MedReleaf Archives - Green Market Report

Debra BorchardtJune 19, 2018


Canadian cannabis company MedReleaf Corp. reported that its sales increased 8% to C$43.6 million for the fiscal year 2018, still the company reported a net loss of C$7.5 million. The fiscal fourth-quarter sales rose 16% to C$12 million and a net loss of C$812,000. The company attributed the losses to increased overhead costs and investments in recreational brands, international business initiatives, and increased research and development efforts.

“In fiscal 2018 we set new records for sales and volume, introduced brands for the adult-use market, expanded our international presence, commercialized new proprietary cannabis varieties, more than doubled our production capacity and MedReleaf was named Top Licensed Producer at the 2017 Canadian Cannabis Awards,” said Neil Closner, CEO of MedReleaf. “I’m immensely proud of our achievements to build a reputable, respected, and enduring business founded on integrity, high quality and strong execution, and I am confident MedReleaf will bring tremendous value to Aurora, as we combine to create a preeminent global cannabis company.”

Extract sales for the fourth quarter increased by C$1.4 million from the previous year to C$2.4 million and representing 20% of total sales. With the launch of topical creams, soft gel capsules, future product development initiatives, and growing industry demand, MedReleaf expects sales of extract products to account for an increasing percentage of the Company’s overall revenue in the future.

The company reported that in the fourth quarter the average selling price per adjusted gram of $8.43 fell from $8.66 for the prior year period. According to the company, the cash cost per gram sold at $1.40, a drop from the previous year’s $1.49 due to increased production and yield improvements that resulted in improved efficiencies in labor utilization and allocation of fixed costs.

Quarter Highlights

MedReleaf introduced three proprietary varieties of premium medical cannabis developed by the company’s internal R&D program. It also received approval for and launched the first color-coded and strain-specific cannabis oil soft gel capsules on the market. MedReleaf closed a bought deal offering of 5,000,000 units at a price of $26.50 for aggregate gross proceeds of $132,500. It also signed an agreement to become the largest supplier to Cannamedical Pharma GmbH, a leading medical cannabis distributor in Germany with a network of over 1,800 pharmacies.

Stock Performance

MedReleaf OTC traded stock was rising by 4% on the news of the earnings to lately trade at $20.95, down from its year’s high of $24.99. The Toronto Exchange traded stock was rising by 5% to lately trade at C$28.00 down from its 52-week high of C$31.25.


StaffMay 14, 2018


It’s time for your Daily Hit of cannabis financial news for May 14, 2018.

On The Site

Canopy Growth

Canadian-based medical marijuana company Canopy Growth (TWMJF) announced that it has applied to the New York Stock Exchange (ICE) to list its shares. The company said that it expects to begin trading at the exchange by the end of May using the ticker symbol CGC. The company currently trades in Canada on the Toronto Stock Exchange using the symbol WEED and also on the OTC Markets with the symbol TWMJF. The New York Stock Exchange has been reluctant to engage with cannabis companies citing the legality of marijuana in the United States, although a handful of entities like Innovative Industrial Properties (IIPR) and India Globalization Corp. (IGC) have squeaked in. It seems Canadian-based companies pass the smell test since marijuana is legal in that country.

In other news, Canopy said that it planned to acquire 33% of BC Tweed Joint Venture Inc., which are the shares that it didn’t already own. That deal is expected to close in July and as a result, Canopy said it will issue $374 million worth of its common stock.

Aurora Cannabis

After denying rumors last week about a potential acquisition, Aurora Cannabis (ACBFF) announced that it was entering an agreement to acquire MedReleaf (MEDFF) in a deal valued at C$3.2 billion. The acquisition brings together two leading producers in Canada’s medical marijuana community enabling them to deliver a capacity of over 570,000 kg of cannabis a year. MedReleaf is known for its ability to reduce the cash cost per gram while still delivering a premium product, Aurora is equally known for its automated greenhouses and low production costs.

According to a company statement, MedReleaf shareholders will get 3.575 common shares of Aurora for each share they own of MedReleaf. The statement read, “Upon completion of the transaction, existing Aurora and MedReleaf shareholders would own approximately 61% and 39% of the pro forma company, respectively, on a fully diluted basis. The Exchange Ratio implies a price of C$29.44 per MedReleaf common share and a premium of approximately 34%, based on the 20-day volume weighted average prices of Aurora and MedReleaf common shares on the Toronto Stock Exchange as of May 11, 2018 .”

In Other News

iAnthus Capital Holdings

After the market closed on Monday,  iAnthus Capital Holdings (ITHUF) announced that it received $50 million investment from Gotham Green Partners, which management believes to be the largest investment to date by a single investor in a publicly traded U.S. cannabis operating company. The company plans to allocate the proceeds of this financing by repaying $20 million of a one-year note and accrued interest to VCP Bridge LLC, continued cultivation and dispensary build-outs in New York and Florida markets and potential expansion activities consistent with iAnthus’ strategic objectives.

Gloucester Street Capital

Gloucester Street Capital, an owner of one of only 10 medical cannabis cultivation and dispensary licenses in New York State, has closed a $6.5 million growth capital round. Viridian Capital Advisors, through its broker-dealer Pickwick Capital Partners, LLC,  served as the placement agent for the Company.

General Cannabis

General Cannabis (CANN)  announced first quarter financial results with revenues of $942,482, a 31% increase over 2017 first quarter revenues of $719,105.  The stock fell over 2% as the net losses rose 70% year over year to $4.4 million versus last year’s net loss of $2.6 million.
“We continue our focus on organic growth and driving each business segment to profitability,” said Joe Hodas, Chief Operating Officer of General Cannabis.  “We have an aggressive, but achievable, plan to grow revenue in each of our existing business segments, while also evaluating opportunities for operational efficiencies. Hodas continued, “While California’s regulated market’s rollout has been slower than anticipated, we made great progress in the quarter developing several key relationships that we believe will generate revenue for both our Security and Operations segments in the second quarter and throughout 2018.”

Emblem Corp.

Emblem Corp.  (EMMBF) and Canntab Therapeutics Limited (CSE: PILL) announced the receipt of Health Canada approval for research and development activities on oral sustained release formulations of cannabinoids, which are the proprietary products conceived by Canntab representing significant progress in Emblem and Canntab’s partnership to develop long-acting cannabis formulations.

Cannabis Wheaton Income Corp. 

Cannabis Wheaton Income Corp. (CBWTF) announced that it entered into a definitive licensing agreement with Dixie Brands, Inc. pursuant to which Cannabis Wheaton will have the exclusive license to Dixie’s intellectual property, product branding and formulation methodologies related to over 100 cannabinoid-infused products in Canada and Mexico.

Debra BorchardtMay 14, 2018


After denying rumors last week about a potential acquisition, Aurora Cannabis (ACBFF) announced that it was entering an agreement to acquire MedReleaf (MEDFF) in a deal valued at C$3.2 billion. The acquisition brings together two leading producers in Canada’s medical marijuana community enabling them to deliver a capacity of over 570,000 kg of cannabis a year.

MedReleaf is known for its ability to reduce the cash cost per gram while still delivering a premium product, Aurora is equally known for its automated greenhouses and low production costs. Both companies have focused on creating extensive distribution channels and setting up international contracts.

Sean Stiefel, Portfolio Manager and CIO of Navy Capital, said, “The risk to the Aurora story was their ability to grow high-quality flower. MedReleaf is one of the most confident growers, we put them right up there with Organigram. They are universally regarded as having the best flower in Canada.” Steifel said that Aurora really needed to do this deal.

According to a company statement, MedReleaf shareholders will get 3.575 common shares of Aurora for each share they own of MedReleaf. The statement read, “Upon completion of the transaction, existing Aurora and MedReleaf shareholders would own approximately 61% and 39% of the pro forma company, respectively, on a fully diluted basis. The Exchange Ratio implies a price of C$29.44 per MedReleaf common share and a premium of approximately 34%, based on the 20-day volume weighted average prices of Aurora and MedReleaf common shares on the Toronto Stock Exchange as of May 11, 2018 .”

The is the second big-name acquisition in which Aurora has paid a premium. Shares of MedReleaf closed at C$24.90 on the TSE as of last Friday as the stock popped almost 8% on the rumors. Also last week, Aurora reported its earnings and despite the increase in revenue, losses for the company were quite high. Aurora delivered a net loss of $20.8 million. The quarterly loss was largely attributed to share-based payments and the costs associated with acquiring CanniMed Therapeutics. Aurora ended up paying a premium for CanniMed as the hostile takeover caused the price of the acquisition to rise.

“They view their stock as a currency right now in a race for growth,” said Stiefel, who has the biggest US-based Long/Short Global equities fund focusing on the cannabis industry. “The deal was done on friendly terms and it was an all-stock deal. Their biggest risk factor was the ability to grow at scale a high-quality product. Aurora needed to do something because the market was concerned about the progress of their new facilities.” He added. “They are also picking up one of the most capable CEO’s in the sector in Neil (Neil Closner, MedRelea). I think it will set off further M&A.”


Management Comments

“This is a transformational transaction that brings together two pioneering cannabis companies, both committed to high technology, high quality, and low-cost production, to create a powerful platform for accelerated growth and success on a global scale,” said Terry Booth, CEO of Aurora. “Our complementary assets, strategic synergies, and strong market positioning will provide us with critical mass and an excellent product portfolio in preparation for the adult consumer use market in Canada. Equally, the combination strengthens our capacity to service the rapidly expanding global medical cannabis markets, and amplifies our early-mover advantage. We are very excited about the combination of our respective science and R&D teams, which will position us exceptionally well for the development of high value-added products, addressing as yet unmet needs in the medical markets, and driving continued innovation for the adult consumer use market.”

Neil Closner , CEO of MedReleaf, added, “MedReleaf was founded on the belief that by striving to be the Medical Grade Standard and bringing the highest level of quality and rigor to the cannabis industry, we would produce safe, consistent, and effective products that help improve the quality of life of our patients and, in time, provide an unrivaled experience for the adult use consumer. This, in turn, would drive growth and opportunity for our business. By combining with Aurora, an integrated producer with an exceptionally strong track record for execution, and deep domestic and international distribution capabilities, we will be ideally positioned to set the global standard for our industry at a pace that will be difficult to match.”

Debra BorchardtMay 4, 2018


It’s time for your Daily Hit of cannabis news for May 4, 2018.

May the 4th be with you.

Aurora Cannabis, MedReleaf

The rumor mill was pretty heated with talk of a big deal between Aurora Cannabis (ACBFF) and MedReleaf (MEDFF). Both company stocks were halted as trading levels entered the “unusual trading” territory. Both companies issued statements saying that there was no deal on the table. Aurora said it engages in such talks with many companies and had even talked to MedReleaf, but there was no deal this time. Aurora is number two in the Canadian marketplace and a combination with MedReleaf would put it within shooting distance of Canopy Growth.

CannaRoyalty Corp.

CannaRoyalty Corp. (CNNRF) announced that its wholly-owned California-based distribution subsidiary, Alta Supply, generated record monthly revenue of ~US$840,000 in the month of April 2018.

The company said in a statement that the number of licensed dispensaries in California decreased from December 2017 to January 2018 as enhanced state-wide regulation was implemented concurrently with the transition to a full recreational adult-use market. As a result, fewer licensed dispensaries exist in the state today than in December 2017. This is a short-term phenomenon as operators work towards compliance. Because of this rapid market reset from December 2017 to January 2018 Alta Supply and RVR experienced a year-over-year decline in revenue at the beginning of 2018 along with their peers. However, as the April revenue figures reported today demonstrate, both companies have steadily and powerfully grown revenue even over a lower dispensary base.

 Isodiol International Inc. 

Isodiol International Inc. (ISOLF) announced that it has signed a Letter of Intent with Zenabis Ltd. one of Canada’s largest Licensed Producers, to import CBD isolate as an Active Pharmaceutical Ingredient, into Canada from Isodiol’s GMP-certified production facility in the United Kingdom. Marcos Agramont, CEO of Isodiol, stated: “Isodiol is pleased to announce another supply agreement for its highest quality, pharma grade CBD isolate. Zenabis’s team is working on various R&D projects focused on developing new products and applications, and we are pleased to be a key partner in enabling this R&D process.”

StaffApril 12, 2018


These are the cannabis news briefs for April 12, 2018:

On The Site

Hemp Bill

Industrial hemp may soon be legal in the United States. On April 12, 2018, United States Senate Majority Leader Mitch McConnell introduced the Industrial Hemp Act of 2018, a bill legalizing industrial hemp nationwide.

Under the proposed legislation, hemp would become legal in the United States and would no longer be listed as a controlled substance. This would allow hemp farmers to have access certain services and rights that they were previously blocked from. For example, hemp farmers would gain access to banking services, waters rights, and would be able to apply for flood insurance. Individual states would be able to self-regulate hemp production so long as they develop a program to monitor its production.


MM Enterprises USA, better known as MedMen Enterprises, announced its intentions to purchase OutdoorPartner Media Corporation in a reverse takeover, with the combined company becoming publicly traded in Canada. MedMen says it will exercise a “reverse takeover,” (RTO), in which shareholders of a private corporation purchase a public company. What is interesting about MedMen’s proposed transaction is RTO’s usually coincide with the company that is being acquired to be listed on an exchange. Currently, OutdoorPartner Media is not listed on any exchange, but it is public.

In Other News

MedReleaf Corp.

MedReleaf Corp. (MEDFF) announced that it closed its previously announced agreement to acquire 1 million square feet of existing greenhouse infrastructure on a 69 acre-property in Exeter, Ontario and 95 acres of adjacent land. The total purchase price for the transaction is approximately $26 million, consisting of $21.5 million in cash and 225,083 common shares of MedReleaf.

Nutritional High International Inc. 

Nutritional High International Inc.  (SPLIF)  announced the approval of its conditional use permit application by the City of Sacramento, for a 9,000 square foot property located in Sacramento that is being leased by the company. The CUP approval sets out the conditions of using the Sacramento Property to manufacture cannabis products using non-volatile solvents, which brings the company closer to being licensed to manufacture cannabis products in-house, rather than relying on contract manufacturing partners.

Bahamas Development Corporation

Bahamas Development Corporation (BDCI) subsidiary company Cannabis Consortium, Inc. and its partners are acquiring an exclusive license to manufacture and distribute in California the entire range of THC and CBD products belonging to an award-winning Edible Infused Candy Company. The Edible Company currently has distribution in approximately 400 retail outlets and generated approximately $2 million in revenue over the prior 12-month period. The Edible Company gives Cannabis an instant and expanded network to distribute its non-competing products in CA while working with its current Cannabis Distillate partners’ distribution channels in California and Oregon.

National Access Cannabis Corp.

National Access Cannabis Corp.(TSX VENTURE: NAC) and The Second Cup Ltd.  (SCU.TO), Canada’s second-largest retailer of specialty coffee,  announced that they have established a strategic alliance to develop and operate a network of NAC-branded recreational cannabis dispensaries initially across Western Canada, expanding to include additional provinces where legally permissible. NAC will apply for licenses to dispense cannabis products and upon receipt, work with Second Cup and applicable franchisees to leverage Second Cup’s extensive Canadian retail footprint to construct retail stores carrying leading cannabis products, including products supplied by CannaRoyalty Corp. (CNNRF).

Debra BorchardtApril 11, 2018


Here are your daily cannabis news briefs for April 11, 2018:

On The Site

Acreage Holdings

The big news this week is that former Speaker of the House John Boehner and former Massachusetts governor Bill Weld have joined the board at the up & coming Acreage Holdings. The company was formerly known as High Street Capital and initially got into the cannabis industry to make investments. It has pivoted from investor to owner and now has ownership of properties in 11 states. The company focuses on medical marijuana but expects to transition to adult-use as legality permits.

Altitude Investment Management

Altitude Investment Management raised  $18.7 million in capital from more than 50 investors for its fund Altitude Investment Partners, which invests in a range of early-stage to growth companies in the emerging legal cannabis industry. This is a major step toward the $50 million target the firm has set for the next 11 months.


Cannabis workforce software company Wurk announced that it has raised $3.2 million in a bridge funding round. The funding round included participation from both new and returning investors, including Poseidon Asset Management, which led the round, as well as Phyto PartnersAltitude Investment Partners, Arcview Investor Network and Arcadian Fund.

Other News


MM Enterprises USA, LLC, better known as MedMen Enterprises, announced today that it has entered into a binding “Letter of Intent” outlining the proposed terms and conditions pursuant to which MedMen Enterprises will effect a reverse takeover of OutdoorPartner Media Corporation. MedMen Enterprises will become a publicly traded company through a reverse takeover, or RTO. In an RTO, the security holders of a private company that aims to become publicly traded take over an existing public company. OutdoorPartner Media Corporation is an unlisted Canadian public company.


Kush Bottles

Kush Bottles (KSHB) entered into a merger agreement to acquire Summit Innovations, LLC. As per the merger agreement, Summit Innovations, LLC will merge into a wholly-owned subsidiary of Kush Bottles in exchange for 1.28M shares of Kush Bottles common stock and $3.2M in cash, a portion of which will be held back to satisfy certain post-closing obligations.

MedReleaf Corp.

MedReleaf announced that it has completed a supply agreement with Société des alcools du Québec (“SAQ”) to supply the future Société québécoise du cannabis (SQDC) with high-quality adult recreational-use cannabis products in accordance with the previously announced Letter of Intent. Under the terms of the agreement, MedReleaf is committed to supplying the Quebec market with 8,000 kilograms of cannabis products per year with a minimum three-year term.

Emblem Corp. 

Fire & Flower, a corporate retail cannabis store, announces that it has entered into a preferred cannabis supplier agreement with Emblem Corp.(EMMBF). Fire & Flower plans to launch retail cannabis stores across Canada. Within Alberta alone, Fire & Flower has applied for 37 retail store licenses with the Alberta Gaming and Liquor Commission (AGLC). Its experienced, industry-leading team will continue to aggressively pursue applications for retail licenses in other provinces at its earliest opportunity.


Debra BorchardtFebruary 13, 2018


MedReleaf Corp. (MEDFF) delivered mixed results for its third quarter fiscal 2018 as sales increased, but so did the losses. The company reported sales of $11.4 million, an increase of 9% over last year and a sequential increase of 16%. Yet, the company still recorded a net loss of $5 million versus last year’s net income of $1.7 million.

According to the company statement, the loss was “mainly due to costs incurred related to the company’s stock-based compensation expense, fair value loss related to the company’s deferred share unit (DSU) plan, increased operating and overhead expenses, and increased advertising and promotional expenses.”

Earnings also slipped as the adjusted EBITDA for the quarter was ($0.2) million, a decrease of $4.3 million from $4.1 million for the prior year period. The drop in earnings was attributed to “overhead costs to support the Bradford Facility; increased expenditures related to professional fees; business development; increased patient support costs to support patient demand; investments in sales, marketing, and brand development; increased human resource talent to support current and future growth; and as a result of the VAC Policy, the company offering discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication.”

On a positive note, the company sold a record 1,263 kilograms of cannabis products, an increase of 27% from the previous year and a 20% increase sequentially. The average selling price per gram was $ 8.98, a decrease from last year’s $10.50 due to the reduction in VAC reimbursement pricing. Sales of cannabis-based extract products were $2.3 million, or 21% of total sales.

The cash cost per gram sold rose dramatically to $1.83, a big increase from last year’s $1.55. MedReleaf said this was primarily due to increased plant operating costs and fixed overhead attributable to the Bradford Facility. The company stated that it expects the cash cost per total gram to improve as the Bradford facility is completed and the company can capitalize on greater efficiencies of scale. MedReleaf has an additional $9 million to spend on the Bradford facility.

Solid Cash Position

The company is in good shape with regards to cash as it closed on a bought deal equity financing that brought in gross proceeds of approximately $132.5 million. At the end of December 31, 2017 , MedReleaf had cash and cash equivalents of $114.6 million and working capital of $137.9 million.

Looking Ahead

On February 6, MedReleaf announced it has received Health Canada approval for the sale of its cannabis oil softgel capsules, becoming the first LP to bring color-coded and cannabis variety-specific softgel capsules to market. Also last week, MedReleaf introduced its first adult-use recreational brand, San Rafael ’71. The company also announced an agreement to become a medical cannabis supplier to Shoppers Drug Mart during the quarter.

Stock Performance

MedReleaf stock on the Toronto Exchange hit a 52-week high in early January as it topped out at C$31.25, but has fallen since hitting C$15.74 on February 2. Lately, the stock has begun climbing back and was recently trading at C$18.54.  The 52-week range for the OTC Marketplace stock was $5.85-$24.99. It was higher by 2.6% on the earnings news, trading at $14.67.

Debra BorchardtJanuary 12, 2018


ICR Inc. held its retail conference in Orlando, FL this week. This “invitation only ” event is mostly retail operations and restaurant/food businesses. It is heavily attended by the investment community looking to get updates on big names like Lululemon (LULU), but also to see where the buzz is for up and coming private companies. This year the conference started to include cannabis companies in the mix.

On the public side, MedReleaf’s (MEDFF) CEO Neil Closner made a presentation and on the private side emerging company Acreage Cannabis Holdings (formerly High Street Capital) presented to a packed room. MedMen’s Jim Carmack was part of a panel that was hosted by Cowen & Co. analyst Vivien Azer, which included MedReleaf, Acreage and me for Green Market Report. There was tremendous interest in the industry from the crowd that had little awareness of the size and growth of cannabis companies.

Cannabis panel at the ICR Inc. conference in Orlando, FL. From left to right, Kevin Murphy CEO Acreage Cannabis Holdings, Vivien Azer Cowen & Co., Debra Borchardt GMR, Neil Closner CEO MedReleaf and Jim Carmack Managing Director of Development MedMen

In his presentation, Closner said that he expected substantial consolidation and the winners will emerge. He noted that MedReleaf already has a 20% market share and he expects his company to be one of the winners. Revenue for the fiscal year of 2017 increased 109% over the fiscal year 2016. For the first half of fiscal year, 2018 revenues are up 4% versus the same time period for 2017.

Closner believes his company will be a winner because most of his competitors had failed to turn a profit. MedReleaf has taken a page from the pharma playbook and zeroed in on patients that would result in the highest volume of prescriptions and usage. The company has also focused on being a low-cost producer. MedReleaf’s cash cost per gram is $1.46, but its average selling price per gram is $9.34 giving it an average 70%+ adjusted contribution margin.

Closner also said he believes international markets will be substantially larger than Canada’s recreational marijuana market, which is why the company is putting so much effort in Germany and Brazil. He expressed relief that MedReleaf had not acquired or taken a stake in any American companies following the move by Sessions to rescind the Cole Memorandum.

Acreage Cannabis Holdings is invested in cannabis companies in 11 different states. CEO Kevin Murphy said, “We will see massive consolidation in this business. We will be on that podium and that is a fact. We are not going to give up this position anytime soon.” He said that his company estimates it will do $130 million in revenue in 2018 and projects that will rise to $3 billion by 2020. He also suggested that the company planned on going public this year.

MedMen’s Carmack agreed that not all cannabis companies will succeed. MedMen now has 13 facilities under its management. Its strategy is to identify key dispensaries, acquire them and then turn it into a MedMen branded retail operation. The company also raises millions for investment purposes.


Debra BorchardtJanuary 9, 2018


MedReleaf Corp. (MEDFF) stock popped over 7% on the OTC Marketplace following the announcement of a $100 million bought deal. Shares jumped over 7% to lately trade at $23.66. This is near the high of its 52-week range of $24.99.

The company announced that it has entered into an agreement with Canaccord Genuity Corp. and GMP Securities L.P.  to purchase, on a bought deal basis  3,800,000 units of the company at a price of $26.50 per share for aggregate gross proceeds of $100.7 million. The deal is expected close on or around January 31, 2018.

According to the company statement, MedReleaf plans on using the net proceeds to finance the acquisition and/or construction of additional cannabis production and manufacturing facilities in Canada as well as in other jurisdictions with federal legal markets.

Each unit will consist of one common share and one-half of one common share purchase warrant of MedReleaf. Each warrant will be exercisable to acquire one common share of the Company for a period of two years following the closing date at an exercise price of $34.50. In the event that the volume weighted average trading price exceeds $51.75 for ten consecutive days, MedReleaf will have the right to accelerate the expiry date of the warrants upon not less than fifteen trading days’ notice.

MedReleaf is the first and only ICH-GMP and ISO 9001 certified cannabis producer in North America. MedReleaf is an R&D-driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis. Sourced from around the world and carefully cultivated in one of two state of the art facilities in Ontario, MedReleaf delivers a variety of premium products to patients seeking safe, consistent and effective medical cannabis.

Cannabis stocks tumbled last week after Attorney General Jeff Sessions rescinded the Cole Memorandum which gave a level of protection to the cannabis companies in U.S. The Cole Memo also made Canadian companies feel a little more secure when dealing with the U.S. So far there has been little response with regards to immediately arresting companies engaged in the cannabis industry. Instead, states, where marijuana has been legalized, have vowed to fight back.

Debra BorchardtOctober 18, 2017

On Tuesday, the Toronto Stock Exchange issued a statement regarding cannabis companies that are listed on its exchange and are pursuing businesses in the United States. The exchange issued a bulletin saying that due to a significant number of inquiries that it had received about cannabis activities in the U.S. it was providing clarification.
The statement read, “The Exchange is aware that a number of U.S. states have legalized the cultivation, distribution or possession of marijuana to various degrees and subject to various conditions. Nevertheless, marijuana remains a Schedule I drug under the U.S. federal Controlled Substances Act. This means it is illegal under U.S. federal law to cultivate, distribute or possess marijuana in the United States.” The exchange noted that these companies could face money laundering issues with the U.S. government and that issuers that violate U.S. law are not complying with the exchange’s requirements.
There has been a flood of Canadian money coming down to the U.S. and making huge investments since they were flush with public market money. This is difficult news for some Canadian companies like Aphria (APHQF) which has jumped heavily into American businesses. Aphria stock slid 13% on the news yesterday. It may also affect other Canadian cannabis companies listed on The TSX, as well as the TSX Ventures Exchange that may have planned on entering the U.S. as part of its business strategy.
MedReleaf (MEDFF) took the opportunity to promote its purely Canadian strategy. “The TSX Staff Notice removes the uncertainty for issuers that were already adhering to the Requirements and validates our strategy of focusing on markets that are federally legal and offer federal regulatory guidelines,” said Neil Closner, CEO of MedReleaf.  “Until there is further clarity on the U.S. market at the federal level, we will focus on growth areas within Canada and elsewhere in the world that have federal regulations in place, minimizing risk to the business and our shareholders.”
The exchange is also separating its cannabis companies into two groups, which essentially boil down to whether the company “touches the plant” or not. The exchange is reaching out to its issuers before the end of the year to review the bulletin. It also strongly recommended that “applicants and listed issuers considering engaging in marijuana-related activities in the United States consult with the Exchange and consider the guidance in this Bulletin accordingly.”

The Canadian Securities Exchange seemed to be pretty happy with the news. It isn’t the behemoth that the TSX is and bills itself at the Exchange for Entrepreneurs. The CSE commented on the Canadian Securities Administration’s staff notice that pushed the TSX to make a change. “We are grateful to the CSA for issuing timely and carefully considered guidance regarding current and prospective reporting issuers focused on the U.S. cannabis sector,” commented Richard Carleton, CEO of the CSE. “This document provides significant comfort to these issuers that their Canadian listings will remain in good standing as long as they provide the disclosure that is rightly required by regulators.”

“We are also committed to ensuring that there is no disruption to the central clearing, depository and settlement services provided by these issuers. We are working with the relevant stakeholders on this matter and are very confident that companies will continue to have trades in their securities cleared and settled.”

Many of the Canadian cannabis companies have also listed shares in the U.S. with the OTC Markets Group, Inc. (OTCM). It may push some of these businesses out of the Canadian Markets to trade solely in the U.S. or leave the Toronto Stock Exchange to go to the Canadian Stock Exchange.

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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


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