Schwazze (OTCQX: SHWZ) posted positive results on Thursday as the company expands in its quest to become a commanding regional MSO.
The Colorado-based seed-to-sale operator — formerly known as Medicine Man Technologies — delivered its second-quarter financial report card ending June 30, 2022.
Schwazze delivered approximately $44.3 million in total revenue during the period, a 44% gain versus the same period last year — right in line with the Yahoo Finance Average analyst estimate for revenues of $44.26 million.
The company said that the increase was due to rising sales of its products as well as revenue from its new retail acquisitions. Additionally, the company is finding profits in newly-recreational markets such as New Mexico since April.
Schwazze said that wholesale revenues in Colorado decreased due to “increased cultivation capacity in the state resulting in an over-supply of wholesale cannabis materials.”
The company also reported a net income of $33.8 million versus a net loss of $4.4 million in the same period last year. The gain is a reversal after losing $26.8 million in the previous quarter.
Diluted earnings per share in the fourth quarter was $0.24 cents versus diluted earnings per share of eight cents in the same period last year — above a diluted loss per share of six cents in the previous quarter, according to SEDAR filings.
“Similar to the rest of the country, the cannabis industry in Colorado is also experiencing a slowdown in growth compared to the last couple of years,” CEO Justin Dye said. “Schwazze, however, is demonstrating that our regional strategy, built on a customer-first approach, developing significant scale, building brands, and leveraging data analytics and technology is not only sound but gaining momentum as demonstrated by revenue and unit sales growth, customer loyalty and by once again outpacing the legacy market growth by approximately 12%.
We believe this model will travel well to other states as we find attractive opportunities. Despite share price weakness driven by broader market influences, we remain bullish on our business and have conviction that as Schwazze continues to deliver superior operating results that our shareholders will be rewarded.”
Schwazze is lowering its guidance for 2022 revenue, citing “challenging Colorado market conditions.” Schwazze’s new forecasted range for revenue is $175 million–$200 million, far below a range of $220 and $260 in the previous quarter. Adjusted EBITDA guidance is estimated to be $60 million–$72 million, down from previous quarter expectations of $70 to $82 million profit.
“During Q2 we focused on completing integration of our acquisitions and made sure that we used our resources effectively,” said CFO Nancy Huber. “We are focused on reducing operating and SG&A expenses and judiciously investing growth capital to ensure adequate liquidity and profitability despite difficult market conditions in Colorado, which we believe to be transitory and temporary. Our balance sheet remains strong, and we have ample liquidity.”
“We are focused on delivering positive cash flow net of acquisition costs for the year while driving organic growth and making smart acquisitions,” she added.
Adjusted EBITDA was $15 million in the second quarter of 2022, versus earnings of $10 million in the same period last year.
Seeing It Through
The dialogue from leadership this quarter is one a bit more optimistic than the previous.
“As we continued our successful transformation into a Regional MSO in the first quarter of 2022, we met certain challenges, including the comparison cycling of an inflated Q1 2021, which was aided by stimulus checks and COVID lockdowns,” Dye said at the time. “Colorado’s high COVID rates during Q1 2022 also impacted sales and internal staff. The devastating Marshall Fires in and around Boulder in January of this year, caused one store to temporarily close and the store has been further impacted due to a displaced population in and around Boulder County.
Also, overall sales and a decrease in wholesale revenue was largely impacted by wholesale distillate pricing pressure and over-supply in the state of Colorado.”
Dye at the time did, however, express that he remained optimistic that the company would see rising profits as its expansion efforts bore fruit in emerging state markets.
Cannabis deal tracker Viridian Capital Advisors issued a “Buy” rating at a $2.55 price target for the company in last September, calling Schwazze a “profitable and cash generating operator in Colorado with a meaningful and scaling presence in the to-date fragmented state,” wrote Director of Equity Research Jonathan DeCourcey.
“We expect MSOs to increasingly target large established markets like Colorado to support growth in the absence of interstate sales,” DeCourcey wrote. “Furthermore we expect expansion to come in the form of large scale acquisitions of companies that can be plug-and-play contributors to results in order to excite investors and boost valuations. We believe GAGE’s recent takeout by Terrascend and Harvest’s Trulieve deal highlight this theme.
In our view, Schwazze would be a solid takeout candidate for any MSO with Colorado aspirations. We believe even the perception of an acquisition is likely to drive upside in the stock from current levels.”
The back story of the cannabis concept stock Bright Green (NASDAQ: BGXX) involves a burned-down building, a years-long battle with the state of New Mexico, a bankruptcy case, and an angry former CEO who is accusing the company of fraud. Bright Green recently began trading on the NASDAQ (NDAQ) as a direct listing, not as an Initial Public Offering (IPO). The stock shot up almost immediately to $58 and has since sold off and was lately selling at $3.54.
Direct Listing vs. IPO
In an IPO situation, founders, employees, and other early-stage investors are typically restricted from selling their stock right away. According to the NASDAQ website, “Companies choosing a direct listing typically have had no immediate need for additional capital, have a large and diverse shareholder base and are a well-known brand with an easy-to-understand business model. Recent examples of direct listings include Coinbase (COIN) and Spotify (SPOT).”
No additional shares are offered to the public, which reduces scrutiny. The public can only buy the shares that are sold by the insiders. Requirements from NASDAQ about direct listings state that in the NASDAQ Capital Market guidelines, “The listing company must have a recent valuation from an independent third party indicating in excess of $10 million to $30 million in the aggregate market value of publicly held shares, depending on the financial standard met. (Rule 5505).” In addition to the valuations, companies also have pre-tax income requirements – which Bright Green doesn’t meet. In fact, the company only has net losses. This valuation figure is a key element in the complaint from the former CEO John Fikany.
Lucky for Bright Green it clearly states in its S-1, “Because of our novel listing process on the Nasdaq Capital Market, Nasdaq’s rules for ensuring compliance with its initial listing standards, such as those requiring a valuation or other compelling evidence of value, are untested. In the absence of a prior active public trading market for our common stock, if the price of our common stock or our market capitalization falls below those required by Nasdaq’s eligibility standards, we may not be able to satisfy the ongoing listing criteria and may be required to delist.” So, the company discloses right up front that it may not be able to even stay listed on NASDAQ.
There are currently several companies that have been approved by the DEA to sell cannabis to the Federal Government for research purposes, so the concept cannabis company actually does have existing companies for comparison in order to determine a true valuation. Granted they aren’t trading publicly, but they aren’t untested with regard to valuations. However, it doesn’t matter because Bright Green already says if it can’t meet those requirements then it will just delist. That’s of course after insiders sell their shares.
Another thing that is unique about companies going public is that the SEC requires a bankruptcy to be disclosed to potential shareholders. The idea is that investors should have adequate information in order to make a wise investment decision. In the case of Bright Green, the company states that no director or executive officer has filed for bankruptcy. In 2017, John Stockwell was listed as the CEO of Bright Green according to this Albuquerque story which stated the greenhouse would open in 2017. He is no longer listed as having a role in the company. However, his wife Lynn Stockwell is a Director of Bright Green and John Stockwell did file for bankruptcy in the state of New Mexico in 2015.
Stockwell is a Canadian citizen and his next-door neighbor in Canada was Jerry Capussi who is suing for shares of Bright Green. According to the bankruptcy documents, in about 2003 Stockwell purchased the assets of Agstar of New Mexico, Inc., including greenhouses in Grants and Estancia, New Mexico. These properties became the Sunnyland Farms.
Sunnyland Farms Burns Down
The documents state that Stockwell approached Capussi and asked for assistance in starting a greenhouse business in New Mexico. Although Capussi never signed any contracts with Stockwell, he met with state officials, helped put together business plans, talked to potential vendors, traveled to New Mexico, provided meeting facilities, and the like. That business was called Sunnyland Farms based in Grants, New Mexico where Bright Green Cannabis is based.
Unfortunately, one of Stockwell’s employees inadvertently started a fire at the Estancia greenhouse. Even worse, the Central New Mexico Electric Cooperative (“CNMEC”) had shut off the electricity at the greenhouse. Without electricity, they couldn’t pump water to fight the fire, and the Estancia greenhouse was destroyed. The fire apparently devastated Stockwell financially according to the bankruptcy documents.
He sued CNMEC in 2005, alleging that the utility wrongfully disconnected the electricity service and was awarded about $22 million in damages. CNMEC appealed the judgment and won giving Stockwell little more than his attorney fees. On further appeal, in 2013 the New Mexico Supreme Court reversed the Court of Appeals’ decision in part, increasing Stockwell’s award to about $7.4 million. CNMEC gave up and paid this judgment amount. After attorney fees were deducted, he was left with about $5.45 million in cash. Unfortunately, this was “fully encumbered by the first lien of the Stockwell’s pre-petition secured lender.” Capussi was awarded $108,000, which was a much smaller amount than the $2 million he had wanted. The Bright Green filing says that Capussi is suing for 108,000 shares of the company. At some point during these years, it seems the Sunnyland greenhouses were transferred to Lynn Stockwell who then transferred the property to Bright Green.
Former CEO Claims Fraud
In addition to the Capussi lawsuit, Bright Green’s former CEO John Fikany is also suing the company. Michigan-based Fikany is an accomplished executive who was once Vice President, North America sales strategy for Oracle, Vice President at Microsoft, and Vice President at Quicken Loans. In his lawsuit, he claims that the Stockwell’s approached him to be CEO. Even though he said he had other offers on the table, the Stockwells said they could pay more. He began working for the company on May 1, 2018, as CEO with a salary of $1 million and was to receive $500,000 on the first day of employment. He was also to get 2.5 million shares. Fikany also says in the lawsuit that his employment wasn’t contingent on any specific measures of success. After six months of work, Fikany had yet to be paid.
While he was employed, Fikany was working on a deal for Bright Green to develop a cultivation facility on Indian land with the Acoma Pueblo tribe. The deal had been in the works prior to Fikany coming on board but hadn’t actually closed. According to the court document Fikany claims that Stockwell almost torpedoed the deal, but he was able to save it. The only thing keeping the deal from being consummated was that Bright Green needed to deposit some escrow money. Ultimately, Stockwell refused to send the escrow money to the Acoma Pueblo and that deal fell through. The Acoma Pueblo sent documentation to formally withdraw from the deal.
While Fikany was working to secure the deal with the Acoma Pueblo he was also working with Stockwell to prepare the company to go public. One issue that arose during the process was the valuation of Bright Green. Stockwell was responsible for hiring the advisors to determine the number, but Fikany said the valuation was “misleading and aggressive”. At this point, the company actually paid Fikany his one and only paycheck of $19,230.77. He also supposedly received another 2.5 million shares. Undeterred, Fikany continued to push back.
Fikany says he was concerned about the false and misleading nature of Stockwell’s valuation report asking, “How is it possible that we continue to radically increase our valuation from $1.5 billion to 2.5 to 4.0 to 6.5?” According to the complaint, Fikany became worried his name would be attached to the company’s valuation statement, which he believed was false and inaccurate. In July 2019, the company issued a letter to investors with the alleged inflated valuation over Fikany’s opposition. He expressed his fear that his reputation would be at risk for knowingly telling investors that Bright Green had a valuation that was incorrect. He was then terminated.
Bright Green Is A Sham
Fikany says in his lawsuit that Bright Green was “a sham, operated illegally and fraudulently.” He alleges that the Stockwell’s “engaged in acts of fraudulent misrepresentation and attempted to force Fikany to aid and abet them in making fraudulent misrepresentations to investors concerning the valuation and progress of Bright Green Corporation.” He is suing for $1.7 million in unpaid wages.
The Stockwell’s deny the allegations about the misrepresentation of the valuation of Bright Green, but they do admit that the deal with the Acoma Pueblo did fall through. Bright Green in its statement suggests that Fikany was hired to complete the Acoma Pueblo deal, which ultimately never closed. Thus, he didn’t meet the conditions of his employment and was terminated.
Bright Green’s current CEO is Edward Robinson. He took over the role in 2019, although his LinkedIn profile only states he is a special advisor, he is on the company website as the CEO. Robinson was the Chief Executive Officer of BMW Financial Services for the America’s Region from April 2005 to December 2016. He gets an annual base salary of $540,000 paid in monthly installments. The employment contract reads, “Robinson shall receive monthly payments in the amount of $6,750 with an aggregate of $344,250 in deferred compensation due and payable on or before December 15, 2022.” Robinson got 5.6 million shares, while his wife Elaine Robinson received 605,000 shares.
John Stockwell’s Connection
John Stockwell supposedly has no official role in Bright Green, but he was featured in a photo (above) of a groundbreaking ceremony in New Mexico in October 2021. Typically in groundbreaking ceremonies, only top executives or board members take the stage. Stockwell’s wife Lynn Stockwell is a Director of the company and owns 44% of the voting shares or 69 million shares. In 2020, she lent the company $392,194 and has no fixed repayment term. She was at the groundbreaking ceremony for the $300 million planned research complex, even though the company has nowhere near that amount of money. This is also the second groundbreaking ceremony.
At the time Lynn Stockwell said, “With the cooperative spirit of federal, state and business we found in New Mexico, we will see New Mexico and Bright Green Corp. become leaders in this emerging field of medical research.
The facility in Grants, New Mexico is supposed to be “A two-acre Fast Start University Greenhouse to begin housing our cannabis research, development, cultivation, and manufacturing operations.” Bright Green also stated in its filing that its existing 22-acre Venlo greenhouse is currently under renovation to be operational in May 2022 and provide the initial supply of marijuana and marijuana extracts. The company has also said that it will be able to harvest its first crop of cannabis in two months, however, any cannabis cultivator will say that it takes at least 3-8 months for a cannabis plant. Bright Green could purchase more mature plants to speed up the process, but then the DEA would actually be buying someone else’s plants.
Most companies clean up lawsuits before going public so that investors won’t see the dirty laundry. In this case, Bright Green plowed ahead. The company played up its connection to the DEA suggesting that the Memorandum of Agreement was a done deal, even though the company doesn’t have a formal contract with the DEA. The DEA also would not confirm it had a contract with Bright Green and wouldn’t comment on the MOA. The NASDAQ seems to be playing along even though it also doesn’t seem to have vetted the company’s valuation claims. Other financial media also jumped in and never looked beyond the company’s press release and helped tout the idea of a cannabis company trading on the NASDAQ. That boosted the share price in the early days further enriching the sellers. Looking at the track record of Sunnyland and then Bright Green, it will remain a stock to keep under the microscope.
New Mexico is now the 18th state to legalize the sale of adult-use cannabis and those sales began last Friday. According to television station KOAT, as of noon on Sunday, recreational sales in the state had reached $3 million. Hundreds of residents had lined up at dispensaries to purchase legal recreational cannabis. KOAT said that according to state officials, 49,552 transactions had occurred totaling roughly $3,092,712.
Democratic governor, Michelle Lujan Grisham was reportedly at a dispensary for the occasion but did not make a purchase. Instead, she was seen speaking with customers.
“I’m excited, this is what New Mexicans said they wanted,” Lujan Grisham said, as quoted by the station. “They said they wanted it long before was I running.”
KRQE reported that, “Non-medical, adult-use cannabis sales passed $475,000 before noon on April 1 and reached $1 million sometime before 4:00 p.m., according to numbers from the Cannabis Control Division (CCD). By 8:00 p.m. statewide total adult-use cannabis sales were starting to approach $1.8 million. As of midnight, $1.9 million had been spent on adult-use cannabis.” The local television station also reported that one dispensary Bad Company got off to a rough start when its software provider BioTrack malfunctioned and would only allow medical marijuana products to be entered. It apparently was resolved and the dispensary was able to begin those sales.
“The legalization of adult-use cannabis paves the way for the creation of a new economic driver in our state with the promise of creating thousands of good paying jobs for years to come,” said Gov. Michelle Lujan Grisham in a statement. “We’re ready to break new ground. We’re ready to invest in ourselves and the limitless potential of New Mexicans. And we’re ready to make this industry a successful one that helps transform New Mexico’s economic future for the better.”
Most of the dispensaries are located in and around Albuquerque. The state also expects numerous Texas residents to cross state lines to make purchases.
“This is the right model for New Mexico because it creates a local, sustainable and regulated industry while at the same time protecting our public health, road safety and the well-being of our youth,” said Superintendent Linda M. Trujillo of the state Regulation and Licensing Department, which will oversee and manage the new industry. “The standardization and statewide regulation that comes with a bona fide industry will protect consumers. In addition, local jurisdictions will be able to enact reasonable zoning, land use and other business requirements.”
NewMexico became the 18th state to legalize cannabis for adults 21 and over after Gov. Michelle Lujan Grisham (D) signed the Cannabis Regulation Act (HB 2) into law on Monday. NewMexico is now the fifth state to adopt a legalization policy by passing a bill through its state legislature, joining Illinois, Vermont, New York, and Virginia. Thirteen additional states have legalized by voter initiative.
According to Marijuana Policy Project, HB 2 legalizes personal possession of up to two ounces of cannabis and home cultivation of six mature plants for adults 21 and over. Additionally, HB 2 includes measures to encourage those who were disproportionately impacted by prohibition to enter the new industry. A companion bill — SB 2 — will provide for automatic expungement. Legal sales will begin no later than April 1, 2022. A summary of HB 2 is available here.
“We commend NewMexico lawmakers and advocates for ending cannabis prohibition. This move will end the injustice of criminalizing NewMexicans for a substance that is safer than alcohol. States across the country are rolling back prohibition and finding that legalizing and regulating cannabis works. This victory in NewMexico, along with the recent legalization victories in New York and Virginia, will help tip the scale towards federal cannabis reform,” said Steve Hawkins, executive director at the Marijuana Policy Project.
New Mexico Market
UltraHealth, the state’s largest MMJ operator said in a statement, “Combined patient sales from the 34 licensed producers in New Mexico’s Medical Cannabis Program totaled $203 million in 2020, an increase of $74 million or 57% over reported patient sales in 2019. Ultra Health, New Mexico’s #1 Cannabis Company, led all operators with nearly $40 million in patient sales, 71% greater than its nearest competitor.”
Altogether, New Mexico’s top five providers accounted for 55% of reported patient sales in 2020, an increase from 49% the previous year. The top 10 out of 34 total providers accounted for 74% of total patient sales in 2020.
1. Ultra Health
3. R. Greenleaf
4. Pecos Valley
“In less than a month, the number of states that have legalized cannabis through the legislative process has more than doubled — from two to five. While we are encouraged by this progress, we urgently call on the other 32 state legislatures to listen to their constituents and legalize cannabis. With supermajority support for legalization, it is outrageous that more than 1,000 Americans are arrested for cannabis every day,” said Matt Simon, senior legislative analyst at the Marijuana Policy Project.
NORML State Policies Manager Carly Wolf said: “This is a day to celebrate! NewMexico will greatly benefit from this new revenue stream and the creation of thousands of jobs. Most notably though, legalization will spare thousands of otherwise law-abiding residents from arrest and a criminal record, and the state’s new expungement law will help provide relief to many who are suffering from the stigma and other collateral consequences associated with a prior marijuana conviction.”
NORML Executive Director Erik Altieri added: “NewMexico joins an ever-growing list of states that have realized the failures of marijuana prohibition and the harms it brings to their communities and citizens. The American people are demanding an end to prohibitionist policies that have wreaked havoc on communities of color, squandered countless millions in taxpayer dollars, and wasted limited judicial and law enforcement resources on criminalizing otherwise law-abiding individuals for possession of a product that is objectively less harmful than alcohol or tobacco.”
New Mexico is one step away from becoming the 17th state to legalize cannabis for adult use and the fourth state to adopt a legalization policy by passing a bill through its state legislature. The last stop is Democratic Governor Michelle Lujan Grisham’s desk for signing. New Mexico follows New York state, which also took this route to full legalization. Illinois and Vermont chose the legislator path while 13 other states have legalized by voter initiative.
Members of the New Mexico House and Senate gave their final approval on Wednesday to two separate measures amending the state’s marijuana laws. The first legalizes and regulates marijuana possession, production, and sales for adults. The second facilitates the automatic review and expungement of the records of those convicted of low-level marijuana offenses.
“New Mexico legislators and advocates deserve a round of applause as they are on the verge of legalizing cannabis for adult use. This year is proving to be nothing short of monumental for the cannabis policy reform movement. State legislatures across the nation are recognizing the urgent need to end cannabis prohibition and are rising to the challenge,” said Steve Hawkins, executive director at the Marijuana Policy Project. MPP said in a statement that under HB 2, personal possession of up to two ounces of cannabis and home cultivation of six mature plants will be legal for adults 21 and over. Additionally, HB 2 includes measures that would encourage those who were disproportionately impacted by prohibition to enter the new industry. Legal sales would begin no later than April 1, 2022. A companion bill provides for automatic expungement.
Commenting on the bills’ passage, NORML State Policies Manager Carly Wolf said: “This is a historic day for New Mexico! These important policy changes will ensure that consumers going forward will no longer suffer criminal arrest and prosecution, while also remedying past injustices caused by the drug war. I commend lawmakers for working together to craft legislation that prioritizes social justice and inclusion. Passage of this legislation will ensure that minor marijuana possession offenders, many of them young people, are no longer saddled with a criminal record and the lifelong penalties and stigma associated with it.”
Emily Kaltenbach, Senior Director for the Resident States and New Mexico for the Drug Policy Alliance said, “New Mexicans are finally able to exhale. After many years of hard work, another whirlwind legislative session, and input from stakeholders throughout the state, social justice-centered cannabis legalization is on its way to the Governor’s desk, where she has already agreed to sign. We thank the Governor and our legislative allies for not taking ‘no’ for an answer and stopping at nothing until we were able to get justice for New Mexico communities—particularly Hispanic/Latinx, Black, Native and Indigenous—that have been immensely harmed by cannabis prohibition.”
She added, “Today’s passage of the cannabis legalization and expungement package will ensure equitable opportunities for farmers and other small businesses, and long overdue justice—including automatic expungement—for those with past cannabis arrests or convictions. And it doesn’t stop there. We still have our work cut out for us to fully repair the damage that has been done as a result of the war on drugs, and that means coming back during the 2022 budget session to ensure funds are made available for critical reinvestment in the communities that have been most harmed.”
NORML Executive Director Erik Altieri added: “New Mexico joins an ever-growing list of states that have realized the failures of marijuana prohibition and the harms it brings to their communities and citizens. They are the third state so far this year that has approved legalization via the legislative process and we expect several more will follow suit in a short period of time. The American people are demanding an end to prohibitionist policies that have wreaked havoc on communities of color, squandered countless millions in taxpayer dollars, and wasted limited judicial and law enforcement resources on criminalizing otherwise law-abiding individuals for possession of a product that is objectively less harmful than currently legal alcohol and tobacco. Thankfully lawmakers at the state level are finally implementing the will of their constituents and, by doing so, they are applying further pressure on the federal government to finally deschedule marijuana nationally and end this ongoing tension between state and federal policies.”
The New Mexico Medical Cannabis Program racked up $106 million in sales in 2018 for a 23% increase over 2017. Patient enrollment grew by 45% from 2017 to 2018 and now counts 67,574 patients in the system. It’s easy to see an imbalance here. The patient count grew faster than sales.
The largest provider in the system Ultra Health said that the problem is plant count limits combined with regulatory hurdles. The company was the largest provider in the state with a market share of 15.4% in 2018 and reporting $16 million in revenue for the year.
“Surpassing $100 million is a great milestone for the Medical Cannabis Program,” said Ultra Health CEO Duke Rodriguez. “However, the industry would have exceeded $212 million if patients were able to purchase an adequate supply of cannabis as allowed for similar patients in Arizona and Colorado.” The belief is that patients are being forced to seek medicine outside of licensed providers which is considered the black market.
Some of the restrictions include purchase limits, potency caps, no reciprocity with patients from other legal states and the inability of producers to offer savings for large purchases. The problems re causing high prices for the patients.
The state’s top five producers accounted for 43% of the reported revenue in 2018 and there are 35 licensed producers. Only 12 grew faster than the overall industry’s pace, while 23 producers fell behind.
2017 % Increase
1. Ultra Health
2. R. Greenleaf
4. Sacred Garden
Ultra Health said that under the current medical marijuana program, revenues are projected to reach $131 million by the end of 2019 and patient enrollment is forecast to reach 87,500. The company said that if the program allowed patients to fully access medical cannabis like Arizona and Colorado, the industry could have easily hit $290 million in sales.
“Whether it’s for physical, mental or social well being, every adult presenting themselves should have the full legal right to choose the cannabis products they need, in the quantities they want, from the provider they prefer and at a price they can afford,” said Rodriguez.
A new report from BDS Analytics and Arcviews stated, “Despite inaction on calls to expand access by adding
qualifying conditions, the state has made some small improvements to the cannabis program. State officials
have simplified the application process for those seeking a medical cannabis card and made other changes
to the application process to address complaints of long application backlogs that result in delayed card issuance.”
Though marijuana remains illegal in New Mexico for recreational use, the growth seen for medicinal purposes has surged in 2018, surpassing $50 million in sales, due in large part to a huge rise in patient enrollments.
According to data compiled by the New Mexico Department of Health (NMDOH), the 35 commercial cannabis producers in the state reported $51 million in sales in the first six months of the year. That marks a 27 percent increase year-over-year.
That jump in sales of which five providers accounted for 78 percent of the increase, was due in large part to patient enrollment in the Medical Cannabis Program, which had 54,857 active cardholders as of June 30th, an increase of 24 percent year over year.
“Providing patients with affordable, safe, and accessible medicine has been the intention of legislators since the inception of the program,” said Duke Rodriguez, CEO and President of Ultra Health in a statement. “Moving forward, success will be defined by the quality of life of the physical, mental and social well-being of each patient rather than merely the number of patients served.”
Ultra is one of the key producers in the state, with patient sales ahead of the other licensed providers for a third consecutive year. It generated $7.7 million in sales in the state, up nearly 80 percent year-over-year, while PurLife also reported strong figured. Combined, the two accounted for 48 percent of new business in the first half of 2018.
In the first half of 2018, patients bought 7,557 pounds of marijuana, up 12 percent over the same time frame in 2017.
The growth throughout the state is widespread, with several counties experiencing significant jumps in enrollment. Counties such as Grant, Otero, Curry, Sante Fe and Dona Aña all experienced 20 percent or more growth in cardholder figures. Grant topped the charts with 42 percent growth.
The growth throughout the state is a good sign for producers, but it’s also a sign that demand is outpacing supply. The state’s licensed producers “are unable to totally meet New Mexico patients’ demand for safe and legal cannabis,” so it may be forcing them to seek their cannabis elsewhere, such as the “unregulated illicit market,” the statement added.
There’s also the concern that wholesale transactions are becoming a burden for the cannabis industry. The Lynn & Erin Compassionate Use Act gave licensed producers the exclusive authority “to produce, possess, distribute and dispense cannabis,” but there is no mention of any limit on the aforementioned activities.
In 2013, NMDOH announced a maximum cap of 450 plants allowed per producer, but in August 2016, Ultra sued the NMDOH, saying that the cap needs to be adjusted higher.
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