Cannabis Round-Up: Canadian Committee Paves Way for Excise Tax Changes, MSO Reports Record Revenue

House of Commons committee calls for cannabis tax changes

The Federal House of Commons Standing Committee on Finance has recommended a change be made to the way cannabis excise taxes are applied in Canada. The excise tax rate is currently C$1 or 10 percent of the selling price set by the producer, whichever figure is higher. Under the proposed changes, a flat 10 percent ad valorem rate would be applied to sales of dried or fresh cannabis, plants and seeds.

The recommendations come as part of a report put out after meetings held in June 2023 to discuss the 2024 budget, which is due in April.

Exorbitant taxes and fees have been a major point of conflict between the cannabis industry and the federal government in Canada. Along with the 10 percent excise tax, a figure that has never been adjusted in the five years since legalization, players in the cannabis industry are also subject to a 2.3 percent regulatory fee charged by Health Canada, a fee that does not apply to sales of alcohol or tobacco.

Despite inaction, cannabis industry leaders have been more vocal about the need for cannabis tax reform. The latest filings show that the cannabis industry owes more than C$200 million in unpaid taxes, a problem that has ballooned as businesses struggle to keep up with the mounting financial strains of inflation and an over-crowded market.

On Tuesday, MJBizDaily reported that the Canada Revenue Agency has requested that provinces take money from licensed producers who are delinquent on their taxes, and last year the agency closed down Tantalus Labs’ Maple Ridge facility over some C$14 million in unpaid taxes, going as far as threatening to destroy the facility’s remaining supply. Tantalus’ brand and inventory was acquired by Atlantic Cultivation the following month.

Verano reports record-breaking year for revenue

Verano Holdings, a Chicago-based multistate operator, has reported record-breaking revenue growth in 2023, despite net losses revealed in its Q4 and full-year financial results.

The company reported a 7 percent increase in revenue compared to the previous year, to a total of US$938.45 million. Free cashflow was also up from 2022, with US$73 million reported compared to negative US$25 million the year before. Q4 revenue was US$237 million, an increase of 5 percent compared to Q4 2022, but 1 percent under Q3 2023.

The company’s chief executive officer, George Archos, cited new brands and product innovation along with adding more stores to Veranos’ portfolio as the primary drivers of revenue growth. The company, which had 136 stores at the end of 2023, has since opened two additional locations, both in Pennsylvania.

In a statement, Archos was optimistic about the future of the company. “As excitement and anticipation builds in the industry, 2024 has the potential to be a game-changing year, and Verano is well positioned to continue capitalizing on growth opportunities both in the current regulatory environment and from any state or federal reform.”

UBC launches clinical trial on use of CBD for bipolar depression

Researchers out of the University of British Columbia are investigating the use of CBD, a non-psychoactive compound and one of the main elements found in cannabis, as a potential treatment for bipolar depression alongside primary courses of treatment. The trial, funded by the Canadian Institutes of Health Research and approved by Health Canada, will enroll some 360 participants across sites in Vancouver, as well as in Ontario, Quebec and Nova Scotia.

This trial builds on findings from a pilot study published last year that suggested that CBD could be a safe and effective supplemental treatment option for bipolar depression.

“Our pilot trial showed signals for efficacy of CBD which provided an impetus for this large trial,” said Dr. Lakshmi Yatham, the study’s principal investigator. “If proven effective, this has the potential to provide significant benefits to patients by helping effectively (manage) their symptoms and improving their overall quality of life.”

The study drug is a CBD product produced and supplied by PBG Biopharma called ProZ-001.

BZAM granted CCAA protection

BZAM (CSE:BZAM,OTCQX:BZAMF), a Canadian multi-licensed cannabis producer based in Vancouver, has been granted protection by the Companies’ Creditors Arrangement Act (CCAA) by the Ontario Superior Court of Justice. According to a press release, the protection will allow the company to “restructure its business and financial affairs.”

The company cites “margin pressure caused by significant competition and fragmentation of the cannabis industry” as the reason for its inability to generate a positive cashflow and for cumulative losses incurred. A sale and solicitation process for BZAM’s business and assets has been tentatively scheduled for March 8 at which time an unknown entity will acquire “substantially all” of BZAM’s business and assets.

Although business operations will continue, BZAM’s common shares may be halted by the Canadian Securities Exchange, which will also review whether the company should be delisted due to it filing for CCAA protection.

Agrify announces US$2.6 million public offering

Agrify (NASDAQ:AGFY), a company that develops vertical farming units used by the cannabis and hemp industries to cultivate crops indoors, is performing a public offering to raise capital. The funds will be used for “working capital and general corporate purposes, which may include capital expenditures and repayment of debt,” according to the company’s press release.

The offering of approximately 6.7 million shares at US$0.38 per share is expected to result in gross proceeds of around US$2.6 million. As per the February 28 press release, the deal was expected to close that day, barring any satisfaction of customary closing conditions.