Goodness Growth Holdings Announces Fourth Quarter and Full Year 2023 Results

 

Company demonstrates improved performance with record revenue and operating income in fiscal year 2023 –

 

  – Q4 2023 revenue of $24.2 million excluding discontinued operations increased 34.4% year-over-year –  

 

  – Q4 2023 operating income of $5.4 million, the second consecutive quarter above $5 million –  

 

MINNEAPOLIS, April 01, 2024 (GLOBE NEWSWIRE) -- Goodness Growth Holdings, Inc. ("Goodness Growth" or the "Company") (CSE: GDNS; OTCQX: GDNSF), a cannabis company committed to providing safe access, quality products and great value to its customers, today reported financial results for its fourth quarter and full year ended December 31, 2023. Key financial results are presented below in summary form with supporting commentary and discussion from management of certain key operating metrics which the Company uses to judge its performance. All currency figures referenced herein are denominated in U.S. dollars.

 

                                                                                                                                                                                                        
            
  Summary of Key Financial Metrics             
  Three Months Ended   Year Ended
  US $ in millions   December 31,   December 31,
  2023   2022   Variance   2023   2022   Variance
            
GAAP Revenue $24.2   $19.0   26.9%   $88.1   $74.6   18.1%
Revenue (excluding discontinued operations) $24.2   $18.0   34.4%   $86.1   $66.2   30.1%
GAAP Gross Profit $12.1   $8.5   41.6%   $44.1   $30.9   42.7%
  Gross Profit Margin    49.9   %     44.7   %     520 bps     50.0   %     41.4   %     860 bps  
SG&A Expenses $6.3   $7.4   -15.9%   $28.2   $33.8   -16.6%
  SG&A Expenses (% of Sales)    25.9   %     39.0   %     1320 bps     32.0   %     45.3   %     1330 bps  
Operating Income (Loss) $5.4   $0.7   666.9%   $10.6   ($6.9)   NM
  Operating Income Margin    22.3   %     3.7   %     1860 bps     12.0   %     -9.3%     2130 bps  
EBITDA $5.7   $0.8   586.7%   $17.0   ($10.0)   NM
  EBITDA Margin    23.7   %     4.4   %     1930 bps     19.3   %     (13.3   %)     3270 bps  
  NM = Not Meaningful             
            
 

  Management Commentary  

 

Interim Chief Executive Officer Josh Rosen commented, "2023 was a transformational year for our Company, and our teams did an excellent job executing our CREAM & Fire strategy to deliver significant improvements in operating and financial performance. We delivered continual improvement in revenue, gross margin, and operating profit throughout the course of 2023. We're entering 2024 in a much stronger position because of these improvements and our team is poised to capitalize on what I believe is an attractive platform for growth. As I have stated in the past, de-risking our balance sheet was another critical focus for us over the past year, and our announcement this afternoon to divest our New York assets helps position us for an exciting year in 2024."

 

Amber Shimpa, President and CEO of Vireo Health of Minnesota commented, "Our operational key performance indicators continued to show strong improvements both during the fourth quarter and over the past twelve months. We remain especially pleased with the progress we've made with our focus on decentralized operations during the year, allowing our local teams and support from partners like Grown Rogue to help drive decision making for improved product quality and fundamental performance. We believe our continued market outperformance in Maryland's recently-launched adult-use market demonstrates that we are ready to compete effectively in adult-use cannabis markets, and we are looking forward to the launch of adult-use sales in Minnesota in 2025. We expect to provide additional updates surrounding our initiatives to ensure a successful adult-use launch in Minnesota in the coming quarters."

 
                                                                                                                                               
            
  Core Market KPIs   1             
  Three Months Ended   Year Ended
  US $ in millions   December 31,   December 31,
  2023   2022   Variance   2023   2022   Variance
Total Flower Harvested (lbs) 4,108   2,669   53.9%   14,267   8,279   72.3%
  % "A" Flower   2    43.0   %     40.8   %     220 bps     48.5   %     34.6   %     1390 bps  
Total Retail Revenue $19.9   $15.2   30.4%   $71.7   $56.1   27.8%
Same Store Sales Growth -   -   30.4%   -   -   27.8%
  Minnesota    -     -     5.3   %     -     -     20.6   %  
  New York    -     -     -15.9%     -     -     -16.5%  
  Maryland    -     -     210.1   %     -     -     121.2   %  
Total Wholesale Revenue $4.3   $2.8   56.5%   $14.4   $9.5   52.6%
  1   Core Markets refer to the Company's operations in Maryland, Minnesota, and New York.  
  2   "A Flower" refers to produced biomass that meet the Company's highest internal standards for flower quality, size, and appearance.  
 
 

  Other Events  

 

On April 1, 2024, the Company executed an eighth amendment to its lease with its landlord, Innovative Industrial Properties, on its cannabis cultivation and manufacturing facilities located in Johnstown, New York. The eighth amendment to the Johnstown lease extends a lease termination option until June 30, 2024, and adds a purchase option of the facility for the tenant.

 

On April 1, 2024, the Company announced that it has executed a binding term sheet with ACE Venture Enterprises, Inc. ("Ace"), whereby Ace will acquire Goodness Growth Holdings subsidiary, Vireo Health of New York, pending regulatory approval. Terms of the transaction include a purchase price between $3.0 and $5.0 million for Vireo Health of New York's licenses, inventory and assets, an investment of $20.0 million from Ace for the development of the Johnstown, NY cannabis cultivation and manufacturing campus, and Ace's assumption of the Johnstown lease agreement with Innovative Industrial Properties. The parties also committed to a collaborative advisory agreement that retains Goodness Growth's management and compliance oversight in return for an approximate 15 percent share of net profits.

 

  Balance Sheet and Liquidity  

 

As of December 31, 2023, total current assets were $148.9 million, including cash on hand of $16.0 million. Total current liabilities were $179.5 million, including $88.3 million in liabilities held for sale related to the Company's businesses in the State of New York. As of December 31, 2023, the Company had a total of 232,799,343 shares outstanding on the treasury method basis.

 

Josh Rosen concluded, "While we await the closing of our pending transaction to divest our New York operations, we currently remain out of compliance with the covenants in our credit agreement. We are in the midst of ongoing, productive conversations with our secured lender, Chicago Atlantic to extend our credit agreement and remain committed to divesting New York. We expect to secure this extension within the next 30 days."

 

  Conference Call and Webcast Information  

 

Goodness Growth management will host a conference call with research analysts today, April 1, 2024, at 4:30 p.m. ET (3:30 p.m. CT) to discuss its financial results for its fourth quarter and full year ended December 31, 2023. Interested parties may attend the conference call by dialing 1-800-715-9871 (Toll-Free) (US and Canada) or 1-646-307-1963 (Toll) (International) and referencing conference ID number 3718174.

 

A live audio webcast of this event will also be available in the Events & Presentations section of the Company's Investor Relations website and via the following link:
https://events.q4inc.com/attendee/669854452 .

 

  About Goodness Growth Holdings, Inc.  

 

Goodness Growth Holdings, Inc. is a cannabis company whose mission is to provide safe access, quality products and value to its customers while supporting its local communities through active participation and restorative justice programs. The Company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations, which include cultivation, manufacturing, wholesale and retail business lines. Today, the Company is licensed to grow, process, and/or distribute cannabis in four markets and operates 14 dispensaries in three states. For more information about Goodness Growth Holdings, please visit www.goodnessgrowth.com .

 

  Additional Information  

 

Additional information relating to the Company's fourth quarter and full year 2023 results will be available on EDGAR and SEDAR later today. Goodness Growth refers to certain non-GAAP financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in circumstances in which the Company believes that doing so provides additional perspective and insights when analyzing the core operating performance of the business. These measures do not have any standardized meaning and may not be comparable to similar measures presented by other issuers. Please see the Supplemental Information and Reconciliation of Non-GAAP Financial Measures at the end of this news release for more detailed information regarding non-GAAP financial measures.

 

  Contact Information  

 
    
  Investor Inquiries:  
Sam Gibbons
Managing Director  
sam.gibbons@alpha-ir.com
(612) 314-8995
  Media Inquiries:  
Amanda Hutcheson
Senior Manager, Communications  
amandahutcheson@goodnessgrowth.com
(919) 815-1476
  
 

  Forward-Looking Statement Disclosure  

 

This press release contains "forward-looking information" within the meaning of applicable United States and Canadian securities legislation. To the extent any forward-looking information in this press release constitutes "financial outlooks" within the meaning of applicable United States or Canadian securities laws, this information is being provided as preliminary financial results; the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such financial outlooks. Forward-looking information contained in this press release may be identified by the use of words such as "should," "believe," "estimate," "would," "looking forward," "may," "continue," "expect," "expected," "will," "likely," "subject to," "transformation," and "pending," variations of such words and phrases, or any statements or clauses containing verbs in any future tense. These statements should not be read as guarantees of future performance or results. Forward-looking information includes both known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company or its subsidiaries to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements or information contained in this press release. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks as set out herein and in our Annual Report on Form 10-K filed with the Securities Exchange Commission. Our actual financial position and results of operations may differ materially from management's current expectations and, as a result, our revenue, EBITDA, and cash on hand may differ materially from the values provided in this press release. Forward-looking information is based upon a number of estimates and assumptions of management, believed but not certain to be reasonable, in light of management's experience and perception of trends, current conditions, and expected developments, as well as other factors relevant in the circumstances, including assumptions in respect of current and future market conditions, the current and future regulatory environment, and the availability of licenses, approvals and permits.

 

Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, the reader should not place undue reliance on the forward-looking information because the Company can give no assurance that they will prove to be correct. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking information is subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking information. Such risks and uncertainties include, but are not limited to: risks related to the timing and content of adult-use legislation in markets where the Company currently operates; current and future market conditions, including the market price of the subordinate voting shares of the Company; risks related to epidemics and pandemics; federal, state, local, and foreign government laws, rules, and regulations, including federal and state laws and regulations in the United States relating to cannabis operations in the United States and any changes to such laws or regulations; operational, regulatory and other risks; execution of business strategy; management of growth; difficulties inherent in forecasting future events; conflicts of interest; risks inherent in an agricultural business; risks inherent in a manufacturing business; liquidity and the ability of the Company to raise additional financing to continue as a going concern; the Company's ability to meet the demand for flower in Minnesota; risk of failure in the lawsuit with Verano and the cost of that litigation; our ability to dispose of our assets held for sale at an acceptable price or at all; and risk factors set out in the Company's Form 10-K for the year ended December 31, 2023, which will be available later today on EDGAR with the U.S. Securities and Exchange Commission and filed with the Canadian securities regulators and available under the Company's profile on SEDAR at www.sedar.com .

 

The statements in this press release are made as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements or forward-looking information to reflect events or circumstances after the date of such statements.

 

  Supplemental Information  

 

The financial information reported in this news release is based on audited financial statements for the fiscal quarter and year ended December 31, 2023, and December 31, 2022. All financial information contained in this news release is qualified in its entirety with reference to such financial statements. To the extent that the financial information contained in this news release is inconsistent with the information contained in the Company's audited financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by the Company's audited 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.

 
                                                                                                                                                                                                                                                                                                                                        
 
  GOODNESS GROWTH HOLDINGS, INC.  
  CONSOLIDATED BALANCE SHEETS AS OF 12/31/2023 AND 12/31/2022  
  (Amounts Expressed in United States Dollars, Audited and Condensed)  
   December 31,     December 31,  
   2023     2022  
  Assets       
Current assets:      
Cash $ 15,964,665    $ 15,149,333  
Accounts receivable, net of allowance for doubtful accounts of $254,961 and $453,860, respectively   3,086,640     4,286,072  
Income tax receivable   12,278,119     
Inventory   19,285,870     20,508,023  
Prepayments and other current assets   1,336,234     2,544,532  
Notes receivable, current   3,750,000     
Warrants held   1,937,352     
Assets Held for Sale   91,213,271     4,240,781  
Total current assets   148,852,151     46,728,741  
Property and equipment, net   23,291,183     89,606,932  
Operating lease, right-of-use asset   2,018,163     6,110,787  
Notes receivable, long-term      3,750,000  
Intangible assets, net   8,718,577     8,776,946  
Goodwill      183,836  
Deposits   383,645     2,312,161  
Deferred tax assets      1,687,000  
Total assets $ 183,263,719    $ 159,156,403  
  Liabilities       
Current liabilities      
Accounts Payable and Accrued liabilities $ 7,674,389    $ 14,928,780  
Long-Term debt, current portion   60,220,535     11,780,000  
Right of use liability   890,013     1,680,294  
Uncertain tax liability   22,356,000     
Liabilities held for sale   88,326,323     1,319,847  
Total current liabilities   179,467,260     29,708,921  
Right-of-use liability   10,543,934     79,757,994  
Other long-term liabilities   155,917     
Convertible debt, net   9,140,257     
Long-Term debt, net      46,248,604  
Total liabilities $ 199,307,368    $ 155,715,519  
  Stockholders' equity (deficiency)       
Subordinate Voting Shares ($- par value, unlimited shares authorized; 110,007,030 shares issued and outstanding at December 31, 2023 and 86,712,030 at December 31, 2022)      
Multiple Voting Shares ($- par value, unlimited shares authorized; 331,193 shares issued and outstanding at December 31, 2023 and 348,642 at December 31, 2022)      
Super Voting Shares ($- par value; unlimited shares authorized; 0 shares issued and outstanding at December 31, 2023 and 65,411 at December 31, 2022)      
Additional Paid in Capital   187,384,403     181,321,847  
Accumulated deficit   (203,428,052 )    (177,880,963 )
Total stockholders' equity (deficiency) $ (16,043,649 )   $ 3,440,884  
  Total liabilities and stockholders' equity (deficiency)   $ 183,263,719    $ 159,156,403  
      
 

 

 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 
  GOODNESS GROWTH HOLDINGS, INC.  
  CONSOLIDATED STATEMENTS OF OPERATIONS  
  THREE MONTHS AND YEAR ENDED DECEMBER 31, 2023 AND 2022  
  (Amounts Expressed in United States Dollars, Audited and Condensed)  
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2023     2022     2023     2022  
  Revenue    $ 24,173,038    $ 19,043,046    $ 88,133,163    $ 74,625,867  
  Cost of sales              
Product costs    12,392,296     9,891,449     42,739,653     39,423,918  
Inventory valuation adjustments    (274,527 )    636,000     1,289,345     4,293,788  
Gross profit    12,055,269     8,515,597     44,104,165     30,908,161  
  Operating expenses:              
Selling, general and administrative    6,252,404     7,430,550     28,217,980     33,823,686  
Stock-based compensation expenses    148,183     57,603     4,157,598     2,694,197  
Depreciation    92,827     165,913     469,948     653,077  
Amortization    180,033     159,766     678,861     676,566  
Total operating expenses    6,673,447     7,813,832     33,524,387     37,847,526  
             
  Gain (loss) from operations     5,381,822     701,765     10,579,778     (6,939,365 )
             
  Other income (expense):              
Impairment of long-lived assets    (411,629 )    (1,119,583 )    (411,629 )    (8,596,201 )
Gain (loss) on disposal of assets    (1,679,171 )    153,822     (4,477,738 )    322,181  
Gain (loss) on sale of property and equipment       3,347        
Interest expenses, net    (8,465,556 )    (7,120,667 )    (31,260,798 )    (22,593,552 )
Other income (expenses)    1,579,826     45,518     7,746,298     1,242,493  
Other income (expenses), net    (8,976,530 )    (8,037,563 )    (26,037,194 )    (29,625,079 )
             
Loss before income taxes    (3,594,708 )    (7,335,798 )    (17,824,089 )    (36,564,444 )
             
Current income tax expenses    1,321,871     (1,955,000 )    (6,036,000 )    (6,085,000 )
Deferred income tax recoveries    (2,310,000 )    (3,993,000 )    (1,687,000 )    192,000  
Net loss and comprehensive loss    (4,582,837 )    (13,283,798 )    (25,547,089 )    (42,457,444 )
Net loss per share - basic and diluted   $ (0.03 )   $ (0.10 )   $ (0.18 )   $ (0.33 )
Weighted average shares used in computation of net loss per share - basic & diluted    143,126,330     128,126,330     135,235,919     128,126,330  
                 
 

 

 
                                                                                                                                                                                                                                                                                                                                                                                                                                                
 
  GOODNESS GROWTH HOLDINGS, INC.  
  CONSOLIDATED STATEMENTS OF CASH FLOWS  
  YEAR ENDED DECEMBER 31, 2023 AND 2022  
  (Amounts Expressed in United States Dollars, Audited and Condensed)  
    December 31,  
    2023     2022  
  CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss   $ (25,547,089 )   $ (42,457,444 )
Adjustments to reconcile net loss to net cash used in operating activities:       
Inventory valuation adjustments    1,289,345     4,293,788  
Depreciation    469,948     653,077  
Depreciation capitalized into inventory    2,404,095     2,682,818  
Non-cash operating lease expense    523,662     934,443  
Amortization of intangible assets    678,861     676,566  
Amortization of intangible assets capitalized into inventory    49,558     
Stock-based payments    4,157,598     2,885,223  
Warrants receivable    (1,937,352 )    
Interest Expense    7,070,026     4,935,616  
Impairment of long-lived assets    411,629     8,596,201  
Deferred income tax    1,687,000     (192,000 )
Accretion    994,654     3,979,503  
Loss (gain) on sale of property and equipment       (173,938 )
Loss on disposal of Red Barn Growers    2,909,757     
Loss (gain) on disposal of assets    1,567,981     
Gain on disposal of royalty asset       (168,359 )
Change in operating assets and liabilities:      
Accounts Receivable    1,449,432     227,747  
Prepaid expenses    1,182,766     (984,419 )
Inventory    (1,823,391 )    (3,992,663 )
Income taxes    (18,330,899 )    801,471  
Uncertain tax position liabilities    22,356,000     
Accounts payable and accrued liabilities    (1,256,913 )    (770,895 )
Changes in operating lease liabilities    (1,151,011 )    
Change in assets and liabilities held for sale    (121,563 )    
Net cash provided by (used in) operating activities   $ (965,906 )   $ (18,073,265 )
  CASH FLOWS FROM INVESTING ACTIVITIES:        
PP&E Additions   $ (4,963,107 )   $ (5,561,663 )
Intangible license additions    (1,090,919 )    
Proceeds from sale of Red Barn Growers net of cash    689,186     395,458  
Proceeds from sale of property, plant, and equipment    253,288     
Proceeds from sale of royalty asset       236,635  
Deposits    1,636,455     (686,948 )
Net cash provided by (used in) investing activities   $ (3,475,097 )   $ (5,616,518 )
  CASH FLOWS FROM FINANCING ACTIVITIES        
Proceeds from long-term debt, net of issuance costs   $    $ 25,763,080  
Proceeds from convertible debt, net of issuance costs    9,150,262     
Proceeds from option exercises       7,201  
Debt principal payments    (2,976,362 )    
Lease principal payments    (917,565 )    (2,086,444 )
Net cash provided by (used in) financing activities   $ 5,256,335    $ 23,683,837  
Net change in cash   $ 815,332    $ (5,946 )
Cash, beginning of period   $ 15,149,333    $ 15,155,279  
Cash, end of period   $ 15,964,665    $ 15,149,333  
       
 

 

 
                                                                                                                                                                                                                                                                                                                                                  
 
  GOODNESS GROWTH HOLDINGS, INC.  
STATE-BY-STATE REVENUE PERFORMANCE
  THREE MONTHS ENDED DECEMBER 31, 2023 AND 2022  
         
    Three Months Ended        
    December 31,        
    2023     2022     $ Change     % Change   
   Retail:               
MN   $ 11,182,332    $ 10,622,384    $ 559,948    5   %
NY    2,088,143     2,482,884     (394,741 )   (16 ) %
NM       1,055,902     (1,055,902 )   (100 ) %
MD    6,588,418     2,124,796     4,463,622    210   %
  Total Retail     $    19,858,893      $    16,285,966      $    3,572,927      22     %  
             
   Wholesale:               
MD    3,076,337     1,312,537     1,763,800    134   %
NY    1,441,473     1,444,543     (3,070 )   (0 ) %
MN    25,300        25,300    100   %
  Total Wholesale     $    4,543,110      $    2,757,080      $    1,786,030      65     %  
             
MD Service Revenue    (228,965 )    -     (228,965 )   100   %
             
  Total Revenue     $    24,173,038      $    19,043,046      $    5,129,992      27     %  
AZ and NM Revenue   $    $ (1,055,902 )   $ 1,055,902    (100 ) %
  Total Revenue excluding AZ and NM     $    24,173,038      $    17,987,144      $    6,185,894      34     %  
             
 

 

 
                                                                                                                                                                                                                                                                                                                                                          
 
  GOODNESS GROWTH HOLDINGS, INC.  
STATE-BY-STATE REVENUE PERFORMANCE
  YEAR ENDED DECEMBER 31, 2023 AND 2022  
             
    Year Ended        
    December 31,        
    2023     2022     $ Change     % Change   
   Retail:               
MN   $ 45,171,621    $ 37,461,646    $ 7,709,975    21   %
NY    8,915,421     10,676,424     (1,761,003 )   (16 ) %
NM    1,964,285     6,040,847     (4,076,562 )   (67 ) %
MD    17,569,539     7,944,440     9,625,099    121   %
  Total Retail     $    73,620,866      $    62,123,357      $    11,497,509      19     %  
             
   Wholesale:               
AZ   $    $ 2,361,233    $ (2,361,233 )   (100 ) %
MD    9,400,733     5,474,824     3,925,909    72   %
NY    5,046,537     3,994,313     1,052,224    26   %
MN    25,300     672,140     (646,840 )   (96 ) %
NM    39,727        39,727    (100 ) %
  Total Wholesale     $    14,512,297      $    12,502,510      $    2,009,787      16     %  
             
  Total Revenue     $    88,133,163      $    74,625,867      $    13,507,296      18     %  
AZ and NM Revenue   $ (2,004,012 )   $ (8,402,080 )   $ 6,398,068    (76 ) %
  Total Revenue excluding AZ and NM     $    86,129,151      $    66,223,787      $    19,905,364      30     %  
             
 

  Reconciliation of Non-GAAP Financial Measures  

 

Goodness Growth management occasionally elects to provide certain non-GAAP financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). EBITDA is a non-GAAP measure and does not have a standardized definition under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.

 
                                                                                                                                        
 
  Reconciliation of Net Loss to EBITDA  
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2023     2022     2023     2022  
  Net income (loss)    $ (4,582,837 )   $ (13,283,798 )    (25,547,089 )    (42,457,444 )
Interest expense, net    8,465,556     7,120,667     31,260,798     22,593,552  
Income taxes    988,129     5,948,000     7,723,000     5,893,000  
Depreciation & Amortization    272,860     325,679     1,148,809     1,329,643  
Depreciation included in cost of goods sold    582,456     723,282     2,453,653     2,682,818  
  EBITDA (non-GAAP)    $ 5,726,164    $ 833,830     17,039,171     (9,958,431 )
             
 

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Thailand Reverses Course on Cannabis, Moves to Recriminalize Amid Political Fallout

Thailand’s groundbreaking experiment with cannabis decriminalization is rapidly unraveling, with the government formally moving to reclassify the plant as a narcotic and ban recreational sales.

The decision has sent shockwaves through an industry once projected to be worth over US$1 billion.

The country’s Ministry of Public Health issued an order this week stating that cannabis only be sold with a medical prescription, effectively ending a short-lived era of liberal recreational access.

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Cannabis leaf over map of Australia.

A State-by-State Guide to Cannabis in Australia

Australia federally legalised medicinal cannabis in 2016, and Australia's cannabis market has seen major growth since then.

Medical cannabis approvals were up by 120 percent in the first half of 2023 compared to the same period in 2022. Statista forecasts that Australian cannabis revenue will reach AU$3.73 billion in 2024 and grow at an annual rate of 3.22 percent, culminating in market volume worth AU$4.53 billion by 2029.

However, Australia’s cannabis industry is still young. Despite there being a strong case for a regulated market, which was outlined in a July 2024 report by the Penington Institute, recreational use is not legal and medical access remains limited and regulated.

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Cannabis leaf on road marked with "2025," with sunlight in the background.

New Cannabis Consumption Trends, Regulatory Shifts Seen Driving Market in 2025

Understanding trends in the cannabis industry is paramount for investors eyeing a market with steady growth potential, but the landscape is complex as products and regulations continue to evolve.

Consumption habits are changing as edibles, vaping and THC beverages gain traction, especially among younger users, and cannabis companies are adapting their offerings to meet shifting demand.

Meanwhile, regulatory uncertainty, particularly surrounding the future of the US Farm Bill and state-level restrictions on hemp-derived cannabinoids, continues to challenge the market.

Despite these headwinds, production data and long-term growth forecasts suggest the cannabis industry remains on a promising — albeit turbulent — path. Read on for more on key trends to watch in 2025.

Consumption methods evolving post-legalization

Shifts in consumer behavior are reshaping markets across the board, and the cannabis industry is no exception.

While smoking remains the dominant method of cannabis consumption, a recent report from the Centers for Disease Control and Prevention highlights the growing popularity of edibles, vaping and dabbing.

The report notes that vaping and dabbing are particularly pronounced among younger adults.

A separate study published by the American Medical Association and funded in part by the Canadian Institutes of Health Research also points to how product preferences have changed among Canadian users since legalization in 2018.


The study indicates that while the use of flower, cannabis concentrates, oil, tinctures and topicals has decreased during that time, the use of vape cartridges, edibles and beverages has increased.

Edibles and beverages were legalized in Canada in late 2019, and Truss Beverage was one of the first players to introduce cannabis-infused drinks. Truss was a joint venture formed by Molson Coors Canada (TSX:TPX.A,TSX:TPX.B) and HEXO, a cannabis company that has since been acquired by Tilray Brands (TSX:TLRY,NASDAQ:TLRY).

In early 2020, Tilray launched a lineup of confectionery, wellness products and beverages through its subsidiary, High Park; Canopy Growth (TSX:WEED,NASDAQ:CGC) made a similar move. These companies gradually brought their products to the US as more states legalized cannabis for medical and/or recreational use.

Today, established cannabis brands typically offer edibles and beverages alongside their other products. Organigram Global (TSX:OGI,NASDAQ:OGI) is one of the newest US entrants, with its April acquisition of Collective Project providing immediate access to the US hemp-derived THC beverage market.

Growing awareness of health and wellness, potentially amplified by the pandemic-led adoption of health trackers, appears to be making an impact on the alcoholic beverage market.

A 2023 Gallup poll reveals a two decade decline in alcohol consumption, particularly among younger adults, suggesting a shift towards more health-conscious lifestyles within this demographic.

Craft beer production declined by 4 percent year-on-year in 2024, according to data collected by the Brewers Association. This marked the largest drop in the industry's history, excluding the pandemic. For small, independent craft breweries, 2024 marked the third consecutive year of declining production. A drop in the number of operating small breweries last year provides further evidence of this trend, with 501 closures in 2024 versus 434 openings.

Challenges in the alcohol market extend beyond the brewing industry, with the New York Times recently reporting the closure of a handful of nightclubs facing decreased alcohol sales alongside rising insurance and rent costs.

Meanwhile, cannabis lounges have been popping up across the US for the last several years. As of early 2025, several states had legalized or were in the process of implementing regulations for cannabis consumption lounges.

Hemp market growth despite regulatory uncertainty

The burgeoning hemp industry is another segment of the expanding cannabis market.

The legalization of industrial hemp — defined as cannabis with a THC concentration of 0.3 percent or less — through the 2018 Farm Bill led to initial investment and optimistic projections for CBD wellness products and various industrial applications. The sector’s rapid evolution also brought the rise of hemp-derived intoxicating cannabinoids, creating a market that presented both opportunities and complexities for participants.

However, after an initial boom, a lack of infrastructure and clearly defined regulations for CBD, as well as state-level variations and market oversupply, ultimately contributed to a quick retraction.

2024 was a pivotal year for the US hemp industry, as the hemp-related provisions of the 2018 Farm Bill — originally set to expire in September 2023, but extended to December 31, 2024 — created an urgent need to address critical issues like THC limits and the regulation of novel hemp-derived cannabinoids. A major point of contention was the proposed shift from defining hemp based on Delta-9 THC concentration (0.3 percent or less) to “total THC,” which includes THCA.

This change had the potential to significantly impact farmers and processors, as many hemp varieties that are compliant under the Delta-9 THC rule could exceed the 0.3 percent limit when THCA is included.

Various bills and amendments were proposed in 2024 as part of the Farm Bill discussions, each with different approaches to regulating hemp. Separate regulatory frameworks for industrial hemp and hemp grown for cannabinoids were suggested, and many states took their own action, leading to a patchwork of regulations and even outright bans.

Despite challenges, data from the US Department of Agriculture suggests signs of recovery.

The department's annual National Hemp Report from 2024 points to an 18 percent increase in industrial hemp production value between 2022 and 2023, with output growth seen in specific sectors like floral (18 percent), fiber (133 percent) and seed hemp (414 percent). The 2025 report from the Department of Agriculture indicates further expansion, with notable increases observed in both acreage (up 64 percent from 2023) and value (46 percent).

The 2024 Farm Bill ultimately did not pass, and right now the hemp industry is operating under a temporary extension of the 2018 Farm Bill under the American Relief Act of 2025, signed into law on December 21, 2024.

The 2018 Farm Bill is now set to expire on September 30, 2025.

While analysts for Markets and Markets project that the North American hemp industry will grow at a CAGR of 22.4 percent and ultimately reach a valuation of US$30.24 billion by 2029, the future of the industry will be heavily influenced by the outcome of the ongoing Farm Bill discussions.

US cannabis legalization remains stalled

Although there is clear demand for cannabis products, the now-defunct rescheduling process in the US is likely to continue casting a shadow of uncertainty over the industry's long-term trajectory.

Legal and procedural delays, including allegations of improper conduct and bias within the US Drug Enforcement Administration (DEA), led to hearing cancellations, and the new administration of US President Donald Trump has brought leadership changes to key agencies like the DEA and the Department of Justice.

Terry Cole, who Trump nominated to be DEA administrator on February 11, has a history of opposing cannabis legalization in the country. Similarly, Pam Bondi, Trump’s pick to lead the justice department, staunchly opposed a movement to legalize medical cannabis during her tenure as Florida’s attorney general.

While there have been bipartisan efforts in Congress to end federal cannabis prohibition and establish regulations for eventual legalization, the DEA’s actions and statements indicate a potential stall or reversal of progress.

In addition to that, new research is adding complexity to the debate.

A study published in the American Journal of Psychiatry this past March highlights an association between the use of high-potency cannabis strains and increased risks of psychosis, a factor that may not have been fully considered by the Department of Health and Human Services. As stronger cannabis strains become more widely available, a reassessment of their potential health risks may be required.

Investor takeaway

While the cannabis industry holds promise for growth and innovation, investors must remain acutely aware of the regulatory uncertainties and market volatility that will undoubtedly shape its trajectory in the years to come.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.

Person touching a cannabis plant; Australia map in flag colours.

ASX Cannabis Stocks: 10 Biggest Companies

While Australia has yet to legalise all forms of cannabis, the country is a growing medical cannabis and hemp market, with many companies manufacturing, researching and exporting the plant-based product.

Medical cannabis was federally legalised in 2016, and the export of cannabis from Australia was legalised in 2018. As for recreational use, the only state to legalise recreational use and possession so far is the Australian Capital Territory, which did so in 2020, but it did not establish a regulated recreational cannabis market.

The country's medical cannabis market has been steadily expanding in size and scope. A Penington Institute report shows that Australians spent approximately AU$400 million on medicinal cannabis in the first half of 2024, 72 percent higher than the AU$234 million they spent over the entirety of 2022.

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Cannabis leaves, gavel.

Cannabis Round-Up: Rescheduling Faces New Roadblocks, SAFER Banking Act Gets Another Look

February 2025 was characterized by an evolving legislative landscape and important financial updates from major players.

These developments underscore the complex and dynamic nature of the sector as it continues to navigate legal, financial, and regulatory challenges while experiencing ongoing growth and evolution.

Discussions around cannabis rescheduling, changes in federal agency leadership, state-level legalization efforts, and financial reports from key companies all contributed to a month of notable activity in the cannabis space.

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Cannabis leaves, US flag.

Cannabis Round-Up: Banking Reform and Rescheduling De-Prioritized as Trump Takes Office

As a new year began, the cannabis industry saw a range of impactful events in January.

Legal obstacles continued to impede progress on a once-promising attempt to reschedule cannabis in the US, and President Donald Trump's leadership choices for key agencies are diminishing hopes it can be accomplished.

Meanwhile, cannabis banking reform won't be discussed at Wednesday's (February 5) meeting of the Standing Senate Committee on Banking, Commerce and the Economy, and Congress seems in no rush to address it.

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