By: Daniel L. Kiselbach, Partner, Deloitte Tax Law LLP dkiselbach@deloittetaxlaw.ca

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ESTABLISHING A MEDICAL MARIJUANA BUSINESS: TOP BUSINESS AND REGULATORY ISSUES

1.    INTRODUCTION

In order to find the path to profitability in a new business it is often necessary to have access to specialized knowledge.  Knowledge and experience can help you to optimize the opportunities.  It can also help to avoid financial, operational or legal traps.  Many business leaders obtain in-depth business and legal advice from accountants and lawyers tailored to their situations.  Armed with specialized knowledge, these experts act as trusted business advisors.

The purpose of this outline is to discuss some business and legal issues that might apply to a new medical marijuana business.  They range from corporate law, to tax and corporate finance.  Some are basic while others are complex.  This outline will give you a sense of the key issues that you may need to consider in establishing a medical marijuana business, such as: evaluating and developing your business idea; deciding on a legal structure for your business; choosing and registering a business name; creating a legal entity for your business; obtaining business premises; obtaining licences and permits; and planning and paying taxes.

2.    TOP BUSINESS AND LEGAL ISSUES

1.     Business Plan

A business plan can be compared to a road map.[1]  Putting together a business plan assists in objective setting, making start-up and operating decisions, and getting financing.  They help save time, energy and money by keeping you on tract.  They are the key to the ability to compete in the marketplace.

“Traditionally considered an exercise in corporate discipline, today’s business plans are at the heart of obtaining financing, forming alliances and recruiting executives. No longer read exclusively by insiders and traditional lenders, business plans must do more than demonstrate a sufficient level of competence. Today’s plans have to withstand stiff competition in attracting funding, key employees, and other desired relationships.”[2]

Since the medical marijuana industry is emerging, market knowledge may be critical.  Product value is tied to the market. The business plan must convince potential financial backers that you understand the target market, the size of the market, the market forces affecting the business and the level of expected sales.

Financial calculations may be essential to your business plan.   One such financial calculation is the break-even analysis.  It shows you the revenue you need to cover expenses. If you can surpass your break-even point, you can make money.  Many entrepreneurs conduct a break-even analysis as a screening tool.  Some won’t complete a business plan unless the break-even analysis shows that projected sales revenue far exceeds the cost of doing business.

In order to perform a break-even analysis, one must make the following estimates and calculations:

  1. Fixed costs:   this term refers to overhead amount which includes rent, insurance, utilities, and other set expenses which are relatively stable.
  2. Sales revenue:  this term refers to the total sales amount that can reasonably be expected to be brought into the business each month or year.
  3. Average gross profit for each sale:  this term refers to the amount of money that remains from a sale after the direct costs of the product are accounted for.
  4. Average gross profit percentage: this term indicates how much of each dollar of sales income is gross profit (calculated by dividing the average gross profit figure by the average selling price).  For example, if a business makes an average gross profit of $200 on a unit of medical marijuana it sells for an average of $300, its gross profit percentage is 66.7% ($200 divided by $300).

The break-even point can be determined using the above calculations.  One must divide the estimated annual fixed costs by the gross profit percentage in order to determine the amount of sales revenue necessary to break even.

Assume that fixed costs are $6,000 per month, and the expected profit margin is 66.7%.  In such case the break-even point is $9,000 in sales revenue per month ($6,000 divided by .667).  The business must make $9,000 a month to pay fixed costs and direct (product) costs.

Other financial projections that should be part of the business plan include:

  1. A profit-and-loss forecast:  this is a monthly projection of a business’s net profit from operations.
  2. A cash flow projection:  this is a calculation of how much cash the business will have on hand each month to meet expenses.
  3. A start-up cost estimate: this is a calculation of the expenses that the business will incur before the business opens.

2.     Branding: Registering Business Name and Trade Name

One of the most important parts of a company’s branding strategy is choosing the right name and logo.  The process may take a lot of time, vision, and money. If your business is not distinctive, it may falter.  Conversely, a strong business name and logo can help you capture a market.  Companies spend a great deal of time, effort and money nurturing a corporate image in order to have it become associated with reliability and quality.

The development of a corporate identity begins with the corporate name.  Registration of the corporate name protects that identity. Federal incorporation gives a company the right to operate under its corporate name throughout Canada.  Provincial incorporation gives a company the right to operate under its corporate name in a province. In general, corporate registrars across Canada will not register a proposed company name if it has been registered in the relevant jurisdiction (eg., in BC under Business Corporations Act, SBC 2002, C. 57 or federally under the Canada Business Corporations Act (R.S.C., 1985, c. C-44).

Canada uses the “NUANS” search program to compare a proposed corporate name or Trade-mark with databases of existing corporate bodies and Trade-marks.  A NUANS corporate name search report is required by the federal and most provincial / territorial governments.  Quebec does not currently provide data to NUANS and a business owner must search the Quebec corporations database. A NUANS report lists similar existing corporate names and trademarks and is used to determine the availability of a new proposed name.  Doing so ensures that new corporate names do not create confusion in the market place.[3]

Only registration under the Trade-marks Act R.S.C., 1985, c. T-13 provides more protection. You may acquire intellectual property rights to a trade name through the registration of a trade mark.  Trade-marks may be one or a combination of words, sounds or designs /logos used to distinguish your products from others.  They represent the products and the reputation of the producer.  A “trade name” can be registered under the Trade-marks Act.  A trade name is the name under which business in conducted.  It can be registered under the Trade-marks Act if it is used as a trade-mark (i.e., to identify goods or services).[4]

3.     Form of Business

Similarly, choosing the right form of your business may be key to future success.  This is one of the first decisions you may have to make as a business owner.  It will have long term effects.  This is because the form of the business will determine how the business is organized.  Business owners need to select a form that is tailored to their needs, having regard to issues such as: who owns the business, who controls the business, liability for business activities, etc.  Relevant factors in making the decision may include:

  1. The expected size of the business.
  2. The number of owners.
  3. The control that you want to have over the business.
  4. Financing requirements;
  5. Limitation of liability concerns.
  6. Tax planning concerns.

Options include the following:

  1. A sole proprietorship: This is a business owned and operated by an individual. A sole proprietorship can be operated under your own name.  An advantage to a sole proprietorship is its simplicity.  You can operate the business in your own name. The disadvantage is that the person operating as a sole proprietorship is not protected from potential liabilities that might arise in the course of operating the business.
  2. A partnership: You can create a partnership between several persons. Laws respecting the rights and obligations of partnerships are provided for in provincial or territorial legislation.  The most common type of partnership is the general partnership, where each partner is jointly and severally liable for the debts of the partnership.   Another type is a limited partnership in which a person can contribute to a business without being involved in the affairs of the partnership.  A limited partner’s liability to the firm or its creditors is limited to the amount that he/she invested.  A limited liability partnership is another type of partnership that provides protection from liability for partners.  In general, a partner is not liable for obligations of other partners if the obligations did not arise from the partner’s negligence or inactions.  Limited partnerships and limited liability partnerships must be registered.
  3. A corporation or company.  A corporation is a distinct legal person whose existence is separate from its owners (i.e., the shareholders of the corporation). This separation of ownership is the single greatest advantage of a corporation.  Shareholders are sheltered from liability arising from the debts and wrongful acts or omissions of the corporation.

It is good to establish your business structure early in the planning process.  The Canada Revenue Agency (“CRA”) takes the position that a business starts when it begins significant activity that is a regular part of the business, or necessary to get the business going.[5]

4.     Directors’ Liability

Corporations are managed by directors.  An invitation to join a corporate board of directors once signified that a person attained business or professional prominence.  That type of invitation was often accepted for the reason that it provided an opportunity to extend one’s network.  Little thought was given to the extent of the director’s exposure to liability.  If Canadian authorities took a casual approach to the issue of directors’ liability in the past, this is no longer the case.[6]

Directors now work in a highly regulated environment.   Individuals who accept a position as a director should understand the characteristics of their corporation and their role in the management of that corporation.

Directors may be liable for the debts, act and omissions of their companies.  For example, directors may be responsible for a company’s failure to pay employee source deductions relating to income tax, Employment Insurance and Canada Pension Plan, as well as unremitted Goods and Services Tax and provincial sales tax.  Taxing statutes impose both civil and criminal liability for certain types of non-compliance.

To avoid personal liability directors must be compliant with various laws which govern the business.  They should keep current with legal developments that may affect their legal exposure.  They can also take other protective measures, such as obtaining appropriate corporate indemnities and directors’ liability insurance.

5.     Financing

Many businesses cannot survive without financing.  It may be necessary to finance the purchase of capital assets and to fund operating expenses.  Each business owner must make decisions respecting the financing options.  There are various options. Some are briefly described here:

  1. Debt financing: this is money borrowed in order to operate the business.  There are generally two types: long term debt financing and short term debt financing.
    1. Long term debt financing usually applies to capital assets (e.g., equipment, buildings, land, or machinery). With long term debt financing, the scheduled repayment of the loan and the estimated useful life of the assets extends over more than one year.
    2. Short term debt financing usually applies for operating expenses (e.g, inventory, supplies, or wages).  This is commonly referred to as an operating loan or short term loan as scheduled repayments (such as a revolving line of credit) usually take place within one year.
    3. Equity financing:  this is the process of raising capital through the sale of shares in a business.  It involves the sale of an ownership interest in order to raise funds. Equity financing spans a wide range of activities in scale and scope and includes for example:
      1. Money raised by an entrepreneur from friends and family.
      2. Money provided by private equity firms.
      3. Initial public offerings (IPOs) on a stock exchange.

Equity financing is distinct from debt financing, which refers to funds borrowed by a business.  Various professional advisors are available to assist in debt or equity financing.[7]

6.     Permits and Licencing

Obviously, licensing is central to the medical marijuana industry.  Health Canada’s website describes the licensing requirements specific to medical marijuana producers.[8]  Industry Canada’s BizPaL is useful for determining the permits and licenses that are required for all levels of government.[9]

Subsections 3(3), 12(1), 12(6) and 12(7) of the Marihuana for Medical Purposes Regulations SOR/2013-119  provide that licensed producers can be authorized to possess, produce, sell, provide, ship, deliver, transport , destroy, import and export marijuana.

The term “licensed producer” means the holder of a licence issued under section 25 of the Marihuana for Medical Purposes Regulations.   Division 2 sets out provisions relevant to producer’s licences. In order to become a licensed producer an interested party must meet the requirements provided for under the Marihuana for Medical Purposes Regulations.

Health Canada has published an application form titled Application to Become a Licensed Producer under the Marihuana for Medical Purposes Regulations.[10]  The application form requires the provision of detailed information including the following:

  1. The identity of the proposed “Senior Person in Charge” who will have overall responsibility for management of the activities carried out by the licensed producer under the license at their site.
  2. The identity of the proposed “Responsible Person in Charge” who will work at the licensed producer’s site and have responsibility for supervising activities.
  3. The identity of the “Alternate Responsible Person in Charge”.
  4. The identity of the proposed “Persons Authorized to Place an Order for Cannabis on Behalf of the Applicant”.
  5. Security Clearance for various individuals an individual applicant and all officers and directors of a corporate applicant; the proposed Senior Person in Charge, the proposed Responsible Person in Charge and the proposed Alternate Responsible Person(s) in Charge.
  6. Activities and substances to be specified on the licence; the building where the activities will take place; and purpose for conducting each of the activities.
  7. The quantity of dried marijuana to be produced.
  8. The quantity of dried marijuana to be sold or provided to eligible persons.
  9. Activities with cannabis, other than marijuana.
  10. Proposed site information.
  11. Information respecting the ownership of the property relevant to the proposed site.
  12. Proposed site and physical security.
  13. Notice to local government, police and fire authorities.
  14. Quality assurance and pre-licensing report:  the applicant must submit a document signed and dated by the proposed quality assurance person that includes:
    1. a description of the quality assurance person’s qualifications in respect of the proposed licensed activities and requirements; and,
    2. a report establishing that the buildings, equipment and proposed sanitation program to be used in conducting the proposed activities comply with regulatory requirements.
    3. Record keeping:  the applicant may be required to submit a detailed description of the documents that the applicant is planning to use to ensure proper record keeping and proposed record-keeping methods.
    4. Declarations and Attestations:  the proposed Senior Person in Charge Responsible Person in Charge, and if applicable, the proposed Alternate Responsible Person(s) in Charge must declare that they are familiar with applicable legislation.
    5. Consent by owner to utilize the site: if the proposed site, or any portion of the site, is not owned by the applicant, this declaration is to be signed and dated by the owner of the site.

7.     Legal Documents

Business entities and business transactions are based upon legal documents.  They are the means by which forms of business are created, by which legal agreements are made, and by which government authorities license or permit activities.  They provide evidence in support of the positions of the parties in litigation.  Given the importance of having proper legal documentation many businesses retain legal counsel when a business is formed.

Typical legal documents that are necessary in order to carry on a business include the following:

  1. The constating documents.  These are the documents that create a corporation.  For a federal corporation these are the certificate and articles of the corporation (e.g., articles of incorporation, continuance or amalgamation).
  2. Documents signed by an authorized business representative in connection with particular activities or transactions:
    1. Shareholders agreement.
    2. Directors’ resolutions.
    3. Employment contracts.
    4. Lease agreements.
    5. Agreements for the purchase and sale of property.
    6. Security agreements in support of loans, mortgages, etc.
  3. Official documents such as licences and permits.

8.     Tax Compliance and Planning

Careful tax planning can make the difference between a profitable and unrewarding business.  Tax compliance and planning issues are best sorted at the beginning.  Doing so can help to avoid the overpayment of tax and the assessment of penalties and interest.  It is often difficult and expensive to fix tax problems after they have been discovered by an auditor.

Obviously, an overview of all the tax considerations that might apply to a medical marijuana business cannot be attempted here.  However, some basic tax considerations include the following:

  1. How should the business entity’s profit be taxed?
  2. What is the most tax efficient way of paying the owners of the business?
  3. Does the business need separate CRA accounts for income tax, GST, PST and customs?
  4. Will the business charge GST, HST and PST on sales?
  5. What income tax deductions will the business claim?
  6. What input tax credits will the business claim?
  7. When does the business need to file tax returns and make tax payments?
  8. In the case of corporate directors, what steps should be taken to ensure that that the  corporation makes tax remittances on account of source deductions, GST, HST, PST, EI, CPP, and income tax?
  9. Can the business take advantage of tax incentive programs (e.g., scientific research and experimental development claims (“SR&ED”)?   Notably, the SR&ED Program, for example, gives claimants cash refunds and /or tax credits for their expenditures on eligible research and development work done in Canada.  It is a federal tax incentive program which is administered by the CRA.  It is designed to encourage Canadian businesses in all sectors to conduct research and development in Canada. It is the largest single source of federal government support for industrial R&D.[11]

9.      Business Premises

Many businesses start out from leased premises.  With respect to commercial leases there are many factors to consider including the current potential of the business, the growth potential of the business and the business goals.  Business owners need to ensure that those factors are addressed in any decision to lease or to purchase business premises.

Leasing can help to avoid a major capital investment (buying or constructing business premises). However, a lease may constitute a significant expense and may hold the lessee to a long-term commitment.  It is, therefore, a very important legal document.

Typical issues that a commercial realtor or advisor can assist with include the following:

  1. Costs of the lease.
  2. Obligations of the lessor.
  3. Obligations of the lessee.
  4. Term of the lease.
  5. Right of renewal.

Issues specific to medical marijuana producers may include:

  1. Tenant improvements required in order to use the space.
  2. Security measures in place to satisfy licensing requirements.
  3. Effect of use on insurance.
  4. Expected costs of utilities.

The purchase of property may be another option.  The purchase of real estate may be a very significant investment.  Advice from a consultant, or realtor and others may assist with in the financing, development and management of real estate.[12]

10.   Business Purchase

In some cases the opportunity may arise to buy an existing business.  In such case the purchaser of a target business has to make a choice between buying the assets and buying shares of the company.  Details respecting this choice are set out below:

  1. Buy the assets:

Considerations in this case include the following.  A purchaser of assets does not inherit the liabilities of the company.  Tax attributes are reset (eg., capital cost allowance).  There is no acquisition of control arising from an asset purchase.  However, there may be allocation issues (such as capital gains on land and recapture on depreciated property).

  1. Buy the shares of a company which owns the assets:

Considerations in this case include the following.  A vendor might want to sell the shares if the vendor has a lifetime capital gains exemption which is applicable to a “qualified small business corporation”.  The purchaser of shares inherits the liabilities of the company.  Tax attributes of assets are not reset.  There is an automatic acquisition of control and a deemed year end.

In sum, the tax treatment and liability consequences of an asset purchase and a share purchase are different.

In either case, it may be prudent to undertake searches in order to protect the asset purchaser or the new shareholder.  Hidden liabilities might include, for example, security agreements, judgments or liens on collateral assets.  With respect to a share purchase issues of concern may include unpaid taxes, or lawsuits against the company.  In making a significant asset or share purchase it may be prudent to draft a buy and sell agreement which sets out the terms of the agreement and appropriate representations and warrantees of the vendor.

11.   Conclusion

This outline has discussed key considerations for new medical marijuana businesses.  If the opportunities in this emerging area are great, the business and legal issues are numerous.  They range from corporate law, to branding, licensing and tax planning.  A business person in this area may need access to specialized skills and knowledge in these areas.   Even so it is not necessary for you to become an expert in all of these areas.  A trusted advisor can help you succeed.

 

About Deloitte Tax Law LLP

Deloitte Tax Law LLP provides advice to domestic and international clients on all aspects of Canadian tax law – including income tax and commodity taxes. The services of Deloitte Tax Law LLP include developing tax planning strategies and tax-efficient corporate structures, whether for new or existing businesses, and advising on the income and commodity tax implications of a wide variety of corporate/commercial transactions. Deloitte Tax Law LLP advise on wealth, estate and business planning for high net worth individuals and have extensive knowledge and expertise in the area of taxation of private corporations and their shareholders. Deloitte Tax Law LLP offers tax litigation and CRA representation services. Its tax litigators have broad experience in representing both corporate and individual clients in dealing with Canadian federal and provincial taxation authorities and have appeared at all levels of court.

 


[2]  Deloitte and Touche, “Writing an Effective Business Plan”  (4th ed) 2003 online: http://www.mitarabcompetition.com/images/pdf/writing-an-effective-business.pdf

[3] See Industry Canada, NUANS Corporate Name Search” (date modified 2012-07-25) online at: http://www.nuans.com/nuansinfo_en/home-accueil_en.cgi) and for British Columbia see BC Registry Services, “Doing Business in BC”: http://www.bcbusinessregistry.ca/

[4] Canadian Intellectual Property Office, “A Guide To Trade-marks” (date modified 2014-01-31) online:  http://www.cipo.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr02360.html

[5] Canada Revenue Agency, “What is a business” online (date last modified 2014-02-14: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/wht-eng.html

[6] Ronald Davis, Director’s Liability in Canada (Specialty Technical Publishers, Vancouver, BC: 2013 ) Intro-1

[7] See Deloitte, Strategies for going public and accessing capital in Canada, online: http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/CSG/ca_en_csg_TSX_en_081109.pdf
Deloitte, Corporate finance, Deloitte Corporate Finance Inc. online: http://www.deloitte.com/view/en_ca/ca/services/financialadvisory/corporatefinance/index.htm

[9] See Bizpal online: http://www.bizpal.ca/en/

[11] See Canada Revenue Agency, Scientific Research and Experimental Development Tax Incentive Program, Date modified: 2014-04-23: http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html.

Multi-state cannabis leader highlights events, partnerships, and activities to coincide with Juneteenth holiday

Trulieve Cannabis Corp . (CSE: TRUL) (OTCQX: TCNNF), a leading and top-performing cannabis company in the United States and its dispensary group Solevo Wellness, today announced the sponsorship of expungement clinics in Pittsburgh, Pennsylvania as well as additional initiatives celebrating the Juneteenth holiday.

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A summertime series of expungement events, employee volunteerism, documentary filmmaking, fundraising and more demonstrate the importance of commitment to reform and restorative justice to build an equitable, inclusive cannabis industry

Today, on the 50 th anniversary of when America started its longest war—the War on Drugs— Cresco Labs (CSE:CL) (OTCQX:CRLBF) (“Cresco” or “the Company”), a vertically integrated multistate operator and the number one U.S. wholesaler of branded cannabis products, announced the launch of a summer-long social justice campaign supported by its Sunnyside retail brand and flagship cannabis brand, Cresco . Through community expungement events, employee volunteerism, a film documenting the impact of unjust prosecution, and financial contributions from the Company and our third-party vendors, the “Summer of Social Justice” campaign aims to influence reform to help shape a future cannabis industry with limitless opportunities for everyone. The campaign will amplify the ongoing restorative justice, community business incubator and education and workforce development programming facilitated by the Company’s established SEED (Social Equity & Education Development) initiative.

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Florida’s legal cannabis program has gained plenty of investor attention as the potential for this segment of the US cannabis market continues to expand.

The US cannabis industry is largely fragmented because the plant remains illegal at the federal level. Despite that obstacle, several states across the country have implemented medical and recreational cannabis legislation allowing for cultivation, processing, commercial sale and consumer use.

While this legislation differs greatly from state to state, one state’s medical cannabis industry has seen unprecedented growth: Florida.

 

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The coastal state’s journey to cannabis legalization has been a challenging one. In 2016, over 70 percent of Floridians voted for a constitutional amendment to allow the use of cannabis for medical purposes.

However, in the 2017 legislation that created the state’s legal medical cannabis framework, then-Governor Rick Scott banned smoking medical cannabis. It wasn’t until March 2019 that Ron DeSantis, the current governor of Florida, lifted the ban on smokable marijuana.

In the face of those challenges, the Sunshine State has developed one of the most attractive medical cannabis markets in the country. In fact, Florida’s medical marijuana space is one of the fastest growing in the country.

Read on to learn more about the investing opportunities in Florida’s legal cannabis space and the top marijuana stocks to look out for.

Florida medical cannabis: High-growth market

Florida’s large population — the third biggest in the US — is a factor in the attractiveness of its cannabis market. The state is also the fourth largest economy in the US with a gross domestic product of just over US$1 billion in 2020.

A 2020 report from Arcview Market Research and BDS Analytics shows the US legal cannabis industry is expected to grow by 18.2 percent between 2019 and 2025 to reach US$33.9 billion. Florida ranks among the jurisdictions that will contribute the most to that growth.

“The Total Available Market, or TAM, is one of the most critical factors for any industry,” states Dustin Robinson, founding partner of Mr. Cannabis Law, in an article written for Green Entrepreneur. “Florida’s marijuana industry happens to have one of the strongest TAMs in the world.”

As of a June 2021 update from Florida Health’s Office of Medical Marijuana Use (OMMU), the state had 569,450 qualified medical marijuana patients and 2,542 qualified physicians.

Florida’s patient count is a small percentage of its population of 21 million, but it has been steadily growing since the drug was legalized in the state in 2016. In fact, the patient figure has more than doubled in the past two years.

According to Robinson, there are almost 300 retail locations in Florida, with another 500 locations expected by the end of 2022.

Beacon Securities analyst Russell Stanley has said Florida boasts a healthy list of addressable medical conditions that can be treated with cannabis, unlike the medical marijuana programs in other states.

“Some other states have had trouble expanding their programs, in part because it’s been very difficult for patients to get access to product,” Stanley told the Investing News Network. “Other states have had restrictions on which healthcare practitioners can recommend it and what they can recommend it for.”

 

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Florida cannabis market: High barriers to entry

The 2017 Florida medical marijuana law established a cap on the number of medical marijuana dispensaries and required that each center be vertically integrated — they all had to manage their own operations, from cannabis cultivation and processing to distribution and sales.

The cap on the number of dispensaries expired in April 2020. While the vertical integration requirement portion of the law underwent a three year court battle, the Supreme Court of Florida recently upheld the legislation, meaning this requirement will continue to shape the Florida cannabis market for years to come.

During a panel discussion, Steve Hawkins, CEO of Horizons ETFs Management (Canada), said he views vertical integration as one of the key benefits for US companies compared to the Canadian cannabis market. Only players that have been able to develop cannabis production, manufacturing and distribution capabilities can compete in the marketplace.

As of March 2021, the state had 22 licensed medical marijuana treatment centers (MMTCs) and five laboratories licensed for third party testing. The low number of licenses currently awarded creates high entry barriers, which is a big plus for the currently operating companies that have already established a strong foothold in the market.

Robinson believes that “the 22 Licensees are in a great position to build multi-billion-dollar companies in Florida’s growing marijuana industry.”

These 22 established licensees will also have an advantage if and when recreational cannabis becomes legal in the state. “In Florida, the medical marijuana license allows the current MMTCs to build out as big of a footprint as possible in preparation for adult use (recreational) legalization,” he said.

Florida cannabis market: Top Florida cannabis stocks

As the legal cannabis industry grows in Florida, some players have begun to stand out in the state.

Florida native Trulieve Cannabis (CSE:TRUL,OTC Pink:TCNNF) holds the lion’s share of the market and has continually been a top-performing stock in the state.

Trulieve opened Florida’s first medical marijuana dispensary back in 2016, and since then it’s grown into a force in the industry, with a current market capitalization of US$5.52 billion.

As of June 4, 2021, Trulieve had 82 dispensing locations in the state, according to data released by the OMMU. In one week’s time it sold more than 76.5 million milligrams of tetrahydrocannabinol (THC) products and 1.6 million milligrams of cannabidiol (CBD) products, in addition to 32,295 ounces of dried flower.

Shortly after smokable marijuana was legalized, Trulieve began selling flower and was the first in the state to do so. Trulieve has also benefited from a vertically integrated structure that includes cannabis cultivation, production and distribution, which is essential since cannabis cannot be moved across states lines just yet.

Surterra Wellness comes in at a distant second place with 39 dispensing locations and sales of over 22.2 million milligrams of THC products and 1.6 million milligrams of CBD products, in addition to 6,911 ounces of dried flower. Surterra is owned by Parallel, one of the largest privately held multi-state cannabis operators (MSOs) in the country.

 

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Parallel recently announced its intentions to go public through a definitive business combination agreement with Ceres Acquisition (NEO:CERE,OTCQX:CERAF), a special purpose acquisition company.

Another big player in the state is Massachusetts-based Curaleaf Holdings (CSE:CURA,OTCQX:CURLF). Though not native to Florida, Curaleaf’s presence in the state’s cannabis business is substantial. Of the MSO’s total 101 dispensaries, 37 are in Florida, putting it in third place behind Trulieve and Surterra.

The vertically integrated company also launched the state’s first medical cannabis tablets in September 2019, followed by the first sublingual tablets in July 2020.

Curaleaf put up impressive revenue numbers for 2020, reporting retail revenue of US$423.2 million compared to US$138.7 million in 2019. The company attributed the 205 percent increase to new store openings in its operating states, including five opened in Florida in 2020.

Liberty Health Sciences, which was acquired by Ayr Wellness (CSE:AYR.A,OTCQX:AYRWF) in February 2021 in all-stock transaction, also has a considerable stake in Florida. According to the OMMU, Liberty currently has 36 dispensing locations in the state.

Ayr Wellness plans to increase that footprint to 42 dispensaries by the end of 2021, and has a target of roughly US$4 million in annual retail revenues per store for 2022. In May 2021, the company announced the launch of its Origyn premium concentrate line in the state. The product line includes wax, crumble, Rick Simpson oil and shatter. Ayr has also begun construction of a 10 acre outdoor cultivation expected to be completed in Q3 2021.

Florida cannabis market: Investor takeaway

As its medical marijuana industry continues to grow, Florida has a lot to offer in terms of investment opportunities. BDS Analytics projects that Florida’s medical cannabis market will hit US$1.5 billion in sales in 2021, up 53 percent over 2020 sales.

The research firms predicts that recreational cannabis could be legal by 2023, which would set Florida on a path to become the third largest US legal cannabis market by 2026. Regardless of whether adult use gets the green light that soon, investors should still consider the Sunshine State as a premier cannabis jurisdiction.

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Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) (“Trulieve” or “the Company”), a leading and top-performing cannabis company based in the United States announced today the opening of a new Florida dispensary, the Company’s 90th nationwide.

The latest dispensary, located in the Florida Keys, supports Trulieve’s goal of ensuring medical cannabis patients across Florida have safe, reliable access to the medications they rely on. The Tavernier dispensary joins the nearby Key West dispensary, as well as several others throughout the Miami area.

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Company to Donate: $30,000 to Assist with Elk Grove Village’s Community Events and Outreach Programs; Additional $15,000 to Go Towards Supporting Alexian Brothers Medical Center’s Foundation, Elk Grove Village Police Drug Education Program and Kenneth Young Youth Center

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