Week In Review: U.S. Senate Banking Committee Advances SAFER Banking Act; Arizona’s Cannabis Social Equity Licenses; MediPharm Settles $9 Million Dispute with HEXO Following Tilray’s Acquisition:

LOS ANGELES–Welcome to the far too-exciting world of cannabis and psychedelics, where it’s a tale of two markets: there’s innovation and progress in full swing in some parts of the country, while in other parts, the industry is on the ropes largely due to collapsing cannabis prices, making cannabis business models less profitable.  This week’s Week In Review is a roundup of key developments in the industry, showcasing the news from key companies in the space.

Weekly Overview: Developments in the Cannabis and Psychedelic Sectors

Cannabis Market Highlights:

The biggest news item this week in the financial world of cannabis was the stunning announcement that Trulieve said they have managed to escape the 280e liability of $143,000,000.Trulieve Cannabis Corp (OTC: TCNNF) is locked in a $143 million tax dispute with the U.S. government for taxes paid in 2019-2021.

Trulieve assert that Section 280E of the Internal Revenue Code, which bars cannabis businesses from deducting standard expenses, led to excessive tax liabilities. Trulieve has filed amended tax returns to claim a refund but acknowledges the outcome’s uncertainty. While it hasn’t disclosed its legal basis, the company promises to reevaluate its stance.

Despite some state relief, federal 280E rules persist, leading to an estimated $1.8 billion overpayment in 2022. Reclassifying marijuana by the DEA could potentially relieve this burden. If Trulieve is successful, expect to see every accounting firm in cannabis will be expected to do the same as Trulieve for all their cannabis clients.

#1. U.S. Senate Banking Committee Advances SAFER Banking Act: A Look at the Stance and Votes: The U.S. Senate Banking Committee’s anticipated markup of the SAFER Banking Act took place on Sept. 27, marking significant progress in the upper chamber for the legislation. The bill aims to streamline cannabis-related banking, and its progress in the Senate has been watched closely by many in the cannabis industry.

#2. Arizona’s Cannabis Social Equity Licenses: Intent Versus Outcome. The State of Arizona’s well-intentioned efforts to address historical disparities in the cannabis industry appear to be veering off course. A deep dive into the allocation of social equity licenses, designed to benefit those who were adversely affected by the war on drugs, reveals that these permits might be benefiting established corporate entities more than the intended recipients.

#3. MediPharm Settles $9 Million Dispute with HEXO Following Tilray’s Acquisition:- The landscape of the Canadian cannabis industry experienced a recent shift with the news of MediPharm’s $9 million settlement, resolving a lingering commercial disagreement with HEXO. The announcement comes on the heels of Tilray Brands’ acquisition of HEXO, which facilitated renewed negotiations between the involved parties.

#4 Cannabis Payments: Navigating a Landscape of Opportunities and Pitfalls:- Cannabis payment systems have always been rife with controversy and uncertainty. As we explore the landscape, the focus is primarily on services purporting to have a compliant mechanism to accept credit cards. To be succinct, while cannabis remains federally illegal, all payment systems for it are mere workarounds. Some are safe, others not, with varying degrees of associated risks. Check out our article here to learn more.

#5 TerrAscend Corp. (OTC: TSNDF) boosted its 2023 revenue guidance, resulting in a 4% stock price increase to $1.91 during its recent investor day at the Toronto Stock Exchange. The updated 2023 outlook now projects a minimum of $317 million in net revenue and $63 million in adjusted EBITDA, marking a remarkable 28% YoY revenue growth and a 62% increase in adjusted EBITDA from continuing operations. Earlier guidance had set these figures at a minimum of $305 million and $58 million. Jason Wild, the executive chairman, expressed confidence in the company’s prospects and expected industry-leading revenue growth, improved P&L metrics, and positive free cash flow in the second half of the year. Additionally, TerrAscend anticipates a gross margin exceeding 50% and positive free cash flow from continuing operations in the latter part of the year.

Psychedelic Market Highlights:

#1 FDA Warns Against Unsupervised Use of Ketamine for Psychiatric Disorders: The U.S. Food and Drug Administration (FDA) has raised concerns over the unsupervised and unauthorized use of compounded ketamine and ketamine-based drugs for treating psychiatric conditions. In a recent alert, the FDA pointed to the dangers posed by the unregulated use of such drugs, especially in the wake of the substance’s growing reputation as a sought-after alternative treatment for mental health issues.

#2California’s Psychedelic Dilemma: Governor Newsom’s Tightrope Walk on SB58: Six decades of advocacy for psychedelic legalization in California might finally culminate with the passage of SB58, a landmark bill proposing the decriminalization of certain natural psychedelics for therapeutic use. Having cleared the state legislature on September 7, the bill now awaits Governor Gavin Newsom’s signature or veto.

#3: Atai Life Sciences N.V. (NASDAQ: ATAI) strengthened its partnership with IntelGenx Technologies Corp. (OTC: IGXT) by acquiring a 63% stake for $3 million in a private placement in August. They signed the Second Amendment and Subscription Agreement Amendments on October 6, 2023, which introduced a Conversion Feature to a loan agreement and allowed Atai to purchase up to 7,401 US Units before August 31, 2026. Atai aims to utilize IntelGenx’s pharmaceutical films for psychedelic drug delivery, particularly for a DMT oral film product. IntelGenx had an earlier collaboration with Tilray Brands, Inc. (NASDAQ: TLRY) for a cannabis oral strip, and arbitration proceedings regarding this partnership were ongoing.

#4: Awakn Prof. David Nutt, a leading figure in psychopharmacology, was recognized as the world’s foremost psychopharmacologist by ScholarGPS. This acknowledgment highlights his role at Awakn Life Sciences Corp. (OTC: AWKNF), a company dedicated to innovative addiction treatment. Prof. Nutt’s leadership at Awakn underscores their commitment to developing groundbreaking addiction treatments. This partnership symbolizes hope for those battling addiction and showcases the power of science and innovation in addressing this critical health crisis.

Updates & Events:

• MJBizCon is the next big event in the busy cannabis conference schedule with thousands expected to attend MJBizCon which has become the biggest conference in cannabis in the world (Nov 28-Dec 1st).
• Check out the short video here showing attendees at the women-only event called the Blunt Brunch gather for a photograph here.  The Blunt Brunch was in San Diego, but they have meetings around most big cannabis conferences. Blunt Brunch is an excellent support network for women entrepreneurs. Find out more about their next events in the coming weeks here.

Stay tuned to Highly Capitalized for more updates as the cannabis and psychedelic industries continue to shape the future at the intersection of wellness and innovation. Subscribe to our newsletter and follow us on LinkedIn.