William Sumner, Author at Green Market Report

William SumnerWilliam SumnerFebruary 23, 2018


Part Two of a Four-Part Series

Why are less than one percent of California cannabis cultivators actually licensed to grow cannabis? That is the question on everyone’s mind in the wake of a 36-page report released by the California Growers Association, which represents more than 1,100 small and independent cannabis businesses.

The report details many of the political, financial, and cultural barriers preventing small to midsize cannabis cultivators from entering the legal market. In part two of our four-part series, Green Market Report will take you through the report and lay out the state and local barriers standing in the way of cannabis cultivators.

Local Policy

Local cannabis regulations in California is, to say the least, a hodgepodge of conflicting rules passed by municipalities struggling to understand the legal cannabis market. As of February 2018, only 13 out of 58 California counties have passed laws allowing commercial cannabis activities

Six counties are likely to pass ordinances in the new future, while 14 more counties are currently studying the issue. Nearly half of California counties (25) have already passed bans on commercial cannabis activity.

Of those counties that have actually passed ordinances allowing cannabis activity, many have implemented caps on the number cannabis business permits available. For example, Trinity County only has 500 available cannabis business permits despite having more than 4,000 cultivators operating in the area.

Similarly, local zoning ordinances have made it increasingly difficult for cultivators. In Sonoma County, for example, a local ban on rural residential and agricultural residential areas have helped to exclude over 3000 cannabis cultivators from the market.

Likewise, in urban areas, many zoning ordinances have left cannabis businesses huddled in small business districts; which in turn have helped spike local real estate prices, thus further making it difficult for small-scale cannabis cultivators.

State Policy

Current state cannabis laws have also played a part in preventing small to midsize cannabis cultivators from entering the market. Under the 1976 Direct Marketing Act, California farmers are allowed to directly interact with consumers through Farmers’ Markets and Community Supported Agriculture.
However, current state law has not adapted to allow the privileges of cannabis cultivators. The state does offer cannabis event licenses, but these are strictly limited to retail cannabis businesses and exclude cannabis cultivators and manufacturers.

The CGA believes that this will have a negative effect on many small to midsize cultivators, many of whom were able to interact directly with patients under now-defunct state law.

Cannabis transportation has also proven to be a bottleneck for cultivators. Of the 192 licensed cannabis distributors, 133 (approximately 69%) hold at least one other license non-distribution licenses. Approximately 28% of distribution licenses are controlled by manufacturers, another 25% are owned by dispensaries, 9% belong to cannabis cultivators, 4% is controlled by businesses with multiple licenses in the supply chain, and 3% are controlled by delivery companies.

Only 31% (59) of the issued cannabis distribution licenses are actually owned by companies focused solely on distribution. What does this mean for cannabis cultivators? In essence, it means that not only are cannabis cultivators forced to rely on competitors for distribution but also that they have to rely on companies that simply not scaled to transport other licensees products.

Further complicating the distribution issue is cannabis testing. Not only are there too few licensed cannabis testing laboratories in the state (22 total), there are not enough distribution companies to meet the demand; which in turn drives up the price for both.

Also hurting cultivators is the soon-to-be distinction between medical and recreational cannabis on the production level. A six month grace period allowing medical and recreational licensees to transact with one another will soon expire, which will increase the start-up cost for prospective cannabis businesses.

For cultivators, this means having to get both a recreational and medicinal cultivation license in order to maintain market flexibility. Not only that, cultivators will have to decide which portion of their harvest will be dedicated to recreational and what portion will go towards the medicinal market.

The confluence of confusing state and local regulations has led to widespread confusion among the cannabis cultivators, which in and of itself is a barrier to licensing. In order to stay compliant with the law, licensees must be aware of regulations from the CDFA, BCC, MCSB, Water Board, CD FW, CDTFA, OSHA, as well as local building and fire code, and local regulatory and tax ordinances.

Stay Tuned for Part Three

According to a poll conducted by the CGA, 57% of its member cite regulatory confusion as a “significant” barrier to becoming licensed. But regulatory woes are not the only barriers towards becoming licensed cannabis cultivators. Indeed there is a litany of financial and even cultural considerations that keep many of the state’s cultivators from joining the legal market; and in part three of our four-part series, we will examine those issues. Stay tuned.

William SumnerWilliam SumnerFebruary 22, 2018


On Feb. 22, 2018, Freedom Leaf Inc. (FRLF) announced that it had filed its 10Q for the quarter ending December 31, 2017, yet the company included no financial information in the press release. In the filing, the company reported revenue for the quarter at $6,332 versus last year’s $448,566. Freedom Leaf delivered a net loss of $742,413 for the quarter versus last year’s loss $111,361 for the same time period.

In the filing, the company stated, “As of December 31, 2017, the Company had $0 in cash. We do not have sufficient resources to effectuate our business.” It went on to say, “We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. ” The company has an accumulated deficit of $6.3 million. It has also been issuing stock to pay for services, which is never a good sign.

Management’s Statement

The company also announced that it would soon launch its CBD product line, Hempology, in 10 US states; including California, Nevada, Washington, Oregon, Texas, Michigan, Georgia, and Alaska.

“Thanks to the efforts of our new CFO and our team, we now expect to move quickly into a new phase of the Company’s development as we continue to acquire and integrate additional revenue-producing companies,” said Freedom Leaf President and CEO, Clifford Perry, in a statement. “This 10Q is only a stepping stone to our goal to become debt free and move forward with our new revenue streams: Hempology and Leafceuticals.”

To meet production demands, the company’s wholly owned division, Leafceuticals, Inc. operates a NuAxon industrial CO2 supercritical extraction facility in North Las Vegas. So far the facility has produced 12 kilos, valued at $200,000, and expects to replicate those figures on a monthly basis.

The company is also the publisher of Freedom Leaf magazine. For six months ending December 31, 2017, the magazine only recorded revenue of $5,826, while the costs related to the magazine were $68,850.

Stockwise, the company has been on a roller coaster over the last month. In mid-January, Freedom Leaf’s stock began to soar, peaking out at $0.43 per share before taking a precipitous tumble down to $0.22 per share. During that peak period, the company retired approximately $167,748 in debt and accrued wages through the issuance of approximately 5.4 million common shares.

William SumnerWilliam SumnerFebruary 22, 2018


Part One of a Four-part series.  

Is California’s cannabis market on the verge of a crisis? If you ask the California Growers Association (CGA), the answer is yes. On Feb. 19, 2018, the group, which represents more than 1,100 small and independent cannabis businesses, released a 36-page report dubbed “An Emerging Crisis: Barriers to Entry in California Cannabis.”

The report details the structural, political, financial and cultural barriers that are preventing thousands of small to mid-size cannabis cultivators from participating in the state’s newly legal, and regulated, cannabis market.Of the state’s estimated 68,150 cannabis cultivators, only 534 are actually licensed to cultivate cannabis; which averages out to less that one percent (0.78%).

So why aren’t California’s cannabis cultivators entering the market?

In this four-part series, Green Market Report will take a look at the CGA’s report and walk you through the concerns it raises, the solutions it recommends, and why it matters to you. For Part One, we’ll take a look at why this report matters at all.

In order to understand why any of this matters, one first must look at the two laws which serve as the linchpin of California’s cannabis market: Proposition 64, which legalized recreational cannabis in the state, and the 2017 Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which attempted to harmonize the medical and recreational market.

The CGA report claims that the role of small to midsize cannabis businesses was central to the conversation surrounding Proposition 64 and MAUCRSA; citing several passages in Proposition 64 aimed at “ensuring… the industry in California will be built around small and medium-sized businesses.,” and notes that MAUCRSA contains similar language.

After establishing the spirit of these two laws, the CGA report examines how the laws’ implementation fails to live up to the spirit; noting several issues which will be covered in more detailed in subsequent issues of this series.

The result of these barriers has had a deleterious effect on market participation from small to midsize cultivators, leading to market consolidation from larger operators. This consolidation leads to four primary issues which concern the CGA:

A small cannabis farm in California. (Shutterstock)

Biodiversity: Most large-scale businesses rely on standardization and reliability. A consolidated cannabis market would result in fewer strain choices for consumers and could limit the discovery of new strains

Overproduction: The CGA estimates that although the state produces 15 million pounds of cannabis a year, the state only consumes three million pounds. Given that the state already produces more than enough cannabis to meet demand, an increase of large-scale is not needed and could lead to overproduction, which is already an issue in states like Oregon.

Increased Use of Pesticides: A hallmark of industrial agriculture is the reliance on pesticides in cultivation, and this is true of large-scale cannabis grows. Small-scale grows, on the other hand, can be managed without the use of pesticides because of their size. More large-scale growers mean more pesticides.

Economic Collapse: The CGA estimates that there are approximately 68,000 small cannabis farms in California. With an average of 3.6 employees per farm, the number of people employed by those farms totals to 258,000. Thousands of people and the communities they live in have built their livelihoods around those farms and current regulations threaten to destabilize that status quo. If this issue is not addressed, the economic fallout could be dire.

Stay Tuned for Part Two

So what is standing in the way between small to midsize cannabis cultivators and becoming licensed by the state? In part two of our series, we’ll take a look at the state and local policies that prevent cannabis cultivators from entering the California market.

William SumnerWilliam SumnerFebruary 21, 2018


Cannabis Strategic Ventures (NUGS), a Los Angeles based firm that offers outsourced personnel solutions to the cannabis industry, announced that it has entered into an agreement to acquire Pure Applied Sciences and its brand of organic and pure cannabis oils, PureOrganix.

“Pure Applied Sciences was extremely attractive to us because of its extensive portfolio of ultra-high quality products. It’s difficult for many small companies to conform with Current Good Manufacturing Practices (cGMP) and to meet FDA guidelines for Active Pharmaceuticals Products (API), but this team has excelled in this area. It’s an important aspect of the product line that will allow for significant expansion. Consumers in the cannabis space demand quality. Pure has built its business around this demand for quality,” said Cannabis Strategic CEO Simon Yu in a statement.

Additionally Cannabis Strategic also announced that it would bring on the principals of Pure Applied Sciences, Christian Young and Mylad Piroozabacht, and as well as their executive teams. The company hopes to use its newly acquired brand, as well as the expertise of Young and Piroozabacht, to launch a new division of consumer brands.

“We are also very pleased the main principals of Pure are joining the Cannabis Strategic team. Chris has considerable marketing experience that will help us grow across all our product lines and Mylad has the science background to head our development efforts. We welcome them to the NUGS family,” Yu added.

This is Cannabis Strategic’s first acquisition as part of a previously announced financing and investment pool geared towards cannabis projects in California. Before moving into the California market, the company made similar investments in the state of Washington. Last month, Cannabis Strategic announced that it had hired L&L CPAs, PA to conduct a full audit of the firm. The company plans to use the audit to help increase liquidity, attract additional investors, and to use as a guide for when it seeks to uplist the company’s stock trading venue.

William SumnerWilliam SumnerFebruary 20, 2018


Canopy Growth Corporation (TWMJF) announced today that it has received a license for its cultivation facility in Aldergrove, British Columbia. Operating under the previously announced BC Tweed Joint Venture Inc. banner, the site is set to become one of the largest cannabis cultivation facilities in the world.

The initial license will cover approximately 400,000 square feet of growing space, but it is expected to expand into 1.3 million square feet over the comings month in time for the flowering and harvest stage of cultivation.

On. Feb. 16, 2018, upon learning that it had been issued a license and after consulting with the Investment Industry Regulatory Organization of Canada, the company decided to temporarily halt the trading of its common shares on the Toronto Stock Exchange as the license represented a substantial change in the company’s production capacity.

In a statement, Canopy President Mark Zekulin praised his company’s progress in the retail cannabis landscape.

“We are the only producer in Canada who can make this claim and we will continue to leverage our production platform in order to solidify a truly national presence for our cannabis brands,” Zekulin said. “A cultivation license for our first BC Tweed site positions us to continue this trend as Canada’s, and indeed the world’s largest, most reliable and most diversified producer and seller of high quality regulated cannabis.”

Over the weekend, the company shipped more than 100,000 cannabis clones, the largest shipment in company history, to the facility from its Tweed Smith Falls Campus to help kick-start the cultivation process.

With the Aldergrove facility now operational, the company plans to turn its focus to a second cultivation facility in British Columbia. With construction well underway, the facility is expected to have approximately 1.7 million square feet of growing space; bringing the company’s total available growing space to 5.6 million square feet.

“As proud native British Columbians and long-time horticulture producers we are excited to continue the proud tradition of BC bud on a national scale,” added BC Tweed’s Victor Krahn. “Working with Canopy Growth we’re going to take the Tweed brand to the next level on the West Coast and bring the best our province has to offer to the country and the world.”

William SumnerWilliam SumnerFebruary 16, 2018


Cannabis Wheaton Income Corp. (CBW) announced today that it had entered into a joint venture with Peter Quiring, one of the largest greenhouse builders and operators in Canada, to build a brand new cannabis greenhouse facility in Leamington, Ontario. The joint venture will operate through a newly formed subsidiary dubbed GreenhouseCo. Quiring will act as Chief Executive Officer of GreenhouseCo.

With over 25 years of experience building and operating greenhouses, Quiring has developed over 2,000 acres of greenhouses, operates approximately 175 acres of automated greenhouses, and operates one of the largest bell pepper and tomato greenhouses in North America.

“Today, I am pleased to announce my new exciting joint venture with Cannabis Wheaton and have full confidence in the management and teams that we have built together within my existing companies,” Quiring said in a statement. “I look forward to bringing my experience and values to this new partnership with Chuck, Hugo and their team at Cannabis Wheaton.”

“This is an exciting project both in terms of its scale and technological sophistication and we are honored to be partnering with the best in the business to ensure that this facility becomes one of the largest and best run greenhouse cultivation facilities in the country,” added Hugo Alves, President, and Director of Cannabis Wheaton.

For Phase 1 of the project, GreenhouseCo will initially develop 1.4 million square feet of a greenhouse on a 102-acre plot in Leamington, Ontario. The facility will be constructed by South Essex Fabricating on a site with access to approximately 27 megawatts of electricity and will be operated with a 100% closed-loop water recycling system.

Once Phase 1 is completed, the company estimates that the facility will produce approximately 120 million grams of cannabis per year. Combined with technological improvements adapted from Quiring’s existing greenhouses, the company believes that facility may be able to increase its output even more.

In addition to their current agreement, both Quiring and the company have agreed to jointly pursue international opportunities related to cannabis greenhouses, which includes greenhouse development and licensing GreenhouseCo’s intellectual property and operational expertise.

William SumnerWilliam SumnerFebruary 15, 2018


On Feb. 14, 2018, United States District Court Judge Alvin K. Hellerstein heard oral arguments on a motion to dismiss a lawsuit challenging the constitutionality of the Schedule I classification of cannabis.

The suit was filed on behalf of a series of high profile plaintiffs, including Denver Broncos Super Bowl Champion, Marvin Washington, and 12-year-old Alexis Bortell, who has captured the attention of the media over the last several weeks.

The suit seeks a declaration that the Controlled Substances Act (CSA), as it pertains to the classification of cannabis, is unconstitutional because it violates the Due Process Clause of the Fifth Amendment, a collection of productions under the First Amendment, and the fundamental right to travel.

The plaintiffs argue that the CSA is unconstitutional because cannabis’ Schedule I classification is “so irrational as a matter of law,” that the law cannot be rationally connected to any legitimate government purpose.

Specifically, the suit argues that the government fundamentally does not believe its own argument against cannabis, pointing to the fact that the federal government owns a medical cannabis patent and has entered into license agreements with medical licensees.

Furthermore, the suit claims that the federal crackdown on cannabis through the CSA was implemented not because of a legitimate government interest, but rather because of the interests of the Nixon Administration to find grounds to arrest anti-war protesters as well as African American Civil Rights protesters.

The CSA is said to violate the fundamental right to travel because medical cannabis patients when traveling to states without medical cannabis laws are forced to make the choice between traveling without their medicine or risk imprisonment.

The suit is also critical of the reclassification process as outlined by the CSA, claiming that it is a violation of the Due Process Clause of the Fifth Amendment. In order for a Schedule I substance to be reclassified, scientific evidence must be presented to the contrary.

However, since Schedule I substances are deemed so dangerous they cannot be safely studied, the government won’t approve the necessary federal research to provide the scientific evidence necessary to reclassify cannabis; essentially creating a feedback loop.

In a statement, Michael S. Hiller, the lawyer representing the plaintiffs, said that the Controlled Substances Act was originally meant to help Americans with addiction but has since been used to “hurt and oppress US citizens”

“We firmly believe the federal government is prostituting and perverting the Controlled Substances Act as well as blatantly criminalizing behavior that they themselves are inducing,” Hiller said. “We look forward to standing on the right side of history and ensuring that cannabis is descheduled once and for all as well as to receiving Judge Hellerstein’s decision, and moving the case forward.”

A timeline for the judge’s decision has not been set.

William SumnerWilliam SumnerFebruary 14, 2018


As Canada continues to prepares legalize recreational cannabis, Quebec consumers are getting a first look at the companies that will provide the province with cannabis. Six cannabis companies announced today that they have signed a letter of intent with the Société des alcools du Québec, the provincial crown corporation responsible for the trade of alcohol and cannabis in the province of Quebec.

Aphria Inc. (APH), based out of Leamington, Ontario, has agreed to provide the province with approximately 12,000 kg of branded cannabis products, including cannabis grown in Ontario and British Columbia and cannabis-derivative products such as cannabis oil, for the first year of the agreement.

Likewise, Canopy Growth Corporation (WEED) has agreed to provide the province with 12,000 kilograms of cannabis. This marks Canopy’s fourth provincial supply agreement; the other provinces are New Brunswick, Newfoundland and Labrador, and Prince Edward Island.

Landing the largest provincial supply agreement was the Hydropothecary Corporation (THCX), which is based in Quebec. Under the LOI, Hydropothecary has agreed to provide a minimum of 20,000 kilograms of cannabis annually. The company is close to completing production facility expansions which will increase its annual production capacity to 108,000 kilograms and make it one of the largest cannabis producers in Canada.

“This supply arrangement is an important step for Hydropothecary. We are honoured by the opportunity to supply cannabis in our home province and we want Quebecers to know that we are committed to providing safe and high-quality products for the adult-use recreational market,” said Hydropothecary CEO and co-founder Sebastien St-Louis in a statement.

Snapping up the smaller supply agreements were Aurora Cannabis Inc. (ACBFF), MedReleaf Corp. (LEAF), and Tilary.

Aurora has agreed to provide a minimum of 5,000 kilograms per year, with supply to be determined on a month-to month basis and determined by consumer demand. Most of the cannabis provided by Auror will come from its Quebec-based production facilities.

Similarly, Tilray will also supply Quebec with up to 5,000 kilograms of cannabis, and cannabis-derivative products per year, across a variety of its branded prodcuts. Tilray’s medically branded cannabis will continue to be sold exclusively in pharmacies and online.

MedReleaf won a slightly larger supply agreement than both Aurora and Tilray. Under MedReleaf’s LOI, the company will supply approximately 8,000 kilograms of cannabis .

William SumnerWilliam SumnerFebruary 14, 2018


Today Canopy Growth Corporation (TWMJF) released its financial results for the third quarter ending December 31, 2017. Quarterly revenue increased 123% to $21.7 million over last year’s $9.8 million and net earnings were $11.0 million, or $0.01 per basic and diluted share, compared to last year’s $10.7 million.

Gross margins fell to 58% of sales ($12.5 million) compared to 64% of sales in third quarter of last year. The margins would have been higher, but the cash operating costs associated with subsidiaries not yet cultivating or selling cannabis (totaling $2.9 million) drove that number down. Excluding those costs, the gross margin would have been 71% of sales ($15.5) million.

“The Company’s record revenues in the quarter were driven by a significant increase in domestic sales across all product formats as well as sales in the German medical market, which is beginning to show impressive growth,” said Bruce Linton, Canopy Chairman & CEO, in a statement. “Success in future global medical markets and the recreational cannabis market in Canada will depend not only on capacity but on strong execution and securing supply agreements with the provinces today. I believe our success on both these fronts is evident as you look at our accomplishments this past quarter.”

The company has approximately $400 million in cash on hand to fund domestic and global expansion.

In terms of cost, the weighted average cost per gram to point of harvest fell by 18% to $0.59 per gram, making it the sixth consecutive quarter under $1 per gram. Likewise, the weighted average cost per gram before shipping and fulfillment also fell by 18% to just $1.03 per gram.

The company sold a record 2,330 kilograms and kilogram equivalents, representing an 87% increase over the previous year’s 1,245 kilograms and kilogram equivalents. The average selling price per gram also rose by 13% to $8.30 per gram, compared to the previous year’s price of $7.36 per gram. The increased selling price was due in part to the improvement of oil products and a higher selling price of medical cannabis in Germany by the company’s wholly-owned subsidiary Spektrum Cannabis GmbH. Cannabis oil sales, which includes oil-based soft gel capsules, made up 23% of Canopy’s product revenue, accounting for 262-kilogram equivalents of the total kilograms sold.

“With the sector’s largest inventory of diversified, high quality cannabis products, demonstrated distribution capabilities, robust IT infrastructure, a vast production footprint, investments in seven provinces across the country and a proven record of leadership and execution, we are now excelling into the anticipated recreational sector with unparalleled opportunity,” added Linton.

Sean Stiefel of Navy Capital, the largest US Global Cannabis, L/S equity fund said, “It was a very clean quarter. The profitability was a huge win. Quebec announced their supply agreements which is a very big catalyst for the sector. Canopy is also showing improvement in their costs and was also successful in their JV and International ops.” he went on to say, “All in a very solid quarter and we except the entire sector to be up today on these earnings.”

William SumnerWilliam SumnerFebruary 13, 2018


Cannabis packaging company Kush Bottles today announced that the company has entered into a strategic partnership with Merida Capital, a private equity fund targeting the cannabis industry. Kush has received a $6 million equity investment from Merida, which the company will use to expand its product portfolio, build new distribution channels and penetrate new legalized markets.

The announcement comes in the wake of the company reporting a 285% rise in revenue for the first fiscal quarter of 2018, with a net income of $94,615 compared to the previous year’s loss of $161,000.

The strategic partnership will leverage Merida’s strong East Coast presence to help build Kush Bottles’ distribution platform and expand the company’s footprint in East Cost medicinal and recreational market; offering the opportunity for the company to develop and execute its acquisition pipeline with Merida’s help.

In a statement Nicholas Kovacevich, the Chairman and CEO of Kush Bottles said that Merida’s understanding of the unique dynamics of the cannabis industry, as well as its strong networks and willingness to finance Kush Bottles’ growth, would serve as an invaluable asset as the company moves to explore new markets and opportunities.

“We plan to use this capital investment to expand our range of proprietary products to meet the needs of the industry, advance our M&A strategy to take advantage of consolidation in the industry and grow market share,” Kovacevich said.

Echoing Kovacevich’s words, Merida’s Managing Partner, Mitchell Baruchowitz, expressed admiration for the team behind Kush Bottles and their work.

“Since we first started discussing a partnership and investment in Kush Bottles nearly seven months ago, we have been deeply impressed by the vision of Nick and his team and the progress they have made strategically positioning Kush Bottles as much more than simply a packaging company. Kush Bottles’ acquisitions and in-house development efforts have established the Company as a critical link in the supply chain for more than 5,000 cannabis growers, extractors, manufacturers, and retailers. The Merida team could not be more excited to put significant resources to work to build on this foundation to expand Kush Bottles’ leading position,” added Baruchowitz.

About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


Recent Tweets

@GreenMarketRpt – 3 hours

Berkeley cuts . Will more Cali towns follow? Fitch says it’s because of the black market.

@GreenMarketRpt – 2 days

$GWPH stock fell 6% in after-hours trading after reporting one of its compounds failed a mid-stage study

@GreenMarketRpt – 2 days

The best hemp clothing designer out there.

Back to Top