Business
Judge rejects counterproposal for cannabis firm Fire & Flower sale process
A counterproposal by a syndicate of parties that opposed a proposed stalking-horse agreement between cannabis retailer Fire & Flower and its largest shareholder, an affiliate of convenience store operator Alimentation Couche-Tard, was rejected by an Ontario judge.
In doing so, the Ontario Superior Court also approved the proposed sale and investment solicitation process (SISP) brought by the Couche-Tard affiliate.
Fire & Flower, headquartered in Toronto, was granted creditor protection in early June under the Companies’ Creditors Arrangement Act (CCAA), allowing the company to maintain day-to-day operations and consult with stakeholders over its future.
Shortly after, in an affidavit filed with the court, Shawn Dym, Fire & Flower’s second-largest shareholder, called the SISP “truncated” and a “fire sale.”
Dym and his syndicate argued the deal wasn’t in the best interest of Fire & Flower or its investors.
The judge sided with the Alimentation Couche-Tard affiliate, which owns approximately 35.7% of Fire & Flower’s issued and outstanding common shares.
“All parties are in agreement about the dire circumstances in which the Applicants find themselves, and about the necessity for fundamental change,” the judge said in the ruling.
“Very material operating losses have been incurred and continue. Similar challenges to those facing the Applicants are facing other operators in the retail cannabis sector as well.”
Dym is co-founder and director of Toronto-based Green Acre Capital Fund II (Canada), which owns roughly 5% of the outstanding common shares of Fire & Flower Holdings.
“At its core, the position of Green Acre is that the business of the Applicants is viable and needs to be recapitalized and restructured, but not sold,” the judge explained.
“It submits that (the Couche-Tard affiliate), as senior secured creditor and also proposed stalking horse bidder, will obtain an unfair advantage if the relief sought is approved, and all potentially available options will not be available for consideration.”
The judge said he was not persuaded that the potential strategic options and alternatives that Green Acre supports are “precluded or foreclosed” by the relief being sought by Fire & Flower.
“On the contrary, I am satisfied that the SISP is appropriate here, and in my view will maximize the value of the business and assets of the Applicants for the benefit of all stakeholders,” the judge concluded.
“It is not as restrictive as is submitted by Green Acre and is specifically intended to solicit interest in, and opportunities for, the Applicants through a variety of different avenues or transaction structures.”
The judge said he does “… not accept the submission of Green Acre that the result will inevitably be a sale of the assets of the Applicants to the exclusion of all other alternatives. That may well be the result, but the SISP will canvass the market for all possible transactions and/or recapitalization alternatives.”
The judge said the alternative structures might include:
- A sale, or successive sales, of the property and/or the business in whole, or alternatively, in part.
- An investment, restructuring, recapitalization and/or refinancing.
- Another form of reorganization of the business.
“There is no prohibition on any stakeholder, specifically including Green Acre, from participating in the process and submitting such proposal or proposals as it may see fit,” the judge said.
Source: https://mjbizdaily.com/judge-rejects-counterproposal-for-cannabis-firm-fire-flower-sale-process/
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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