from 2021 to 2022.
- A CA$50,000 contribution from Agriculture and Agri-food Canada to help Ontario cultivator Glasshouse Botanics achieve GMP certification for European medical cannabis sales, lasting from 2021 to 2023.
- A CA$2.9 million contribution, from 2022 to 2025, to British Columbia producer Tantalus Labs for greenhouse expansion from Western Diversification Canada, which has since been divided into Pacific Economic Development Canada (PacifiCan) to serve British Columbia and PrairiesCan to serve Alberta, Manitoba and Saskatchewan.
Other government grants and cannabis industry contributions have been related to the COVID-19 pandemic.
The biggest Canadian government contribution to the cannabis industry listed on the Open Government portal is a nearly CA$5.4 million contribution from PrairiesCan to Alberta-based PBG BioPharma to increase manufacturing capacity, lasting from 2022 to 2025.
A PrairiesCan spokesperson recommended companies visit the agency’s website to learn about funding programs as well as ISED’s Business Benefits Finder to search for government support opportunities.
For cannabis companies seeking funding like Mother Labs received, CEO Bain offered some advice: “Be diligent, don’t take no for an answer.”
“Be aware of different programs that are out there, and constantly ask questions,” he added.
A variety of federal and provincial programs are available, Bain continued, adding that companies “have to go out there and find them.”
“And if you’re not there to apply, then your chances of getting it are obviously zero.”
Source: https://mjbizdaily.com/how-a-canadian-cannabis-nursery-got-nearly-ca2-million-in-federal-funding/
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:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
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/
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.”
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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