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Law Canada MJ News

Black market pot sales still higher than legal sales in Canada

Legal weed may bring in in tens of millions of dollars across Canada, but the black market still sells more.

That’s according to the latest numbers from Statistics Canada.

The agency says around $2.2-billion worth of cannabis was sold in the last three months of 2018.

About 65 per cent of those sales were illegal.

Legal sales were highest in Alberta for the last quarter of 2018, with $123.7-million.

Ontario and Quebec came in second and third, while B.C. had the lowest legal sales of any province other than P.E.I.
 
Quebec's ban on growing cannabis at home unconstitutional, judge rules
marijuana.jpg

Quebec's cannabis law is among the most strict in Canada. But a judge has deemed the prohibition of growing cannabis at home unconstitutional. (Associated Press)


Quebecers are free to grow cannabis at home, at least for now.

Quebec Superior Court Justice Manon Lavoie ruled Tuesday the provincial law prohibiting Quebecers from growing cannabis for personal use is unconstitutional.

She said the ban amounts to criminal legislation, which is under federal jurisdiction.

Julien Fortier, the lawyer who led the challenge, said those wanting to grow cannabis at home can now do so legally.

But he cautioned the province can still appeal the ruling, or rewrite the law to try to make the ban constitutional.

Fortier called the judge's ruling "very technical."

"No evidence was filed, except for the legislative debates," Fortier said. "It was really a case that was strictly about the ... constitutional law."

For now, residents are permitted to grow a maximum of four plants at home, as stipulated under federal legislation.

Quebec's cannabis law, which included a ban on home-growing, was passed in June 2018 under the previous Liberal government.

The Coalition Avenir Québec government still plans to amend the law to raise the legal age of consumption from 18 to 21.

A spokesperson for Lionel Carmant the CAQ's junior health minister, who is overseeing the government's cannabis legislation, said the government is studying Tuesday's ruling.
 
U.S. reverses lifetime ban on Canadian woman who crossed border with CBD oil

U.S. Customs and Border Protection did not provide specific reasons for decision to reverse ban


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On its website, the Canada Border Services Agency says 'transporting cannabis across the border in any form — including any oils containing THC or cannabidiol (CBD) — without a permit or exemption authorized by Health Canada remains a serious criminal offence,' even after legalization. (Rémi Authier/CBC)


Less than two weeks after a Canadian woman was barred from entering the United States after she was found with cannabidiol (CBD) oil at the border, her lifetime ban from entering the states has been reversed in what her lawyer is calling a "best-case scenario."

The 21-year-old, who has asked not to be identified by CBC News, was crossing the border between B.C. and Washington state last month when CBD oil was found in her backpack.

CBD is a non-psychoactive product of the cannabis plant. The woman said she uses it to treat the painful side-effects of scoliosis.

She said she thought it was OK for the oil to be carried over the border, considering such products are legal in both British Columbia and Washington. But while some states have dismantled prohibition, cannabis possession remains a criminal offence federally, and the U.S. border is governed by federal law.

The woman, an undergraduate student at the University of Guelph in Ontario, was fined $500 for failing to declare the oil, fingerprinted and subsequently denied entry to the U.S.

She was told if she ever hoped to regain entry to the U.S., she would have to pay an additional $585 to apply for a special waiver, a document required for all people denied admission after deportation or removal.

'180-degree turn'
Lawyer Len Saunders, who had been working with the woman to fill out that application, said his client was unexpectedly contacted by a supervisor at the Point Roberts, Wash., point of entry on Friday and told her inadmissibility case had been reversed and she would no longer be required to apply for the waiver.

"My reaction obviously was shock. I was shocked that it was such a 180-degree turn from basically being barred for life to being told that they had on their own reviewed the case and had basically reversed their decision," said Saunders, who is based in the border city of Blaine, Wash.

The port of entry did not provide the woman, or Saunders, a reason for the reversal, he said.

In a statement sent to CBC News on Wednesday, U.S. Customs and Border Protection confirmed the lifetime ban had been reversed, but a spokesperson declined to elaborate on the reasons for the agency's decision.

A spokesperson said the case was automatically reviewed, as are all cases in which travellers are deemed inadmissible.

"In this particular case, management determined that [the woman] did not meet the terms for inadmissibility.... Determinations about admissibility are made on a case-by-case basis by a CBP officer based on the facts and circumstances known to the officer at the time," the spokesperson wrote in an email.

"In some instances, decisions about admissibility may be changed upon further review and presentation of additional information, verification of further evidence, etc."

usa-marijuana.jpg

Depending on the product, CBD oil usually contains only trace amounts of tetrahydrocannabinol (THC) — the principal psychoactive compound in cannabis — and typically does not produce any sort of high. (Mike Segar/Reuters)

Saunders said the case highlights the confusion around cannabis laws and international borders.

"Did they decide themselves that having CBD oil is not the same as having THC or cannabis? At this point I don't know," the lawyer said.

Depending on the product, CBD oil usually contains only trace amounts of tetrahydrocannabinol (THC) — the principal psychoactive compound in cannabis — and typically does not produce any sort of high.

'A moving target'
On its website, the Canada Border Services Agency said "transporting cannabis across the border in any form — including any oils containing THC or cannabidiol (CBD) — without a permit or exemption authorized by Health Canada remains a serious criminal offence," even after legalization.

But Saunders said the federal government has done a poor job of educating people about travelling with cannabis-related products, and regulations remain "a moving target."

"Going forward all I can tell people is to be cautious on what they bring to the United States because who knows, today CBD oil is OK, but CBD oil next month may not be. Nobody really knows what's going on," he said.

Saunders said his client, who has since returned to Ontario, is immensely relieved by the outcome.

Saunders is working on a similar case involving a Canadian man who was travelling to the U.S. from Tokyo, and was detained for several hours at Seattle's airport after customs officials found he was carrying two bottles of CBD oil.

He said he now plans to reach out to U.S. Customs and Border Protection at Seattle's Sea-Tac Airport to see if it will also reverse its decision to issue a lifetime ban.
"It should be consistent [no matter] the border — there needs to be consistent application of the law," Saunders said.
 
Wow, really? This was all about seed stock? I mean, seed and clone sources its the unacknowledge secret in all med legal states in the USA because surely they didn't cross state borders and violate Federal law. It was sort of like immaculate conception. haha

But seed stock...and in CAN growers are only licensed for certain strains? Why in the world would CAN do that???



Black market pot entered CannTrust facility, flowed into legal market last year: Sources

Senior operating staff working at CannTrust Holdings Inc.’s Pelham, Ont. facility late last year brought cannabis seeds from the black market into production rooms, leading to some illicitly-grown pot flowing into the legal market, according to internal company documents obtained by BNN Bloomberg and four sources directly familiar with the matter.


The documents suggest that, in an apparent effort to conceal the black market cannabis seeds from regulatory inspections and other staff members, some CannTrust employees changed the names of as many as 20 strains to those which the company was licensed to sell in the legal medical and recreational markets.


Cannabis plants from at least two strains that originated from the black market-sourced seeds entered production rooms where they were fully grown to flower, packaged and sold into the recreational market, according to the sources.


In total, more than one thousand cannabis plants that originated from the illicit seeds were grown at CannTrust’s cultivation facility, the documents show. It is unknown how many of those plants were eventually processed for sale or destroyed, according to two of the sources.


Adding cannabis seeds obtained through the black market would have allowed CannTrust to significantly bolster its production at a time when it had overcommitted itself with supply contracts with provinces and other licensed marijuana producers, the sources said.


Three of the sources said that unauthorized activity ramped up shortly after CannTrust president Brad Rogers and its head of production, Michael Ravensdale, left the company last October.


CannTrust spokesperson Jane Shapiro told BNN Bloomberg in an emailed statement that “to the best of our knowledge, no product using seeds from unauthorized external sources was introduced into the market.”


Three sources who said they directly tended to the unauthorized cannabis said the operation was led by Brady Green, who recently left CannTrust after a five-year tenure that culminated as the company’s vice-president of cultivation. Green was hired by CannTrust in May 2014 as a grow technician and quickly rose through the ranks, holding several production roles including head grower and director of cultivation, according to a biography on the company’s website. CannTrust removed Green’s biography from its website Friday morning shortly after BNN Bloomberg published this story.

“[Green] has a passion for developing new cannabis strains, constantly improving growing methods and efficiencies, and passing his knowledge onto budding growers at the CannTrust Niagara Perpetual Harvest Facility,” CannTrust said on its website.


The team that Green allegedly tasked with handling the unauthorized cannabis was dubbed “The Brady Bunch” by other staff members, the three sources said.


“[Green’s team] didn't order [the seeds] through the normal chain of command,” alleged one of the sources directly familiar with the production of unauthorized cannabis.


“There is no way because it would take way too long if you wanted to do it right. I asked myself, 'We already have [the strain] Cannatonic. How come we have Cannatonic here and I have to take care of these [new] seedlings?’ I learned that they're under those names because those are the registered names that we have which we're allowed to grow, but they're really not those [strains].”
 
Edibles Regulations to be Challenged in Canadian Court

Lawyer John Conroy, who has been at the heart of several major Canadian cannabis legalization cases, including the Allard decision, said his next constitutional challenge will be the federal government’s regulations on edibles, extracts, and topicals.

Conroy says the edibles-package limit of 10 mg THC was far too little for medical consumers—who do not have access to edibles directly from the LPs they’re required to buy from.

This is among the stranger aspects of Canadian cannabis law.
While we have separate streams for medical and adult-use/recreational cannabis, Health Canada is framing edibles/ingestibles as all for adult-use purposes.
As many medical cannabis users with chronic pain will tell you, whole-flower edibles are among the most effective delivery systems for soothing those long-term discomforts. Which makes it even stranger that Health Canada has not authorized a separate stream for more powerful edibles for medical patients.


So while edibles will be sold as recreational, there will be no corollary available from the medical system—meaning the Health Canada regulations will determine to freeze THC content at a fraction of the amount many medical users need for relief.
With that in mind, Conroy will challenge the ban under Section 7 of the Charter of Rights and Freedoms, saying it cannot “arbitrarily deprive medicinal cannabis patients of their right to security of the person.”
Conroy’s involvement in this case is important because of his role in the Allard case as well as that of Owen Smith.


In the Smith case, the Supreme Court of Canada found in 2015 that it was unconstitutional to charge a man with preparing cannabis cookies for a compassion club, as medical users have the right to access cannabis.
To ban such preparations of the plant, the court found, “foreclose[ed] reasonable medical choices through the threat of criminal prosecution. Similarly, by forcing a person to choose between a legal but inadequate treatment and an illegal but more effective one, the law also [infringed upon the] security of the person.”
 
The cannabis 2.0 addition of extracts and edibles to the list of legal products happens next month.
I look forward to giving the pax era a try as long as the available pods are all natural.

Edit found this which could change things.

www.theleafnews.com

Sep 2019: Vaping concerns loom over Canadian pot industry

TORONTO - A wave of illnesses and deaths in the U.S. linked to vaping products may dampen demand for soon-to-be-legal cannabis vapes in Canada later this year, industry watchers say.An ongoing vaping probe south of the border — where as many as five people have died and hundreds more have fallen...
www.theleafnews.com www.theleafnews.com
 
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'Odourless' cannabis nearly ready for market, Canadian firm claims

Cannabis connoisseurs looking to get high on the sly may have a new option—nearly “odourless” pot.

CannabCo Pharmaceutical Corp., a Brampton, Ont.-based company awaiting a production licence from Health Canada, claims to have technology that virtually eliminates the tell-tale smells when cannabis is smoked and stored.

“A number of users, and people that are around cannabis smokers, complain about the smell, especially in enclosed areas, condos and apartments, and this technology addresses those concerns,” CannabCo president and chief executive officer Mark Pellicane wrote in a news release on Tuesday.

CannabCo said it has an agreement with an undisclosed provider to deploy the anti-odour technology, and plans to release a wide variety of products for the medical and recreational markets. The privately-held company is touting the pending release as a “global first.”

CannabCo claims its PURECANN technology “greatly reduces” cannabis odour when flower is combusted, and makes the smell “virtually undetectable” when dry product is in storage. The technology is also said to reduce harshness when smoking, and lessens day-after effects.

According to the news release, Health Canada has given CannabCo a Confirmation of Readiness notification, and the company is currently raising capital. They are also constructing a pilot facility in Brampton.

CannabCo said the technology is fully compliant with GMP standards, a widely-accepted set of rules on handling, cleaning, quality assurance and packaging processes for manufacturing facilities and products.

CannabCo said it will have exclusive rights to deploy the technology for use in its Canadian production upon receiving a licence from Health Canada, and has not ruled out potential processing agreements with other producers.

"There are no third-party gadgets, or devices on the part of the user. The end result is pure cannabis that doesn't smell,” Pellicane added. “A woman can carry cannabis in her purse without having the odour concentrated or leaking out in her handbag.”
 
Only 44 Canadians have been given cannabis pardons under new system

A man is led away in handcuffs during a series of arrests at a Toronnto marijuana dispensary in April 2017.

A man is led away in handcuffs during a series of arrests at a Toronnto marijuana dispensary in April 2017. Bernard Weil/Toronto Star via Getty Images

As Canadians started to debate how — not if — cannabis would be legalized, a persistent question was: what about the hundreds of thousands of Canadians with prohibition-era convictions for possession?

In the end, the federal Liberals rejected a plan for records for possession to be expunged, or completely erased, in favour of a streamlined version of the pardon, or “record suspension,” processthat’s available for other crimes, minus the waiting period and $631 fee.

About 250,000 Canadians are thought to have prohibition-era records for simple possession of marijuana, though because some people were charged under a generic drug possession offence rather than one specific to cannabis, it’s not clear how many there are. Also, those who have a record for other offences aren’t eligible for the program.

READ MORE: Liberals’ pot amnesty would be easy for a new government to reverse, expert warns

But more than a month after the federal government announced that the long-promised amnesty program was taking applications, only 44 pardons have been granted out of a total of 71 people who have applied.

“The balance of applications are either under investigation or may have been returned to the applicant as incomplete or ineligible,” Parole Board spokesperson Iulia Pescarus Popa wrote in an email.

The process is very cumbersome and bureaucratic, says Toronto lawyer Caryma Sa’d.

Records need to be requested from police and the court system, and if they’re old, they may be hard to find. Often, they need to be requested in person at the courthouse where the case was originally handled, even if the person concerned now lives in a different part of the country.

“If it’s not ‘Hamilton and Milton, can you guys share records,’ it’s ‘Winnipeg and Hamilton’ — that just throws an additional wrench in,” says Sa’d.

“Certain things do need to be requested in person. Someone could hire an agent or sign an authorization form so that they don’t need to physically book a plane and be in Winnipeg. But again, that takes co-ordination. Even if you are in the city, it can still be a frustrating process.”

Former members of the military face an extra step of getting a copy of their conduct sheet, either from the defence department or from the National Archives.

And if possession convictions that they know exist aren’t in the records, they face the task of proving they happened.

Although the pardon application fee no longer exists, it still costs money to find the records and have fingerprints done and sent to Ottawa, Sa’d says.

“I’d say at least a couple of hundred dollars. That’s a huge obstacle right there.”
Click to expand...
For older convictions, it’s possible that getting a pardon — unearthing paper records that have been slumbering in an archive for years and creating a modern version that may leave traces — may do more harm than good.

“Assuming their situation transpired before records are as digitized as they are now, it’s possible that a pardon could actually put them on the electronic map so when they’re crossing the border, this thing that otherwise would have been buried in the back of a file cabinet somewhere is now present, and it’s evident that there was a pardon for something, where otherwise it may not have had consequences,” Sa’d says.
https://twitter.com/intent/tweet?te....ca/news/5876201/cannabis-possession-pardons/
Click to expand...
 
Cannabis Canada Daily: How Ontario Lost $42M Selling Cannabis During Its Last Fiscal Year

Ontario’s cannabis crown corporation loses $42M last fiscal year

Ontario’s government lost $42 million selling cannabis in its last fiscal year, according to provincial public accounts released on Friday. The losses come despite the Ontario Cannabis Retail Corporation, a crown corporation that operates the Ontario Cannabis Store’s online retail business and sells wholesale cannabis to the province's private retail stores, generating $64 million in the fiscal 2018-2019 year. An OCS spokesperson said the agency wasn’t able to book wholesale revenue from selling into the first wave of physical retail stores in the latest fiscal year, which hurt the crown corporation’s bottom line. Meanwhile, the Ontario government said Friday it generated $19 million in revenue from cannabis excise taxes in its last fiscal year, falling well short of the $35-million estimate presented in the most recent provincial budget.

Canopy Growth’s IP-focused deal for Ebbu highlights difficulty of filing patents for cannabis-related products

Canopy Growth’s deal to acquire cannabis researcher Ebbu Inc. last October was centered on the company’s vast array of intellectual property. However, Ebbu has struggled to get its IP converted into patents after one of its first applications has been rejected by the U.S. Patent and Trademark Office three separate times. Bloomberg reports the difficulties Ebbu faced in securing patents point to a broader issue in the pot sector, where many companies tout their intellectual property but few have successfully obtained exclusive rights to their inventions. A spokesperson for Canopy, which eventually paid $429 million for Ebbu factoring in the condition of how the Canadian company’s shares traded after the deal was announced, acknowledged Ebbu’s patent applications remain in flux but it also was attracted to the firm for its “R&D advancements and capabilities and how they complemented our own.”

Democrat-led House expected to vote on SAFE Banking Act this month

The drum beat of cannabis legalization in the U.S. continues as a bipartisan bill to protect banks that service marijuana businesses is due to be introduced in the U.S. House of Representatives this month. Marijuana Moment reports that House Majority Leader Steny Hoyer will hold a vote in favor of the Secure and Fair Enforcement (SAFE) Banking Act during the last week of September. The upcoming vote comes as the Senate Banking Committee is preparing a marijuana-focused banking bill of their own, although a timeline isn’t apparent, the news site reports.

Expect further delays for more Ontario pot stores after judge suspends work for two weeks

If you’re expecting another round of pot stores to open in Ontario, you might have to wait a little bit longer after a provincial judge suspended the province’s regulator from issuing any new pot shop licences for two weeks. Justice David Corbett said he will rule on Sept. 25 whether 11 disqualified cannabis retail lottery winners should resume the application process for a coveted pot shop licence in Ontario or let people on a waiting list take their place. Lawyers representing some of the applicants previously on a waiting list and now in line to apply for a licence argued to stay the entire application process to "ensure the integrity of the process." The disqualified applicants’ main argument centres on whether they breached a rule that they needed to provide a $50,000 letter of credit within five days of being notified that they had won one of the 42 spots to apply for a pot shop licence.

Curaleaf gets approval for five new pot shops in Massachusetts

U.S. cannabis multi-state operator Curaleaf said it was granted approval for its three final and two provisional adult-use licenses to open pot stores in Massachusetts. Further inspections need to be completed in order for the stores to be allowed to open its doors, a process the company expects to be completed in the coming months. GMP analyst Robert Fagan viewed the announcement as a “definite positive” development which should see the company begin to book revenue in the fourth-quarter of the year. Fagan estimated Curaleaf could generate between US$95 million to US$120 million in revenue for its Massachusetts stores.

Legalizing cannabis could be one solution amid recent vaping-related health scare: lobby group

There could be a silver lining amid the rash of vaping-related illnesses being reported across the U.S. The National Cannabis Industry Association, a lobby group, is calling on the U.S. Congress to remove cannabis from the U.S.’s “Controlled Substances Act” and regulate marijuana in a manner similar to alcohol and other regulated products. That would allow U.S. officials to properly regulate how cannabis-infused vape cartridges could be manufactured and sold, rather than allowing the black market to essentially self-regulate itself. More than 400 people have reported illnesses and at least six deaths have been tied to vaping, according to the U.S. Center of Disease Control, many of which have been linked to an additive in cannabis vape cartridges.

DAILY BUZZ

$7.22
-- The price of a gram of cannabis in Canada, up 6.3 per cent from the prior week, according to the Cannabis Benchmark’s Canada Cannabis Spot Index. This equates to US$2,479 per pound at current exchange rates.

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CannTrust’s cannabis sales licence suspended by Health Canada

CannTrust Holdings Inc.’s licence to produce and sell recreational and medical cannabis in Canada was suspended by federal regulators on Tuesday, the latest blow to the beleaguered pot firm after an inspection uncovered that it grew thousands of kilograms of marijuana in unlicensed rooms.

CannTrust said in a statement that it received notice from Health Canada earlier Tuesday morning that it won’t be able to sell and produce cannabis, other than cultivating and harvesting existing plants.

“While the suspension remains in effect, CannTrust will be permitted to cultivate and harvest existing lots or batches previously propagated, as well as conducting ancillary activities to those lots, including drying, trimming and milling. During the suspension, CannTrust may not propagate new lots or batches of cannabis or engage in the sale or distribution of cannabis,” the company said in a statement.

CannTrust added the notice from Health Canada states the regulator could reinstate its licences “if the reasons for the suspension no longer exist or if CannTrust demonstrates that the suspension was unfounded.” The Vaughan, Ont.-based company said its management and board are reviewing the notice with its counsel and other advisors.

CannTrust said federal regulators listed several measures that the firm could implement, which would address the various public health and safety risks that contributed to Health Canada’s partial suspension.

In a separate statement sent to BNN Bloomberg, CannTrust said the company’s remediation efforts are underway and “significant progress has been made” in its operations to comply with Health Canada’s regulations.

“CannTrust’s paramount and urgent priority is to satisfy regulators that the company meets or exceeds all regulatory requirements so that the reasons for suspension no longer exist, we are in a position to resume operations and to regain the trust and confidence of our shareholders, patients, customers and partners,” said Robert Marcovitch, the company’s interim CEO, in an emailed statement.

CannTrust has been in a state of turmoil since July 8 when it revealed it had breached Canadian regulations by growing marijuana in unlicensed areas of its Pelham, Ont.-based facility.

As a result of that infraction, Health Canada seized nearly 5,200 kilograms of dried cannabis and the company instituted a voluntary hold on approximately 7,500 kg at another facility.

The pot firm has also fired CEO Peter Aceto with cause, demanded the resignation of chairman Eric Paul and formed a special committee tasked with probing the regulatory scandal. CannTrust also hired Greenhill & Co. as a financial advisor to explore a sale of the company, strategic investment or a business combination.

In August, CannTrust said Health Canada found that its Vaughan manufacturing facility was non-compliant as well. CannTrust also disclosed last month that the Ontario Securities Commission’s Joint Serious Offences Team had opened an investigation into “matters and parties” related to the company.

Earlier this month, BNN Bloomberg reported that some CannTrust staff late last year brought cannabis seeds from the black market into production rooms, leading to some illicitly-grown pot flowing into the legal market.

CannTrust now joins a handful of Canadian cannabis producers which have had their ability to grow and sell legal cannabis suspended by Health Canada, the federal regulator in charge of enforcing and licensing pot in the country.

Last week, British Columbia-based Evergreen Medicinal Supply Inc.’s licence was suspended due to issues relating to its production practices, record-keeping, inventory control, and adherence to licence controls. In February, Bonify Holdings Corp.’s licences were suspended after the company was found to be selling marijuana it obtained from illicit sources.
 
B.C. pot firm Evergreen Medicinal’s licence suspended by Health Canada

British Columbia-based cannabis producer Evergreen Medicinal Supply Inc.’s licence to grow and sell marijuana was suspended by federal regulators, the latest compliance shortfall to hit Canada’s legal pot market.

Health Canada spokesperson Tammy Jarbeau confirmed to BNN Bloomberg in an email that the government agency suspended Evergreen’s ability to “cultivate, process and sell dried and fresh cannabis, cannabis plants and cannabis seeds” in August following an unannounced inspection that led to a non-compliance order on the company.

“On Aug. 9, Health Canada suspended Evergreen Medicinal Supply’s licences to protect public health and safety, including preventing cannabis from being diverted to the illegal market, as a result of non-compliance with certain provisions of the Cannabis Act and Cannabis Regulations,” Jarbeau said.

Evergreen Medicinal’s suspension is the second time that Health Canada has enforced such an action on a licensed cannabis producer. Earlier this year, Health Canada suspended the sales licence of Winnipeg-based cannabis producer Bonify Holdings Corp. after the company was found to be selling marijuana it obtained from illicit sources.

It also comes as investors await Health Canada’s ruling on what penalty it will enforce on CannTrust Holdings Inc., after the regulator found thousands of kilograms of cannabis being grown in unlicensed rooms. Possible penalties for CannTrust range from a $1-million fine, to a suspension or revocation of the company’s ability to produce and sell legal cannabis in Canada.

Jarbeau said Evergreen provided Health Canada with a response to its licence suspension on Sept. 9 and “is working on corrective actions” that will be reviewed by regulators.

Health Canada inspectors conducted an unannounced inspection at the company’s facility in Saanichton, B.C. in April, Jarbeau said. The inspection uncovered “a number of critical observations and an overall non-compliant rating” related to the company’s production practices, record-keeping, inventory control, and adherence to licence controls, Jarbeau added.

Evergreen received its licence to sell medical cannabis in March 2017 and operated mainly to produce legal pot for other accredited licence producers. According to a 2017 press release from the company, Evergreen operates a 5,700-square-foot facility in Saanichton -- about 20 kilometres north of Victoria -- and had zoned approvals to upgrade its production space to an additional 150,000-square-foot area.

British Columbia court documents also show Evergreen was recently sued for unpaid rent and an expired lease. Philip Illingworth, who owns the land that Evergreen operated on, said the company owes him $425,061 in rent and continued to do business despite its lease expiring at the end of last year. Justice B.D. MacKenzie ruled in July in favour of Illingworth and ordered Evergreen to vacate its facility by the end of August, according to CanLII court documents.

Shawn Galbraith, Evergreen’s founder and chief executive officer, didn’t immediately respond to multiple requests for comment from BNN Bloomberg.
 
Gotta love this... :lol:

Cannabis product recalled because it won’t get Canadians high enough

A marijuana product has been recalled because it won’t get Canadians high enough.
The product, sold at a Quebec cannabis distributor, was mislabelled leading Health Canada to release an actual hazard warning.
Some customers received cannabis containing 12.2% THC while others received ‘Bayou Flower’ containing 6.36%.

That would probably mean some people were getting 50% higher than others depending on what they were sent.
As many as 16,818 units of the recalled product were sold though fortunately only 245 units were mislabelled.

The statement read:
To date, HEXO has received one complaint related to the recalled lot and Health Canada has not received any complaints related to the recalled lot.
Neither Health Canada nor HEXO have received any adverse reaction reports for the recalled cannabis product.
Click to expand...
 
Disqualified Ontario pot shop applicants to appeal dismissal

The 11 disqualified cannabis store applicants in Ontario who had their case dismissed last Friday are appealing the decision and asking the court to suspend allocating any licences to future pot shops again, a lawyer representing the group said.

Lawrence Gridin, a lawyer from Brauti Thorning LLP who represents the group, confirmed to BNN Bloomberg in a phone interview that the law firm filed documents at Ontario’s Court of Appeal and plans to ask for an interim stay of the court’s ruling from Friday.

He declined to provide further comment on the group’s plans for appeal.

On Friday, three judges overseeing the notice for judicial review – Justice David Corbett, Justice Katherine Swinton and Justice Robbie Gordon – dismissed an application brought forward by the disqualified applicants to be reinstated in the licensing process. The judges stated they will release reasons for their ruling within 10 days.

In the judicial review notice submitted to the Ontario Divisional Court, each of the disqualified candidates stated that they were notified by the Alcohol and Gaming Commission of Ontario (AGCO) at least one day after a date-stamped notice was submitted to them via email, couriered letter or through a phone call.

Lawyers representing the AGCO said each of the disqualified candidates missed a five-business day window to submit a $50,000 letter of credit required to move forward in the cannabis store licensing process.

A stay on Ontario’s licensing process for the latest round of cannabis stores has also been lifted, the judges said Friday. Earlier this month, Justice Corbett had paused the process until the case was resolved.

Ray Kahnert, a spokesperson with the AGCO, declined to comment in an email to BNN Bloomberg.

If another interim stay is granted by an Ontario appellate judge, it would further exasperate delays in the opening of bricks-and-mortar pot stores in the country’s most populous province. The situation has been blamed for softer-than-expected sales among cannabis producers in the first year of legal recreational marijuana in Canada.

Lawyers representing the group of disqualified applicants focused their argument on whether or not an email that isn’t delivered to the intended recipient is enough to be considered “notifying” that person, according to court filings obtained by BNN Bloomberg.

“The issues raised by this appeal go beyond the interests of the parties,” the filings said. “Issues of notice and notification affect broad swaths of society and commercial transactions.”

Additionally, the filings note the court’s earlier dismissal has “the potential to impact a broad segment of the Canadian population,” as well as the country’s cannabis retail industry.
 
Ontario considering alternative to cannabis wholesale model: sources

Ontario is considering alternative cannabis distribution models and intends to launch a consultation process in the coming weeks, according to sources familiar with the matter.

This comes after the Ontario Cannabis Retail Corp., which handles online sales and wholesale distribution of recreational pot and operates as the Ontario Cannabis Store, earlier this month said it lost $42 million in the latest fiscal year ended March 31.

The consultation also comes as the provincial government is ramping up the number of legal pot outlets to 75 by October, up from 25 retail licences currently, while edibles and other next-generation products are set to be legalized later this year.

When asked for comment, OCS spokesman Daffyd Roderick said that its wholesale and e-commerce distribution operations will continue to serve Ontarians and facilities are in place to allow for the planned expansion and new product categories.

He added in an emailed statement that the OCS “continuously considers how to improve operations and services” and it is in “constant communications” with licensed pot producers and industry partners to ensure that distribution capacity is in place.

Ontario officials are expected to consult with industry and other stakeholders in the coming weeks on potential alternative delivery models, sources told The Canadian Press.
 
Ah yes, the efficiencies of Government once again on display


The 1 Sentence From HEXO That Tanked the Entire Marijuana IndustryHEXO's fourth-quarter update is a warning to all pot stocks.


Sean Williams

Oct 11, 2019 at 7:51AM

The cannabis industry has been a red-hot investment for years, with many early investors racking up triple- or quadruple-digit percentages if they had the wherewithal (and stomach) to hold on for the ride. Incredible growth projections, one of which calls for $200 billion in worldwide sales by the end of the next decade, have fueled the excitement surrounding cannabis.
But the past six-plus months have been nothing short of a disaster for the marijuana industry. A number of problems throughout North America have stymied once lofty projections, and now that operating results actually matter, pot stocks have failed to deliver.
A visibly worried man looking at a plunging chart on his computer monitor.

Image source: Getty Images.
HEXO dishes on its fourth-quarter results and it isn't pretty
On Thursday, Oct. 10, the latest in a line of marijuana failures hit the newswires. Prior to the opening bell, Quebec-based HEXO (NYSE:HEXO) released its preliminary fourth-quarter operating results and updated its fiscal 2020 guidance.
When HEXO released its third-quarter operating results in mid-June, the company guided toward a rough doubling in sales during the fiscal fourth quarter, ended in July. For context, HEXO reported about 13 million Canadian dollars in net sales during Q3 2019. Management also stood by its forecast for CA$400 million in full-year sales for fiscal 2020.
But just four months later, HEXO is withdrawing its fiscal 2020 guidance completely and has reduced sales expectations for the fiscal fourth quarter to a range of CA$14.5 million to CA$16.5 million. At the midpoint, this would represent modest sequential quarterly growth of around 19% when approximately 100% sequential sales growth had initially been expected.
Although HEXO didn't provide any commentary in its update on the company's bottom-line expectations, it's worth noting that HEXO's operating expenses totaled CA$24.1 million in Q3 2019 and they're liable to have grown in the recently ended fourth quarter. In other words, the implication is that HEXO will report another loss, at least on an operating basis and without one-time benefits and fair-value adjustments.
A cannabis leaf laid within the outline of the maple leaf on Canada's flag, with rolled joints and a cannabis bud to the left of the flag.

Image source: Getty Images.
The one thing HEXO said that completely wrecked the marijuana industry
We've certainly witnessed our fair share of operating disappointments in the pot industry of late. However, the negative impact of these disappointments is typically relegated to the company making the announcement and perhaps an immediate peer or two.
But that wasn't the case when HEXO updated its fourth-quarter expectations on Thursday. Instead of just HEXO's stock tanking, pretty much the entire industry went up in smoke. And one sentence in HEXO's fourth-quarter update looks to be to blame.
Though HEXO CEO Sebastien St-Louis noted that the company suffered from lower product sell-through (i.e., lower-than-expected sales), it's the commentary that followed that stood out. In particular, this statement from HEXO's press release is very worrisome: "Slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure are being felt nationally."
If you pick this statement apart piece by piece, it's apparent that Canada's cannabis problems aren't an easy or quick fix.
A large dispensary store sign with a cannabis leaf.

Image source: Getty Images.

"Slower than expected store rollouts"
For starters, Canada has been contending with persistent supply issues since day one of legalization nearly a year ago (Oct. 17, 2018). Though some of this blame can be placed on the growers themselves for waiting too long to expand capacity, a larger portion of the blame rests with Health Canada and individual provinces.
Regulatory agency Health Canada entered the year with a backlog of more than 800 cultivation, processing, and sales licenses to review. These licenses often take many months, if not more than a year, to review and approve or deny. This process has kept cannabis out of the legal marketplace. And even with changes to the cultivation license application process introduced earlier this year, there's no quick resolution to the regulatory agency's backlog.
Furthermore, certain provinces (ahem, Quebec) have struggled to approve licenses for physical dispensaries. In other words, even in instances where supply exists, consumers are forced to buy online and wait days or weeks for product delivery because few physical retail locations exist. This seems to be HEXO's chief complaint in its home province.
These issues are fixable, but that fix isn't going to happen overnight.
A cannabis leaf and tag that says edibles that's laying atop an assortment of cookies and brownies.

Image source: Getty Images.
"A delay in government approval for cannabis derivative products"
Another way Health Canada failed the marijuana industry is by giving the green light to cannabis derivative products later than expected. Derivatives are non-dried-flower products, such as edibles, vapes, infused beverages, topicals, and concentrates.
Heading into 2019, the expectation from pretty much everyone in the industry had been that derivative products would hit dispensary shelves no later than one year after recreational weed was legalized in Canada. However, in June, Health Canada laid out a disappointing timeline on the rollout of derivatives.
Rather than these products hitting the market by October, only the regulations governing derivatives are set to go into effect on Oct. 17, 2019. According to Health Canada, it's still going to take a good two months (i.e., until mid-December) before derivatives begin hitting dispensary shelves.
This is a big problem, considering that derivatives are a higher-margin product than dried cannabis flower. Derivatives have become a significant component of every Canadian growers' product portfolio, meaning this launch delay is inescapable. From major pot growers like Aurora Cannabis (NYSE:ACB) and Canopy Growth, which will be offering an array of vapes and/or infused beverages, to smaller growers, this delay in the launch of derivatives means waiting another one to two quarters before sales growth has any real shot of picking up for Canadian pot stocks.
A clear jar packed with dried cannabis buds that's sitting atop a messy pile of cash.

Image source: Getty Images.

"Early signs of pricing pressure are being felt nationally"
As the icing on the cake, Canadian cannabis stocks are stuck between a rock and a hard place with dried flower pricing beginning to sink, according to HEXO. This, of course, isn't a surprise given that we've witnessed oversupply and dried flower commoditization strike in a handful of recreationally legal U.S. states.
The concern is that marijuana stocks have no escape from these challenges. Dried flower is already a lower-margin product, and the per-gram price is already beginning to sink. Meanwhile, derivatives aren't going to hit dispensary shelves for at least two more months and their rollout will feature many of the same supply challenges that have plagued dried flower since it was legalized a year ago.
For example, Aurora Cannabis noted in its fiscal fourth-quarter results, ended in June, that the average net selling price per gram of consumer cannabis products had declined by 6% from the sequential quarter. Aurora is beginning to benefit from economies of scale and its market-leading output, but it's a concerning sign that its average per-gram price for consumer cannabis is already declining rapidly despite persistent shortages still present in most Canadian provinces.
In short, HEXO's earnings warning isn't just a company issue. It's a shot across the bow for the entire industry that should rightly have pot stocks and marijuana investors concerned.


Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.

Author

Sean Williams


Sean Williams

(TMFUltraLong)

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and investment planning. You'll often find him writing about Obamacare, marijuana, drug and device development, Social Security, taxes, retirement issues and general macroeconomic topics of interest.

Article Info

  • Oct 11, 2019 at 7:51AM
  • Health Care

Stocks

Aurora Cannabis Inc. Stock Quote
Aurora Cannabis Inc.
NYSE:ACB
$3.73
up
$0.01
(0.40%)

HEXO Corp. Stock Quote
HEXO Corp.
NYSE:HEXO
$2.71
down
$0.13
(-4.58%)

Related Articles




Canadian Cannabis Companies Are Struggling; Here's Why They Could Be Headed Even Lower
Pot stocks have crashed in value this year, and things may not be getting better anytime soon.


David Jagielski

Oct 11, 2019 at 8:00AM

About a year ago, Aurora Cannabis (NYSE:ACB) was trading as high as $12.52 a share, a sobering reminder for investors of how far the stock has fallen since then. Today, Aurora's stock is less than one-third of that price. But it isn't alone; since legalization took place in Canada last October, marijuana stocks have plummeted in value. While it may be tempting to buy the stocks at their reduced prices, investors may want to hold off, as things could get worse before they get better.
Disappointing sales numbers could lead to further declines
What drove the industry to the heights it reached last year was the promises of growth and all the potential that there was in the market. However, with the Canadian market having an estimated market size of $5.2 billion in five years and the U.S. still being off limits (besides hemp), the opportunity simply doesn't look that big. And that's even more obvious when you consider that even with Aurora's stock crashing as much as it has over the past year, it's still valued at more than $4.2 billion.
While the company does have a large international presence, many of those markets are still in their very early growth stages. Make no mistake -- the success of the Canadian market is going to be key for Aurora and other pot stocks to be able to achieve their lofty expectations. After Aurora disappointed investors with its fourth-quarter results, Chairman Michael Singer told BNN Bloomberg that having more retail pot shops in Canada is going to be critical to the company being able to achieve a positive earnings before interest, taxes, depreciation, and amortization (EBITDA) figure.
Marijuana leaf on top of a map of Canada

IMAGE SOURCE: GETTY IMAGES.
However, that's assuming sales will also continue to grow at a high rate, and according to analysts from the CIBC (Canadian Imperial Bank of Commerce) the sales numbers that the cannabis industry is expecting for the next few years are simply unrealistic. The analysts see sales for cannabis producers reaching $2.2 billion Canadian dollars in 2020 and just CA$3.3 billion the year after that.
If that turns out to be the case, that could not only jeopardize Aurora's ability to generate positive EBITDA, but its ability to meet its own sales targets as well, which has not been a given at this point.

Key takeaways for investors
One of the challenges with the cannabis industry thus far has been in estimating just how much sales it will achieve. This year, producers like Aurora have been able to smash last year's sales numbers because the recreational market wasn't open back then. And in 2020, they'll also benefit from derivative sales, which should commence in December and should give those figures a boost as well.
There's going to be a lot of pressure on companies to continue growing sales while also focusing more on profitability, and if there's a softness in either the sale of edibles or existing products, there could be even more of a sell-off of cannabis stocks.
 
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