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The Future Of Dispensaries Means Contactless Marijuana Vending Machines For Colorado And Massachusetts

CANADA-HEALTH-DRUGS-MARIJUANA

TO GO WITH AFP STORY by Deborah Jones, Canada-health-drugs-marijuana Chuck Varabioff, Director of … [+] AFP VIA GETTY IMAGES

Move over potato chips and chocolate candy bars! The future of marijuana now offers Massachusetts and Colorado contactless marijuana vending machines.

The Boston based company, anna, first debuted at Strawberry Fields Dispensary in Pueblo, Colorado. CEO and Founder of anna, Matt Frost, describes the “tricked out vending machines” in an interview with the Knowoffering edibles, flowers, and vape all without much interaction.

“There are experienced cannabis customers who don’t necessarily need that one-on-one interaction with a budtender. They know what they want before they walk in, they’re ready to go in and out. By doing this, we’re giving more time back to the people who do need hand-holding and want that education from a live person,” Frost said. “With COVID and social distancing and contactless, definitely, we have an appeal there, as well.”

A background in data analytics, Frost created the system after recognizing the long wait times and some requirements of scheduled pick-ups at dispensaries and the fear of contracting Covid-19. “It’s about getting customers through faster with less contact,” Frost told Masslive.com.Recommended For You

Using anna is quite simple. The 8 square foot machine features over 2,000 products to cater to each customer’s requirement. Each customer can preorder on the anna app or check-in and select items; each machine takes cash or debit. After making selections, anna dispenses, and customers can choose, wholly contactless, and fast. The legal age and payment require approval from dispensary workers before processing.

The future of anna machines selling non-psychoactive cannabis products in a gas stations and retail stores will happen soon. Anna is not the first vending machine to help with seamless customer interaction, Zazz Machine was introduced in 2014 to check customer IDs at a dispensary in Avon, CO.

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Anna is set to debut in Massachusetts in September. Since the legalization of retail marijuana sales in November 2018, Massachusetts dispensaries have already made around 320 million dollars. While companies are excited about the idea, is it uncertain how it will affect the recent unionizations throughout the state.

In a statement by the United Food and Commercial Workers Union (UFCW):

“The legal cannabis industry is a newly regulated market that can offer local communities jobs with strong wages and benefits that can’t be outsourced.”

As for the future of anna, Frost suggests this is only the beginning. “The partnership that we’re about to strike I have to keep under wraps for now, but [it’s] a very significant CBD distribution opportunity that we’re excited about,” in an interview with The Know

The next dispensary planned for anna vending machines is Starbuds in Aurora, Colorado, for later this year.

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California wildfires claim several marijuana farms, threatening growers with financial losses

The series of wildfires ravaging Northern California have inflicted major damage on several marijuana farms, with possibly more outdoor grow operations threatened in the region.

“There are a ton of farms that are located in the fire’s path. No one’s out of the woods yet. This is just starting,” said Keala Peterson, whose small, family-run cannabis operation, Sweet Creek Farms in Sonoma County, was damaged by the fires.

Peterson noted that many of the largest fire complexes were either not contained at all or only slightly contained by firefighters, a situation that exposes cannabis farmers to significant financial losses because the outdoor crops aren’t necessarily insured.

Peterson said Sweet Creek Farms lost about four-fifths of its marijuana crop to the fire on Wednesday but noted that firefighters were able to save part of her family compound.

“It looks like a wasteland,” she said. “Pretty much, it’s a total loss.”

Peterson said her cannabis crop isn’t insured, and she estimated her family will likely absorb about $150,000 in losses, perhaps more, if they aren’t able to salvage the unburned marijuana that has yet to fully flower.

“We’re guardedly optimistic that those (unburned marijuana plants) could come to term, but with smoke damage, if the bud has set enough, it’ll just be smoky marijuana, and nobody wants to smoke that,” Peterson said.

Still, she’s not too worried about the future of Sweet Creek because her family has a diversified income and doesn’t rely solely on cannabis.

The fires, many caused by lightning and sometimes pushed by strong winds, have burned hundreds of thousands of acres as they chewed through brushland, rural areas, canyon country and dense forest surrounding San Francisco. Fires also burned in the Sierra Nevada and Southern California wild lands.

Another Sonoma County cannabis farmer replied to a call for comment with a text message that said, “I’m evacuating. Sorry I can’t talk now.”

Santa Cruz operations threatened

To the south of San Francisco, in Santa Cruz County, longtime medical cannabis nonprofit WAMM Phytotherapies also likely lost a farm, said founder Valerie Corral. But she’s not even certain of the farm’s status because she had to evacuate Tuesday night.

“We just found out that probably everything burned” at WAMM’s farm in northern Santa Cruz County, she said, adding that a second farm, in southern Santa Cruz, was still untouched.

“It’s pretty awful here in Santa Cruz,” Corral said. “I have to be thankful that no one’s life has been lost.”

The WAMM farm was also uninsured, but Corral said she and her organization have been through worse and they’ll get back on their feet, one way or another.

Yet another series of fires in Yolo County, directly west of Sacramento, is threatening Preferred Gardens, said owner David Polley.

He said Thursday he’ll have to deal with smoke damage to at least 2,000 of his 12,000 plants, which he said might have to be destroyed.

What he’s worried about is the possibility of the winds shifting and that the fires might turn and begin heading south toward his farm.

“If this fire doesn’t get under wraps, then everything is going to go down,” Polley said. ” We’re just going to pray that doesn’t happen.”

If it does, Polley said, it could put his losses in the millions of dollars and potentially put him out of business.

But Polley, like others in the industry, remains stubbornly optimistic, and he pointed out that he’s been in the industry for 15 years.

“I’ve been through all different kinds of hell,” he said. “This is just another day.”

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Adult-use cannabis sales remain steady even as unemployment bonus ends

Though the U.S. government’s temporary lifeline to tens of millions of unemployed workers expired, sales of recreational marijuana products have proved resilient.

The $600-a-week unemployment benefit ended July 31, and Congress failed to pass an extension before leaving for its August vacation.

The weekly boost brought the disposable income of many recipients to near “normal” – in pre-pandemic terms. Without the stipend, many people might be struggling to meet basic needs, such as rent and food.

But in the two weeks since the benefits ended, sales of recreational marijuana in key markets remained stable, even posting a visible increase during the first week, according to data provided by Seattle-based Headset.

It’s difficult to assess why that would happen, according to Liz Connors, director of analytics for Headset, but “it is still very early after the expiration.”

“Consumer spending doesn’t often drastically shift overnight but, rather, gradually changes over a few months,” she said.

The case might also be made that cannabis is an “inferior” good – a product that experiences sales increases during negative economic cycles. Alcohol sales often follow this pattern.

With fewer outside-the-home entertainment options available, consumers might shift discretionary spending to activities that can be done at home, including ingesting marijuana.

Speaker of the House Nancy Pelosi called back the U.S. House of Representatives to address other issues, but some legislators are pushing to vote on a coronavirus relief package, which includes additional unemployment benefits.

Markets might also see a shift toward medical marijuana purchases, which are not subject to the same taxes as recreational, according to analysis from New York-based cannabis consultants Greenwave Advisors.

States that allow adult-use sales often see a slowing of MMJ purchases as consumers opt for the ease of not having to register with the state to obtain a medical card for purchases.

However, as household incomes shrink, that ease of access might not be enough to offset the additional cost.

Sales of medical marijuana in Colorado, for example, have increased more rapidly than adult-use sales since the beginning of 2020.

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Federal Judge Rules Portland, Maine, Cannot Prioritize Local Cannabis Businesses in Adult-Use Licensing

U.S. District Judge Nancy Torreson ruled Aug. 14 that Portland, Maine, cannot prioritize local cannabis businesses in its adult-use licensing process, according to a Bangor Daily News report.

Wellness Connection of Maine, which operates dispensaries in Portland, Brewer, South Portland and Gardiner, along with its Delaware-based investor, High Street Capital Partners, filed a civil lawsuit in U.S. District Court in June, alleging that Portland’s cannabis ordinance, which offers a residency bonus for license applicants who have lived in Maine for at least four years, is “unconstitutional” and “discriminatory” to non-local businesses.

Torreson sided with Wellness Connection in her decision, which determined that there was “sufficient threat” that Wellness Connection would be at a disadvantage when competing for adult-use dispensary licenses in Portland, Bangor Daily News reported.

Maine’s Office of Marijuana Policy announced Aug. 14 that the state’s adult-use cannabis sales can launch Oct. 9, nearly four years after Maine voters approved legalization in 2016.

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Michigan marijuana testing lab closed for alleged reporting failures

Michigan regulators shut down a marijuana testing laboratory for alleged reporting failures, dealing a setback to a program that was already stretched thin because it lacked an adequate number of labs.

The move leaves the state with only five cannabis testing labs and could cause a backup throughout the marijuana supply chain.

According to the Detroit Free Press, Michigan’s Marijuana Regulatory Agency filed a complaint against Iron Labs, based in Walled Lake, and suspended the company’s license for a number of violations, including a failure to report:

  • Cannabis that tested above the legal limit for contaminants.
  • Edibles that tested above the allowable THC limit.

The state is warning consumers to be cautious about cannabis products tested by the lab, particularly medical marijuana patients.

“Respondent lacks integrity, moral character and responsibility or means to operate or maintain a marijuana facility,” the state wrote in its complaint, according to the Free Press.

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3 Tips to Help Cannabis Dispensary Buyers Select Vendors

© Vinnie Neuberg

Oregon’s market is flooded with more cannabis than Oregonians can consume, meaning customers have more options than ever to shop for quality and value. When it comes to vendor selection in Oregon’s highly competitive market, quality will always beat quantity. 

At Oregon’s Finest (OF), our purchasing team searches out quality first and foremost, so you’ll know what is on the shelf is the best possible representation of that product. As the company’s founders always say, “The strain is only as good as the grower.” Here are three tips to help ensure your vendors are worthy of your store: 

1. Work with transparent vendors. 

OF has an extensive and rigorous transparency process to ensure our customers are consuming the best cannabis products in Oregon. Each vendor must provide samples, extensive lab tests, detailed information about their company practices and processes, and agree to allow OF’s buying team to tour their facility at any time. 

The OF process requires vendors to disclose all grow methods and nutrients used. We ask vendors to specify their extraction methods for concentrated products, including all ingredients (including flower source), solvents, sources for any added terpenes and intended uses. 

2. Work with third-party certified vendors. 

As a Clean Green Certified dispensary, OF partners with other third-party certified companies. Due to federal restrictions, the United States Department of Agriculture (USDA) organic certifications cannot apply to cannabis businesses. Many cannabis companies use these third-party certifications, such as Clean Green and Certified KIND, to help them distinguish themselves from farms with conventional methods. That said, some vendors might not be able to afford a certification, so keep an open-mind and check if their processes meet those same standards. 

3. Don’t be shy about discussing ethics. 

Consider a company’s ethics when selecting your vendors. At OF, we give preference to companies who focus on sustainable business practices by being involved in their community, having earth-friendly processes, offering employee benefits and paying a living wage. Try to find vendors who relate and align with your mission statement, and don’t be afraid to trust your gut if something feels off. 

Justin Lipchitz is the general manager for Oregon’s Finest. He started with the company just as recreational cannabis became legal in Oregon. Lipchitz began working in the cannabis industry after moving to Oregon from the East Coast, where he acquired years of knowledge in both the fine dining and retail industries.

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Cresco Labs Announces Accelerating Revenue and Increasing Operating Leverage in Record Second Quarter 2020 Results

  • Record revenue of $94.3 million, 42% growth QoQ
  • 30+% sequential revenue growth in all of the Company’s U.S. markets except Massachusetts 
  • Record adjusted EBITDA1 of $16.5 million, 419% growth QoQ
  • Reduced SG&A by $1.5 million QoQ
  • Wholesale revenue growth of 44% QoQ to $55 million and retail revenue growth of 39% QoQ to $39 million

CHICAGO–(BUSINESS WIRE)– Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) (“Cresco Labs” or the “Company”), one of the largest vertically integrated multi-state cannabis operators in the United States, today released its unaudited financial results for the second quarter ended June 30, 2020. All financial information presented in this release is in U.S. dollars, unless otherwise noted.

Management Commentary

“While Q2 continued to be about building, scaling and refining our operations in the largest and most important cannabis markets in the U.S., we are also beginning to see the fruits of our labor come to bear,” said Charles Bachtell, Co-founder and CEO of Cresco Labs. “We grew revenue in every single one of our U.S. markets sequentially by more than 30%, with the exception of Massachusetts, where adult use was halted for part of the quarter. Cresco Labs is the largest wholesaler of branded cannabis products with nearly $55 million in revenue and our Sunnyside* retail strategy is outperforming with $39 million generated from our 17 locations. We are accelerating growth and beginning to generate substantial leverage as we scale our operations and benefit from the investments we’ve made over the past 12 months.”

Second Quarter 2020 Financial Highlights 

Operating Results

  • Revenue for the second quarter of 2020 was $94.3 million, an absolute increase of nearly $28 million or a 42% increase over Q1’20 revenue. Revenue increased sequentially by more than 30% in every U.S. market, with the exception of Massachusetts. Wholesale growth was driven by product popularity in California and first harvests from expanded capacity in Illinois and Pennsylvania. Retail growth was driven by strong sequential same-store growth of 31% and two new store openings in Illinois.
  • Operational Gross Profit1 as a Percentage of Revenue was 47% in the quarter as compared to 48% in the prior quarter. Operating costs associated with the expansion of the Company’s cultivation centers in PA and IL in Q4’19 and Q1’20 were associated with Q2 products sales, impacting the Company’s cost of products sold for the quarter.
  • SG&A was $45.2million, a reduction of $1.5 million from Q1. SG&A included $5.2 million in non-core costs associated with the integration of Origin House and the termination of the Tryke transaction, $0.8 million in COVID-19 related expenses, and $6.7 million in share-based compensation. Excluding these non-core and non-cash items, SG&A would have been $32.5 million or 35% of revenue.
  • Adjusted EBITDA1was $16.5million, an increase of 419% sequentially. This was achieved while integrating Origin House during the quarter, and was driven primarily from higher revenues and increased operational gross profit in Illinois and Pennsylvania.
  • Net Loss2was $4.7 million, whichincludes unrealized gains and losses on mark-to-market instruments that fluctuate until obligations are settled, changes in fair value of biological assets, interest expense and tax expense.
  • Net Cash Used in Operating Activities was $9.9 million, compared to $40.1 million used in Q1. The improvement in cash used in operating activities was driven by increased operating leverage across the business as the Company scales.

Shares Outstanding

Total shares on a fully converted basis were 377,691,701 as of June 30, 2020.

Conference Call and Webcast

The Company will host a conference call and webcast to discuss its financial results and provide investors with key business highlights on Thursday, August 20, 2020, at 5pm Eastern Time (4pm Central Time). The conference call may be accessed via webcast or by dialing 866-688-4235 (409-216-0711 for international callers) and providing conference ID 2957578. Archived access to the webcast will be available for one year on the Cresco Labs’ investor relations website.

Consolidated Financial Statements 

The financial information reported in this news release is based on unaudited management prepared financial statements for the three months ended June 30, 2020. The Company expects to file its unaudited interim consolidated financial statements on SEDAR by August 20, 2020. Accordingly, such financial information may be subject to change. All financial information contained in this news release is qualified in its entirety with reference to such financial statements. While the Company does not expect there to be any material changes, to the extent that the financial information contained in this news release is inconsistent with the information contained in the Company’s financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by the Company’s financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws. Further, the reader should refer to the additional disclosures in the Company’s audited financial statements for the year ended December 31, 2019, previously filed on SEDAR.

Cresco Labs references certain non-IFRS financial measures throughout this press release, which may not be comparable to similar measures presented by other issuers. Please see the “Non-IFRS Financial Measures” section at the end of this press release for more detailed information.

About Cresco Labs Inc.

Cresco Labs is one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco Labs is built to become the most important company in the cannabis industry by combining the most strategic geographic footprint with one of the leading distribution platforms in North America. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco Labs’ house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco Labs’ national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco Labs has launched the industry’s first national comprehensive Social Equity and Educational Development (SEED) initiative designed to ensure that all members of society have the skills, knowledge and opportunity to work in and own businesses in the cannabis industry. Learn more about Cresco Labs at www.crescolabs.com.

Non-IFRS Financial Measures

Operational gross profit, EBITDA and Adjusted EBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The Company has provided the non-IFRS financial measures, which are not calculated or presented in accordance with IFRS, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. These supplemental non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein. Accordingly, the following information provides reconciliations of the supplemental non-IFRS financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with IFRS.

Forward Looking Statements 

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. The Company’s forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to those risks discussed under “Risk Factors” in the Company’s Annual Information Form dated April 28, 2020, and other documents filed by the Company with Canadian securities regulatory authorities; and other factors, many of which are beyond the control of the Company. Readers are cautioned that the foregoing list of factors is not exhaustive. Because of these uncertainties, you should not place undue reliance on the Company’s forward-looking statements. No assurances are given as to the future trading price or trading volumes of Cresco Labs’ shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise.

1 See “Non-IFRS Financial Measures” at the end of this press release for more information regarding the Company’s use of non-IFRS financial measures. 
2 Net loss includes amounts attributable to noncontrolling interests.

Cresco Labs Inc.
Unaudited Financial Information and Non-IFRS Reconciliations
(All amounts expressed in thousands of U.S. Dollars)
 
Unaudited Consolidated Statements of Operations
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
 
For the Three Months Ended 
($ in thousands) 6/30/20203/31/20206/30/2019
Revenue$94,256 $66,380 $29,890 
Cost of sales – production costs (60,835) (46,200) (17,145)
Gross profit before fair value adjustments 33,421  20,180  12,745 
 
Realized changes in fair value of inventory sold (41,774) (24,584) (17,620)
Unrealized gain on changes in fair value of biological assets 77,822  38,544  29,814 
Gross profit 69,469  34,140  24,939 
GP% 73.7% 51.4% 83.4%
Expenses:
Selling, general and administrative 45,186  46,653  19,705 
Depreciation and amortization 5,358  4,619  894 
Total expenses 50,544  51,272  20,599 
 
Gain (loss) from operations 18,925  (17,132) 4,340 
 
Other (expense) income:
Interest expense, net (9,597) (8,216) (2,087)
Other (expense) income, net (740) 15,523  (621)
Income (loss) from investment in associate 24  (144) 36 
Total other expense, net (10,313) 7,163  (2,672)
Income (loss) before income taxes 8,612  (9,969) 1,668 
Income tax expense (13,312) (3,462) (5,586)
Net loss 1$(4,700)$(13,431)$(3,918)
 
1 Net loss includes amounts attributable to non-controlling interest.
Cresco Labs Inc.
Summarized Consolidated Statements of Financial Position
As of June 30, 2020 and December 31, 2019
   
June 30, 2020  December 31, 2019
($ in thousands) (Unaudited)  (Audited)
Cash and cash equivalents$70,994  $49,102
Other current assets 185,732   110,236
Property and equipment, net 175,281   155,839
Intangible assets, net 199,882   94,206
Goodwill 451,632   137,719
Other non-current assets 125,583   69,452
Total assets$1,209,104  $616,554
   
Total current liabilities 163,396   150,169
Total long-term liabilities 308,890   143,762
Total shareholders’ equity 736,818   322,623
Total liabilities and shareholders’ equity$1,209,104  $616,554
Cresco Labs Inc.
Unaudited Revenue and Gross Profit Metrics
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
For the Three Months Ended
($ in thousands) 6/30/20203/31/20206/30/2019
Revenue$94,256 $66,380 $29,890 
Cost of sales – production costs1 (60,835) (46,200) (17,145)
Realized changes in fair value of inventory sold (41,774) (24,584) (17,620)
Unrealized gain on changes in fair value of biological assets 77,822  38,544  29,814 
Gross profit$69,469 $34,140 $24,939 
Cultivation costs expensed under IAS 412 3,951  6,050  912 
Net impact of fair value of biological assets (36,048) (13,960) (12,194)
Expansion, relaunch and rebranding costs3 4,616  3,881  722 
COVID-19 related expenses 1,887     
Fair value markup for acquired inventory 331  1,889   
Operational gross profit (Non-IFRS)$44,206 $32,000 $14,379 
Operational GP% 46.9% 48.2% 48.1%
 
1 Production (cultivation, manufacturing, and processing) costs related to products sold during the period.
2 Costs would be capitalized under IAS 2 and do not reflect cost of inventory sold in the period.
Costs related to non-recurring third-party product costs, start-up costs, and samples/discounts to expand footprint and relaunch in certain markets.
Cresco Labs Inc.
Unaudited Reconciliation of Net Income to Adjusted EBITDA
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
 
For the Three Months Ended 
($ in thousands) 6/30/2020 3/31/2020 6/30/2019
Net loss1$(4,700)$(13,431)$(3,918)
Depreciation and amortization 9,626  8,368  2,075 
Interest expense, net 9,597  8,216  2,087 
Income tax expense 13,312  3,462  5,586 
Earnings before interest, taxes, depreciation
and amortization (EBITDA) (Non-IFRS)
$27,835 $6,615 $5,830 
 
Expansion, relaunch and rebranding costs2 4,616  3,881  722 
COVID-19 related expenses 2,648     
Other expense (income), net 740  (15,523) 621 
(Gain) loss from investment in associate (24) 144  (36)
Fair value markup for acquired inventory 331  1,889   
Cultivation costs expensed under IAS 413 3,951  6,050  912 
Adjustments for acquisition and other non-core costs 5,205  11,843  3,203 
Management incentive compensation (share-based) 7,207  2,235  3,210 
Adjusted EBITDA (Non-IFRS)$52,509 $17,134 $14,462 
 
Net impact of fair value of biological assets (36,048) (13,960) (12,194)
Adjusted EBITDA (non-IFRS), net of impact of biological assets$16,461 $3,174 $2,268 
 
1 Net loss includes amounts attributable to non-controlling interest.
Costs related to non-recurring third-party product costs, start-up costs, and samples/discounts to expand footprint and relaunch in certain markets.
3 Costs would be capitalized under IAS 2 and do not reflect cost of inventory sold in the period.
Cresco Labs Inc.
Unaudited Summarized Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2020, March 31, 2020 and June 30, 2019
      
 For the Three Months Ended 
($ in thousands)  6/30/2020  3/31/2020  6/30/2019
Net cash used in operating activities $(9,881)  $(40,101)  $(5,797)
Net cash provided by (used in) investing activities  14,888    (38,641)   (34,863)
Net cash (used in) provided by financing activities  (2,227)   95,020    (4,047)
Effect of foreign currency exchange rate changes on cash  (288)   946     
Net increase in cash and cash equivalents  2,492    17,224    (44,707)
Cash and cash equivalents and restricted cash, beginning of period  71,376    54,152    113,401 
Cash and cash equivalents and restricted cash, end of period $73,868   $71,376   $68,694 
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4 Tips for Maximizing Cannabinoid Distillation

Separating cannabis extracts into their component molecules is a nuanced process. Here’s how to optimize results.

Components of the refinement process can cause isomerization during distillation. To mitigate this, it’s important to refine extracts prior to distillation.

Cannabis extraction and refinement create different raw materials for formulation. They are critical processes that separate cannabis extracts into their component molecules. Cannabinoid distillation is a particularly complex stage of the extraction and refinement process that involves a nuanced interplay among component boiling points, heat and vacuum. 

Here are some tips and tricks producers can use in their distillation protocols to optimize their results. 

1. Aim for highly refined and clean material. 

Limit the number of substances that interact during the distillation process and components that can negatively affect the performance of the equipment. For example, certain fatty acids have boiling points near cannabinoids and will often polymerize, which diminishes product purity and increases system maintenance. Also, components of the refinement process (i.e., clarifying agents) can cause isomerization during distillation. To mitigate this, refine extracts prior to distillation. Refinement processes include winterization, clarification and scrubbing filtration. 

2. Fully decarboxylate and degas the material. 

A simple way to increase the throughput of the distillation process is to decarboxylate and degas the cannabis extract before distillation. Decarboxylation and degassing are the processes of converting the acid form cannabinoids to the neutral forms and removing volatiles, respectively, by applying heat and agitation. By undertaking those two processes, the vacuum operates under reduced load and more cannabinoids are distilled per unit time. 

3. Use a well-designed vacuum system. 

The atmospheric boiling points of cannabinoids are not known to any degree of certainty because these heavy molecules tend to degrade before they boil. However, by removing atmosphere, the cannabinoids can be encouraged to boil at a lower temperature. Their boiling points under vacuum (i.e., 5×10-3 Torr)—as documented by Adams et al. in 1941 and Gaoni & Mechoulam in 1964—are between 155 and 160 degrees Celsius. That’s why it’s important to have a substantial vacuum system to reduce the heat required to vaporize cannabinoids and minimize the risk of degradation. An ideal vacuum system for this application is a dual-stage rotary-vane pump designed to pull to 1×10-4 Torr with a diffusion pump to increase the depth and stability of the vacuum under load. It’s also important to correctly size the tubing and seal the connectors.

4. Maintain short heated-surface contact. 

Heat can degrade or isomerize cannabinoids. Use a system that can deliver heat to a thin layer of oil to minimize total heat exposure. Wiped film or centrifugal systems are ideal for this because the oil’s contact with heat is several seconds compared to several hours. Finally, stainless steel heating surfaces (i.e., still body or centrifugal plate) increase the efficiency of heat transfer and the throughput of the distillation process. 

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Ethical Questions Posed by Cannabis Proprietary Protections

Protecting industry secrets sparks high competition and patent wars.

The legalization of cannabis (and hemp) has spiraled down many interesting rabbit holes, one of which is the evolving pursuit of plant patents and protections. A lot is riding on botanical invention within a global industry expected to reach nearly 100 billion USD by 2027 (15.26 billion hemp and 73.6 billion legal cannabis).

But cannabis is an industry built on the backs of clandestine breeding programs. Furthermore, many cultivators are still passionate about patient-controlled medicine. The growing drive for cannabis and hemp plant patents pose an ethical dilemma to the sector.

PLANT PATENTS PROTECT THE CORPORATE SIDE OF THE INDUSTRY 

Both the backyard breeder and the industrial-scale producer can easily breed new cannabis cultivars. The main difference is the investment, as the producer pumps much more into the program than the backyard breeder. A new strain, with exceptional disease resistance, an exciting cannabinoid profile, or other unique characteristics, can provide exponential returns. A commercial grower lays their money, name, and future on the line with these genetic inventions. Financially speaking, it makes sense to protect these new botanical strains against the competition, and have a chance to reap the financial returns.

This need to protect the financial investment is the driving force behind plant patents. At the most elemental level, a patent provides financial protections to the inventor (in this case, the breeder). Upon approval, a patent ensures that the inventor can hold exclusive rights to the invention for the life of the patent. Whether it’s a new technology, pharmaceutical, or a unique cultivar, the same principle holds.

Although other crops have long had the option of plant patent protection, this is a relatively new development for hemp (and still not on the table for cannabis). As patent lawyer Jeremy Kapteyn discussed with KUNR in 2019, “the race is on for cannabis producers to secure the rights to their inventions.” In his opinion, protections like these help legitimize an emerging industry, meaning patents will quickly transform cannabis from a back yard, black market crop into an all-out-corporate industry.

GROWING DRIVE FOR CANNABIS PATENTS IGNORES THE PAST

Even Kapteyn recognizes this move to proprietary protections will not play fair. He explained, “there’s going to be winners and losers. It’s not a merit-based system. It’s whoever’s first and has the most money.” Small craft producers, who have transitioned from the black market to the open market may have invested years into specialized cultivars, but all this could be taken away with an aggressive move by a more financed commercial operation.

It’s impossible to discuss the ethics of cannabis and hemp patents without discussing the plant’s recent and illicit history. Although cannabis is now legal in a growing number of countries and states, it wasn’t that long ago that it existed only in the black market. This illicit history forced cannabis breeding programs underground and pitted producers and consumers against the government.

Cannabis advocates have a long history of distrust for government, bureaucracy, and regulation – and rightly so. There is also a strong tradition of medical cannabis patients who turned to the plant as a rejection of Big Pharma and corporate control. Cannabis has long offered people personal control over their own lives, and they have fought hard to maintain this control.

With hemp and likely soon, THC-rich cannabis, getting swept under the control of large corporate entities through proprietary protections, this old guard of cannabis advocates remains staunchly opposed to corporate greed and botanical takeovers. From their standpoint, cannabis (and especially medical cannabis) is a plant for the people, not corporate profits.

LESSONS FROM THE MONSANTO EXAMPLE

Patent fear isn’t just a holdover from a black market of regulation. Cannabis cultivators have watched patent wars play out in other agricultural settings, like the now-famous examples from Monsanto.

Monsanto, an agrochemical and agricultural biotechnology, has long patented it’s biological and chemical innovations and followed up with fierce litigations against hundreds of farmers who often unknowingly break the rules. Under most Monsanto patents and licensee agreements, their genetically engineered seeds (for potato, wheat, rapeseed, soybeans, and more) may be planted and harvested, but the seeds of these plants may not be collected and planted again.

But despite Monsanto’s fierce control of their genetic property, nature still controls the winds and pollination patterns. In some cases, farmers have replanted seed collected or harvested seeds from windblown crops, cross-pollinated with Monsanto’s cultivars. Monsanto continues to take these farmers to court for stealing protected property. Monsanto, a company worth 60 billion USD, has one every single lawsuit it has pursued against these small-scale farmers.

Cannabis cultivators see the Monsanto precedent and worry about cannabis. With hundreds, if not thousands, of unique cannabis cultivars available, could these long-standing strains snapped up by commercial grow operations with deep pockets?

NO STRAIGHT ANSWER ON THE ETHICS OF PLANT PATENTS AND PROTECTIONS 

The nascent cannabis sector has long held itself apart from commercial conventions. This is especially true in comparison to the conventional agricultural industry. But as the cannabis and hemp sector grows, cannabis is going corporate. A bigger market and bigger payoffs mean the industry is leaning into more competitive business practices.

One aggressive move by a big commercial grow, could financially devastate long-time growers who have worked for generations to cultivate award-winning strains. Furthermore, plant patents may even threaten patient rights. Could patients eventually be excluded from growing their medicine depending on how cannabis and hemp plant patent scheme develops? For the older generation of cannabis entrepreneurs and advocates, the business of prosperity patents is a terrifying evolution.

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High-Tech Cannabis Grow Systems Simplify Growing At Home

Ultimate guide to indoor grow systems, including automated, grow boxes, home grow systems, and DIY grow boxes.

Many states allowing legal cannabis also permit patients and residents to grow a certain number of plants for personal use. For many medical patients, producing their medicine at home dramatically reduces costs and increases their control over what they consume. However, learning how to grow a quality cannabis plant isn’t always as easy as it may seem.

Just as the refrigerator changed the way people shopped for food, and the microwave altered the way people cook, the cannabis indoor growing systems could revolutionize the way people grow their plants at home. Several companies are at the helm of the home grow revolution, and CannabisTech has all the details you need to know below about the future of home-grown cannabis technology.

THE ARMOIRE BY GREEN GODDESS SUPPLY

Price: $1,395+

The Armoire made by Green Goddess Supply has a furniture-inspired look and feel, in a unit that comes in two finishes. Resembling a traditional armoire, it’s an easy-to-use system that yields up to a quarter-pound of dry bud in a 60-day auto-flower harvest cycle. Growing cycles vary by species dominance, but the most popular is the 8 to 10-week strains (some strains can go as long as 12-14 weeks). The Armoire is ergonomically designed, lightweight, waterproof, and comes with everything you need except seeds, water, and soil mix (UV safety glasses, wi-fi camera, digital hygrometer [LCD temperature & humidity module] and moisture meter are just a few of accessories included with the system. The LED large footprint light is proprietary—designed down to the last nanometer— and uses an intuitive 4 winch pulley system for easy scaling as your plant grows. It’s also energy efficient — with a carbon footprint of approximately 150 watts. The system is user-serviceable and backed by a multi-component warranty. An industry first, a childproof magnetic lock is standard, which helps to ensure your plants aren’t accessed by anyone but the grower. The exhaust fan is quiet and can be easily removed for cleaning, the no odor carbon “long life” scrubber uses high-grade Australian activated carbon. Also included: 4 LST “plant training” rods, 4 internal circulation fans with six vents and protection grills, 2 fine mesh passive air intake filters, timer, grounded surge protector with both AC and USB input receptacles, cloth 5-gallon grow pot, and large, rigid water collection saucer.

This indoor grow system includes everything you need to start growing, minus the seeds, soil, and water. The GGS team provides a vetted list of online seed and soil vendors, along with personalized Concierge Service, to ensure your first grow goes smoothly. The team’s mantra is, “if you can water a houseplant, you will have success with The Armoire.” Designed and promoted as a “nurturing system,” the philosophy and grow protocol is the result of over 40 years of indoor and outdoor grow experience, tips, and tricks—including Autoflower-specific LST (Low-Stress Training) on-hands training. Although minimal, the GGS team embraces interaction with your plant–albeit just a few minutes a day. The company believes this is the best insurance, best practices, results-driven approach that professional handcrafted cultivars’ employ–brought down to a single plant, personal use scale.

If you are looking for a stylish and discreet grow box to easily grow high yielding plants in your home or apartment, The Armoire is the perfect unit to blend right in. And think about it; four ounces of top-shelf flower—including taxes (especially in metropolitan markets) equals the purchase price of The Armoire. It not only pays for itself with your first harvest, but you know—without a doubt that there are “no pesticides, no molds, and no chemical additives or nutrients.”

Whether you are an amatuer marijuana user who wants to start their very first home grow, or an experienced cannabis connoisseur looking to streamline their home grow systems, these units offer a stealthy way to embark on your own home grow.

SEEDO BY SEEDOLAB

Price: $2,499+

The Seedo resembles a high-tech mini-fridge, but features an automated hydroponic system-based technology, with automated lighting, mineral system, and CO2 enhancement.

Its most significant benefit is the efficient size and automated growing process. It sports an app that allows you to control the growth process and receive alerts.

Officially launching in 2013, the excitement behind a product like this had generated a lot of social buzz and a huge wave of initial customer orders. Seedo even managed to secure a celebrity endorsement from the High Chief himself, Snoop Dogg.

While the Seedo looks like the optimal sizing for apartments, the unit is a little on the small side, the price is a bit steep, and there isn’t any yield expectation or approximate yield guide. 

There are more ongoing costs for operation due to the consumables (nutrients, pH balancing, C02 cartridges, etc.) required for these systems, and hydroponic systems bring issues with either hard piping in plumbing or dealing with bacterial and/or algae-collecting reservoirs. 

The company claims up to 4-oz— from 4 plants. At $2,500- it will take several grows to get your money’s worth, and the actual wattage is over 250 watts (the LED alone is 144 watts, and that doesn’t include the refrigeration unit and fans.

Seedo has gotten into some hot water recently as well, according to Reddit user u/reefer-rabbi, “Seedo simply doesn’t give a ”… customers who have purchased the initial units have reported numerous systems failures and a lack of transparency from the company. Buyer beware if you decide to purchase the Seedo, if you do have a working unit, please let us know how your grow is going. 

GROBOX BY CLOUDPONICS

Price: $2,690+

GroBox is a fully automated grow device that’s completely synced with an app (IOS or Android), where you can watch and monitor the progress of your plant(s). The primary benefit of this product is the software system that makes every aspect of the growing process automated. The app includes humidity control, watering frequency, pH buffering processes, temperature regulation, LED grow light scheduling, and auto-off. This makes it as close to a “set it and forget it” unit as possible.

The dimensions are 69.75″ x 29.50″ x 30.75″, making this a sizable unit for growing indoors. You will need to plan your growing location accordingly.

It’s priced at the top of the market, but it does produce a substantial yield, up to one pound in 3 months. However, customers have repeatedly vented their frustrations — they just don’t seem to work right. Hardwood floors and/or carpeting can be ruined if water sensors fail. They tend to weigh a lot, consume a lot of power and can be overly complicated. Recently, it has been reported that the company is pivoting away from selling the units outright and starting to use them in conjunction with consulting services instead because of all the issues reported. 

The Growbox by Cloudponics is currently “sold out” on their website.

LEAF BY GET LEAF

Price: $2,690+

The LEAF grow box is the most expensive automated home grow system on the market. LEAF utilizes an app to control and automate the growing process. The unit itself includes a carbon filter, HD camera, toolbox, LED lighting, water sensing, and exchanging cartridges and air control/ nutrient system.

The typical growth for this unit is 3-4 months long and yields about 4 ounces. The unit is a decent size at 62” x 27” x 25”. The LEAF unit will use about $15-50 a month in electricity and uses around 5 gallons a week of water. The LEAF unit is very versatile in that you can add water manually, or you can hook it up directly to water plumbing, therefore never having to worry about changing the water. It looks like an industrial refrigerator, and word is that they were still not shipping after 3 years of pre-orders. (This may or may not have changed by the time of this printing). This unit also uses consumables — purchased from the company — to run efficiently. Also, like the Seedo, it has an industrial look and feels.

GROBO BY GROBO

Price: $2,199+

Canadian startup Grobo aims to create a simple home growing system that takes the guesswork out of cultivating cannabis, to help users achieve consistently high-quality results (typical yield is two ounces every three months). 

The system is sleek-designed. After adding water and seeds, the growing process is automated within the unit. Each yield can bring up to 3 oz, and the unit is reported to pay for itself in 18 months.

Aside from the process being automated, Grobo’s unit is somewhat compact at 48” x 14” x 14”, customers have a choice of the Grobo and the Grobo Premium. The base model is a sleek looking windowless grow box while for those who really want to show off their buds, the Grobo Premium offers a fluid glass window that can display your plant at the touch of a button.

SUPERSTAR SMART GROW BOX BY SUPERCLOSET

Price: $1,384+

The SuperStar Smart Grow Box is a hydroponic system that combines top feed watering and bottom feed oxygenation. Designed like a locker, built sturdy, and with a door locking mechanism, this system can be modulated to grow clones or traditional cannabis plants. The unit’s dimensions are 24” wide, 24” deep, and 60” high. The SuperStar Smart Grow Box features include a Kind LED K3 Series 2 XL300 light, dual activated carbon scrubbers, digital hygrometer and thermometer, and an adjustable internal circulation fan. Wattage is quite high, and prior grow experience is recommended.

DIY GROW BOX OR TENT

Another option for some is to individually purchase all the equipment necessary to build your own DIY grow tent or convert a space in your home to a DIY grow room. While it can be more of a process, this allows home growers to fine-tune the setup to their individual needs.

The advantages of setting up your own cannabis grow tent are mostly in the price. You can find lights, tents, pots, and nutrients all online. This is good for those who aspire to become a professional cannabis grower. Individual component warranties vary from none to “some”… If you are on a tight budget, know what you are doing and only care about price (not safety or manufacturer’s liability), this is a workable, albeit high learning curve alternative. Choosing what kind of lights you feel would best suit the size and number of plants you are looking to grow, hydro or soil, child safety, and other considerations must be part of the pros and cons of building such a system.

Not always, but often one gets what they pay for. Home grow tents can have more kinks in how they operate and be less seamless than automated systems. Another disadvantage of a DIY grow tent is you must possess the knowledge of each facet of the grow. It can be hard for the casual grower to know what pots, lights, tent, nutrients, temperature, humidity air circulation, acceptable noise levels, and the watering system is best for them and their situation. In addition, pests such as spider mites can be the norm if set up in a garage or basement.