Canada edition / February 08, 2020
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1 TERRY BOOTH IS OUT AT AURORA, AMID LAYOFFS, WRITE-DOWNS

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Aurora founder and CEO Terry Booth announced he was stepping down from his position, which he's occupied since 2013. He'll remain in an advisory role. Executive chairman Michael Singer will replace him as interim CEO. BNN Bloomberg, Barron's
  • The company is cutting 500 staff—15% of its 3,400 employees. One quarter of positions cut are executive. BNN Bloomberg
  • The combined goodwill writedowns (one alone is for between $740M and $775M) and impairment charges related to "certain intangible and property, plant and equipment" added up to roughly $1B. Financial Post, Twitter—Vanmala Subramaniam
  • Multiple analysts downgraded the company on news of Booth's departure. Over the last year, Aurora's share price has declined by 80%. Twitter—David George-Cosh
In one piece of good news, Aurora announced it had got the permits it needed to begin selling MED again in Germany, the EU's largest market. MJ Biz Daily
Booth's departure follows the company asking high-profile Chief Corporate Officer Cam Battley to resign in December. (Battley had kind words for Booth on his departure.) Since that time, C-suites across the floundering sector have begun to shuffle their membership, with five companies changing CEOs and executive teams in January alone. Times Colonist, Twitter—Cam Battley, Financial Post Two days prior to Booth's announcement, Keith Merker stepped down as CEO of WeedMD. He had been in that position since 2018.
Wildfire Collective CEO Mark Spear said, "The bittersweet thing about what is happening now in the cannabis industry is that a handful of people were sounding the alarm 4 years ago about what would happen if quality wasn't dramatically improved. They were fired. Now the people that fired them are fired." Twitter—Mark Spear

2 TILRAY LAYS OFF 10% OF WORKERS

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Tilray was the other major LP to announce layoffs this week, cutting 10% of its workforce of 1,443 across Canada, the US, Europe, and Australia. BNN Bloomberg
  • CEO Brendan Kennedy said "reducing headcount and cost" will make Tilray "better positioned to achieve profitability." Financial Post
  • Kennedy said Tilray would focus on international MED, domestic REC, science and research, and the hemp foods company Manitoba Harvest, which it acquired for $420M last year.
PI Financial analyst Jason Sandberg said, "I expect to see many [LPs] announce significant job cuts in the near future." Alberta Farm Express
  • Cowen analyst Vivien Azer called Tilray's cuts a "logical response given the current state of the industry," noting, "Both Canadian and international LPs have built up infrastructure levels that exceed current market demand."
  • Various legacy-turned-legal operators offered sympathies and advice for those who lost their jobs, most encouraging them to join smaller and craft LPs. Twitter—Ryan Lee, Aaron W. Anderson, Mark Spear
Ernst Young strategic growth and risk leader and industry expert Ashley Chiu said, "A lot of cannabis companies should never have gone public to begin with. Reckless disregard and no respect for capital. We are going through a corrective period which hopefully brings the industry to a better place." Twitter—Ashley Chiu
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3 CANADA POST TO LPS: STOP SELLING TO NB ISLAND

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Canada Post asked LPs to stop shipping product to New Brunswick's Campobello Island, which is only accessible through Lubec, Maine, nine months of the year. Financial Times
REC is legal in Maine, but US Customs and Border Protection enforces federal laws, including federal cannabis prohibition.
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4 CANNTRUST CLASS ACTION SUIT APPROVED

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PUBLIC DOMAIN
A group of law firms has had its class-action suit against CannTrust approved by Ontario Superior Court Justice J. Hainey. Among the law firms is celebrity litigator Marie Henein's company Henein Hutchinson. Canada.com, National Post
  • The suit is related to Canntrust's equity offering in May of last year (underwritten by major investment banks, among them RBC Dominion Securities, Canaccord Genuity, and Jefferies Securities. ).
  • The suit is related to Canntrust's equity offering in May of last year (underwritten by major investment banks).
  • The four investors who lodged the suit argue former Canntrust CEO Peter Aceto and other executives misrepresented the company by claiming it had all licensing necessary to grow product, at a time when CannTrust was growing product in unlicensed rooms). Investment Executive

Quick Hits

  1. Norfolk, Ontario will buy a drone in order to fly over properties and determine whether illicit cannabis is being grown on site. Simcoe Reformer
  2. If you get pulled over in Ontario with cannabis secured in a fastened, closed bag "not otherwise readily available to any person in the vehicle or boat," the police can't ticket you. But that hasn't stopped them, in some places. Twitter—Harrison Jordan

5 TAX REVENUE FALLS SHORT OF EXPECTATIONS

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The federal government has only collected half the excise taxes it expected following legalization. The government projected $35M for 2018-2019, but brought in only $18M.
  • Ottawa has adjusted its excise-tax revenue expectations for this year from $100M down to $66M.
  • Nonetheless, it projects $135M in excise tax revenues next year, reaching $220M in 2023.
More data: For the first time, licensed cultivation space is now predominantly outdoors rather than indoors. Health Canada has licensed 19M square feet of outdoor grow space, compared with 13M square feet indoors (including greenhouses). MJ Biz Daily
In recent market data reporting, Health Canada has ceased to specify units of measure for cannabis sold, and has begun to use the unspecified "units" and "packaged units." Twitter—Mollytime, Cannalysts
  • BNN Bloomberg's David George-Cosh reported Health Canada told him the change "aligns with how many regulated parties track their product internally."
  • Cannalyst Craig "GoBlueCDN" Wiggins said, "Anyone underperforming against metrics and targets - like LPs, public retailers, and governments - will applaud and support Health Canada moving from widely understood measures such as KGs and litres to the amorphous 'Units.'" Twitter—GoBlueCDN
Edmonton police reported there has been a slight rise in drug-impaired driving arrests, but admitted the impact of legalization on drug-impaired driving was lower than it expected. CBC Edmonton Massachusetts sold $677M worth of legal cannabis in its first legal year—more than half of the $1B sold in Canada's first legal year, but in a state with a 6.9M population. Illinois (population 12.7M), meanwhile, sold $40M worth of legal REC in its first month. 420 Intel, Nasdaq
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6 ACROSS THE SECTOR

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The Bank of Montreal is now charging cannabis licensees $7,000 to their documents to decide whether to provide them services. They charge an additional $1,000 annually for "maintenance." Insiders were unimpressed. Twitter—PipeDreemz, Matt Maurer, Trina Fraser
Stock prices across the sector declined for the tenth month in a row. New Cannabis Ventures Indigo's online gifting platform Thoughtfull will now sell cannabis accessories, to be "curated" by 48North. Vancouver Sun, NewsWire Quebec MED LP Cannara Biotech got licensed and will soon begin growing in Quebec's second-largest indoor cannabis production site, a 58,000-square foot facility 60km outside Montreal. The company aims to secure a supply agreement with the SQDC. Global News, GrowthOp After BC craft-umbrella LP Pasha laid off much of its staff and lost most of its board of directors in December, some relocated up-and-coming LP Shelter, which this week acquired Saskatchewan licensed cultivator and processor Agro Greens Natural Products for an undisclosed amount. The Deep Dive Dragon's Den star Kevin O'Leary hopped on the corporate psychedelics bandwagon, while his co-star Brett Wilson bought all of Indiva's $2M offering. (Indiva which also received its edibles, extracts, and topicals license.) GrowthOp, London Free Press, New Cannabis Ventures

7 CANNABIS HEALTH PRODUCTS INSPIRE 1,100 SUBMISSIONS

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PUBLIC DOMAIN
Last June, Health Canada proposed introducing a new "Cannabis Health Product" (CHP) designation for non-intoxicating cannabis products, in order to allow the products to be sold outside REC retail. This week, Health Canada revealed it had received 1,100 responses to its public consultation on the CHP designation and discussed its next moves. MJ Biz Daily
  • After publishing a summary of the feedback in coming weeks, Health Canada will strike an external scientific advisory committee (within months) to decide on the necessary amount of evidence to demand to prove CHP safety and efficacy.
  • New regs will have to create a framework to bring to market legally cannabis products that make health claims and can be sold without physician permission.
  • Under current law, cannabis is not allowed in Natural Health Products (NHPs, such as vitamins, and probiotics).
  • Provinces would determined where CHPs could be legally sold.

Quick Hits

  1. According to new data derived from cannabis consumption tracker Cannatrack, Canadian women consumed roughly as much cannabis as men in the first 50 weeks of legalization. Cannabis Retailer
  2. With the largest selection in Canada, the Ontario Cannabis Store has more than 600 cannabis products for sale. Twitter—David George-Cosh

8 NATIVE NEWS: CONSTITUTION AUTHOR BLESSES DISPENSARIES

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Del Riley helped write sections 25 and 35 of the Constitution Act, 1982. Last week, the former Chief of the National Indian Brotherhood (which became the Assembly of First nations) from the Chippewas of the Thames First Nation told a cannabis discussion at Aundeck Omni Kaning First Nation on Ontario's Manitoulin Island, "Your treaty rights [often containing guarantees of protecting businesses] are constitutionally protected. We’ve always run our own businesses, we’ve always traded all sorts of goods. We’ve never had to have licences for our businesses before." Manitoulin Expositor A year after Akewsasne Mohawk Police Services raided dispensaries in Akwesasne Mohawk Territory licensed by the traditional Longhouse (a rival government that disputes the jurisdiction of the elected and federally recognized Mohawk Council of Akwesasne), the parties have arrived in court. Cornwall Standard-Freeholder
  • Jared Jock, whose dispensary was raided, will argue the constitution allows Longhouses to approve their own dispensaries without approval from the MCA.
At Eskatoni First Nation, a Mi'kmaq community in Nova Scotia, there were two instances of children being accidentally served THC-infused edibles. First, students, teachers, and parents attending a winter feast were accidentally served molasses cake believed to contain THC, sending some to hospital. Global News, Daily Hive
  • Several days later, a four-year-old girl was hospitalized after eating THC-infused chocolate. CTV News
  • "I think we look pretty amateur, man," resident Christopher Bernard told CTV News, "when it comes to the cannabis, man."

Quick Hits

  1. Industry may not like Health Canada's slow rollout, conservative packaging, and draconian advertising rules, but some American analysts watching figure this isn't the worst way to legalize REC. Food Processor
  2. Université de Montréal postdoctoral addiction neuroscience fellow Dr. Shaun Khoo argued it was unethical for LPs to fund research on cannabis due to fear of pressure or incentivization creating industry-friendly studies. Stat

9 TRINA FRASER’S GUIDE THROUGH SECURITY CLEARANCES

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TRINA FRASER
Lawyer Trina Fraser helpfully broke down the process of applying for security clearances in the most efficient manner possible. Twitter—Trina Fraser
  • Security clearances are necessary for many people employed in licensed businesses, including most executives (directors, officers, partners) as well as key figures like master growers, security heads, and quality-assurance managers.
  • I spoke with Fraser this week as part of an upcoming WeedWeek Report on the Ontario sector. She told me that those who grew illicit cannabis before legalization, in a best-case situation, clearances can take a matter of "a few months, but you have to budget a much longer timeframe for that." Twitter—Travis Lane
One piece of good news Fraser shared: in a month of open applications for REC retail in Ontario, "they've received over 600—but I can tell you that every single one of our clients who's applied has gotten some type of feedback essentially on their applications and some are done. I have been pleasantly surprised with how fast the AGCO has been processing these operator applications." She noted at the rate the authorizations are taking place, "we could get a lot more than 20 store authorizations a month coming out come May, June, July, into the summer. It's going to take a couple of months, but they will start to flow pretty quickly I think."

Quick Hits

  1. The Nova Scotia Human Rights commission, in a potentially precedent-setting case, determined MED was a medical necessity in the case of an employee denied it by his insurer. Financial Post
  2. After six LPs moved into a single industrial area in eastern Montreal, the municipal council is passing zoning laws to prohibit cannabis cultivation in certain areasto avoid "olfactory problems." La Presse

10 REC RETAIL ROBBERIES, AGAIN

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Edmonton REC store owners and employees are uneasy following a series of robberies stretching back into December. CTV News
  • Edmonton REC store CannaMart owner Christopher Wilson said witnesses were unable to see the robbery taking place at his store due to window coverings. A representative of Alberta Gaming, Liquor and Cannabis said window coverings were a federal mandate, but stressed fully covering windows was not required by law.
  • Health Canada only "prohibits the display of cannabis or cannabis accessories where they can be seen by a young person." An AGLC rep said, "In order to better display products for sale openly within the store and for customer experience purposes, most licensees have decided to cover their windows – but this is not an AGLC requirement."
In Ontario, staff closing the Oshawa Tokyo Smoke location were robbed last Saturday night by bandits carrying guns and wearing Halloween masks. Durham Region First Responders, Durham Region Police Service Facebook

Quick Hits

  1. Cannabis tourism isn't taking off in Alberta, but in BC's Kootenays, a local council is trying to encourage it. Craft cannabis advisor Kelly Coulter argued BC needs to seize the opportunity to become the REC equivalent of Napa Valley. GrowthOp, Globe and Mail
  2. Here's an interview with a representative of the United Food and Commercial Workers International Union about unionizing workers at Aurora subsidiary MedReleaf. Cannabis Wire