Despite the incessant nitpicking on the part of Ohio’s Republican leadership, which is seeking changes to the Nov. 7 voter-approved initiative that legalized adult-use cannabis, one Cleveland representative has stepped up to question what many are calling anti-democratic procedures.
Republican Governor Mike DeWine and Ohio Senate president Matt Huffman are seeking, among other changes, to redirect the usage of the hundreds of millions likely to be raised by excise taxes. One example that is raising the most dissent is the Republicans ‘ insistence on utilizing cannabis revenue for law enforcement rather than the agreed-upon social equity program and community reinvestment that earmarked tax dollars to support individuals who have been “disproportionately affected by past marijuana-related law enforcement.”
Enter Juanita Brent
Ohio Rep. Juanita Brent (D-Cleve) underscored the importance of having people who were directly impacted by cannabis prohibition participate in the legal marketplace and have seats at the table, as the Republican leadership moves ahead with its changes.
“If you’ve been criminalized by cannabis, the best thing you can do is come back into the field,” Brent told The Statehouse News Bureau.
Brent also pointed out that it is equally important that those involved in amending the initiative, known as Issue 2, are not outright anti-cannabis crusaders, which alas seems to be the case in Ohio.
Why Are Prohibitionists Making These Decisions?
“Ohioans have to remember that the people who are trying to be the loudest at the [statehouse] are people who were anti-cannabis,” Brent said. “We cannot have anti-cannabis people leading on what’s going to happen with cannabis. We need people who are involved. We need people who have been doing the work. We need people who have been advocating.”
Social equity provisions, by the way, are built into every legal marijuana program across the U.S. as a way to deal with well-documented racial disparities in marijuana arrests.
“We need to build more cultivators because there is going to be a lot of demand. We can have dispensaries that we want in the state, but if we don’t have cultivators there will be an increase in price,” she said.
GOP Lawmakers Running Out the Clock Before Dec. 7 Deadline
Republican lawmakers have said they are planning to publicize their policy changes to Issue 2, Huffman said last week, although he did not give details on the exact proposals or a timeline.
Huffman famously implied last week that Ohioans had not understood that the social equity elements in the new legalization law were prioritizing people affected by past cannabis-related enforcement.
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#IntheWeedswithSteve
Be patient Florida, this too, shall pass! Steven M Smith InspirationalTech.org CEO since 2013.
Federal authorities are weighing whether to stop classifying marijuana among the riskiest drugs, a move that cannabis advocates have long hoped would result in more research on its health effects, businesses having an easier time selling it and fewer people going to jail.
But experts warn the August recommendation by the Department of Health and Human Services to strip marijuana’s designation as a Schedule I drug may not fulfill those hopes.
The proposal before the Drug Enforcement Administration to reclassify marijuana as a Schedule III substance — in the same category as prescription drugs such as anabolic steroids, ketamine and testosterone — would free marijuana from some of the restrictions that apply to Schedule 1 drugs such as heroin and LSD. A decision is expected in coming months.
While marijuana advocates have cast the proposal as a step forward, some contend it doesn’t go far enough and would like to see the drug removed from the schedule system entirely, treated like tobacco and alcohol, and eventually legalized at the federal level.
Rescheduling marijuana would amount to a symbolic win in the quest to normalize the drug.
“A recognition from the federal government after all these years that marijuana is safe and effective as a therapeutic agent for patients is significant because obviously that would be a reversal of a very long-standing and very public position,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws (NORML), an advocacy group. “When it comes to the practical elements, I don’t think anyone knows because we have never gone down this road before.”
Marijuana legalization faces tough odds in holdout red states despite Ohio win.
The implications are mired in legal complications, especially because cannabis is caught in a convoluted system for regulating the drug across different levels of government as both medicinal and intoxicating. Here’s a rundown of what we know about rescheduling and the concerns swirling around different aspects of marijuana reform.
What does drug scheduling mean?
The Controlled Substances Act regulates drugs and categorizes them into one of five “schedules” depending on their medical benefits and potential for abuse.
The schedules aren’t a ranking of how bad the drugs are for you or society, but instead are a guide for how limited access to the drug should be for doctors, pharmacists and patients. (For example, LSD, which rarely kills users, is scheduled higher than opioid painkillers, which causes tens of thousands of fatal overdoses, because painkillers are routinely used in treating patients.)
Marijuana’s designation as a Schedule I substance means the federal government thinks there is no accepted medical use and a high potential for abuse. Federal law prohibits the cultivation and possession of Schedule I drugs, except for approved research studies.
Possible easing of marijuana restrictions could have major implications.
A Schedule III designation under consideration for marijuana means the drug has moderate to low potential for physical and psychological dependence. Federal health officials have declined to answer questions about how they have assessed marijuana’s potential for abuse and dependence.
Here’s where things get really tricky: Federal officials have previously said they are obligated to classify marijuana as a Schedule I or II substance under an international treaty to fight drug trafficking by tightly controlling narcotics. That’s one of the issues the DEA would have to sort out before deciding whether to reschedule the drug.
Effects on health research
All controlled substances come with restrictions on research, but marijuana and other Schedule I substances have the toughest requirements. Experts say it’s imperative to conduct more research on marijuana to understand its benefits and risks as legal markets flourish and consumer use soars.
To gain access to pot, researchers need to register with the DEA under rules that would not apply if they studied Schedule II substances like cocaine and fentanyl. They must submit research protocols to the DEA that need to be reviewed by the Food and Drug Administration. And they must meet stringent requirements for drug storage in electronic safes or vaults that some researchers say are too expensive and burdensome to follow.
“It’s incredibly excessive and totally unnecessary,” said Ryan Vandrey, a cannabis researcher at Johns Hopkins Medicine. “I can run an entire study with an amount of cannabis that’s less than $100 in street value and bought by an adult in the state of Maryland at any of the different dispensaries.”
Researchers have to obtain marijuana from growers that follow federal restrictions. But they say such restrictions on growing marijuana for studies make it harder to examine the effects of high potency products and other forms of cannabis now popular among consumers.
Marijuana addiction is real. Those struggling often face skepticism.
Some researchers have found ways to get around these rules, but their studies have limitations.
For example, Washington State University researchers studying the cognitive effects of cannabis had to use Zoom to observe participants who just used marijuana they bought at dispensaries. The ideal study would involve researchers providing high-potency cannabis from dispensaries, including a placebo to a control group, and participants coming to a lab to provide blood samples and record physiological data points such as heart rate variability and cortisol levels that cannot be measured over Zoom.
The university risks losing federal funding if researchers administer cannabis themselves even though marijuana is legal in Washington, said Carrie Cuttler, an associate professor of psychology who directs The Health & Cognition (THC) Lab at Washington State.
“It’s absurd, absolutely absurd,” she said, “to treat cannabis as pretty much the most dangerous narcotic available in the world.”
Despite these restrictions, there is still plenty of research done on marijuana without ever handling the physical drug.
And experts caution there would still be hurdles in conducting the kind of research that’s now off-limits even if marijuana is reclassified as a Schedule III substance. That’s because the drug would still be treated as a therapeutic rather than an increasingly popular recreational product. It would still be difficult to study all the new marijuana products flooding the market, particularly edibles, vape cartridges and highly concentrated forms such as waxes and shatter.
Kevin Sabet, president of Smart Approaches to Marijuana, which opposes marijuana legalization, said his organization has proposed creating a new schedule category that would relax research restrictions on marijuana while maintaining other restrictions from its Schedule I status.
Unclear future for the cannabis industry
One of the toughest questions to answer about rescheduling is what it would do to the thousands of marijuana companies operating in a legal gray zone.
It is expected they would be able to deduct business expenses from their tax obligations for the first time, boosting their bottom lines. Beyond that, it gets complicated.
Industry advocates hope rescheduling might encourage more banks to work with marijuana companies, but a bill in Congress to shield fnancial institutions from punishment is the more direct path for achieving that goal.
There is no precedent for reclassifying a drug that is legal in states, and the booming marijuana industry, and its broad network of direct-to-consumer sales, is nothing like the markets for other Schedule III drugs such as ketamine and testosterone, which require a prescription.
In some ways, the status quo of treating marijuana as one of the riskiest drugs may actually be better for business.
Because marijuana is a Schedule I substance, the FDA has punted to the DEA to regulate it, and the DEA is not in the business of overseeing industries and markets.
A group of marijuana organizations raised concerns that treating marijuana as a Schedule III substance meant for medicinal purposes could upend the industry. They fear the FDA would prohibit recreational marijuana and hold therapeutic products to the high bar needed to sell medicine — requirements only large pharmaceutical companies may realistically be able to overcome — but leading experts dismiss that concern as unfounded.
Some experts argue that it is unlikely the FDA will suddenly crack down on marijuana after taking a largely hands-off approach for years, given the disruption it would cause and the resources it would take. Advocates counter that there’s no guarantee the winds won’t shift — for example, if Florida’s Republican governor, Ron DeSantis, wins the presidency after railing against marijuana.
“There is no way anyone could know or predict in our current political climate what the risk of FDA enforcement is,” said Shaleen Title, a former Massachusetts marijuana regulator who runs a cannabis think tank. “What I worry about is by trying to relax marijuana laws, we would inadvertently end up in a situation where we would be criminalizing existing state operators in a new way.”
Limited impact on federal pot prosecutions
Marijuana is illegal at the federal level regardless of how it’s classified, and rescheduling alone would not change penalties for major federal marijuana cases.
Possession of Schedule I substances is a federal crime, but few people go to federal prison just for having marijuana. Federal marijuana trafficking charges have plunged 90 percent in a decade as authorities make fentanyl their top priority. Under federal law, rescheduling would not affect penalties for trafficking convictions, said Shane Pennington, a D.C. attorney who specializes in cannabis law.
“It’s going to be a lot less of a boon for criminal justice reform than people think,” Pennington said.
Marijuana prosecutions tend to happen in state courts, and there were at least 209,000 arrests for possession last year, according to FBI statistics.
Along the Interstate 40 corridor that cuts across the Texas Panhandle between New Mexico and Oklahoma, local police officers routinely arrest motorists transporting marijuana loads from illegal grow operations in California, said Texas defense attorney Adam Tisdale, who specializes in marijuana cases. The loads are typically headed to Florida, and the drivers are charged in state court with possession of marijuana, which becomes a felony depending on the weight of the marijuana. Tisdale predicts local officers won’t stop making those arrests, which usually result in hefty fines, not jail time.
President Biden grants mass pardons for those convicted of simple marijuana possession.
“It won’t make any difference in my neck of the woods,” Tisdale said of rescheduling.
Proponents of rescheduling, such as the U.S. Cannabis Council, say it would send a powerful signal to law enforcement agencies that marijuana cases should be a low priority.
Critics, including the former DEA and White House officials who signed a letter organized by the anti-marijuana organization Smart Approaches to Marijuana, argue that rescheduling removes a “key tool” that federal agents have in prosecuting cartels.
Experts are split on what impact rescheduling would have on the nation’s criminal justice systems, which for decades have punitively targeted people — particularly Black and Latino people — for possessing or trafficking in a drug that is now legal for recreational use in 23 states. The Minority Cannabis Business Association and other advocates for racial equity in marijuana policy contend rescheduling alone continues the war on drugs.
“I don’t know if it’s worth the trade-off to be stuck in this murky middle,” said Kaliko Castille, board president of the Minority Cannabis Business Association. “You are still going to have business owners making millions of dollars and others in prison for a plant.”
Ohio certainly wasn’t the first state to legalize recreational cannabis — 23 other states have done so since 2012 — but the Buckeye State’s arrival on that list could ultimately be quite consequential for the growing industry.
Ohio voters’ approval of a legalization measure on Tuesday comes just months after cannabis saw some of its most significant movements at the federal level. In late August, a US Department of Health and Human Services official recommended that marijuana be reclassified as a Schedule III drug. One month later, a cannabis banking bill passed a key Senate committee.
A conservative and politically influential state such as Ohio legalizing marijuana should be the straw that breaks the proverbial camel’s back in terms of bringing federal regulation to cannabis, said Andrew Freedman, a partner at Forbes Tate and executive director of the Coalition for Cannabis Policy, Education and Regulation. “As Ohio goes, so goes the nation,” he said.
“It’s not the reddest [state] — the reddest was Missouri — but it is historically important, nationally important, presidentially important,” Freedman told CNN. “I honestly think it will have massive reverberating effects on what Congress has to do about this.”
More than two-thirds of US states have legalized cannabis in some capacity: 38 states have approved comprehensive medical cannabis programs, and Ohio brings the recreational total to 24 states.
And support for legalization continues to grow. A record 70% of US adults surveyed by pollster Gallup said that cannabis use should be legal, according to a new poll released Wednesday.
Still, cannabis remains federally illegal, and marijuana is classified as a Schedule I substance, the harshest of all drug classifications.
“A ‘no’ vote does send a signal across the nation that this is a major, middle-of-the-road/leaning-right part of this country that is saying, ‘Not too fast,’ and yet it passed by an overwhelming margin,” Freedman said. “I do think that it is a very clear message to the federal government that prohibition is no longer the law of the land, even though it remains on the books.”
For Ohio regulators, legislators and business operators, now comes the hard part.
More work to come
The voter-approved recreational measure approved this week is far afield from early legalization efforts in the state. In 2015, residents overwhelmingly voted against a medical and adult-use measure that would have limited growing and sales to 10 properties, all of which were owned by an investor group that included the 98 Degrees boy-bander Nick Lachey.
The law allows for adults over the age of 21 to buy and possess up to 2.5 ounces of cannabis and grow some plants at home for personal use. Legal sales will be subject to a 10% excise tax, as well as other local and state taxes, and those proceeds will go toward communities with dispensaries, programs such as small and minority business development, and addiction treatment.
Existing medical cannabis dispensaries will have the opportunity to be grandfathered in and have first crack at licenses, but municipalities can decide whether to allow sales.
Since it’s a citizen-initiated measure and not a constitutional amendment, it could be modified or repealed in the Republican-controlled state legislature. Some lawmakers and Republican Governor Mike DeWine have opposed legalization.
But Freedman said: “I think the legislature needs to be careful, because it passed with large amounts of support (57% of voters approved), and generally, you should respect the will of the voters. But if there are parts of the bill that would create a lack of accountability, then those should be shored up.”
“For the most part, I think that they should have the nuts and bolts of a system that can have good inventory control, take bad actors out of the market and make sure that sales will stay internal to Ohio,” he said.
Some legislators may try to “slow walk” implementation or try to scuttle it; however, others who see it as a potential economic development boon may try to push it forward, said Douglas Berman, executive director of the Drug Enforcement and Policy Center at The Ohio State University’s Moritz College of Law.
“That’s the to-be-determined on implementation, and of course this has been the story state by state nationwide,” he said. “Every state has had its own uncertainty for rollout. And given the fact that Ohio’s the 24th state is likely to help this go a little bit smoother.”
Industry woes
If all goes smoothly, Ohio’s recreational program could get up and running relatively quickly.
The law goes into effect on December 7; state regulators have to issue licenses to existing medical cannabis applicants within nine months and additional licenses to other applicants within two years.
“I certainly think, perhaps to the chagrin of some longtime Buckeyes, that it would be fair to say this is kind of a Michigan model that Ohio has adopted through this initiative,” Berman said. “In 2018, Michigan fully legalized cannabis, set a relatively low tax rate and my perception is it’s been a fairly successful industry there.”
It’s “pretty universally held at this point in time that this industry is not doing well,” said Irina Dashevsky, partner and co-chair of the cannabis law practice group at Greenspoon Marder.
Companies are struggling because of the federal state disconnect that’s resulted in cannabis firms facing extremely onerous tax burdens, the inability to conduct interstate commerce, and lack of access to the full financial system the United States has to offer, she said. Additionally, some states have seen the number of operators — regulated and illicit — swell, resulting in a glut of cannabis product and, thus, plunging prices.
Investors have recoiled, and companies have had to turn to debt-based funding, but that’s expensive because cannabis companies can’t avail themselves of traditional financial services and bank loans, she said.
The Secure and Fair Enforcement Regulation (SAFER) Banking Act, which passed a key Senate committee, could allow cannabis businesses greater access to banks — but it does not solve all the issues the industry faces, Dashevsky said.
“There is this confluence of things that really lead me to believe that change of the federal level is on the forefront, but we’ve been there before and it hasn’t crossed the finish line for weird, outside reasons,” she said. “It should be regulated; no one’s saying it should be a free-for-all, but the people in the US want it legalized, and so for the federal government not to catch up after a decade? I think it’s definitely time, and Ohio is a huge indicator of that.”
Opportunities for expansion
Adult-use sales in Ohio could total an estimated $1.5 billion to $2 billion in the first year after market-launch, and $3.5 billion to $4 billion by the fourth year, according to industry publication MJBizDaily.
In five years of operation, Ohio could see between $276 million and $403 million in annual tax revenue, according to Drug Enforcement and Policy Center research. That’s a drop in the bucket of the overall state budget, which for fiscal year 2023 stood at $81.1 billion.
Harvest of OH, which opened medical cannabis dispensaries in 2021, is one of the Ohio firms gearing up for a major expansion to respond to what could be an “onslaught” of recreational sales, said Ariane Kirkpatrick, founder and majority owner.
Harvest will have the opportunity to receive three additional licenses at the recreational level and has already received approval for the expansion of its cultivation footprint.
“It’s all sort of new, it’s all up in the air right now, but we’re pretty adaptable,” Kirkpatrick said, noting the company’s team, processes and logistics that are already in place.
Harvest of OH also has the potential to help drive the industry forward by making it more inclusive, said Amonica Davis, the company’s chief operating officer.
“In the state of Ohio, with dispensaries, cultivators and processors, there are already over 150 operators and just a handful of us are Black,” she said. “And so we have a commitment, and we are very intentional in creating our workforce that is very highly concentrated with women at the executive level, over 50% of our employees are people of color, and much of our supply chain comes from partners who are traditionally underrepresented in this space.”
We are often faced with our own personal conflicts which directly influence our interactions with our peers and family.
When Inspirational Technologies is an endorsement of the “Cannabis” approach to the medical condition, we say, let’s let the look at the data and the people who say that they benefit for cannabis alternatives.
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As many know, 2022 was a mixed bag for the cannabis industry. While new markets showed healthy growth, legal cannabis sales declined in many mature markets, slowing, or even reversing, growth in those markets. While some of this might be attributable to parallels experienced by the broader economy in the wake of COVID-19, it nevertheless resulted in numerous companies across the sector being hit by layoffs, cash crunches, and increased debt.
But 2022 wasn’t all bad news. Three more states enacted laws legalizing adult-use cannabis, while recreational sales kicked off in several other states. On the federal level, the Biden administration took steps toward reform, pardoning federal offenses of simple marijuana possession and directing review of cannabis’s classification under federal law. Congress also enacted the Medical Marijuana and Cannabidiol Research Expansion Act.
Below, we recap some of the biggest developments of 2022 and what we are currently experiencing in 2023. Possible 2024 predictions.
Market headwinds slowed down growth in 2022 and will likely persist throughout 2023.
After enjoying a sales surge during the early stages of the pandemic, the U.S. cannabis industry showed signs of slowing down in the face of regulatory and economic challenges, including declining demand. As a result, legal cannabis markets across the country, particularly mature markets, are facing a supply glut that is driving down wholesale and retail prices.
In California, for example, wholesale prices are reported to have crashed by as much as 95% since the state voted to legalize cannabis in 2016. (“How falling cannabis prices killed a 3rd generation family cannabis farm,” KSBW-TV Action News 8, Monterey Hearst Television Inc., Updated Dec. 14, 2022). And in Massachusetts, the retail price of an ounce has decreased from roughly $400 to under $250 over the last two years. (“Recreational cannabis prices in Mass. plummet as dispensary owners weigh future,” Boston.com, Dec. 13, 2022).
At the same time, legal retailers continue to struggle with onerous taxes, regulations, and competition from the illegal market. Many of these same challenges are likely to persist throughout 2023, including the slump in wholesale and retail cannabis prices.
Federal legalization stalled in 2022, but there are glimmers of hope for 2023 and beyond.
While Congress once again failed to pass meaningful cannabis reform — and federal legalization remains unlikely in 2023 — federal reform efforts made incremental progress in 2022.
In October, President Biden released a statement pardoning federal offenses of simple marijuana possession. In addition, the president asked the Secretary of Health and Human Services and the Attorney General to review cannabis’s classification as a Schedule I drug — the highest level of classification — under federal law. Although not without drawbacks, rescheduling to Schedule II would be an overall boon to the medical marijuana industry, as (among other things) it would likely allow medical cannabis to be grown in one state and sold in another.
While the announcement marked the biggest shift in federal cannabis policy since the passage of the Controlled Substances Act (CSA) in 1970, its effects are not immediate. Administrative review of cannabis’s status under federal law does not have a set timetable and is unlikely to be completed in 2023. Moreover, because state cannabis convictions far outnumber federal convictions, most pardons will have to happen at the state — not the federal — level.
In December, Congress passed its first standalone piece of cannabis-related reform: the Medical Marijuana and Cannabidiol Research Expansion Act (MMCREA). The bipartisan legislation paves the way for more research into cannabis’s medicinal uses by rolling back federal restrictions on research and the cultivation of research-grade cannabis (which are presently conducted exclusively at the University of Mississippi). The MMCREA also promotes the development of U.S. Food and Drug Administration (FDA)-approved drugs using CBD and cannabis.
We anticipate that several federal legalization bills will be re-introduced in 2023. Congressional Democrats are likely to re-introduce the Cannabis Administration and Opportunity Act (CAOA) in the Senate and the Marijuana Opportunity and Reinvestment (MORE) Act in the House. Both bills were introduced in previous legislatives sessions and aim to end the federal prohibition on cannabis.
The Secure and Fair Enforcement (SAFE) Banking Act is also likely to be re-introduced in 2023, which would provide protections to financial institutions and various other professional service firms doing business with state-legal cannabis businesses and is likely to get the most attention (as has been the case in previous years). The bill has now passed the House seven times and enjoys both bipartisan and industry support.
Another likely candidate for re-introduction is the States Reform Act (SRA), which would decriminalize cannabis at the federal level while deferring to state powers over prohibition and commercial regulation.
FDA guidance on CBD may finally be on the horizon.
It has now been nearly four years since the FDA asserted regulatory oversight over cannabidiol (CBD). Despite repeated calls for regulations from lawmakers and industry participants, the agency has yet to comprehensively address rules relating to CBD, leaving manufacturers and distributors without much guidance (aside from the periodic release of warning letters). 2023 is likely to be the year this finally changes.
Up to this point, the FDA has generally pursued limited enforcement activity regarding CBD, focusing primarily on food and beverage products that make unsubstantiated health claims. But recent shifts in the agency’s internal and external approach to regulating CBD products and other cannabinoids could be an indication of what’s in store for 2023, and beyond.
For example, in September, the FDA hired Norman Birenbaum — an experienced cannabis policy expert — as a senior public adviser at the Center for Drug Evaluation and Research. Industry watchers speculate that this could indicate that the agency is finally gearing up to develop a regulatory framework for cannabis-derived products, including CBD.
In addition, the FDA issued warning letters in the first half of 2022 to companies selling products containing Delta-8 THC, an intoxicating hemp-derived cannabinoid that is currently being sold on the unregulated market in certain states. And in November, the FDA again issued a series of warning letters, this time to companies selling CBD-infused food and beverages.
The FDA also announced in a recent interview with The Wall Street Journal that it is aiming to reveal its oversight plans in the coming months. (“FDA, Concerned About Safety, Explores Regulating CBD in Foods, Supplements,” WSJ.com, Updated Dec 29, 2022) The ultimate effect of the FDA’s forthcoming oversight plans remains uncertain, but will likely have a significant impact on the existing CBD industry. So, stay tuned!
States continue to lead the way on legalization and reform despite facing challenges.
According to a recent report by NORML, lawmakers and voters enacted more than 40 cannabis-related reform laws in over a dozen states in 2022. On the adult-use front, three states — Rhode Island, Maryland, and Missouri — enacted laws legalizing and regulating the market. Meanwhile, Mississippi enacted legislation legalizing medical cannabis.
2022 also saw recreational cannabis sales kick off in New Jersey, Rhode Island, and (to a very limited extent) New York. Retail sales in Connecticut also began earlier this month. Retail markets in Maryland and Missouri are expected to launch later this year. As it stands, 39 states have legalized cannabis in some capacity, with 21 states (plus the District of Columbia) permitting recreational adult-use.
Given that public support for reform remains at an all-time high (See “Americans overwhelmingly say marijuana should be legal for medical or recreational use,” Pew Research Center, Nov. 22, 2022), we expect legalization and reform at the state level to continue in the year ahead. For example, lawmakers in Minnesota introduced a pair of bills earlier this month that would legalize recreational cannabis. Minnesota’s newly elected governor, a known cannabis legalization advocate, has stated that he could see legalization happening in the state in the coming year.
Pennsylvania also recently elected a pro-cannabis governor and saw Democrats Retake the State House, improving the Keystone State’s chances of legalization passing in 2023. Oklahoma has an opportunity to legalize recreational cannabis in March. Ohio’s Legislature is also considering a bill to legalize recreational cannabis, and lawmakers in several other states have already filed a handful of bills in the first few weeks of 2023 aimed at liberalizing cannabis laws (including Indiana and Kentucky).
But legalization is just the first step. The roll-out of state-legal cannabis programs can be complicated, time-consuming, and does not always progress in a linear fashion. For example, it has taken New York almost two years to launch its adult-use program, with the first sales occurring just at the end of December at a single location. To date, only 36 retailers in the state have been granted provisional licenses. Meanwhile, regulators have approved 318 conditional licenses for adult-use cultivators and processors, stoking fears that there may not be enough state-sanctioned stores, and that growers could be facing an oversupply issue. Early-stage growth of New York’s market has also been blunted by competition from the “legacy” (i.e., unregulated) market.
Several other states’ cannabis programs, including New York’s social equity component, are facing legal challenge on the basis that their licensing requirements violate the dormant commerce clause (DCC) of the U.S. Constitution, which prohibits states from discriminating against interstate commerce by favoring citizens of their states over others.
In August, a split 1st U.S. Circuit Court of Appeals panel affirmed that the DCC applies to the federally illegal cannabis industry and that a Maine law mandating local ownership of cannabis businesses is unconstitutional. The decision throws into question states’ ability to safeguard their cannabis industries from out-of-state competition and has been used as the basis for a New York federal court to partially enjoin New York’s Conditional Adult-Use Retail Dispensary (CAURD) program.
2023 still could be the year as the 2nd and 9th Circuits weigh in on this issue (as the same Michigan-based applicant has initiated litigation in New York and California on this ground).
Probably more importantly to the “Cannabis Future” is how we are using Hemp, the cousin of Cannabis, to impact our future in the industrial world. Something that is being missed, in the mix.
WHY HEMP IS IMPORTANT TO OUR FUTURE, AS IT WAS TO OUR PAST.
Hemp, In the Mix.
Hemp is not called the wonder crop for no reason. It is possibly the most important plant on earth. It offers many different uses that promote a more sustainable world. Hemp products can be recycled, reused, and are 100% biodegradable. Industrial hemp is a very robust, competitive plant that can out-compete weeds. Its cultivation and usage have significant environmental benefits.
In a time when we are not-so-gradually moving towards the destruction of our planet, the need for sustainable alternatives has increased. While the world is busy thinking of possible alternative solutions, Mother Nature has already provided us with one. All that is left to us is to make the most of it.
What are sustainable practices?
Sustainability is defined as the ability to maintain a balance of a certain process or state in any system. In recent times, the phrase sustainable practices is used in association with biological and human systems. Sustainability is expressed in human organization concepts such as eco-municipalities and sustainable cities, and for human activities such as sustainable agriculture and renewable energy.
For humans to live sustainably, it is imperative to use the Earth’s resources at a rate at which they can be replenished. But as is no surprise, the humans aren’t currently doing this. Let’s understand what sustainable practices truly mean.
The finest way to define sustainable practices is through the three pillars of sustainability.
Sustainability depends on three independent areas that are equally important–social implications, economic implications, and environmental implications.
Social Implications
Sustainable practices must ensure that global human rights are always respected. This spreads over areas such as inequality, poverty, social injustice, fair wages, and other human rights matters. True sustainability is achieved when farming and industrial practices must always leave a positive social impact.
Economic Effects
The mass adoption of sustainable agriculture has been, for some part, put off by its economic effect. While the benefits of sustainability don’t always translate to swift economic growth, they do prove safe for the environment and mankind. Sustainable practices can only be adopted when they fuel economic development.
Environmental Impact
Sustainability is, more often than not, synonymous with environmental impact. And there is a good reason for this association. The Earth is rich but it only has so many natural resources that we can exhaust. To ensure our survival as a species, it is important to manage them carefully.
Therefore, producers, cultivators, and consumers must pay attention to the impact they are leaving on the environment. It then becomes obvious that we need to adopt renewable energy and sustainable agricultural practices, among other things.
Hemp — the Sustainable Crop
Hemp can, for the most part, alleviate the need for many other mass-produced modern raw materials. The large amounts of toxins and waste produced by fuel industry and other pharmaceutical products can be largely reduced by hemp. When compared to common resources (for example, cotton), the roots of the hemp plant not only result in environment-friendly fibers, cosmetics, fuels, and medicines but also protects the earth and enriches the land where it grows.
Hemp is a crop that leaves minimal or no footprint on the earth while addressing many of mankind’s present needs.
Growing Hemp — Environment-friendly Cultivation
Hemp is a more sustainable and eco-friendlier crop than the majority of crops dominating the human cultivation today. While many people feel that hemp propagates are against traditional crops such as cotton, they fail to understand that we are for environment. Though these crops have been growing on the land forever, the environment of the land has changed, and this has necessitated for a sustainable solution.
After its much controversial fate, hemp is beginning to the see the light of the day in people’s life yet again. And almost all the reasons for that are rooted in the crop’s sustainable and eco-friendly characteristics.
Competitive in Nature
Hemp is inherently a competitive plant that grows densely and literally chokes out the competing plants. Hemp naturally reduces pests and therefore does not require pesticides and herbicides.
Hemp is naturally resistant to pests, fungi, and diseases so cultivators do not have to focus on excessive amounts of chemicals for cultivating their crops.
Enriches the Soil where it grows.
Careless agricultural practices extract water and nutrients from the ground without allowing the soil to replenish itself. This results in soil degradation and soil pollution which in turn results in deforestation as well as threatens the productivity and overall health of our food crops.
Hemp is a sustainable crop because it returns a significant percentage of nutrients back to the ground during the process of retting. This results in healthier soil that helps in decelerating erosion and keeps our lands healthy for a longer period of time.
Can reduce Carbon emissions.
Industrial hemp is a high biomass crop that possesses the ability to sequester higher amounts of carbon through the process of photosynthesis. This carbon is then stored in the roots and the body of the plant. This carbon is then transferred into processed bio-fiber products.
Bio-products made from hemp are environment-friendly that can easily be replaced in compost or in landfills. Majority of hemp-based products are free of toxics, biodegradable, and renewable.
Requires less amount of Water.
Industrial hemp has a large tap root that is capable of penetrating deep into the soil profile to pick up the water and nutrients required by the plant for development. This is a benefit because hemp can recover the nutrients that might otherwise be leached below the root zone and enter the groundwater.
Moreover, hemp’s deep roots open up the soil and enhance it for future crops. Hemp requires one-third of the amount of water required by cotton and similar traditional crops. This value considerably cuts down on the water we dedicate to traditional crops for clothing and textile needs all the while producing more comfortable and durable products.
Can be made into biofuel.
Hemp can be made into biofuels which can easily be used in the existing transportation vehicles. Gasoline produced from hemp is 85% greener than petroleum gasoline. Hemp biodiesel, as studies have found, are 97% more efficient than traditional gasoline (i.e. 97% of hemp oil can be converted to biodiesel) and can be used at lower temperatures than other biodiesels.
Carbon neutral buildings
Through its green concrete alternative, Hemp gives us an opportunity to produce carbon neutral building supplies including but not restricted to insulation, pressboard, flooring, wall, and concrete. Hempcrete is energy-efficient, non-toxic, and resistant to mold and, insects and fire.
Produces Higher Yield from the Same Space
One of the most interesting and beneficial characteristics of hemp is that it can grow in different soils and climates and thrives in small spaces. Multiple studies suggest that one acre of hemp can yield as much as 8.7 tons given the right conditions. This way, the hemp crop opens up a way for farmers to decrease their land usage without compromising on their yield or finances.
Can replace plastic.
We are all aware of the way plastic is destroying the earth. The need for an alternate solution to plastic is supercilious to all other needs. Hemp helps us here too. Hemp provides an option to create a non-toxic and completely bio-degradable plastic that can be used in the stead of regular plastic.
A hemp plastic bottle degrades within 10 days of discard.
This is not the first time that the world is hearing of hemp plastic. In fact, Henry Ford built a car out of hemp and soy plastic in the early 1940s. In 2008, the Lotus Eco Elite employed hemp in its composite body panels and spoiler. And since, many car manufacturers have switched to hemp composites for different parts of their cars such as door panels, columns, seat backs, instrument panels etc.
Hemp and Deforestation
The timber industry has been paramount in the production of jobs and manufacture of products in the world. But this income and these convenient products come at a heavy cost to our environment. In order to cater to the demands of the timber industry, our forests are destroyed, streams are hurt, flora and fauna are killed, species are wiped out, and environment is polluted.
In the present time, more than 90% of world’s paper is made from trees. Almost 60% of the world’s forests are used for timber. This fills the natural water sourced with nitrates which leaves terrible effects on the ecosystem. This is not even the entire tip of the iceberg.
What can be the solution? Hemp.
Cannabis or industrial hemp gives us environment-friendly products to replace timber. Hemp grows like other industrial crops but with fewer necessities and in lesser space. This means that switching to hemp would save our forests from being needlessly wasted thus saving our waters, wildlife, and the environment on the whole.
Not only will hemp offer a softer and better paper, but it will also offer more yield per acre as well. This makes hemp one of the very few sustainable crops that are not heavy on the producer’s pocket.
Hemp and Global Warming
Another battle that the wonder crop can help us fight is the battle against the rising temperature of the planet. Hemp begins sequestering carbon the moment it is seeded. Conservatively, hemp yields an approximate sequestration ratio of 1.5 units of sequestration per unit produced. That is to say, 1 ton of harvested hemp fiber should ideally sequester 1.62 tons of carbon dioxide.
In addition
Hemp can also sequester carbon back into the soil through a process called Bio sequestration. The hemp crop captures the carbon emissions from the atmosphere and on slow-smoldering, hemp can be used to create carbon-free biochar which can be mixed with other nutrients and returned to the soil.
When used in the form of bio concrete, hempcrete undergoes calcination overtime and absorbs more carbon dioxide from the environment.
Using Hemp — Environment-friendly Consumption
While hemp is a sustainable option for producers, it is a sustainable and healthier option for the consumers as well. As an industrial crop, hemp provides healthier alternatives to consumers. We have already established that hemp is free of toxins, does not contribute to pollution, and is completely biodegradable. But these are not the only reasons why hemp supports eco-friendly consumption.
Eco-friendly Consumption
While the products made from hemp are stronger, more durable, and biodegradable, hemp in itself can act as a nutrition storehouse for consumers. Hemp consumption is eco-friendly in the sense that the crop grows without any pesticides and herbicides, consumers lesser amount of water, and is a vegan product.
The fatty acid and amino acid profiles of hemp are identically aligned with the human DNA. Therefore, as a food source, hemp offers protein, omegas, and dietary fibre in perfect proportions for our nutritional needs. Hemp is naturally gluten-free and easily digestible in the form of seeds.
Beyond nutrition
Hemp provides the strongest, most durable, natural, and long-lasting fibre compared to the alternative sources. The flexible characteristics of the plant allow for the creation of durable clothing, building materials, shelters, and innumerable products that can satisfy the human needs and wants.
Hemp’s Environmental Impact in a Nutshell
Pollution-free: Hemp is among the fewest plants that can grow anywhere, in any climate. It does not need fertilizers or pesticides and naturally fights against fungus, diseases, and weeds. It cleans up toxins from the ground and can significantly reduce chemical pollution.
Sustainable Agriculture: In addition to using zero fertilizers, hemp replenishes the soil where it grows with nitrogen, carbon, and other nutrients restoring the health and fertility of the soil.
Carbon Sequestration: Hemp grows quickly and absorbs carbon from the air storing it back to the earth.
Clean Industry: Processing hemp fiber for cloth and paper does not require any chlorine which is one of the major polluters.
Eco Fuel: When used as a bio-diesel fuel, hemp emits 80% carbon dioxide, as compared to fossil fuels, with almost no sulphur dioxide. The hemp fuel, therefore, does not destroy the ozone layer and thus generates less greenhouse gas. Hemp fuel also does not contribute to acid rain.
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Water-saving: Compared to wood and cotton plantation, hemp requires 1/3rd the amount of water.
Land-saving: 1 acre of usable fiber equates to 4 acres of usable fiber of trees and 2 acres of usable fiber of cotton. Cultivating hemp could save the land cleared for agricultural means and help in deforestation.
Oxygen release: Hemp plants are proven to release a lot of oxygen given their high carbon sequestration percentage.
Durable Products: Hemp produces stronger fiber than cotton and other plants and can be recycled a greater number of times. Efficient Land Use: Hemp yields 4 times an average forest can. A hemp crop is harvested in 90 days as compared to 25 years taken by trees.
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We are often faced with our own personal conflicts which directly influence our interactions with our peers and family.
When Inspirational Technologies is an endorsement of the “Cannabis” approach to the medical condition, we say, let’s let the look at the data and the people who say that they benefit for cannabis alternatives.
Beginning in Late November 2023 Inspirational Technologies will promote the long-awaited series, “In the Weeds with Steve “. An Inspirational Technologies production under their own “Background Noise Productions Studios.
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Inspirational Technologies premieres “In the Weeds with Steve.” The long-awaited series, originally set to begin in September 2020, has finally begun production. Inspirational Technologies Production Company, Background Noise Productions, in the upcoming weeks, is slated to premier the anticipated, “In the Weeds with Steve”. Originally set to start in January 2021, was shelved due to the constraints of those days.
Beginning in November 2023 Inspirational Technologies will promote the long-awaited series, “In the Weeds with Steve “. An Inspirational Technologies production under their own “Background Noise Productions Studios.
Revenue up 18% Y/Y to $116.7 Million, Excluding Discontinued Operations
Company Delivers Record Adjusted EBITDA(1) of $29.4 Million, up 78% Y/Y, 12% Sequentially, with Adjusted EBITDA Margin of 25%
GAAP Loss from Operations Improved 81% Y/Y, 79% Sequentially to $(4.5) Million, Excluding Discontinued Operations
Aug. 17, 2023 AYR Wellness Inc. a leading vertically integrated U.S. multi-state cannabis operator (“MSO”), is reporting financial results for the second quarter ended June 30, 2023. Unless otherwise noted, all results are presented in U.S. dollars.
The following financial measures are reported as results from continuing operations due to the sale of the Company’s business in Arizona in March 2023, which are reported as discontinued operations. All historical comparisons have been restated accordingly.
David Goubert, President & CEO of AYR, said, “The second quarter represented a meaningful step in AYR’s journey towards generating meaningful cash flow, as we simultaneously got leaner and more efficient while continuing to lay the foundation for revenue growth. We generated record Adjusted EBITDA, up 78% year-over-year with an Adjusted EBITDA margin of 25% and improved our GAAP loss from operations by 81% year-over-year to a loss of $4.5 million. Our efforts around cost savings and optimization accelerated margin expansion ahead of our expectations, and we believe these efforts will enable us to maintain Adjusted EBITDA margin in the mid-twenties for the second half as we unlock working capital through aggressive inventory management throughout the remainder of the year.
“We have also made meaningful progress on improving our liquidity profile in the second quarter. Along with the amendments to various earnout considerations completed in May, we also reached contingent agreements to extend the maturity of $69 million in promissory notes by two years and recently refinanced and upsized our Gainesville cultivation facility mortgage. As a result of the collective amendments to the vendor notes, contingent promissory notes and earn-out payments, and refinancing and upsizing of our Gainesville facility mortgage, we have extended the payment terms of more than $120 million of obligations, inclusive of the $69 million of contingent agreements. These important milestones reflect our commitment to strengthening AYR’s balance sheet, as we are intently focused on improving our working capital and liquidity.
“We are positioning AYR for sustainable long-term growth and profitability across all our markets, while prioritizing the financial health of the Company. As we look to the rest of the year, we plan to accelerate our cash generation via our 2023 optimization plan, making strides in inventory optimization, continuing to align our production with demand, and developing further synergies within our supply chain, retail, wholesale and purchasing functions. Additionally, we believe our ongoing initiatives to grow our Florida footprint, improve operations in New Jersey, and build out retail footprints in Ohio, Illinois, and Connecticut will enable us to accelerate growth in the quarters ahead.”
Second Quarter Financial Summary (excludes results from AZ for all periods) ($ in millions, excl. margin items)
(1) Adjusted EBITDA, Adjusted Gross Profit and Adjusted EBITDA Margin are non-GAAP measures, and accordingly are not standardized measures and may not be comparable to similar measures used by other companies. See Definition and Reconciliation of Non-GAAP Measures below. For a reconciliation of Operating Loss to Adjusted EBITDA as well as Gross Profit to Adjusted Gross Profit, see the reconciliation tables appended to this release.
Second Quarter and Recent Highlights
-- Retail Updates
-- Opened the Company's 86th retail location, subsequent to quarter
end.
-- Q2 retail sales increased 1% sequentially from Q1, with total
transactions up 6%.
-- The Company has opened 10 Florida stores thus far in 2023,
bringing its Florida store total to 62 open locations to date. The
Company plans to exit 2023 with a total of Florida 64 stores,
compared to 52 to start the year.
-- Completed re-brand of full fleet of Florida stores to AYR Cannabis
Dispensary.
-- Announced agreement to acquire third Ohio dispensary license.
-- Announced an exclusive licensing and retail agreement in Florida
with Kiva Confections, a global leader in cannabis edibles. As
previously announced, the agreement will bring Kiva's collection
of award-winning cannabis edibles to the Florida market for the
first time via AYR's retail locations across the state.
-- Corporate Updates
-- Closed the acquisition of Tahoe Hydroponics, an award-winning
cultivator and one of Nevada's top producers of high-quality
cannabis flower.
-- As previously announced, reached an agreement to amend the terms
of contingent consideration under the membership interest purchase
agreements of GSD NJ, LLC and Sira Naturals Inc.
-- As previously announced, reached contingent agreements to defer
approximately $69 million of promissory note payments.
-- Subsequent to quarter end, closed a $40 million refinancing and
upsizing of its existing mortgage for its Gainesville cultivation
facility, contributing a net $14 million of cash proceeds. The new
loan carries an interest rate of 5-year FHLB Rate + 4%.
Financing and Capital Structure
-- The Company deployed $6.7 million of capital expenditures in Q2 and ended
the quarter with a cash balance of $60.0 million.
-- The Company has approximately 77.2 million fully diluted shares
outstanding based on a treasury method calculation.i
-- Subsequent to the quarter end, the Company closed on a $40 million
refinancing and upsizing of its existing mortgage for its Gainesville
cultivation facility. Following the July 7, 2023, paydown of its existing
$25.3 million mortgage, the Company had a pro forma cash balance of $74
million.
-- In 2023, the Company filed an application with the U.S. Internal Revenue
Service ("IRS") for the employee retention credit ("ERC"), as originally
enacted through the U.S. Coronavirus Aid, Relief, and Economic Security
Act. The Company anticipates receiving $12.3 million relating to its ERC
application.
Outlook
The Company remains committed to its financial health and is positioning itself to achieve sustainable long-term growth and profitability across all markets of operation. AYR expects to generate revenue and Adjusted EBITDA growth in the second half of 2023 and into 2024 and to generate positive GAAP cash flow from operations for the calendar year 2023.
AYR’s expectations for future results are based on the assumptions and risks detailed in its Management’s Discussion and Analysis (“MD&A”) for the period ended June 30, 2023, as filed on SEDAR+ and with the U.S. Securities and Exchange Commission (“SEC”).
