Cannabis News
Cash Is King, Use Your Data, and Go Sell Legal Cocaine in Canada
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2 years agoon
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Out of Money, Out of Time, and Debt Piling Up – The Benzinga Cannabis Conference Miami 2023
I wanted to not be a curmudgeon.
I wanted to talk about the key phrases the speakers kept brining up like “cash is king”, “data is so key to your future”, “AI is here and coming for cannabis”. But alas, none of that will matter if everyone closes due to expenses being greater than revenue.
I wanted to go to Benzinga and find out there is a light at the end of the tunnel, and cannabis industry in North America has a bright and vibrate future.
Well, as Roadrunner taught us, the light at the end of this tunnel is actually another train about to run you over called Federal Legalization and international legalization.
The toils of the cannabis industry are well written about now, high taxation, high regulation costs, no access to capital, a fierce black market emerging in all legal states, 280E tax code issues, etc, etc. But after 72 hours in Miami checking under the hood of the cannabis and psychedelics industry, it is much, much worse than you thought.
The best way to go over how bad it is right now is to pull out a rap battle, Comedy Central Roast, or old Henny Youngman or Rodney Dangerfield type of narrative. Do you remember, the “your wife is so fat, she could put on high heels and hit oil!”, and the next comedy would jump I and say, “Well, your wife is so fat, she can XYZ..”
No respect, as Rodney would say, but let me get to my point about, “the cannabis industry is so bad” comedy routine…
To be clear, the Benzinga group and cannabis conference is 1st class, and the most important cannabis show to hit all year due to it’s access to VIP people, great networking events, fund raising options there, etc. They show is fantastic each year on South Beach and you NEED to attend it if you want to know what is really going on with the movers and shakers in weed. That being said, even that group of fabulous people can only polish a turd so much. This is a review of the cannabis industries problems, not a reflection of the Benzinga show or people, that is top notch, first rate, invest in them if you can.
Let’s get to the main event…
The cannabis industry is so bad…. The show opener on the “deal and finance” stage was a rousing, high-five-ing talk about how “lucky we are this year because we only paid 8% on debt, and everyone else is double digits! Woooohoooo! Give me some love!.” I paraphrase but you get the point, that was the opener of the show! Not “Jumping Jack Flash” or “Start Me Up”, we got the “my debt payments are only half as bad as I thought and way better then the other guy drowning in debt!”
And that talk opened the show, on the “let’s make a deal” stage!
The cannabis industry is so bad…we were told if you paid all your bills and paid all your taxes including your 280 taxes, and had 0 left after that, you are winner this year! If you ended the year and were able to pay your debt and taxes, and had nothing left after that, guess what, you killed it! You are a cannabis 1% er! Congrats on that take-home pay.
The cannabis industry is so bad…. Deal makers talked on stage about how if it weren’t for debt financing, there would be no marijuana industry anymore. All cash has completely dried up, equity deals are dead as no one wants crappy stock and buyers don’t want to dilute their shares and ruin the cap-x tables. No cash deals, no equity deals, only thing left is debt. Debt costs have obviously risen greatly in the last 6 months as interest rates climb in the US. The industry is living off credit card debt basically, turning over debt frantically and trying to find where the next dollar is coming from regardless of payback terms and rates. The future be damned, if we don’t do it, we are done anyway, was a common realization for people in the last 72 hours.
The cannabis industry is so bad…. Sellers can’t even sell. There is no more cash payout and go to your own island and retire. The M&A experts said sellers may be lucky to get 10 to 20% in cash. There are no more sales, only getting acquired. Whoever buys you is going to give you a modicum of cash, and stock in the company or project you are being acquired for. If it is Walmart, you are getting some small cash payment and Walmart stock, if it is Jungle Gym Vapes buying you, are getting $50 and a whole lot of “what could be” with JGVapes stock. Buyers are taking much longer to close deals and doing more due diligence. Cash, and cash flow is king right now, preserve it, protect it, because you have no idea if someone or company will ever hand you cash again.
The cannabis industry is so bad….that certain attorney presentations talked about clients wanting to “use the IRS as their banks, don’t pay the IRS but keep paying your lender, the fees and penalties are worse from your lender than the IRS, so let them finance you.”
I fell on the floor after that one. The OG cannabis legend I got to spend the show with just looked at me like he didn’t believe what he just heard. I would be 32% richer too if I didn’t pay my taxes, too, but that doesn’t mean you can do it. The problem is the IRS will throw you in real jail if you skip out on your taxes long enough, Citibank can’t and won’t. This is one of the worst ideas in the history of bad cannabis ideas. Stiff the IRS and let them finance you? No way. While there is one tax strategy out there used by some MSOs on 280E called deferment, or, as we call it, kicking the can down the road.
That basically means they are deferring this massive tax sums to future quarters hoping that federal legalization will happen and they can take the IRS to court to say these taxes are actually not invalid, as weed is now a federally legal drug and subject to regular IRS regulation and not draconian 280E.
How long can companies keep rolling the amount forward? Does the IRS allow unlimited deferment? I can defer paying my taxes for 10 years? 50? 100? There is a limit to how long you can “kick the can down the road praying for regulations to change”, the IRS is not stupid, and the one thing to remember is that they will never run out of people, time, or money, and you will. This may work for now but the massive bills coming due, whether we see federal legalization or not, are going hurt some bottoms lines of your favorite cannabis investments in the future.
The IRS should never be your bank or finance option. They are a taxation collection agency, they can put you in jail if cheat enough or brazenly enough like this industry is thinking of doing, take the L and pay, the future is much worse if you don’t. The interest and penalties on those taxes numbers are going to be much worse than your 9% credit line.
The cannabis industry is so bad – two lawyers on stage talked about doing deals out of receivership or bankruptcy, if the cannabis companies could even declare it. Yes, some people are moving on distressed debt and buying companies from the owner of the loan, but is $0.55 on the dollar a good deal if you can pay $0.20 in 90 days? It is a small and bold crew calling a bottom in April of 2023.
The cannabis industry is so bad…even the data people I talked to, who are right by the way, think using your data to improve your margins is nice, but can only do so much. So I asked, “The black market is beating you 85 to 0 and by improving your margins and getting tighter on what you offer and knowing what you clients want will make it 85 to 10?” They all nodded and said, “yeah, kind of”. I applaud the use of data, but data can only boost your efficiency so much to improve your bottom line, 6% here, 12% there, it can’t overcome a 93% price difference in legal to illicit edible pricing.
The cannabis industry is so bad…. venders are now setting up “buy now and pay over time” for their industry. Why? Because no one has cash to pay their bills. Remember, Weedmaps now has hundreds of vendors in errs for over 90 days. That means they are nonpaying clients, unable to pay the monthly tab for being on their map and selling weed. The famous vape brands setting up the “buy now and we will finance you” model said they listened to their customers biggest problems and they all need help paying their invoices.
So now brands and suppliers are financing the retail guys, the guys on the front lines, sharing their pain of a very restricted cash flow. If brands and suppliers don’t do it, their customers won’t be able to pay the invoice anyway, so might as well work with them on financing the deal. A little of something is worth more than nothing as they say.
Yes, you knew the cannabis industry was a disaster right now, but, no, you probably don’t know how bad. The biggest problem is that there is no good news coming down the tracks like a train at the end of a tunnel. I few speakers and investors talked about how we are at the bottom, and it may be a great time to buy. Says who? One deal maker said he got a company that raised over $10 million for only a $1 million this week. That’s great, but what if you could have got that company for free next month since they can’t pay their debt? You just overpaid by $1 million dollars. You could then go to their lenders and say I will pay you $0.02 on every $1 of debt, take it or leave it, $0.02 is better than the 0 you are going to get. The lender will likely want to get anything they can for the investment and say yes.
The cannabis industry is a falling knife right now and some people are thinking of trying to catch it. Warren Buffet will tell you that is one of the hardest things to do in life, catch a falling market at the right moment.
If the cannabis industry was worth a $1, but is now worth $0.35 in your mind, that doesn’t mean it is a good time to buy, it may find a bottom at $0.05.
The next two events coming to save the day are also strong negative influences for an already punished market. The light at the end of the tunnel to save the day is an oncoming locomotive called Federal Legalization. If you think we are within 36 months of Federal legalization (I am not of that thought), interstate commerce will decimate the industry margins as legal and illegal markets begin selling and shipping massive amounts of cannabis by taking orders online and shipping through major channels.
Price compression, round 64.
The second catalyst to save the idea is international legalization, changing the UN drug treaties and allowing every low-cost provider country to ship and sell cannabis. That is the end for the US legal market and will also take a good chunk out of illegal market sales. As we covered with Colombia producing at $0.04 a gram and shipping all over the world already, look for Latin and South American countries to win this war long term.
There is no way at the current cost structures that currently run the cannabis industry.
What happens to all that debt when ounces when there are $50 ounces online, free shipping and 48-hour delivery? If that is the new legal price with interstate commerce smoothing out the industry, as we look at here on the black market, if ratios hold, you are looking at $25 to $30 ounces on the illicit markets being shipping all over the country too. Does the price and revenue model of your company work at those numbers?
There will never be enough cash or refinancing to take on all this debt, even with legalization. We will see a major MSO bankrupt, if not more, as funding may dry up even for them. There will be many losers and life savings lost on this cycle. It will have to crumble to be rebuilt with the correct prices for the commodity known as cannabis.
The current industry is bleak, and the future doesn’t look much better, unfortunately.
The cannabis industry is so bad…. the best idea I heard was to sell legal cocaine in British Columbia. BC recently decriminalized aggressive drug use and there are so many people dying of fentanyl, they are supposedly issuing licenses for clinics to sell medically pure cocaine as a gateway drug off fentanyl. Groups were pitching their licenses and the potential of being a legal coke dealer in Canada.
The best idea in cannabis is to be a legal coke dealer in Canada.
That about sums it up.
MORE ON BENZINGA SHOWS, READ ON…
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Cannabis News
Maintaining The Highest Level of Quality and Freshness for THCa Products
Published
5 hours agoon
January 7, 2025By
admin
When looking for food, the freshness and quality of the product are essential to the customer. Care must be taken with every product to keep its original qualities. This makes sure that customers have the best experience possible with every buy. Brands ensure their products stay potent and fresh, so to maintain they put them in airtight containers. This gives customers a premium experience that stands out in the market even if they are bought from thca flower clearance. This is especially important when it comes to cannabis goods. Keeping THC-rich flowers fresh ensures every person has a good experience that meets their needs.
The practice of storing things in air-tight containers is very helpful for maintaining their quality. These containers help keep out air, light, and wetness, which can all make the product fresh and effective over time. For people who use cannabis, how fresh the product is can have a big effect on how strong and how long the benefits last. When THC flowers are stored properly, users can expect a better experience that keeps all of the product’s benefits.
The chemicals that give weed its unique tastes and smells, don’t break down when it is stored in an airtight container. Terpenes are very important for improving the taste and making each type unique. The natural qualities of these terpenes can be kept safe by storing them in the right way. This way, every user can enjoy the full range of tastes and smells that the product has to offer.
Why airtight containers are important
Containers that don’t let air in are not only useful, they are necessary for storing things. Over the time, oxygen can break down the product’s cannabinoids and oils. When you use airtight cases, the product stays protected from the outside world. This keeps its chemical structure and makes sure it stays strong.
The users will trust the products only if they feel good about quality. Whether they are used for fun or medical reasons, THC flowers if not stored correctly may have less effect, giving a bad experience for users. To keep the level of quality, it is important to spend money on good storage methods like using airtight containers.
Make sure you have a great time
When a product has been carefully stored in the best possible ways, the experience is more powerful. Whether you are buying flowers to help you feel better or just for fun, they should always be live. With this care, users can get a product that works well like they bought the day it was packaged.
Freshness is at the heart of this process. By making sure that goods are kept in containers that keep air out, businesses can keep up the quality of the goods and make sure that customers can get the best items. Customers are happier and more likely to trust the brand to always provide better goods.
In the end, keeping the product fresh and high-quality isn’t just about keeping it safe, it is also about giving the customer a regular, good experience. Making sure that a product stays fresh and effective from the time it is packed until it gets to the customer is very important. One easy and very effective way to reach this goal is to store things in containers that keep air out. Looking at good storage methods will continue to be important for keeping the quality of THC products even as the cannabis business grows. Customers can be sure that this way of keeping things fresh and effective will make their experience better, whether they are looking for new types or taking advantage of thca flower clearance deals.
Cannabis News
Cannabis Code Enforcement Fines Must be Remedial, Not Punitive, Federal Court of Appeal Holds
Published
6 hours agoon
January 7, 2025By
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The Ninth Circuit Court of Appeal has reinstated a civil rights lawsuit against Humboldt County, California, that challenges the county’s practices in imposing punitive daily fines. It is the first time a federal appellate court has weighed in on local government’s enforcement of code violations involving cannabis farms.
The Court of Appeal decision
The decision, in Thomas v. County of Humboldt, comes after years of complaints by cannabis cultivators that local governments impose unfair fines for technical violations at licensed farms. That counties and municipalities have adopted and are enforcing large fines involving licensed properties is one of many reasons why increasing numbers of farms have given up their licenses and shut down completely or returned to the illicit market. This is hurting state efforts to bolster the legal market and suppress the illicit market for cannabis.
Lessons for industry and regulators
A takeaway from the decision is that local governments need to keep the goal of remediation in mind in establishing penalties, must be more reasonable in allowing cultivators to fix violations, and more flexible in decisions to impose fines and settling disputes. The decision should motivate county and city attorneys, and cannabis licensees and applicants, seek assistance from a mediator with expertise in the cannabis market and regulation. The courthouse might not now be as friendly a venue for local government as it has been in the past.
Most cannabis businesses that run afoul of local codes pay the penalties, no matter how unfair they might seem, because they can’t afford a long legal battle and the administrative and court processes are tilted against the property owner. Administrative hearing officers routinely uphold notices of violations and the penalties imposed by code enforcement officers. Writs of mandate brought against local government in state court, particularly in smaller counties, are extremely difficult to win.
Background on the Thomas case
What has made the Thomas case viable is that several plaintiffs banded together in a civil rights class action in federal court under 42 U.S.C. § 1983, alleging that Humboldt County’s penalties for cannabis abatement violate the Eighth Amendment’s Excessive Fines Clause.
Humboldt County established a schedule of daily fines for illegal cannabis cultivation of up to $10,000, with a minimum of $6,000. Upon receiving a notice of violation from the county, the party has 10 days to abate all violations, subject to an appeals process, during which penalties continue to accrue. Violations included not just the illegal cultivation of cannabis itself, but also any other violation that facilitates illegal cultivation of cannabis. The Thomas plaintiffs contended that the county issues violation notices with hefty fines based on imprecise data (such as satellite and drone photos) and for code violations that originated with previous property owners.
The lower District Court dismissed the lawsuit on the basis that the plaintiffs lack legal standing, because they had not, at the time of suit, paid any penalties. But the Ninth Circuit held that the plaintiffs had concrete injuries, providing standing, because they suffered emotional distress and had incurred expenses with engineers and attorneys as they attempted to abate the alleged violations and defended themselves in hearings.
Getting to the merits of the lawsuit, the Ninth Circuit held that the plaintiffs had plausible claims under the Excessive Fines Clause because the penalties were punitive, not remedial. The Ninth Circuit agreed with the plaintiffs that the fines were unconstitutionally excessive because (1) the notices were vague, often inaccurate, or involved violations that pre-dated the plaintiffs’ occupation of their properties; (2) lesser penalties could accomplish the same health and safety goals; and (3) the alleged offenses caused no harm beyond a technical lack of compliance with the county’s permitting regulations.
Humboldt provides for an administrative appeal before a hearing officer who determines whether a violation has occurred or continues to exist. The hearing officer can only reduce the penalty for a violation in limited circumstances and cannot reduce it to less than $6,000 per day. Although the Ninth Circuit did not explicitly address it in the Thomas decision, a property owner in most circumstances also can be forced to pay the county or municipality’s abatement costs and legal expenses — including those incurred in a subsequent writ of mandate proceeding in state court. The Ninth Circuit agreed that the Thomas plaintiffs had come under:
“immense pressure to settle due to the County’s issuance of ruinous fines, . . . its undue delay in providing hearings, its denial of permits while abatements are pending, and the cost the County imposes to prove one’s innocence.”
The Ninth Circuit found that Humboldt County’s fines were “clearly punitive, not remedial as argued by the County.” The fines could reach millions of dollars, and, in the case of one plaintiff, the fines dwarfed the value of her property. The appellate court was untroubled by the involvement of cannabis, which remains unlawful under the federal Controlled Substances Act:
“[I]t seems clear to us that lesser penalties could accomplish the same health and safety goals,” and “the offenses here have caused no harm beyond a technical lack of compliance with the County’s cannabis permitting regulations.”
The Thomas plaintiffs’ strategy pays off
The Thomas plaintiffs’ strategy of going to federal court was fraught, because the court could have just as easily declined to hear the matter under the illegality doctrine, but it paid off here; the Ninth Circuit not only considered the case but also disregarded the problem of whether the plaintiffs were entitled to any remedy under federal law.
The Ninth Circuit concluded by acknowledging that local government is “often at the forefront of addressing difficult and complex issues,” but it should use “flexibility” in decision making and “cannot overstep its authority and impose fines on its citizens without paying heed to the limits posed by the Eighth Amendment.”
Note: This post was first published January 6, 2025 on the Alger ADR Blog
Cannabis News
Are Americans Shifting to Cannabis and Saying Goodbye to Cigarettes for Good?
Published
7 hours agoon
January 7, 2025By
admin
Are Americans Shifting To Weed And Saying Goodbye To Cigarettes?
We live in a time when people are more health-conscious than ever.
For the first time in history, we’re seeing a downward trend in the consumption of cigarettes, especially among young adults and adolescents. Just a few decades ago, cigarettes were considered ‘cool’. The link between cancer and cigarettes were established by the 1950’s, though accepting that cigarette smoking was “bad” for you didn’t take root socially until around the late 1990’s.
Now, we know that cigarette smoking is a dangerous, often fatal habit that leads to cancer, respiratory illnesses, and heart disease. According to the World Health Organization (WHO), over 8 million people die prematurely from tobacco use yearly.
In the results of a Gallup poll from early 2024, they found that more Americans are more likely to smoke weed than cigarettes, while young people are more than 5 times more likely to choose weed over tobacco. The poll found that 17% of Americans smoke weed, while 12% admitted to smoking cigarettes in the previous week. The more dramatic difference was observed among the 18-34 age range, where 26% admitted to consuming weed while only 5% of them still smoke cigarettes.
For the same poll, they also found that the older adults aged 55 and up were more likely to still smoke cigarettes compared to marijuana. “Americans’ reported marijuana smoking has more than doubled since 2013, when Gallup first added the question in its annual Consumption Habits survey,” explained Gallup. “That year, seven percent said they did,” they reported.
Improved Public Perceptions Leads To Healthier Choices
One can’t deny that there has been a massive shift in the increasing awareness of marijuana’s health benefits, as well as the dangers of cigarette smoking. This leads to changing public perceptions, better and more scientific research as well as clinical studies, and an improvement in the law.
The law, specifically, has been instrumental in mitigating the spread of cigarette use. For example, many governments worldwide have established strict no-smoking policies and placed a massive tax on cigarettes. Tobacco manufacturers are no longer allowed to freely advertise their product. All these have led to a downward trend in cigarette smoking habits and purchasing.
The proliferation of legal cannabis throughout North America, not just for medical use but also for recreational use has also contributed to a widespread cultural acceptance of cannabis, which has also improved the public perception of the drug. As we speak, it’s already become a part of society not just in North America but also in countries such as Thailand, several European nations, Uruguay, and Mexico to name a few.
In addition, people are also becoming more educated about the use of alcohol. While it may still be the most widely used intoxicant, its days me be numbered: there is a small yet growing number of people who are choosing to replace alcohol with weed, because of the sheer number of studies proving the dangerous link between fatal illnesses and alcohol. Not to mention that alcohol is linked to drunk driving and road fatalities, multiple different types of cancers, horrible hangovers, and so much more.
Even Gallup polls from as far back as 2022 revealed that people in the United States have already begun to smoke more weed than cigarettes. Gallup conducted the survey from July 5 through 26 of 2022. The results reveal that 11% of the population smoke cigarettes, while back in the mid-1950’s, 45% of Americans smoked them. Meanwhile, 16% of Americans reported that they smoke weed, and 48% tried it in the past. Back in 1969, just 4% of Americans smoked weed!
It’s clear that societal and cultural perceptions around both have changed dramatically. “Smoking cigarettes is on the decline and is most likely to become even more of a rarity in the years ahead,” explains Gallup Senior Scientist Dr. Frank Newport. “This reflects both public awareness of its negative effects and continuing government efforts at all levels to curtail its use,” he said.
Unfortunately, the Gallup poll also found that alcohol remains a popular substance for Americans. Despite the increasing studies being published right now that alcohol is a proven carcinogen, one can’t blame the population: it’s legal, easily accessible, and affordable for many.
Overall, it seems that the demand for wellness is slowly taking over. Wellness is no longer just a buzzword or a trend; it’s a real pursuit that more, especially young people, are seeking. And cannabis fits very well into that picture: whether CBD or THC, the components of marijuana have proven beneficial for the mental and physical health of people, across a wide age group. From pediatric CBD applications to therapeutic uses for the elderly, cannabis can be beneficial for many people.
It’s so easy to see why thousands of young adults commonly include cannabis as part of their everyday wellness regimen – the same generation that have shunned cigarette smoking for good.
Conclusion
If you really must have a smoking habit, choose weed over cigarettes. Even then, any type of weed is much healthier than tobacco. Marijuana is so much healthier for your mind and body, and it can function as a medicine and supplement as well.
For individuals who are struggling to quit smoking cigarettes, you might even want to consider using cannabis as a cessation aid. Many have found success using cannabis to quit cigarettes, with longer-lasting success rates.
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